Fiscal Year 2011 CAFR (PDF)

QUEEN ANNE'S COUNTY, MARYLAND

COMPREHENSIVE ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDED JUNE 30, 2011

TABLE OF CONTENTS

Page(s)

INTRODUCTORY SECTION

Letter of Transmittal 1-5 Certificate of Achievement for Excellence in Financial Reporting 7 Organization Chart 8 Certain Elected and Other Officials 9

FINANCIAL SECTION

Independent Auditor's Report 11-12 Management's Discussion and Analysis (required supplementary information) 13-33

BASIC FINANCIAL STATEMENTS 35

Government-Wide Financial Statements Statement of Net Assets 36-37 Statement of Activities 38-39 Governmental Fund Financial Statements Balance Sheet 40-41 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets 43 Statement of Revenues, Expenditures and Changes in Fund Balances 44-45 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 46-47

Enterprise Fund Financial Statements Statement of Net Assets 48-49 Statement of Revenues, Expenses, and Changes in Fund Net Assets 50-51 Statement of Cash Flows 52-53 Fiduciary Fund Statements Statement of Fiduciary Net Assets 54 Statement of Changes in Fiduciary Net Assets 55 Notes to Financial Statements 56-110

REQUIRED SUPPLEMENTARY INFORMATION 111

Other Post-Employment Benefits (OPEB) Trust Schedule of Funding Progress and Schedule of Participating Agencies' Contributions 112-113 Budgetary Comparisons for General and Major Special Revenue Funds 114 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 115 Schedule of Revenues and Other Financing Sources - Budgetary Basis 116-117 Schedule of Expenditures and Other Financing Uses - Budgetary Basis 118-119

Roads Board Special Revenue Fund Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 120

QUEEN ANNE'S COUNTY, MARYLAND

COMPREHENSIVE ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDED JUNE 30, 2011

TABLE OF CONTENTS (CONTINUED)

Page(s)

FINANCIAL SECTION (CONTINUED)

COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

(SUPPLEMENTARY INFORMATION) 121

Non-Major Governmental Funds 123-125 Combining Balance Sheet 126-128 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 130-132 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budgetary Basis 134-138 Capital Projects Funds 139 Schedule of Appropriations and Expenditures 140-142 School Impact Fees Capital Projects Fund Schedule of Revenues, Expenditures and Changes in Fund

Balances - Budget and Actual 143 Non-Major Enterprise Funds 145-147 Combining Statement of Net Assets 148-149 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets 150-151 Combining Statement of Cash Flows 152-153 Fiduciary Funds 155-157 Other Post-Employment Benefit Trust Fund Combining Statement of Fiduciary Net Assets 158 Combining Statement of Changes in Fiduciary Net Assets 159

Agency Funds Statement of Agency Funds Assets and Liabilities 161 Statement of Changes in Agency Funds Assets and Liabilities 162-163 Community Partnerships for Children Special Revenue Fund 165 Combining Balance Sheets - By Grantor 166-167 Schedule of Revenues, Expenditures, and Changes in Fund Balances - By Community Partnership Agreements (CPA) and Non-Community Partnership Agreements (Non-CPA) 168-171

Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budgetary Basis 172-173

STATISTICAL SECTION (UNAUDITED) 175

Table 1 Net Assets by Component - Government-Wide 176-177 2a Changes in Net Assets - Government-Wide 178-181 2b General Tax Revenues - Governmental Activities 182 3 Fund Balances - Governmental Funds 183 4 Changes in Fund Balances - Governmental Funds 184-185 5 Assessed Value of Taxable and Exempt Property 187 6a Real Property Tax Rates - County Direct Rate 188 6b Real Property Tax Rates - County Special Taxing Districts 189

6c Real Property Tax Rates - Overlapping Governments - Towns 190-191 7 Ten Highest Commercial Property Taxpayers 192 8 Property Tax Levies and Collections 193 9 Ratios of Outstanding Debt by Type 194 10 Ratios of General Bonded Debt Outstanding 195 11 Computation of Net Direct and Overlapping Debt 197 12a Computation of Legal Debt Margin 198-199 12b Computation of Local Debt Limit 200 13 Principal Employers 201

14 Demographic Statistics 202 15 County Government Employees - Full-Time Equivalents 204 16 County Government Employees - Full-Time Only by Function 205 17 Operating Indicators by Function 206 18 Capital Asset Statistics by Function 207 Introductory Section

QUEEN ANNE’S COUNTY DEPARTMENT

OF BUDGET AND FINANCE

THE LIBERTY BUILDING

107 N. LIBERTY STREET

CENTREVILLE, MARYLAND 21617

TAX DIVISION (410) 758-0414 FAX: (410) 758-4405

ACCOUNTING (410) 758-4064 FAX: (410) 758-3036

COUNTY COMMISSIONERS ——————————————————

TDD (410) 758-2126 www.qac.org JONATHAN R. SEEMAN

STEVEN J. ARENTZ – AT LARGE DIRECTOR

DAVID L. DUNMYER – DISTRICT 1

BOB SIMMONS – DISTRICT 2

PHILIP L. DUMENIL – DISTRICT 3 MARIE K. LANGE

DAVE OLDS – DISTRICT 4 CHIEF TREASURY OFFICER

GREGG A. TODD, COUNTY ADMINISTRATOR

MARGIE A. HOUCK, EXECUTIVE ASSISTANT TO COUNTY COMMISSIONERS

December 21, 2011 The Board of County Commissioners and The Citizens of Queen Anne’s County, Maryland Formal Transmittal of the Comprehensive Annual Financial Report (CAFR) State law requires that all general-purpose governments publish a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America (GAAP) and audited in accordance with auditing standards generally accepted

in the United States of America by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of Queen Anne’s County, Maryland for the fiscal year ended June 30, 2011.

This report consists of management’s representations concerning the finances of Queen Anne’s County. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in the report. To provide a reasonable basis for making these representations, the management of Queen Anne’s County has established a comprehensive internal control framework that is designed both to protect the government’s

assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of Queen Anne’s County’s financial statements in conformity with Generally Accepted Accounting Principles (GAAP). Because the cost of internal controls should not outweigh their benefits, Queen Anne’s County’s comprehensive framework of internal controls has been designed to provide a reasonable, rather than absolute, assurance that the financial statements will be free

from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

Queen Anne’s County’s financial statements have been audited by Clifton Gunderson LLP, a firm of licensed certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements of Queen Anne’s County, for the fiscal year ended June 30, 2011, are free of material misstatement. The independent audit involves examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that Queen Anne’s County’s financial statements for the fiscal year ended June 30, 2011, are fairly presented in conformity with GAAP. The independent auditor’s report is

presented as the first component of the financial section of this report.

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The independent audit of the financial statements of Queen Anne’s County is part of a broader, federally mandated, “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal

controls and legal requirements involving the administration of federal awards. These reports are available in Queen Anne’s County’s separately issued Single Audit report.

GAAP requires that management provide a narrative introduction, overview, and analysis, entitled Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. Queen Anne’s County’s MD&A can be found immediately following the report of the independent auditor.

PROFILE OF THE GOVERNMENT

Queen Anne’s County is situated on the Eastern Shore of Maryland. It is bordered to the north by Kent County, to the east by the State of Delaware, to the south by Caroline and Talbot counties, and to the west by the Chesapeake Bay. Access to the western shore of Maryland is provided by the Chesapeake Bay Bridge. The County is 373 square miles in area and has approximately 47,899 citizens. The County seat is located in Centreville. The County

Commissioners of Queen Anne’s County are empowered to levy a property tax on both real and personal properties located within its boundaries.

Queen Anne’s County was formed in 1706 and is governed by a five-member Board of County Commissioners. County code provides that one Commissioner be elected purely at large; the remaining four Commissioners must reside in specific districts, but are elected at large. The Commissioners operate under Maryland’s Code Home Rule form of government. Both the executive and legislative functions of the County are vested with the Board of County

Commissioners.

Queen Anne’s County provides a full range of services including public safety (police, volunteer fire protection, emergency services, detention center, and animal control), highways and streets, solid waste, planning and zoning, economic development, culture and recreation, education, libraries, and general administrative services. In conjunction with the State, the County also operates services related to general community health and social services. In

addition, the County operates a water and wastewater utility, an airport, and certain recreational facilities as Enterprise Funds.

The appropriated annual budget is prepared by fund, function (e.g. public safety), and department (e.g. detention center). Department Heads may make transfers of appropriations within a department of up to $10,000 with the approval of the County Administrator. Transfers of appropriations or appropriation of new revenues in excess of $10,000 requires the approval of the County Commissioners. Budget to actual comparisons are provided in this report for

individual governmental funds for which an appropriated annual budget has been adopted.

The budget comparisons for the general fund and the roads board are presented on pages 115 to 120 as part of the Required Supplementary Information portion of this report. For non-major funds with appropriated annual budgets, budget to actual comparisons are presented in the Supplementary Information subsection of this report on pages 134 to 138; on page 143; and on pages 172 to 173.

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ECONOMIC OUTLOOK AND CONDITION

The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which Queen Anne’s County operates.

The unemployment rate for Queen Anne’s County is typically below the state and national averages, as shown in the chart below. The June 2011 rate for the County was 7.0%, compared to the state’s rate of 7.4% and the U.S.’s rate of 9.2%. The 2011 average rate for the County was 6.7%.

Unemployment Rate 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Jun‐05 Dec‐05 Jun‐06 Dec‐06 Jun‐07 Dec‐07 Jun‐08 Dec‐08 Jun‐09 Dec‐09 Jun‐10 Dec‐10 Jun‐11 Queen Anne's County Maryland United States

LOCAL ECONOMY

The local employment base is somewhat limited and centers on several stable manufacturers, as well as the agriculture, maritime, construction, retail, leisure, and hospitality industries.

Three of the five largest employers are governmental units, including the County, the Board of Education, and Chesapeake College. There is a small, but growing, base of specialty manufacturers. In addition, the County’s proximity to the Western Shore enables nearly 60% of the workforce to commute to locations outside the County, primarily to higher paying jobs in the Baltimore and Washington areas.

Property taxes increased by 1.4% in fiscal year 2011. In the fiscal year 2012 budget, there is a projected 9.6% increase in property tax revenue, due to the increase in the property tax rate, from $0.7671 to $0.8471 per $100 of assessed value, effective July 1, 2011. Local income tax is the County’s other main revenue source. Income tax collections were relatively stable in fiscal year 2011, when compared to the previous year, with a decrease of less than one

percent. Due to an increase in the income tax rate, the fiscal year 2012 projections for income tax represent a 5.3% increase from fiscal year 2011 collections. The rate increased from 2.85% to 3.2%, effective January 1, 2012.

County revenues related to housing activity continue to be affected by the bursting of the real estate bubble that began in fiscal year 2006. Recordation tax revenue, a leading indicator of the health of the local real estate market, decreased by 3.3% from the prior fiscal year.

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LONG TERM FINANCIAL PLANNING

Rainy Day Fund – In calendar year 2002, the County adopted Ordinance No. 02-08 to establish a Rainy Day Fund. The ordinance required that the County maintain a fund balance reserve for contingencies in an amount equal to 7% of general fund operating revenues budgeted for the following fiscal year. In fiscal year 2011, the County adopted Ordinance No.

11-05, which served the purpose of eliminating the requirements for reserve fund balance for contingencies in Queen Anne’s County which are not in compliance with Governmental Accounting Standards Board (GASB) Statement No. 54. Therefore, for the year ended June 30, 2011, Queen Anne’s County does not have a rainy day fund. However, the County Commissioners are working with the Finance Office in efforts to reestablish sufficient levels of

reserves in compliance with GASB requirements.

Capital Projects - The County Commissioners’ six-year capital program, starting with fiscal year 2012, prioritizes capital expenditures over these years to meet the County’s needs. The six-year program includes: $13.5 million for renovation of various school facilities; $12.6 million for the Bay Bridge Airport; $8.9 million for emergency services; and $6.3 million for a new community swimming pool. Offsetting nearly 97% of the Airport’s capital costs, $12.2 million in

grants and other non-operating, non-debt resources are anticipated. Another $6.3 million in grants will cover 100% of the costs for the community swimming pool.

Task Force on Government Sustainability – On December 28, 2010, the Commissioners established a Task Force on Government Sustainability, which consisted of seven citizens and two commissioner representatives tasked with reviewing existing County functions/services and recommending steps to ensure the long-term sustainability of County government. The Task Force was divided into three subcommittees: County functions, Public Safety, and Board

of Education. Each subcommittee reviewed vital topics and presented recommendations to the County Commissioners. Before issuing the recommendations, the Task Force met publically on eleven separate occasions. The recommendations were considered as part of the Commissioners’ budget deliberations, and incorporated into the adoption of the fiscal year 2012 budget.

FINANCIAL POLICIES

Bond Ratings - The financial policies and management practices of Queen Anne’s County were recognized by two major rating agencies. Fitch Rating Service issued an AA+ bond rating and Moody’s issued a rating of Aa2.

Debt Management Policy – In calendar year 2009, the County adopted Resolution 09-13, which establishes the County’s Local Dept Policy. In accordance with this policy, the Director of Finance is responsible for following certain procedures to ensure that debt limits established by the Policy are not exceeded. A key element of the Policy is that prior to the issuance of any new bonded indebtedness, the Director must certify that existing and new General Obligation

Debt will not exceed (1) 2.5% of the total taxable assessable base and (2) $3,000 per capita.

For fiscal year 2011, Queen Anne’s County general obligation debt was 1.38% of the total taxable assessable base, and the per capita debt measurement was $2,236. Both thresholds are well below the policy limits. In addition, general bonded debt outstanding, as a percentage of total taxable assessable base, has improved over the last ten fiscal years, from 1.88% in fiscal year 2002 to 1.38% in fiscal year 2011.

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QUEEN ANNE’S COUNTY, MARYLAND

GOVERNMENTAL ORGANIZATION

CERTAIN ELECTED AND OTHER OFFICIALS

AS OF JUNE 30, 2011

CERTAIN ELECTED OFFICIALS

County Commissioners Steven J. Arentz, At Large David L. Dunmyer, District 1 Bob Simmons, District 2 Philip L. Dumenil, District 3 David Olds, District 4 State’s Attorney Lance G. Richardson, Esq.

Sheriff Raymond G. Hofmann

CERTAIN DEPARTMENT HEADS AND OTHER OFFICIALS

County Administrator Gregg A. Todd Director of Public Works Todd R. Mohn Director of County Administration Gregg A. Todd Director of Planning and Zoning J. Steve Cohoon Director of Community Services Catherine R. Willis Director of Budget and Finance Jonathan R. Seeman Chief Treasury Officer Marie K. Lange County Attorney Patrick E. Thompson, Esq.

Independent Auditor Bond Counsel Financial Advisor Clifton Gunderson LLP McKennon, Shelton Public Advisory Consultants Certified Public Accountants & Henn, LLP Baltimore, Maryland Timonium, Maryland Baltimore, Maryland

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Independent Auditor’s Report The Board of Commissioners of Queen Anne's County, Maryland Centreville, Maryland We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Queen Anne’s County, Maryland (the County) as of and for the year ended June 30, 2011, which collectively comprise the County’s basic

financial statements as listed in the table of contents. These financial statements are the responsibility of County’s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the component unit financial statements of the Board of Education of Queen Anne’s County and the Queen Anne’s County Free Library, which comprise 88% of the assets, 88% of the net assets and 97% of the revenues

of the discretely presented component units. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for the above mentioned component units, is based solely on the reports of the other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, based on our audit and the reports of other auditors, 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 units, each major fund, and the aggregate remaining fund information of the County as of June 30, 2011, and the respective changes in financial position and cash flows, where

applicable, for the year then ended in conformity with accounting principles generally accepted in the United States of America.

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In accordance with Government Auditing Standards, we have also issued our report dated December 20, 2011 on our consideration of the County’s internal control over financial reporting and on our tests of 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 the internal control over financial reporting or on compliance.

That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

The Management’s Discussion and Analysis; Schedule of Funding Progress; Schedule of Participating Agencies’ Contributions; and Schedule of Revenues, Expenditures, Other Financing Sources and Changes in Fund Balance – Budget and Actual – General Fund and Roads Board Special Revenue Fund as referenced in the table of contents are not a required part of the basic financial statements but are supplementary information required by accounting

principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County’s basic financial statements. The introductory section, combining and individual fund financial statements and supplementary schedules listed as supplementary data, and statistical section, as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The

combining and individual fund financial statements and supplementary schedules, listed as supplementary data have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

The introductory section and statistical tables listed in the table of contents have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

a1 Baltimore, Maryland December 20, 2011

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Management’s Discussion and Analysis Introduction This section of the Comprehensive Annual Financial Report of Queen Anne’s County, Maryland (the County) presents a narrative overview and analysis of the financial activities of Queen Anne’s County Government for the fiscal year ended June 30, 2011. We encourage readers to consider the discussion and analysis along with the other information in this report, including the

transmittal letter, basic financial statements, and the notes to the financial statements.

Adoption of new GASB Statements During fiscal year 2011, the County adopted GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. GASB 54 establishes standards for fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of resources reported in governmental funds.

Additionally, the definitions of a general fund, special revenue fund, capital projects fund, debt service fund, and permanent fund are clarified by the provisions in this Statement. Under the new standard, the County recorded fund balance into five new classifications: nonspendable, restricted, committed, assigned and unassigned.

Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to Queen Anne’s County Government’s basic financial statements. The County’s basic financial statements are comprised of three components:

Government-Wide Financial Statements Fund Financial Statements Notes to the Financial Statements This report also contains other required and non-required supplementary information in addition to the basic financial statements themselves.

Government-Wide financial statements: The government-wide financial statements are designed to provide readers with a broad overview of Queen Anne’s County Government’s finances, in a manner comparable to a private sector business.

The statement of net assets presents information on all of Queen Anne’s County Government’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position and condition of Queen Anne’s County Government is improving or deteriorating.

The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes and earned but unused

vacation leave).

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Both of the government-wide financial statements distinguish functions of Queen Anne’s County Government that are principally supported by taxes and intergovernmental revenue (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities).

The governmental activities of Queen Anne’s County Government include general government, public safety, public works, health, social services, education, parks and recreation, library, conservation of natural resources, and economic and community development. The businesstype activities of Queen Anne’s County Government include water and sewer services, an airport, public marinas, parks, and various recreational facilities.

The government-wide financial statements include not only Queen Anne’s County Government itself (known as the primary government), but also legally separate component units. Queen Anne’s County Government has the following discretely presented component units: Queen Anne’s County Board of Education, Queen Anne’s County Free Library, and the Queen Anne’s County Public Housing Authority. Financial information for these component units is reported

separately from the financial information presented for the primary government itself. The government-wide financial statements can be found on pages 36 to 39 of this report.

Fund Financial Statements: A fund is a group of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Queen Anne’s County Government, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of Queen Anne’s County Government can be divided into three categories: governmental funds,

proprietary funds, and fiduciary funds. Fund financial statements can be found throughout this report, with basic statements found on pages 40 to 55.

Governmental funds: Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements.

However, unlike the government-wide financial statements, governmental fund financial statements focus on near term inflows and outflows of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements.

By doing so, readers may better understand the long-term impact of the government’s near term financing decisions. Both the balance sheet for governmental funds and the statement of revenues, expenditures, and changes in fund balances for governmental funds provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. These two reconciliations begin with governmental fund financial data; describe all

transactions that are added or subtracted to yield governmental activities; and end with governmental activities financial data. These reconciliations can be found on pages 43 and 46 to 47.

Queen Anne’s County maintains three types of governmental funds: the general fund, a variety of special revenue funds, and five capital project funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for all governmental funds. Fund type is identified for each fund.

Queen Anne’s County adopts an annual appropriated budget for its general fund; school, fire, and parks impact fee capital projects funds; and the following special revenue funds: roads board, department of aging, housing and community services, community partnerships for children,

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dredging special assessments, Kent Narrows, law library, inmate welfare, agricultural transfer, rural legacy, and purchase of development rights. A budgetary comparison statement has been provided for each of these funds, which can be found on pages 115 to 120; 134 to 138; 143; and 172 to 173 of this report.

Proprietary funds: Queen Anne’s County maintains enterprise funds to report the same functions presented as business-type activities in the government-wide financial statements.

Queen Anne’s County Government uses enterprise funds to account for its water and sewer services, airport, marinas, parks, and other recreational facilities. The basic proprietary fund financial statements can be found on pages 48 to 53 of this report, as well as non-major statements on pages 148 to 153.

Fiduciary funds: Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support Queen Anne’s County Government’s own programs. The County acts as a fiduciary for two trust and six agency funds. The accounting used for fiduciary funds is much like that used for proprietary

funds. The basic fiduciary fund financial statements can be found on pages 54 to 55 of this report, while further detail can be found on pages 158 to 163.

Notes to the financial statements: The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

The notes to the financial statements can be found on pages 56 to 110 of this report.

Government-wide Financial Analysis Statement of Net Assets A summary of government-wide assets, liabilities, and net assets is as follows:

Governmental Activities Business Type Activities Total Summary of Net Assets 2011 2010 2011 2010 2011 2010 Current and Other Assets $ 66,453,636 $ 6 2,893,658 $ 23,992,122 $ 25,185,923 $ 9 0,445,758 $ 88,079,581 Capital Assets 1 43,875,958 1 43,124,217 97,987,069 1 00,360,772 2 41,863,027 243,484,989 Total Assets 210,329,594 2 06,017,875 121,979,191 125,546,695 3 32,308,785 331,564,570 Noncurrent liabilities 119,962,802 1 00,708,984 23,137,941 23,470,640 1 43,100,743 124,179,624

Other liabilities 1 0,886,689 7 ,112,156 3,950,284 4 ,862,873 1 4,836,973 11,975,029 Total Liabilities 130,849,491 1 07,821,140 27,088,225 28,333,513 1 57,937,716 136,154,653 Net assets:

Invested in capital assets, net of related debt 118,274,533 1 21,702,025 78,069,061 79,032,373 1 96,343,594 200,734,398 Restricted 22,399,514 2 2,290,307 16,821,905 18,180,809 3 9,221,419 40,471,116 Unrestricted ( 61,193,944) (45,795,597) - - (61,193,944) (45,795,597) Total Net Assets $ 79,480,103 $ 9 8,196,735 $ 94,890,966 $ 97,213,182 $ 1 74,371,069 $ 195,409,917 The County’s total current and other assets increased by $2.4 million, or 2.7 percent, to $90.4

million. The County’s total assets exceeded its liabilities at the close of fiscal year 2011 by $174.4 million.

Net assets are divided into three categories: invested in capital assets (net of related debt);

restricted net assets; and unrestricted net assets. By far, the largest portion, $196.3 million, of the County’s total net assets reflects its investment in capital assets (e.g. land, buildings, machinery and equipment, vehicles, and infrastructure), less any related and outstanding debt used to construct or acquire those assets. The County uses these capital assets to provide services to citizens; consequently, they are not available for future spending. Although the

County’s investment in its capital assets is reported net of related debt, it should be noted that the

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resources needed to repay the debt must be provided from other sources since the capital assets themselves cannot be used to liquidate these liabilities.

It is important to note that, although counties in the State of Maryland issue debt for the construction of schools, the school buildings are owned by each county’s Board of Education.

Ownership reverts to the county government only if the local Board determines a building is no longer needed for educational purposes. Therefore, while the County’s financial statements include outstanding debt related to Board of Education capital assets, those statements do not include the capital assets funded by the debt. Debt outstanding for the Board of Education amounted to $72.4 million at June 30, 2011. Absent the effect of this relationship, the County

would have reported positive unrestricted net assets of $11.2 million on its government-wide financial statements, rather than the negative unrestricted net assets of $61.2 million reported herein. For a multi-year view of this calculation, see the Footnote presented in Table 1 of the Statistical Section.

An additional $39.2 million of the County’s total net assets represents resources that are subject to restrictions on how they may be used. For governmental activities, this amount includes:

$16.7 million of unspent bond proceeds restricted for specific capital projects; $2.4 million restricted for programs related to conservation of natural resources; $1.0 million for impact fee balances; $735 thousand related to Housing and Community Services; and an additional $1.6 million for other restrictions. For business-type activities, this amount includes: $6.4 million restricted for subsequent year operations in those enterprise funds not reported separately in the

following restricted amounts; $6.4 million in allocations restricted for Sanitary District capital projects or debt service; $3.2 million restricted to meet Sanitary District debt covenants; and $753 thousand restricted by Sanitary District developer exaction project requirements.

At the end of the current fiscal year, Queen Anne’s County Government reports positive balances in two out of three categories of net assets, both for the government as a whole, as well as for its separate governmental activities. Business-type activities report all non-capital net assets as restricted, due to the inherent nature of those activities, and show a positive balance in both categories.

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Statement of Activities The following table summarizes changes in net assets for governmental and business-type activities during the year:

Governmental Activities Business Type Activities Total Summary of Changes in Net Assets 2011 2010 2011 2010 2011 2010 Revenues:

Program revenues:

Charges for services $ 4,141,854 $ 4,518,799 $ 9,883,640 $ 9,970,816 $ 14,025,494 $ 14,489,615 Operating grants and contributions 6,000,107 6,698,744 59,528 203,269 6,059,635 6,902,013 Capital grants and contributions 3,551,752 8,460,623 2,070,839 2,562,943 5,622,591 11,023,566 General revenues:

Property taxes 60,070,368 59,267,240 - - 60,070,368 59,267,240 Local income tax 30,624,679 25,715,247 - - 30,624,679 25,715,247 Other local taxes Admission and amusement taxes 188,715 208,736 - - 188,715 208,736 Recordation taxes 3,609,751 3,734,340 - - 3,609,751 3,734,340 Hotel taxes 441,123 397,141 - - 441,123 397,141 County transfer taxes 1,158,897 1,147,179 - - 1,158,897 1,147,179 Investment income 136,523 144,553 407,629 436,045 544,152 580,598

Gain on sale of capital assets 281,158 2 6,731 - - 281,158 26,731 Miscellaneous 711,868 786,719 884,772 962,540 1,596,640 1,749,259 Total Revenues 110,916,795 111,106,052 13,306,408 14,135,613 124,223,203 125,241,665 Expenses:

Governmental Activities:

General government 15,968,633 14,089,387 - - 15,968,633 14,089,387 Public safety 25,413,678 25,361,341 - - 25,413,678 25,361,341 Public works 9,098,949 9,432,489 - - 9,098,949 9,432,489 Health 1,701,677 1,663,321 - - 1,701,677 1,663,321 Social services 5,001,240 5,554,667 - - 5,001,240 5,554,667 Education 57,506,341 53,491,659 - - 57,506,341 53,491,659 Parks and recreation 3,090,228 3,618,427 - - 3,090,228 3,618,427

Libraries 1,457,336 1,473,689 - - 1,457,336 1,473,689 Conservation of natural resources 3,811,748 5,281,372 - - 3,811,748 5,281,372 Economic and Community development 1,893,570 2,001,306 - - 1,893,570 2,001,306 Interest and fiscal charges 4,078,105 3,510,678 - - 4,078,105 3,510,678 Business-type Activities:

Water and sewer - - 10,905,989 10,610,705 10,905,989 10,610,705 Parks and recreation - - 4,099,507 2,789,901 4,099,507 2,789,901 Public marinas - - 67,395 96,739 67,395 96,739 Airport - - 1,167,655 1,017,780 1,167,655 1,017,780 Total Expenses 129,021,505 1 25,478,336 16,240,546 14,515,125 145,262,051 139,993,461 Decrease in Net Assets before Transfers ( 18,104,710) (14,372,284) (2,934,138) (379,512) (21,038,848) (14,751,796)

Transfers in (out) ( 611,922) (559,331) 611,922 559,331 - - Increase (Decrease) in Net Assets ( 18,716,632) (14,931,615) ( 2,322,216) 179,819 (21,038,848) (14,751,796) Net Assets - Beginning of Year 98,196,735 113,128,350 97,213,182 97,033,363 195,409,917 210,161,713 Net Assets - End of Year $ 79,480,103 $ 98,196,735 $ 94,890,966 $ 97,213,182 $ 174,371,069 $ 195,409,917

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Governmental activities:

Revenues for governmental activities were $110.9 million for fiscal year 2011. The following chart depicts revenues by source for governmental activities:

Revenues by Source - Governmental Activities For the Year Ended June 30, 2011 Investment Income County 0.12% transfer taxes 1.05% Gain on Sale of Capital Assets Miscellaneous 0.25% Recordation 0.64% taxes Hotel taxes 3.25% 0.40% Charges for services 3.74% Admission and amusement taxes Operating, capital & 0.17% restricted grants 8.61% Local income tax 27.61% Property taxes 54.16%

• Taxes comprise the largest source of County revenue, totaling $96.1 million (86.6

percent) of total revenue for fiscal year 2011. Of that amount, property and local income tax together yielded $90.7 million (81.8 percent) of all revenue. Each County sets its own property and income tax rates, within parameters established by the State. For fiscal year 2011, the County’s property tax rate was set at $.7671 per $100 of assessed value of real property, based on full cash value of that property. This was a slight decrease

from the fiscal year 2010 rate of $.770 per $100 of assessed value of real property. The County’s local income tax rate remained at 2.85 percent of the State taxable income for calendar years 2011 and 2010. There is no local sales tax in the State of Maryland.

• Operating grants and contributions, totaling $6.0 million, reflect grants from Federal and

State agencies that support specific County programs. Programs that benefitted the most were: social services ($2.1 million or 34.2 percent) and public safety ($1.5 million or 24.4 percent).

• Charges for services, totaling $4.1 million, reflect fees charged to County citizens. These

primarily support public safety ($1.1 million or 26.3 percent), general government ($1.1 million or 26.3 percent), public works ($872 thousand or 21.1 percent); and education functions ($755 thousand or 18.2 percent).

• Capital grants and contributions, totaling $3.6 million, reflect contributions from Federal

and State agencies, as well as developers. Capital activities that benefit the most this year are: conservation of natural resources ($1.9 million or 54.2 percent) and public works ($901 thousand or 25.4 percent).

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Expenses for all governmental activities were $129.0 million for fiscal year 2011. The following chart depicts expenses by function for governmental activities:

Expenses - Governmental Activities For the Year Ended June 30, 2011 Economic and Community Interest and fiscal development Conservation of 1.47% charges natural resources 3.16% 2.95% General government Libraries 12.38% 1.13% Parks and recreation Public safety 2.39% 19.70% Public works Education 7.05% 44.57% Health 1.32% Social services 3.88% As noted in the chart above and the table below, by far the County’s largest program and highest

priority is education, with expenses totaling $57.5 million (44.6 percent). In order of priority, public safety expenses totaled $25.4 million (19.7 percent); general government expenses were $16.0 million (12.4 percent); public works and roads expenses were $9.1 million (7.0 percent);

social services expenses totaled $5.0 million (3.9 percent); conservation of natural resources were $3.8 million (2.9 percent); parks and recreation expenses were $3.1 million (2.4 percent);

economic and community development expenses were $1.9 million (1.5 percent); and other expenses were $7.2 million (5.6 percent).

The following table summarizes costs and program-related revenues for the same programs in order of priority, yielding net service costs:

Expenses Program-Related Revenues Net Cost of Services Net Cost of Governmental Activities 2011 2010 2011 2010 2011 2010 Education $ 57,506,341 $ 53,491,659 $ 755,443 $ 1,285,201 $ (56,750,898) $ (52,206,458) Public Safety 25,413,678 25,361,341 2,634,510 3,457,898 (22,779,168) (21,903,443) General Government 15,968,633 14,089,387 1,899,088 1,852,149 (14,069,545) (12,237,238) Public Works 9,098,949 9,432,489 2,320,360 1,688,797 (6,778,589) (7,743,692)

Social Services 5,001,240 5,554,667 2,335,192 5,422,585 (2,666,048) (132,082) Conservation of Natural Resources 3,811,748 5,281,372 3,004,963 4,385,045 (806,785) (896,327) Parks and Recreation 3,090,228 3,618,427 389,467 932,408 (2,700,761) (2,686,019) Economic and Community Development 1,893,570 2,001,306 354,690 654,083 (1,538,880) (1,347,223) Other 7,237,118 6,647,688 - - (7,237,118) (6,647,688)

Total $ 129,021,505 $ 125,478,336 $ 13,693,713 $ 19,678,166 $ (115,327,792) $ (105,800,170)

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Of the total cost of $129.0 million for governmental activities, $13.7 million (10.6 percent), of those costs were covered by program-related revenues paid by individuals and external governmental entities. Of these outside entities, individuals who benefited directly from County programs were charged user fees of $4.1 million, while governments and other organizations that benefited indirectly from these programs contributed operating grants of $6.0 million and capital

grants of $3.6 million.

County taxpayers paid for most of the remaining $115.3 million in net program costs, through a variety of County taxes, for a total of $96.1 million. Net program costs of services provided to the public, in order of net cost, were: $56.8 million for education; $22.8 million for public safety; $14.1 million for general government; $6.8 million for public works; $2.7 million for parks and recreation;

$2.7 million for social services; $1.5 million for economic and community development; $807 thousand for conservation of natural resources; and $7.2 million for other services. See Changes in Net Assets and General Fund Budgetary Highlights for further details.

Changes in net assets: Government-wide revenues, less expenses, plus/minus transfers in/out, yield changes in net assets. During fiscal year 2011, governmental activities decreased the County’s net assets overall by $18.7 million, compared to a decrease of $14.9 million in fiscal year 2010. The following discussion explains changes in net assets relative to the prior fiscal year.

Revenues for governmental activities decreased by $189 thousand (0.2 percent). The following key revenues changed, when compared to the prior fiscal year:

• Local income tax increased by $4.9 million (19.1 percent), from $25.7 million to $30.6

million. The majority of the increase relates to the local income reserve held by the State of Maryland for Queen Anne’s County. For fiscal year 2010, the local income tax reserve held by the State decreased by $4.3 million (compared to fiscal year 2009), and was reflected in the income tax revenue for the year. However, for fiscal year 2011, the local income tax reserve increased by $1.4 million when compared to fiscal year 2010.

However, actual receipts for local income tax remained almost constant, with a decrease of only $120 thousand.

Local Income Tax Reserve - Held by State of Maryland for Queen Anne's County as of June 30 Tax Year Reserve Percent Change Increase/(Decrease) 2003 2001 $ 7,514,231 2004 2002 9,791,788 30% $ 2,277,557 2005 2003 10,814,022 10% 1,022,234 2006 2004 12,051,523 11% 1,237,501 2007 2005 12,303,288 2% 251,765 2008 2006 12,902,125 5% 598,837 2009 2007 11,695,290 -9% ( 1,206,835) 2010 2008 7,378,018 -37% ( 4,317,272)

2011 2009 8,748,190 19% 1,370,172

• Capital grants and contributions decreased by $4.9 million, from $8.5 million in fiscal year

2010 to $3.6 million in fiscal year 2011. Significant factors influencing this decrease are:

o Social Services decreased by $2.5 million (92.0 percent). Of this decrease, $2.1 million related to the Sudlersville Senior Center, which was constructed as part of a Public Housing Authority contract, and subsequently donated to the County’s Social Services department to manage in fiscal year 2010. In addition, $429 thousand was received in fiscal year 2010 from the American Recovery and Reinvestment Act

(ARRA) of 2009 for the purchase of five buses for the Department of Aging.

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o Conservation of Natural Resources decreased by $2.3 million (54.1 percent), mainly due to a decrease of $3.7 million in state capital grants related to purchasing easements as part of the Rural Legacy program. Offsetting this decrease was an increase of $1.4 million in state capital grants for the purchase of Conservation Reserve Enhancement Program (CREP) easements.

o Parks and Recreation decreased by $432 thousand (68.4 percent). There were several capital projects with decreased capital grant and contribution revenue in fiscal year 2011, as well as other projects with increased capital grant and contribution revenue. All of these fluctuations relate to the timing of the projects. There were several projects that closed at the end of fiscal year 2010, and not as many were in

progress during 2011, therefore the net revenue decreased.

o Public Works increased by $637 thousand (241.3 percent), mainly as a result of an American Recovery and Reinvestment Act (ARRA) grant of $878 thousand received in fiscal year 2011 for roads capital projects.

• Operating grants and contributions decreased by $700 thousand, from $6.7 million in

fiscal year 2010 to $6.0 million in fiscal year 2011. Key factors for this change are:

o Social Services decreased by $617 thousand (23.1 percent) mainly due to decreased operating grant funding of $575 thousand for Community Partnerships. The decrease to Community Partnerships was the result of funding cuts from the State of Maryland.

o Education decreased by $433 thousand (100 percent). In fiscal year 2010, a State grant for $433 thousand was received for the renovations at Bayside Elementary School. There was no such grant in fiscal year 2011.

o Public Safety decreased by $430 thousand (22.7 percent). Although there were numerous increases and decreases between 2010 and 2011, a few significant transactions are worth mentioning. First of all, there was a new grant of $365 thousand received in fiscal year 2011 for the Eastern Shore Communications Alliance. Secondly, a grant of $799 thousand was received in fiscal year 2010 for a new phone system for Emergency Services, of which there was no similar grant

received in fiscal year 2011.

o Conservation of Natural Resources increased by $913 thousand (981.9 percent) as a result of federal grant funding of $962 thousand received in fiscal year 2011 for the purchase of a land conservation easement.

• Gain on sale of capital assets increased by $254 thousand (951.8 percent), from $27

thousand in fiscal year 2010 to $281 thousand in fiscal year 2011. The majority of the increase related to the sale of land in the Matapeake Business Park. The land was sold for $350 thousand, which was $190 thousand higher than the basis.

Expenses for governmental activities increased by $3.5 million (2.8 percent) and transfers out to business-type activities increased by $53 thousand, for a total increase of $3.6 million. Key positive and negative expense changes, in order of relative importance, are:

• Education expenses increased by $4.0 million (7.5 percent). This increase was primarily

the result of increased expenses relating to school related capital projects. In fiscal year 2011, the expense associated with capital projects for schools was $7.9 million, which was an increase of $3.5 million from fiscal year 2010. Of the total $7.9 million in fiscal year 2011, $6.2 million related to the construction of Sudlersville Middle School. In fiscal year 2010, only $463 thousand was spent on the new middle school. In addition, several

other school related capital projects had fluctuations from the previous year.

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• General Government expenses increased by $1.9 million (13.3 percent), which was the

result of the early retirement incentives in fiscal year 2011. The County offered two separate early retirement incentives during the year to employees who met certain criteria related to age and length of service. Although approximately $2.4 million in expenditures (including termination pay, deferred compensation, and other benefit costs) were incurred to implement the early retirement programs, the County fully expects to

recover these costs and realize substantial savings in the future.

• Conservation of Natural Resources decreased by $1.5 million (27.8 percent) which was

the result of several changes. First, the Agricultural Transfer program did not incur any expenses in fiscal year 2011; however $1.1 million of expenses was incurred in fiscal year 2010. Secondly, the Rural Legacy program incurred $1.1 million of expense in fiscal year 2011, which is a decrease of $2.5 million from the $3.6 million spent on Rural Legacy in fiscal year 2010. Both of these programs relate to the purchase of easements

that preclude development, and together, they accounted for a decrease in expenses of $3.6 million in fiscal year 2011 from the prior year. Next, expenses for conservation of natural resources related to capital projects increased by $2.2 million, all of which relates to land preservation easements. For many of the easements, including Agricultural Transfer, Rural Legacy, and capital projects easements, the timing of purchases is

affected by whether land is identified for an easement, and also by the amount of any potential State funding available.

• Interest and fiscal charges increased by $567 thousand (16.2 percent). This increase

related to the 2009 bonds, of which the interest expense increased by $698 thousand. In fiscal year 2010, only a partial year’s interest was due, however, a full year’s interest was due in fiscal year 2011.

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Business-type activities:

Revenues, transfers in, and expenses for business-type activities were $13.3 million, $612 thousand, and $16.2 million, respectively, for fiscal year 2011. The following two charts depict revenues by source and expenses by service for business-type activities:

Revenues by Source - Business-Type Activities For the Year Ended June 30, 2011 Investment Miscellaneous income 6.65% 3.06% Operating & Charges for capital grants services & contributions 74.28% 16.01% Expenses by Service - Business-Type Activities For the Year Ended June 30, 2011 Public Airport marinas 7.19% 0.41% Water and sewer 67.16% Parks and recreation 25.24% Business-type activities decreased the County’s net assets altogether by $2.3 million in fiscal

year 2011, which was $2.5 million less than the prior year’s increase of $180 thousand. The fiscal year 2011 change in net assets resulted primarily from:

• Capital grants and contributions decreased by $492 thousand (19.2 percent), from $2.6

million in fiscal year 2010 to $2.1 million in fiscal year 2011. The net decrease in funding resulted from changes in several projects simply due to the timing of the projects. As the majority of activity took place in fiscal year 2010 for the new runway project, the Airport had a decrease of $1.1 million for capital grants. Offsetting the decreases in Airport capital grants was an increase of $590 thousand for sewer capital projects; and $39

thousand for water capital projects.

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• Operating grants and contributions decreased by $143 thousand (70.7 percent), from

$203 thousand in fiscal year 2010 to $60 thousand in fiscal year 2011. Part of this decrease is the result of reimbursements from FEMA in fiscal year 2010 for the costs associated with the record breaking snow storms that occurred in December 2009 and February 2010. In fiscal year 2010, the Sanitary District received $44 thousand from FEMA and the Airport received $32 thousand, for a total FEMA reimbursement of $76

thousand. No such activity occurred in fiscal year 2011. Also, the Sanitary District had additional state grant funding in fiscal year 2010 of $54 thousand.

• Operating expenses before transfers increased by $1.7 million (11.9 percent), from $14.5

million in fiscal year 2010 to $16.2 million in fiscal year 2011, for all business-type activities. Of the total increase in expenses, $1.3 million is related to a loss on disposal of capital assets for Property Management. As explained later in the capital assets section of this MD&A, the disposal related to the Bay Model Property. Of the remaining increase, $226 thousand was caused by a loss on disposal of capital assets due to the

retirement of obsolete Sanitary District infrastructure.

Financial Analysis of the Government’s Funds As noted earlier, Queen Anne’s County Government uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. Detailed financial data based on the government’s fund accounting can be found in the governmental fund statements in this report.

Governmental Funds: The focus of Queen Anne’s County Government’s governmental funds is to provide information on near term inflows, outflows, and balances of spendable resources.

Such information is useful in assessing Queen Anne’s County Government’s near term financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of a fiscal year.

As of the end of the current fiscal year, Queen Anne’s County Government’s governmental funds reported combined ending fund balances of $48.7 million, compared to $49.6 million for the prior year. Approximately 9.6 percent of this total ($4.6 million) constitutes unassigned fund balance, which is available for spending. The total unassigned fund balance of $4.6 million includes $4.8 million of positive unassigned fund balance for the general fund, which is offset by negative

unassigned fund balances of $172 thousand in the non-major governmental funds. Additional detail on the negative unassigned balances can be found in Note 15 on page 106.

The nonspendable fund balance, at 9.0 percent of the total fund balance ($4.4 million), is not available for spending and includes amounts related to inventory and loans receivable.

Restricted fund balance of $22.3 million (45.9 percent) includes amounts that can be spent only for specific purposes stipulated by external sources or legal restrictions. Committed fund balance of $2.5 million (5.1 percent) represents those amounts that can be used only for the specific purposes of the government’s highest level of decision-making authority.

The remaining 30.4 percent of fund balance ($14.8 million) constitutes assigned fund balances.

These amounts are intended to be used by the government for the specific purposes of each fund.

The General Fund is the chief operating fund of Queen Anne’s County Government. At the end of the current fiscal year, the General Fund had a total fund balance of $5.8 million, which is a decrease of $8.2 million from the fiscal year 2010 balance of $14.0 million.

Of the total $5.8 million in fund balance, $4.8 million is unassigned, meaning that there are no constraints on how the funds can be spent. During the year, the County decided to eliminate the requirement to maintain a Rainy day Fund, as the fund did not meet the criteria established for

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Rainy Day Funds under GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The County Commissioners plan to establish a new Rainy Day Fund in the future that meets the requirements of GASB Statement No. 54.

The decrease of $8.2 million in the fund balance of the General Fund was primarily due to a decrease in revenue. Total revenues, including transfers in, for fiscal year 2011 were $100.5 million, which is $7.6 million less than the total revenues of $108.1 million in fiscal year 2010.

Although all revenue sources fluctuated, the noteworthy item to mention is the change in transfers into the General Fund. In fiscal year 2010, a transfer of $8.3 million was made from the General Capital Projects Fund to the General Fund and no such transfer was made in fiscal year 2011.

Expenditures also decreased by $376 thousand, from $109.1 million in fiscal year 2010 to $108.7 million in fiscal year 2011. Transfers out decreased by $5.3 million, from $8.2 million in fiscal year 2010 to $2.9 million in fiscal year 2011. In fiscal year 2010, transfers out included $4.7 million to the Roads Board in an effort to compensate for the decrease in State Shared Highway User Tax revenue. The General Fund did not transfer any funds to the Roads Board in fiscal year

2011.

Offsetting the decrease in transfers out was an increase in debt service and also in miscellaneous expense. Debt service increased by $2.4 million; from $8.0 million in fiscal year 2010 to $10.4 million in fiscal year 2011. This increase was the result of payments totaling $2.2 million (principal and interest) due on the 2009 bonds, of which only a partial interest payment of $553 thousand was due in fiscal year 2010. Also, a payment of $800 thousand was made on a loan

related to property, which there were no principal payments due for this loan last year.

Miscellaneous expense increased from $1.4 million in fiscal year 2010 to $4.7 million in fiscal year 2011, which is an increase of $3.3 million. There were several increases to various miscellaneous expenses during the year; however, the most significant was the cost of $2.4 million for the early retirement incentive plans.

For further explanations of General Fund revenues and expenditures, see the General fund Budgetary Highlights section of this MD&A.

The General Capital Projects Fund accounts for all capital projects related to governmental funds, except those accounted for in the Roads Capital Projects Fund, which is discussed below.

As of June 30, 2011, the General Capital Projects Fund has a total fund balance of $28.4 million, compared to $17.7 million at the end of the prior fiscal year. This $10.7 million increase in total fund balance is comprised of $7.0 million in bond proceeds, which were received but legally restricted to cover certain on-going projects; $2.7 million assigned to fund future capital projects;

and $1.0 million in commitments by County officials to fund construction of facilities and infrastructure.

The Roads Capital Projects Fund accounts for financial resources used for the construction of County Road infrastructure, as well as other large multi-year projects that relate to capital assets, and are financed mostly from roads-related capital grants and roads benefit assessments.

As of June 30, 2011, the Roads Capital Projects Fund has a total fund balance of $4.1 million, compared to $4.0 million at the end of the prior fiscal year. Of this total $4.1 million fund balance, $3.3 million has been assigned to fund ongoing projects, while $778 thousand has been contributed by local developers and is committed to fund certain infrastructure improvements.

The School Impact Fees Capital Projects Fund accounts for financial resources generated by new residential construction. Those funds are then used for the construction of public school facilities or payment of debt relating to such construction.

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The total fund balance as of June 30, 2011 was $416 thousand, which was a decrease of $652 thousand from the prior year fund balance of $1.1 million. This decrease resulted from a transfer out of $1.4 million to the General Fund, to cover debt service payments related to school construction, while only $756 thousand was received during the year. This revenue consists mainly of impact fee charges, which were $97 thousand lower than received the year before.

The Roads Board Fund accounts for financial resources received from the State, plus a substantial amount from the County, for the maintenance of County road infrastructure.

The total fund balance as of June 30, 2011 was $1.6 million, which is a decrease of $2.6 million from the fiscal year 2010 fund balance of $4.2 million. This decrease in fund balance mainly resulted from a decrease in transfers in for the year. In fiscal year 2010, the County transferred $4.7 million to the Roads Board Fund from the General Fund; however, there were no transfers in for fiscal year 2011. In addition,

revenue decreased by $66 thousand in fiscal year 2011, compared to the prior fiscal year. This decrease resulted from a decrease of $217 thousand in Highway User Tax Revenue, which was partially offset by increases in other revenue sources.

Offsetting a portion of the decreases in revenue and transfers in was a decrease of $820 thousand in operating expenditures when compared to the prior fiscal year, and also a decrease in transfers out in the amount of $445 thousand. The decrease in operating expenditures results from the County’s decision to complete only crucial tasks during the year, while curtailing routine maintenance. This decision was made as a result of the State virtually ceasing to share State levied Highway User Tax

revenue with its counties, starting early in fiscal year 2010. Given the drastic cuts in Highway User Tax revenue and a persistently soft economy, the County only has resources to maintain the roads at a serviceable level.

Transfers out decreased by $445 thousand, as the transfer out in fiscal year 2010 related to a one time transaction. Funds were collected in the Roads Board Fund in a prior year, however, they related to a capital project; therefore the funds were transferred out of the Roads Board and to the Roads Capital Project Fund in fiscal year 2010.

Proprietary funds: Queen Anne’s County Government’s enterprise fund statements provide the same type of information found in the government-wide financial statements, but in more detail.

Also, due to/due from other funds are combined in the government-wide statements and reported as Internal Balances between governmental and business-type activities, which net to zero.

Total unrestricted net assets of the Sanitary District Enterprise Funds at the end of fiscal year 2011 amounted to $13.3 million, which is $263 thousand less than the prior year. This resulted from the use of Restricted Fund assets to repay a large portion of debt service due for the BNR/ENR sewer plant debt, which is an approved use for these restricted monies.

Total net assets amounted to $74.4 million at the end of fiscal year 2011, which decreased by $1.1 million when compared to the prior year. A large portion of the decrease relates to the costs associated with other post-employment benefits (OPEB), which totaled $792 thousand in fiscal year 2011 for the Sanitary District. Another part of the decrease is also due to the transfer of monies, in excess of receipts, from the Restricted and Debt Service Funds to operating Funds to

pay debt service. During fiscal year 2011, $311 thousand and $382 thousand were transferred in excess of receipts from the Restricted and Debt Service Funds, respectively.

The unrestricted net assets of the Bay Bridge Airport Enterprise Fund at year end amounted to negative $389 thousand compared to a negative $80 thousand at the end of the prior fiscal year, reflecting a decrease of $309 thousand. This change was mostly due to a reduction in federal and state capital contributions compared to the prior fiscal year, on the new runway project.

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Total net assets amounted to $13.5 million at the end of fiscal year 2011, which decreased by $95 thousand when compared to the prior year. This change was due to other post-employment costs of $65 thousand and also an increase of approximately $50 thousand in fuel expenses.

A discussion of Enterprise Fund capital assets and long-term debt can be found in those sections presented later in this MD&A.

General Fund Budgetary Comparisons The County adopts an operating budget for the General Fund as of July 1 each year and amends that budget throughout the year in response to actual events. Three schedules detail these events: summary, revenues and expenditures. These schedules can be found as part of Required Supplemental Information, which is located after the Notes on pages 115 through 119.

These Schedules report original and final budgets, as well as the variance between actual events and final budgets.

Original to Final Budget Comparisons. The final expenditure budget for the General Fund, including transfers out, totaled $113.9 million. Amendments increased spending authority by $4.6 million during fiscal year 2011, when compared to the original budget of $109.3 million.

Major components of these expenditure budget increases are as follows:

• Budgeted Miscellaneous Expenditures on behalf of Insurance and Benefit costs

increased by $2.8 million during the year, to $4.3 million. This increase in budget authority arose out of the following events:

o The majority of the increase in Insurance and Benefit Costs related to the retirement incentive plans. Due to the challenging financial situation the County faced in fiscal year 2011, the County developed two retirement incentive plans for the year, which included termination pay, deferred compensation and other benefits payable.

o The remaining increase relates to workmen’s compensation insurance costs.

The County also allocates workmen’s compensation insurance costs through the year based on insurance rates attributable to each class of workers. At year end, these costs are similarly adjusted to actual costs.

• Budgeted Debt Service increased by $665 thousand during the year. The majority of this

increase was for debt service for land purchased for the future construction of a new Circuit Courthouse.

• Budgeted Public Safety Expenditures increased by $673 thousand, from the original

budget of $21.4 million to the final budgeted expenditures of $22.1 million for fiscal year 2011. Of the increase, $365 thousand related to the Eastern Shore Communications Alliance, which was a new grant this year, as mentioned previously in this MD&A.

Another $220 thousand increase related to two grants for Emergency Services; $190 thousand for a Homeland Security Program Grant and the remaining $30 thousand for a grant from the Maryland Emergency Management Agency. There were also a few miscellaneous decreases which offset a small portion of the increased budgeted expenditures.

Budget to Actual Comparisons. Actual revenues for the General Fund, including other financing sources and before appropriated fund balance were less than final budgetary estimates by $4.0 million. Actual expenditures, and other financing uses, were less than final budgetary appropriations by $5.2 million. The net effect of these two opposing events was a positive variance of actual to final budget of $1.2 million.

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The most noteworthy differences between final budgeted amounts and actual amounts are summarized as follows:

Revenues:

• Income tax revenue was $3.5 million less than budgeted (10.5 percent). The previous

County Commissioners based the budget for fiscal year 2011 income tax revenue on positive economic indicators; however the actual revenue came in much less, but comparable to the prior year.

• Recordation tax revenue was $223 thousand less than expected (8.4 percent), as County

revenues related to housing activity continued to be affected by the slow housing market.

• Investment income was $177 thousand less than expected (78.0 percent). This resulted

from fluctuations in cash on hand and interest rate reductions.

Expenditures:

• Final Budgeted Salaries and Benefits were $31.7 million for the year, while actual costs

were $30.0 million. They were underspent at year-end by $1.7 million (5.3 percent). Of this amount, the department of emergency services was responsible for $383 thousand of the unspent portion, the sheriff’s office for $357 thousand, and solid waste for $273 thousand. This was due to routine turnover, vacant positions and the retirement incentive plans offered by the County during this fiscal year.

• Final Budgeted Other Operating Charges were $81.7 million for the year, while actual

costs were $78.5 million. These costs were lower than budget at year end by $3.2 million (3.9 percent). Operating Charges include contracted services, supplies, debt service, transfers out, and other charges.

o Contracted Services were underutilized by $419 thousand, largely due to savings by the detention center ($208 thousand), with the largest savings for medical charges ($186 thousand).

o Supplies were underspent by $120 thousand, largely due to savings by the detention center ($46 thousand), with the largest savings for uniforms/apparel ($20 thousand) due to the timing of the orders.

o Other Charges were underspent by $2.3 million, primarily due to debt service ($1.3 million) and the timing of bond payments. Included in the fiscal year 2011 budget were payments for the 2011 bonds, however there were not any payments due until fiscal year 2012. The remaining $1.0 million in savings for other charges were spread out throughout the General Fund, as all departments are continuing the effort of increasing efficiencies whenever possible.

o Transfers Out were underutilized by $394 thousand, primarily due to savings by the Department of Aging ($257 thousand) and the Department of Housing ($83 thousand), which allowed these Departments to forgo this portion of their appropriation.

• Final Budgeted Capital Outlay was $512 thousand for the year, while actual costs were

$238 thousand. Purchases of capital assets were less than anticipated by $274 thousand (53.5 percent). This is largely due to the County’s economic climate and its desire to reduce spending.

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Capital Assets and Debt Administration Capital assets: Queen Anne’s County Government’s investment in capital assets for its governmental and business-type activities as of June 30, 2011 amounted to $241.9 million (net of accumulated depreciation). This investment in capital assets includes land and land improvements, intangible rights, construction in progress, buildings, improvements other than buildings, infrastructure, autos, machinery, and equipment.

Capital asset activities, net of depreciation, are summarized as follows:

Governmental Activities Business Type Activities Total Capital Assets, Net of Depreciation 2011 2010 2011 2010 2011 2010 Land and Land Improvements $ 81,551,088 $ 79,718,879 $ 14,209,466 $ 14,209,466 $ 95,760,554 $ 93,928,345 Intangible Rights - Easements 13,390 13,390 6,140 - 19,530 13,390 Construction in Progress 8,171,028 11,616,229 5,486,372 5,199,865 13,657,400 16,816,094 Buildings 30,780,208 26,865,669 10,459,319 12,419,423 41,239,527 39,285,092

Improvements other than Buildings 4,777,203 4,570,359 4,444,591 4,137,631 9,221,794 8,707,990 Infrastructure 9,066,088 8,962,561 48,429,689 48,632,364 57,495,777 57,594,925 Auto, Machinery, and Equipment 9,516,953 11,377,130 14,951,492 15,762,023 24,468,445 27,139,153 Total $ 143,875,958 $ 143,124,217 $ 97,987,069 $ 100,360,772 $ 241,863,027 $ 243,484,989 Queen Anne’s County’s total investment in capital assets for the current fiscal year, net of

depreciation, decreased by 0.7 percent, or $1.6 million. Of this amount, governmental investment in capital assets increased by $752 thousand, while business-type investment in capital assets decreased by $2.4 million.

Changes in the County’s capital assets, with depreciation shown separately, are summarized as follows. Note that completed projects that were reclassified from construction in progress (CIP) to other asset accounts during the year net to zero and are reported in the same column.

Governmental Activities Construction In Changes in Capital Assets 2010 Additions Progress & Transfers Retirements 2011 Land and Land Improvements $ 79,718,879 $ - $ 1,992,091 $ (159,882) $ 81,551,088 Intangible Rights - Easements 13,390 - - - 13,390 Construction in Progress 11,616,229 4,422,434 (7,668,861) ( 198,774) 8,171,028 Buildings 35,066,000 35,040 4,959,022 ( 227,064) 39,832,998 Improvements other than Buildings 5,517,458 16,130 359,008 - 5,892,596

Infrastructure 15,491,275 - 358,740 - 15,850,015 Auto, Machinery, and Equipment 28,988,183 482,223 - (1,361,546) 28,108,860 Total Assets before depreciation 176,411,414 4,955,827 - (1,947,266) 179,419,975 Less Depreciation ( 33,287,197) ( 3,533,792) - 1,276,972 (35,544,017) Total Assets after depreciation $ 143,124,217 $ 1,422,035 $ - $ (670,294) $ 143,875,958 Business-Type Activities Construction In

Changes in Capital Assets 2010 Additions Progress & Transfers Retirements 2011 Land and Land Improvements $ 14,209,466 $ - $ - $ - $ 14,209,466 Intangible Rights - Easements - 6,140 - - 6,140 Construction in Progress 5,199,865 1,737,157 (1,381,340) ( 69,310) 5,486,372 Buildings 18,218,809 13,451 15,497 (1,494,595) 16,753,162 Improvements other than Buildings 6,407,390 - 559,519 - 6,966,909 Infrastructure 68,224,214 837,427 806,324 (226,763) 69,641,202

Auto, Machinery, and Equipment 23,277,123 366,760 - (436,196) 23,207,687 Total Assets before depreciation 135,536,867 2,960,935 - (2,226,864) 136,270,938 Less Depreciation ( 35,176,095) ( 3,704,009) - 596,235 (38,283,869) Total Assets after depreciation $ 100,360,772 $ ( 743,074) $ - $ (1,630,629) $ 97,987,069

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Noteworthy capital asset events during the current fiscal year for governmental activities included the following:

• Land and Land Improvements increased by a net amount of $1.8 million. This increase is

primarily the result of the following three events: (a) the County acquired a parcel of land near the Town of Centreville with the intent of encouraging commercial use of the property ($1.4 million); (b) the site work necessary to construct access roads to the Queen Anne’s Emergency Center in Grasonville was completed ($584 thousand); and (c) the County sold a parcel of land in the Matapeake Business Park to a commercial entity

for $350 thousand ($160 thousand book value).

• Construction in Progress (CIP) decreased by a net amount of $3.4 million. The following

factors contributed to this decrease:

Costs reclassified from Construction in Progress include: (a) a major renovation to the County’s transit garage facility ($4.7 million); (b) infrastructure improvements near the Queen Anne’s Emergency Center ($730 thousand); (c) improvements to Ferry Point Park ($374 thousand); and (d) a housing property rehabilitated and later sold to a qualified buyer ($217 thousand).

Major additions to Construction in Progress include: (a) costs to acquire the County Complex property, later reclassified to the Land account ($1.4 million); (b) the acquisition of agricultural easements ($717 thousand); (c) improvements to Tanyard Road ($686 thousand); (d) Railroad Avenue building renovations ($581 thousand); (e) further development of the White Marsh Park ($178 thousand); and (f) security upgrades and a

new generator for the County Courthouse ($85 thousand).

Additionally, costs related to soil remediation efforts were retired from Construction in Progress as those amounts were deemed to be non-capital in nature ($199 thousand).

• Buildings and Improvements increased by a net amount of $4.8 million. This increase is

due almost exclusively to the completion of the public works transit garage renovation ($4.7 million). Other additions include minor renovations to the emergency services hanger and the lower level of the circuit court building ($46 thousand).

• Improvements to Site Other than Buildings increased by $375 thousand. This increase

relates primarily to the completion of two capital projects: (a) the Ferry Point Trail improvements and amenities were completed ($166 thousand); and (b) traffic barriers were installed along several roadways throughout the County ($192 thousand).

• Infrastructure increased by $359 thousand. This increase relates primarily to the

completion of two infrastructure projects as follows: (a) Shoreway Drive and Leonard Smith Road, which provide access to the Queen Anne’s Emergency Center in Grasonville ($146 thousand); and (b) the construction of a pedestrian crossing at the Ferry Point Park ($207 thousand).

• Auto, Machinery and Equipment decreased by a net amount of $879 thousand. The

following factors culminated in this change:

Additions of $482 thousand include the following: (a) the Aging Department utilized grant funding to acquire two new small scale transit buses ($199 thousand); (b) the Sheriff’s department acquired replacement law enforcement vehicles ($139 thousand); (c) Solid Waste purchased roll-off containers and a waste compactor ($50 thousand); and (d) computer-related equipment was acquired for several County departments ($37

thousand).

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Retired items of $1.4 million include the following, the majority of which were fully depreciated: (a) vehicles and construction equipment deemed obsolete ($806 thousand);

(b) retirement of unserviceable public safety and transit vehicles ($465 thousand); and (c)

obsolete computer software and hardware ($96 thousand).

Noteworthy capital asset events during the current fiscal year for business-type activities included the following:

• Buildings decreased by $1.5 million due to the clearing of the Bay Model property. In an

effort to promote economic growth in the County, this land is currently being developed as the Matapeake Business Park, with lots to be sold to commercial entities.

• Improvements to Site Other than Buildings increased by $560 thousand. This increase

relates to the completion of three public landings improvement projects as follows: (a) Shipping Creek Bulkhead ($197 thousand); (b) Kent Narrows Ramp ($174 thousand);

and (c) Thompson Creek Ramp ($189 thousand).

• Infrastructure increased by a net amount of $1.4 million. The following factors contributed

to this increase: (a) two Sanitary Waterworks capital projects were completed and the resulting infrastructure was placed in service ($806 thousand); (b) water and sewer infrastructure constructed by developers were contributed to the County and incorporated into the County’s water and sewer system ($837 thousand); and (c) obsolete infrastructure removed from service and retired ($226 thousand).

Additional information on the County’s capital assets can be found in Note 6 of this report.

Long-term debt: At the end of the current fiscal year, Queen Anne’s County Government had total bonded debt, loans, capital leases, other post-employment benefit obligations, and compensated absence obligations of $143.1 million for its governmental and business-type activities.

The full faith, credit and unlimited taxing power of the County are irrevocably pledged to the levy and collection of taxes in order to provide for the payment of principal and interest due on the bonded debt.

Of this $143.1 million in debt, $23.1 million is considered to be self-supporting, in that obligations of the County’s enterprise funds will be funded through charges and assessments related to the operations of those funds. In addition, the Sanitary District’s Debt Service Fund holds total assets of $5.2 million, which are restricted to payment of the Sanitary District’s subsequent year’s debt.

See Note 10 on pages 93 to 95 for restricted assets and subsequent year debt service obligations.

Debt activities are summarized as follows:

Bonded Debt, Loans, Other Post-Employment Benefit Obligation, Governmental Activities Business Type Activities Total and Compensated Absences 2011 2010 2011 2010 2011 2010 Bonds, Notes, Premiums and Deferred Debt Costs $ 103,916,450 $ 8 9,725,398 $ 20,150,999 $ 21,611,733 $ 124,067,449 $ 111,337,131 Other Post-Employment Benefit Obligation 13,884,282 8 ,548,639 2,647,180 1,562,119 16,531,462 10,110,758

Compensated Absences 2,162,070 2 ,434,947 339,762 296,788 2 ,501,832 2,731,735 Total Long-term Debt $ 119,962,802 $ 100,708,984 $ 23,137,941 $ 23,470,640 $ 143,100,743 $ 124,179,624

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During the 2011 fiscal year, the County’s total net debt increased by $18.9 million (15.2 percent).

Of this amount, governmental debt increased by $19.3 million (19.1 percent), while business-type debt decreased by $333 thousand (1.4 percent). The County issued 2011 Bonds totaling $21.5 million and also entered into a promissory note agreement for $365 thousand. In addition, total Other Post-Employment Benefit Obligations increased by $6.4 million. Offsetting these increases were changes in accruals, plus the County’s repayment of existing debt in accordance with

established repayment schedules for bonds, notes, and capital lease agreements.

Additional information on the County’s long-term debt can be found in Note 9, pages 83 to 92, of this report.

The public local laws of Queen Anne’s County limit the amount of general obligation debt to no more than $8.0 million, unless authorized under specific legislation. Currently, approximately $6.9 million of this authority is available. All other debt has been authorized under specific legislation. Additional information on the computation of the legal debt margin can be found in Table 12 of the Statistical Section of this report.

During fiscal year 2011, the rating agencies recalibrated their ratings and Queen Anne’s County Government received an “AA+” bond rating from Fitch Rating Service and an “Aa2” bond rating from Moody’s Investors Service.

Economic Factors and Next Year’s Budget and Rates The following economic factors were considered in preparing Queen Anne’s County Government’s operating and capital budgets for the 2012 fiscal year:

• Property assessments are projected to decrease by 0.15 percent over the previous year,

based on State Assessment Office values used to compute the Constant Yield rate.

• The County Commissioners adopted a property tax rate of $.8471 per $100 of assessed

valuation of real property for fiscal year 2012. This is an increase of $0.08 (10.4 percent) from the rate of $0.7671 in effect for the 2011 fiscal year. In addition, the County Commissioners also increased the Homestead Property Tax Credit from 0% to 5% for the taxable year beginning July 1, 2012. The property tax rate, along with the expected decrease in property assessments, are reflected in the projected fiscal year 2012

property tax revenue of $65.9 million, which is an increase of $5.8 million (9.6 percent) over the fiscal year 2011 revenue of $60.1 million.

• Income tax revenue is projected to increase to $31.1 million in fiscal year 2012, which is

a 5.3% increase over actual receipts for fiscal year 2011. The increase is a result of the County Commissioners raising the income tax rate from 2.85% of all taxable wages, to 3.2% (12.3% increase), effective January 1, 2012.

• In preparation for the fiscal 2012 budget, a Task Force on Government Sustainability was

formed. The committee consisted of seven citizens and two commissioner representatives tasked with reviewing existing County functions/services and recommending steps to ensure the long-term sustainability of County government. The Task Force was divided into three subcommittees: County functions, Public Safety, and Board of Education. Each subcommittee reviewed vital topics and presented recommendations to the County Commissioners. Before issuing the recommendations,

the Task Force met publicly on eleven separate occasions. The recommendations were considered as part of the Commissioners’ budget deliberations, and incorporated into the adoption of the fiscal year 2012 budget.

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In addition to the increase in the property and income tax rates, the following are a few of the policies to continue through fiscal year 2012:

o Continue the hiring freeze through fiscal year 2012 with all requests for new parttime and full-time employee positions to be presented to the Commissioners for approval prior to advertising a vacancy;

o Continue implementation of the County workforce furlough program;

o Continue the suspension of the employee education assistance program; and o Continue the suspension of the employee vacation pay-out program.

Requests for information This financial report is designed to provide a general overview of Queen Anne’s County Government’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Queen Anne’s County Finance Office, 107 N. Liberty Street, Centreville, Maryland 21617. This report can also be found on the County’s website,

http://www.qac.org (see Departments, Finance, Financial Reports and Forms, Link to 2011 Comprehensive Annual Financial Report (CAFR)).

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- 34 -

Basic Financial Statements

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QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF NET ASSETS

JUNE 30, 2011

PRIMARY GOVERNMENT

GOVERNMENTAL BUSINESS-TYPE

ACTIVITIES ACTIVITIES TOTAL

ASSETS

Equity in Pooled Cash and Investments $ 45,672,988 $ 9,901,836 $ 55,574,824 Cash and Cash Equivalents - - - Taxes Receivable (Net) 376,226 - 376,226 Accounts and Loans Receivable (Net) 4,819,962 6 29,006 5,448,968 Special Assessments (Net) 1,139,327 - 1,139,327 Internal Balances 751,513 (751,513) - Due from Primary Government - - - Due from Component Units 120,082 - 120,082 Due from Other Governments 12,897,896 1 54,469 13,052,365

Bond Interest Reimbursement Receivable - Build America Bond 110,004 4,496 114,500 Inventories 565,391 4 45,810 1,011,201 Prepaid Items 247 - 247 Restricted Assets:

Equity in Pooled Cash and Investments - 10,789,829 10,789,829 Investments - - - Accounts Receivable (Net) - 47,578 47,578 Special Assessments Receivable (Net) - 2 ,770,611 2,770,611 Capital Assets:

Nondepreciable Assets 89,735,506 19,701,978 109,437,484 Depreciable Assets, Net 54,140,452 78,285,091 132,425,543 Total Assets 210,329,594 121,979,191 332,308,785

LIABILITIES

Accounts Payable and Other Current Liabilities 3,830,576 4 25,042 4,255,618 Accrued Interest Payable 1,264,252 1 23,495 1,387,747 Due to Primary Government - - - Due to Component Units 3,008,665 - 3,008,665 Due to Other Governmental Agencies 319,806 - 319,806 Unearned Revenue 2,463,390 6 92,518 3,155,908 Escrow Deposits - 47,717 47,717 Liabilities Payable from Restricted Assets:

Unearned Revenue - 2 ,661,512 2,661,512 Noncurrent Liabilities:

Due within One Year 8,620,719 2 ,316,402 10,937,121 Due in More than One Year 111,342,083 20,821,539 132,163,622 Total Liabilities 130,849,491 27,088,225 157,937,716

NET ASSETS

Invested in Capital Assets, Net of Related Debt 118,274,533 78,069,061 196,343,594 Restricted for:

Governmental Activities 22,399,514 - 22,399,514 Debt Service - 3 ,288,572 3,288,572 Capital/Debt Service - 6 ,388,195 6,388,195 Business-type Operations - 6 ,391,838 6,391,838 Capital Projects - 7 53,300 753,300 Other Purposes - - - Unrestricted Net Assets (Deficit) (61,193,944) - (61,193,944) Total Net Assets $ 79,480,103 $ 94,890,966 $ 174,371,069 The accompanying notes to the basic financial statements are an integral part of this statement.

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QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF NET ASSETS

JUNE 30, 2011

(CONTINUED)

COMPONENT UNITS

BOARD OF FREE HOUSING

EDUCATION LIBRARY AUTHORITY

$ - $ - $ 2 ,123,122 13,772,461 703,236 3 34,490

- - -

490,248 21,509 6,876

- - -

- - -

3,008,665 - -

- - -

1,294,037 - 4 07,607

- - -

51,741 - - 4,120 17,200 -

- 650,441 -

- - 99,331

- - -

- - -

24,780,234 29,850 1 ,365,852 120,727,509 946,449 1 8,167,028 164,129,015 2,368,685 2 2,504,306 13,185,292 41,802 61,965

- - 20,904

- - 1 20,082

- - -

29,613 - 1 15,970 1,323,112 - 6,134

- - 97,855

- - -

492,102 - 1 02,089 15,412,480 561,264 2 ,780,751 30,442,599 603,066 3 ,305,750 145,503,183 976,299 16,995,112

- - -

- - -

- - -

- - -

815,400 - 2 ,073,691 225,990 10,500 - (12,858,157) 778,820 1 29,753 $ 133,686,416 $ 1,765,619 $ 19,198,556 The accompanying notes to the basic financial statements are an integral part of this statement.

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QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2011

PRIMARY GOVERNMENT

OPERATING CAPITAL

CHARGES FOR GRANTS AND GRANTS AND TOTAL

EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS REVENUE

PRIMARY GOVERNMENT

Governmental Activities General Government $ 15,968,633 $ 1,086,641 $ 694,347 $ 1 18,100 $ 1,899,088 Public Safety 25,413,678 1,090,545 1,461,080 82,885 2,634,510 Public Works 9,098,949 872,352 546,719 901,289 2,320,360 Health 1,701,677 - - - - Social Services 5,001,240 69,382 2,050,062 215,748 2,335,192 Education 57,506,341 755,443 - - 755,443 Parks & Recreation 3,090,228 187,901 1,868 199,698 389,467

Library 1,457,336 - - - - Conservation of Natural Resources 3,811,748 75,354 1,006,138 1 ,923,471 3,004,963 Economic/Community Development 1,893,570 4,236 239,893 110,561 354,690 Interest and Fiscal Charges 4,078,105 - - - - Total Governmental Activities 129,021,505 4,141,854 6,000,107 3 ,551,752 13,693,713 Business-type Activities Water and Sewer 10,905,989 8,192,471 - 837,426 9,029,897 Parks & Recreation 4,099,507 1,568,227 39,572 196,487 1,804,286

Public Marinas 67,395 84,987 16,241 588,326 689,554 Airport 1,167,655 37,955 3,715 448,600 490,270 Total Business-type Activities 16,240,546 9,883,640 59,528 2 ,070,839 12,014,007 Total Primary Government $ 145,262,051 $ 14,025,494 $ 6,059,635 $ 5 ,622,591 $ 25,707,720

COMPONENT UNITS

Board of Education $ 103,922,978 $ 1,528,632 $ 21,202,277 $ - $ 22,730,909 Free Library 1,945,560 7,818 198,275 - 206,093 Housing Authority 3,013,711 1,277,554 1,458,042 583,176 3,318,772 Total Component Units $ 108,882,249 $ 2,814,004 $ 22,858,594 $ 5 83,176 $ 26,255,774 General Revenues Local Property Tax Local Income Tax Other Local Taxes Admission and Amusement Taxes Recordation Taxes Hotel Taxes

County Transfer Taxes Grants and Contributions Not Restricted to Specific Programs Investment Income Gain on Sale of Capital Assets Miscellaneous Transfers In (Out) Total General Revenues and Transfers Change in Net Assets Total Net Assets - Beginning of Year Total Net Assets - End of Year The accompanying notes to the basic financial statements are an integral part of this statement.

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QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS

PRIMARY GOVERNMENT COMPONENT UNITS

GOVERNMENTAL BUSINESS-TYPE BOARD OF FREE HOUSING

ACTIVITIES ACTIVITIES TOTAL EDUCATION LIBRARY AUTHORITY

$ (14,069,545) $ - $ (14,069,545) $ - $ - $ - (22,779,168) - (22,779,168) - - - ( 6,778,589) - (6,778,589) - - - ( 1,701,677) - (1,701,677) - - - ( 2,666,048) - (2,666,048) - - - (56,750,898) - (56,750,898) - - - ( 2,700,761) - (2,700,761) - - - ( 1,457,336) - (1,457,336) - - - ( 806,785) - ( 806,785) - - - ( 1,538,880) - (1,538,880) - - - ( 4,078,105) - (4,078,105) - - - (115,327,792) - (115,327,792) - - -

- (1,876,092) (1,876,092) - - -

- (2,295,221) (2,295,221) - - -

- 6 22,159 622,159 - - -

- (677,385) ( 677,385) - - -

- (4,226,539) (4,226,539) - - -

$ (115,327,792) $ (4,226,539) $ (119,554,331) $ - $ - $ -

- - - (81,192,069) - -

- - - - (1,739,467) -

- - - - - 305,061

- - - (81,192,069) (1,739,467) 305,061

60,070,368 - 6 0,070,368 - - - 30,624,679 - 3 0,624,679 - - - 188,715 - 188,715 - - - 3,609,751 - 3,609,751 - - - 441,123 - 441,123 - - - 1,158,897 - 1,158,897 - - -

- - - 86,712,367 1 ,559,606 318,319

136,523 4 07,629 544,152 1 5,175 7,143 4,076 281,158 - 281,158 - - - 711,868 8 84,772 1,596,640 2 67,928 83,096 - ( 611,922) 6 11,922 - - - - 96,611,160 1 ,904,323 9 8,515,483 86,995,470 1 ,649,845 322,395 (18,716,632) (2,322,216) (21,038,848) 5 ,803,401 (89,622) 627,456 98,196,735 97,213,182 1 95,409,917 127,883,015 1 ,855,241 1 8,571,100 $ 79,480,103 $ 94,890,966 $ 1 74,371,069 $ 133,686,416 $ 1 ,765,619 $ 1 9,198,556

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

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QUEEN ANNE'S COUNTY, MARYLAND

BALANCE SHEET

GOVERNMENTAL FUNDS

JUNE 30, 2011

SCHOOL

GENERAL GENERAL ROADS IMPACT FEES

FUND CAPITAL CAPITAL CAPITAL

ASSETS

Cash and Cash Equivalents $ 3,903,548 $ 31,376,579 $ 3,415,386 $ 4 16,209 Prepaid Items - - - - Receivables Taxes Receivable (Net) 254,204 122,022 - - Accounts and Loans Receivable (Net) 266,842 2 ,036 1 9,518 4 19,329 Special Assessments (Net) - - 4 55,933 - Due from Other Governments 11,209,964 230,351 6 86,352 - Due from Other Funds 1,010,173 6 8,775 - - Due from Component Units 120,082 - - - Inventory 4,000 - - -

Total Assets $ 16,768,813 $ 31,799,763 $ 4,577,189 $ 8 35,538

LIABILITIES AND FUND BALANCES

Liabilities Accrued Liabilities $ 2,882,780 $ 357,040 $ 31 $ - Due to Other Funds - - - - Due to Component Units - 3,008,665 - - Due to Other Governmental Agencies - - - - Deferred Revenue 8,067,511 8 0,307 5 15,900 4 19,329 Total Liabilities 10,950,291 3,446,012 5 15,931 4 19,329 Fund Balances Nonspendable 4,000 - - - Restricted 333,798 16,920,733 - 4 16,209 Committed 657,068 1,042,909 7 77,909 -

Assigned 70,000 10,390,109 3 ,283,349 - Unassigned 4,753,656 - - - Total Fund Balances 5,818,522 28,353,751 4 ,061,258 4 16,209 Total Liabilities and Fund Balances $ 16,768,813 $ 31,799,763 $ 4,577,189 $ 8 35,538 The accompanying notes to the basic financial statements are an integral part of this statement.

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QUEEN ANNE'S COUNTY, MARYLAND

BALANCE SHEET

GOVERNMENTAL FUNDS

JUNE 30, 2011

(CONTINUED)

TOTAL

ROADS NON-MAJOR GOVERNMENTAL

BOARD GOVERNMENTAL FUNDS

$ 1,493,085 $ 5 ,068,181 $ 45,672,988

- 247 247

- - 376,226

62,837 4,049,400 4,819,962

- 683,394 1,139,327

266,341 504,888 12,897,896

- - 1,078,948

- - 120,082

561,391 - 565,391 $ 2,383,654 $ 1 0,306,110 $ 66,671,067 $ 198,683 $ 392,042 $ 3,830,576

- 327,435 327,435

- - 3,008,665

- 319,806 319,806

586,402 835,763 10,505,212 785,085 1,875,046 17,991,694 561,391 3,840,092 4,405,483 167,827 4,560,947 22,399,514

- - 2,477,886

869,351 202,406 14,815,215

- (172,381) 4,581,275

1,598,569 8,431,064 48,679,373 $ 2,383,654 $ 1 0,306,110 $ 66,671,067 The accompanying notes to the basic financial statements are an integral part of this statement.

- 41 -

- 42 -

QUEEN ANNE'S COUNTY, MARYLAND

RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF NET ASSETS

JUNE 30, 2011

Total Fund Balance - Governmental Funds $ 4 8,679,373 Amounts reported for Governmental activities in the Statement of Net Assets are different because:

Receivables not included in the governmental funds because they relate to debt.

A portion of the County’s 2009 Bond offering was issued using Build America Bonds. As an incentive to use these bonds, the Federal government offered an interest reimbursement grant, which offsets the County's debt service for interest expense. Therefore, at year end, a receivable is booked for the interest reimbursement due, but not yet received.

ADD Bond Interest Reimbursement Receivable - Build America Bond 1 10,004 Capital assets used in governmental fund activities are not financial resources and therefore are not reported in the funds.

ADD Nondepreciable capital assets Land and Land Improvements $ 40,902,400 Infrastructure 40,662,078 Construction in Progress 8 ,171,028 89,735,506 ADD Depreciable capital assets Buildings 39,832,998 Improvements other than Buildings 5 ,892,596 Machinery and Equipment 18,893,933 Automobiles and Trucks 9 ,214,927 Infrastructure 15,850,015 Less Accumulated depreciation (35,544,017) 54,140,452 Revenues that are deferred in the governmental funds because they do not

provide current financial resources are recognized as revenues in the Statement of Activities.

ADD Property Taxes deferred in governmental funds 78,885 ADD Income Taxes deferred in governmental funds 6 ,213,478 ADD Loans receivable deferred in governmental funds 1 ,749,459 8,041,822 Long-term liabilities related to governmental fund activities are not due and payable in the current period and therefore are not reported in the funds.

SUBTRACT Accrued Interest Payable (1,264,252) SUBTRACT Long-Term Liabilities Due within One Year Accrued Compensated Absences (1,379,933) Bonds and Notes Payable (7,240,786) (8,620,719) SUBTRACT Long-Term Liabilities Due in More than One Year Other Post-Employment Benefit Obligation (13,884,281) Accrued Compensated Absences (782,138) Bonds and Notes Payable (96,675,664) ( 111,342,083) Total Net Assets - Governmental Activities $ 79,480,103

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

- 43 -

QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

SCHOOL

GENERAL GENERAL ROADS IMPACT FEES

FUND CAPITAL CAPITAL CAPITAL

REVENUES

Taxes Local Property Tax $ 60,061,951 $ - $ - $ - Local Income Tax 29,527,496 - - - Admission and Amusement Taxes 141,536 - - - Recordation Taxes 2,426,641 361,901 - - Hotel Taxes 441,123 - - - County Transfer Taxes - 1,158,897 - - State Shared Taxes - - - - Licenses and Permits 919,663 - - - Intergovernmental 1,933,743 2,912,038 901,289 - Bond Interest Reimbursement - Build America Bond 438,022 - - -

Charges for Current Services 1,553,687 - 59,793 755,443 Fines and Forfeitures 36,244 - - - Investment Income 50,109 23,842 34,640 220 Donations 35,335 12,804 - - Miscellaneous 510,843 8,025 - - Total Revenues 98,076,393 4,477,507 995,722 755,663

EXPENDITURES

Current General Government 9,789,937 523,985 - - Public Safety 20,657,018 9,743 - - Public Works 2,938,771 457,300 388,669 - Health 1,670,222 - - - Social Services 284,865 26,592 - - Education 49,691,877 7,874,988 - - Parks 2,373,537 147,638 - - Library 1,433,725 - - - Conservation of Natural Resources 531,968 2,228,386 - - Economic/Community Development 1,027,499 - - - Miscellaneous 4,699,452 - - -

Capital Outlay 238,195 3,601,013 974,216 - Debt Service Principal 6,835,118 - - - Debt Issuance Costs - 129,671 - - Interest and Fiscal Charges 3,614,051 - - - Total Expenditures 105,786,235 14,999,316 1,362,885 - Excess of Revenues Over (Under) Expenditures (7,709,842) (10,521,809) (367,163) 755,663

OTHER FINANCING SOURCES (USES)

Issuance of Debt - 21,508,901 388,669 - Bond Premiums - 139,136 - - Proceeds of Capital Asset Disposals - 564,742 - - Insurance Proceeds 99,028 - - - Transfers In 2,320,569 665,525 - - Transfers Out (2,922,343) (1,680,551) (10,000) (1,408,120) Other Financing Sources (Uses) (502,746) 21,197,753 378,669 (1,408,120) Net Increase (Decrease) in Fund Balances (8,212,588) 10,675,944 11,506 (652,457) Fund Balances, July 1 14,031,110 17,677,807 4,049,752 1,068,666

Fund Balances, June 30 $ 5,818,522 $ 28,353,751 $ 4,061,258 $ 416,209 The accompanying notes to the basic financial statements are an integral part of this statement.

- 44 -

QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

TOTAL

ROADS NON-MAJOR GOVERNMENTAL

BOARD GOVERNMENTAL FUNDS

$ - $ 36,008 $ 6 0,097,959

- - 2 9,527,496

- 47,179 188,715

- 821,209 3 ,609,751

- - 441,123

- - 1 ,158,897

1 97,776 32,625 230,401

- - 919,663

3 28,943 2 ,701,716 8 ,777,729

- - 438,022

2 90,779 484,144 3 ,143,846

- 42,101 78,345

4,797 22,915 136,523

- 61,203 109,342

86,264 103,323 708,455 9 08,559 4 ,352,423 109,566,267

- 83,535 1 0,397,457

- 460,560 2 1,127,321

3 ,493,027 - 7 ,277,767

- - 1 ,670,222

- 3 ,787,193 4 ,098,650

- - 5 7,566,865

- - 2 ,521,175

- - 1 ,433,725

- 1 ,112,562 3 ,872,916

- 688,025 1 ,715,524

- - 4 ,699,452

13,732 11,425 4 ,838,581

- 129,440 6 ,964,558

- - 129,671

- 15,375 3 ,629,426

3 ,506,759 6 ,288,115 131,943,310 (2,598,200) (1,935,692) (22,377,043)

- - 2 1,897,570

- - 139,136

2,208 15,651 582,601

- - 99,028

- 2 ,400,162 5 ,386,256

- (593,507) (6,614,521)

2,208 1 ,822,306 2 1,490,070 (2,595,992) (113,386) (886,973) 4 ,194,561 8 ,544,450 4 9,566,346 $ 1,598,569 $ 8 ,431,064 $ 4 8,679,373 The accompanying notes to the basic financial statements are an integral part of this statement.

- 45 -

QUEEN ANNE'S COUNTY, MARYLAND

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2011

Change in Fund Balances - Total governmental funds, per Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds $ (886,973) Amounts reported for governmental activities in the Statement of Activities are different because:

Capital outlay expenditures are reported in Governmental Funds during the year. However, in the Statement of Activities, costs for capital asset purchases are allocated over the estimated useful lives of those assets and reported as depreciation expense over a number of years. Therefore, the change in assets differs from the change in fund balance by the amount of capital asset purchases that will be capitalized

and depreciated over a number of years, less the offsetting depreciation expense for the current year.

Proceeds received on disposal of capital assets are reported in Governmental Funds as current financial resources. In the Statement of Activities, only the gain or (loss) realized on disposal of capital assets is reported. Thus, the change in net assets differs from the change in fund balance by the cost of capital assets sold, net of accumulated depreciation (i.e., book value).

In addition, developer contributions of capital assets (primarily infrastructure) are not reported in Governmental Funds because they do not represent current financial resources available to cover this year's expenditures.

Thus, the change in net assets differs from the change in fund balance by the value of capital assets received.

Donated Capital Assets are not reported in Governmental Funds because they are not current financial resources.

However, in the Statement of Activities, they are recognized as capital contributions and as capital assets.

The following is a summary of the net increase in capital assets, which is detailed in Note 6 - Capital Assets - Primary Government.

ADD capital assets acquired as capital outlay $ 263,352 ADD capital assets resulting from force-in-kind expenditures 117,246 ADD capital assets resulting from general capital projects 3,601,013 ADD capital assets resulting from roads capital projects 974,216 SUBTRACT book value of disposed capital assets, net of accumulated depreciation (670,294) SUBTRACT current year depreciation expense (3,533,792)

Net Increase in Capital Assets 751,741 Receivables not included in the governmental funds because they relate to debt.

A portion of the County’s 2009 Bond offering was issued using Build America Bonds. As an incentive to use these bonds, the Federal government offered an interest reimbursement grant, which offsets the County’s debt service for interest expense. Therefore, at year end, a receivable is booked for the interest reimbursement due, but not yet received.

ADD current year's bond interest reimbursement receivable - Build America Bond 110,004 SUBTRACT prior year's bond interest reimbursement receivable - Build America Bond (113,640) (3,636) The accompanying notes to the basic financial statements are an integral part of this statement.

CONTINUED

- 46 -

QUEEN ANNE'S COUNTY, MARYLAND

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

Revenues that are earned but not collected within sixty days after the end of the fiscal year are not considered to be "available" to meet current cash requirements and are deferred in the Governmental Funds to the following year.

However, these revenues are recognized in the Statement of Activities. The amount by which this type of deferred revenue increased or (decreased) relative to the prior year is as follows:

ADD current year's Property Tax Deferred Revenue $ 78,885 SUBTRACT prior year's Property Tax Deferred Revenue (106,476) $ (27,591) ADD current year's Income Tax Deferred Revenue 6,213,478 SUBTRACT prior year's Income Tax Deferred Revenue (5,116,295) 1,097,183 Issuance of long-term debt (e.g., bonds, notes, and capital leases) provides current financial resources to Governmental Funds, while repayment of principal due for long-term debt consumes current resources.

In the Statement of Net Assets, issuing debt increases long term liabilities, while repayment reduces those liabilties.

ADD retirements and repayments made on long term debt General Bonds Payable 6,822,151 Notes Payable 946,450 Bond Premiums, Net of Issuance Costs 66,070 Deferred Refunding Costs (170,483) Capital Leases 51,795 7,715,983 SUBTRACT proceeds of 2011 Bond (21,532,570) SUBTRACT Bond premium, net of issuance costs for 2011 bond (9,465) SUBTRACT proceeds of Loan for Frizz King Property (365,000) SUBTRACT College reimbursement received (239,495)

ADD County's allocation to College for debt 60,524 (14,370,023) Some accrued expenses, reported in the Statement of Activities, do not require the use of current financial financial resources and are not reported as expenditures in the Governmental Funds. The net amount by which these accruals increased or (decreased) over the prior period is as follows:

ADD prior year's Accrued Interest Payable 1,049,686 SUBTRACT current year's Accrued Interest Payable (1,264,252) (214,566) ADD prior year's Accrued Compensated Absences 2,434,948 SUBTRACT current year's Accrued Compensated Absences (2,162,071) 272,877 ADD prior year's Accrued Other Post Employment Benefit Obligation 8,548,637 SUBTRACT current year's Accrued Other Post Employment Benefit Obligation (13,884,281)

(5,335,644) Change in Net Assets - governmental activities, per Statement of Activities $ (18,716,632) The accompanying notes to the basic financial statements are an integral part of this statement.

- 47 -

QUEEN ANNE'S COUNTY, MARYLAND QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF NET ASSETS STATEMENT OF NET ASSETS

ENTERPRISE FUNDS ENTERPRISE FUNDS

JUNE 30, 2011 JUNE 30, 2011

(CONTINUED)

SANITARY DISTRICT

SEWER WATER RESTRICTED

ASSETS OPERATIONS OPERATIONS FUND

Current Assets Unrestricted Equity in Pooled Cash $ 6 ,146,764 $ 2,915,613 $ - Accounts Receivable (Net) 3 29,474 176,347 - Due from Other Funds 2 80,682 - - Due from Other Governments - - - Bond Interest Reimbursement Receivable - Build America Bond - - - Inventories 3 97,081 - - Restricted Restricted Equity in Pooled Cash - - 7,131,635 Restricted Accounts Receivable (Net) - - 9,860 Total Current Assets 7 ,154,001 3,091,960 7,141,495

Noncurrent Assets Restricted Special Assessments Receivable (Net) - - 1,199,203 Capital Assets Intangible Rights - 6,140 - Land, Improved and Unimproved 8 16,331 - - Buildings and Improvements to Buildings 1 4,265,248 180,203 - Improvements Other Than Buildings 1 ,615,474 128,152 - Automotive Equipment 9 77,486 203,387 - Equipment 1 9,893,847 1,073,319 - Furniture and Fixtures 4 7,216 6,228 - Infrastructure Improvements 4 9,003,503 20,637,699 -

Construction in Progress 2 70,283 - - Capital Assets before Depreciation 8 6,889,388 22,235,128 - Less Accumulated Depreciation (28,062,092) ( 6,406,160) - Total Capital Assets, Net of Accumulated Depreciation 5 8,827,296 15,828,968 - Total Noncurrent Assets 5 8,827,296 15,828,968 1,199,203 Total Assets 6 5,981,297 18,920,928 8,340,698

LIABILITIES

Current Liabilities Payable from Unrestricted Assets Accounts Payable 2 61,021 49,455 - Accrued Interest Payable 8 8,420 5,984 - Escrow Deposits 2 8,140 - - Due to Other Funds - - - Unearned Revenue 6 64,827 - - Current Portion of Compensated Absences 1 17,489 46,625 - Current Portion of Bonds/Notes Payable 1 ,431,598 447,118 - Payable from Restricted Assets Current Portion of Bonds Payable - - - Total Current Liabilities 2 ,591,495 549,182 -

Noncurrent Liabilities Payable from Unrestricted Assets Compensated Absences 6 6,592 26,427 - Other Post-Employment Benefit Obligation 1 ,506,837 467,915 - Bonds/Notes Payable 1 5,092,700 599,283 - Liabilities Associated with Restricted Assets Unearned Revenue - - 1,199,203 Total Noncurrent Liabilities 1 6,666,129 1,093,625 1,199,203 Total Liabilities 1 9,257,624 1,642,807 1,199,203

NET ASSETS

Invested in Capital Assets, Net of Related Debt 4 2,302,998 14,782,567 - Restricted for:

Debt Service - - - Capital Projects - - 753,300 Unrestricted 4 ,420,675 2,495,554 6,388,195 Total Net Assets $ 4 6,723,673 $ 17,278,121 $ 7,141,495 The accompanying notes to the basic financial statements are an integral part of this statement.

- 48 -

QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF NET ASSETS

ENTERPRISE FUNDS

JUNE 30, 2011

(CONTINUED)

TOTAL

PRIMARY

SANITARY DISTRICT NON-MAJOR GOVERNMENT

DEBT SERVICE BAY BRIDGE ENTERPRISE ENTERPRISE

FUND TOTAL AIRPORT FUNDS FUNDS

$ - $ 9,062,377 $ - $ 839,459 $ 9,901,836

- 505,821 1 12,807 10,378 629,006

- 280,682 - 20,000 300,682

- - 5 8,542 95,927 154,469

- - 7 12 3,784 4,496

- 397,081 3 9,992 8,737 445,810

3,658,194 10,789,829 - - 10,789,829 37,718 47,578 - - 47,578 3,695,912 21,083,368 2 12,053 978,285 22,273,706 1,571,408 2,770,611 - - 2,770,611

- 6,140 - - 6,140

- 816,331 1 0,670,168 2,722,967 14,209,466

- 14,445,451 1 ,126,839 1,180,872 16,753,162

- 1,743,626 2 ,146,831 3,076,452 6,966,909

- 1,180,873 5 9,470 83,445 1,323,788

- 20,967,166 4 1,020 791,519 21,799,705

- 53,444 - 30,750 84,194

- 69,641,202 - - 69,641,202

- 270,283 2 ,938,210 2,277,879 5,486,372

- 109,124,516 1 6,982,538 10,163,884 136,270,938

- (34,468,252) (2,431,226) ( 1,384,391) ( 38,283,869)

- 74,656,264 1 4,551,312 8,779,493 97,987,069

1,571,408 77,426,875 1 4,551,312 8,779,493 100,757,680 5,267,320 98,510,243 1 4,763,365 9,757,778 123,031,386

- 310,476 2 7,983 86,583 425,042

3,210 97,614 9 ,082 16,799 123,495

- 28,140 8 ,630 10,947 47,717

280,682 280,682 3 77,884 393,629 1,052,195

- 664,827 - 27,691 692,518

- 164,114 7 ,507 45,231 216,852

- 1,878,716 4 1,710 124,753 2,045,179

54,371 54,371 - - 54,371 338,263 3,478,940 4 72,796 705,633 4,657,369

- 93,019 4 ,255 25,636 122,910

- 1,974,752 1 66,141 506,287 2,647,180

178,620 15,870,603 5 93,963 1,586,883 18,051,449 1,462,309 2,661,512 - - 2,661,512 1,640,929 20,599,886 7 64,359 2,118,806 23,483,051 1,979,192 24,078,826 1 ,237,155 2,824,439 28,140,420

- 57,085,565 1 3,915,639 7,067,857 78,069,061

3,288,128 3,288,128 - 444 3,288,572

- 753,300 - - 753,300

- 13,304,424 (389,429) ( 134,962) 12,780,033

$ 3,288,128 $ 74,431,417 $ 1 3,526,210 $ 6,933,339 $ 94,890,966 The accompanying notes to the basic financial statements are an integral part of this statement.

- 49 -

QUEEN ANNE'S COUNTY, MARYLAND QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS

ENTERPRISE FUNDS ENTERPRISE FUNDS

FOR THE YEAR ENDED JUNE 30, 2011 FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

SANITARY DISTRICT

SEWER WATER RESTRICTED

OPERATIONS OPERATIONS FUND

OPERATING REVENUES

Charges for Services $ 4,897,764 $ 2,054,158 $ 699,498 Intergovernmental - - - Bond Interest Reimbursement - Build America Bond - - - Material Sales 2,450 4 ,022 - Miscellaneous Revenues 97,204 137,373 - Total Operating Revenues 4,997,418 2,195,553 699,498

OPERATING EXPENSES

Cost of Sales and Services Collection 2,223,367 - - Distribution - 9 9,180 - Treatment 1,281,225 1,055,985 - Shop 157,220 9 6,923 - Airport - - - Parks and Recreation - - - Public Marinas - - - Total Cost of Sales and Services 3,661,812 1,252,088 - Administration and Inspection 685,074 511,852 - Other Post-Employment Benefit Contributions 601,594 190,256 - Depreciation 2,890,057 488,614 - Total Operating Expenses 7,838,537 2,442,810 -

Operating Income (Loss) (2,841,119) (247,257) 699,498

NON-OPERATING REVENUES (EXPENSES)

Investment Income 102,881 5 3,536 120,835 Interest Expense (298,759) (78,966) - Loss on Disposal of Capital Assets (29,118) (197,321) - Total Non-Operating Revenues (Expenses) (224,996) (222,751) 120,835 Income (Loss) Before Contributions and Transfers (3,066,115) (470,008) 820,333 Capital Contributions, Fees and Grants 751,231 8 6,195 - Transfers In 1,706,498 539,645 - Transfers Out - - (1,131,894)

Net Transfers In (Out) 1,706,498 539,645 (1,131,894) Change in Net Assets (608,386) 155,832 (311,561) Total Net Assets - Beginning of Year 47,332,059 17,122,289 7,453,056 Total Net Assets - End of Year $ 46,723,673 $ 17,278,121 $ 7,141,495 The accompanying notes to the basic financial statements are an integral part of this statement.

- 50 -

QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS

ENTERPRISE FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

TOTAL

PRIMARY

SANITARY DISTRICT NON-MAJOR GOVERNMENT

DEBT SERVICE BAY BRIDGE ENTERPRISE ENTERPRISE

FUND TOTAL AIRPORT FUNDS FUNDS

$ 541,051 $ 8,192,471 $ 37,955 $ 1 ,653,214 $ 9,883,640

- - 821 38,927 39,748

- - 2,894 16,886 19,780

- 6,472 412,340 53,196 472,008

- 234,577 107,118 71,069 412,764

541,051 8,433,520 561,128 1,833,292 10,827,940

- 2,223,367 - - 2,223,367

- 99,180 - - 99,180

- 2,337,210 - - 2,337,210

- 254,143 - - 254,143

- - 856,188 - 856,188

- - - 2,365,820 2,365,820

- - - 55,504 55,504

- 4,913,900 856,188 2,421,324 8,191,412

- 1,196,926 - - 1,196,926

- 791,850 64,999 228,212 1,085,061

- 3,378,671 171,640 153,698 3,704,009

- 10,281,347 1,092,827 2,803,234 14,177,408

541,051 (1,847,827) (531,699) (969,942) (3,349,468) 130,152 407,404 225 - 407,629 (20,478) (398,203) (21,510) (43,797) (463,510)

- (226,439) (53,318) (1,319,871) (1,599,628)

109,674 (217,238) (74,603) (1,363,668) (1,655,509) 650,725 (2,065,065) (606,302) (2,333,610) (5,004,977)

- 837,426 448,600 784,813 2,070,839

1,056,894 3,303,037 62,740 468,110 3,833,887 ( 2,090,071) (3,221,965) - - (3,221,965) ( 1,033,177) 81,072 62,740 468,110 611,922 (382,452) (1,146,567) (94,962) (1,080,687) (2,322,216) 3,670,580 75,577,984 13,621,172 8,014,026 97,213,182 $ 3,288,128 $ 74,431,417 $ 13,526,210 $ 6 ,933,339 $ 94,890,966 The accompanying notes to the basic financial statements are an integral part of this statement.

- 51 -

QUEEN ANNE'S COUNTY, MARYLAND QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF CASH FLOWS STATEMENT OF CASH FLOWS

ENTERPRISE FUNDS ENTERPRISE FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

SANITARY DISTRICT SANITARY DISTRICT

SEWER WATER RESTRICTED

OPERATIONS OPERATIONS FUND

CASH FLOW FROM OPERATING ACTIVITIES

Receipts from customers and users $ 4 ,838,066 $ 2 ,037,932 $ 704,795 Receipts from other operating sources 1 32,768 1 41,395 - Receipts from bond interest reimbursement - Build America Bond - - - Payments to suppliers (1,700,809) (761,642) - Payments to employees and on behalf of employees (2,586,127) (1,016,541) - Net Cash Provided (Used) by Operating Activities 6 83,898 4 01,144 704,795

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES

Transfers in from other funds 1 ,706,498 5 39,645 - Receipts (payments) from interfund loans (128,224) - - Transfers to other funds - - (1,131,894) Principal paid on interfund loans - - - Net Cash Provided (Used) by Noncapital Financing Activities 1 ,578,274 5 39,645 (1,131,894)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Proceeds (loss) from the disposition of capital assets - - - Receipts from capital grants - - - Principal paid on capital debt (1,446,361) (455,435) - Receipts from bonds, including premiums, net of issuance costs - - - Interest paid on capital debt (312,427) (62,226) - Acquisition and construction of capital assets (296,847) (88,725) - Net Cash Provided (Used) by Capital and Related Financing Activities (2,055,635) (606,386) -

CASH FLOWS FROM INVESTING ACTIVITIES

Net Cash Provided by Investing Activities - Investment Income 1 02,881 5 3,536 120,835 Net Increase (Decrease) in Cash and Cash Equivalents 3 09,418 3 87,939 (306,264) Balances - Beginning of the year 5 ,837,346 2 ,527,674 7,437,899 Balances - End of the year $ 6 ,146,764 $ 2 ,915,613 $ 7,131,635 Reconciliation of operating income (loss) to net cash provided by operating activities Operating income (loss) $ (2,841,119) $ (247,257) $ 699,498

Adjustments to reconcile operating income (loss) to net cash provided by operating activities:

Depreciation 2 ,890,057 4 88,614 - Effect of changes in operating assets and liabilities:

Accounts receivable, net (3,312) (16,226) 5,297 Special assessments receivable, net - - 193,371 Operating grants receivable 3 3,114 - - Build America Bonds Interest receivable - - - Inventories and Prepaid Expenses (55,832) - - Vendor accounts payable 1 12,926 (15,271) - Compensated absences 2 ,856 1 ,028 - Other Post-Employment Benefit Obligation 6 01,594 1 90,256 - Escrow deposits payable 1 ,920 - -

Deferred revenue collected in advance (58,306) - (193,371) Net Cash Provided (Used) by Operating Activities $ 6 83,898 $ 4 01,144 $ 704,795 Noncash investing, capital and financing activities:

Donation of capital assets (infrastructure) by developers $ 7 51,231 $ 8 6,196 $ - The accompanying notes to the basic financial statements are an integral part of this statement.

- 52 -

QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF CASH FLOWS

ENTERPRISE FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

TOTAL

PRIMARY

SANITARY DISTRICT NON-MAJOR GOVERNMENT

DEBT SERVICE BAY BRIDGE ENTERPRISE ENTERPRISE

FUND TOTAL AIRPORT FUNDS FUNDS

$ 579,498 $ 8,160,291 $ 41,729 $ 1,664,367 $ 9,866,387

- 274,163 1,400,980 178,196 1,853,339

- - 2,857 14,512 17,369

- (2,462,451) (713,456) (1,250,604) (4,426,511)

- (3,602,668) (219,488) (1,322,312) (5,144,468)

579,498 2,369,335 512,622 (715,841) 2,166,116 1,056,894 3,303,037 62,740 468,110 3,833,887 280,682 152,458 377,884 403,629 933,971 (2,090,071) (3,221,965) - - (3,221,965) (152,458) (152,458) (500,591) (125,147) (778,196) (904,953) 81,072 (59,967) 746,592 767,697

- - (53,318) 15,000 (38,318)

- - 8,250 1,128,786 1,137,036

(50,586) (1,952,382) (41,919) (110,517) (2,104,818)

- - 13,540 605,493 619,033

(20,943) (395,596) (20,822) (82,219) (498,637)

- (385,572) (358,611) (1,262,143) (2,006,326)

(71,529) (2,733,550) (452,880) 294,400 (2,892,030) 130,152 407,404 225 - 407,629 (266,832) 124,261 - 325,151 449,412 3,925,026 19,727,945 - 514,308 20,242,253 $ 3,658,194 $ 19,852,206 $ - $ 839,459 $ 20,691,665 $ 541,051 $ (1,847,827) $ (531,699) $ (969,942) $ (3,349,468)

- 3,378,671 171,640 153,698 3,704,009

4,154 (10,087) 3,574 (7,874) (14,387) 460,683 654,054 - - 654,054

- 33,114 880,701 15,004 928,819

- - (37) (2,374) (2,411)

- (55,832) 64,198 9,374 17,740

- 97,655 (142,485) (198,524) (243,354)

- 3,884 1,531 37,559 42,974

- 791,850 64,999 228,211 1,085,060

- 1,920 200 39 2,159

(426,390) (678,067) - 18,988 (659,079) $ 579,498 $ 2,369,335 $ 512,622 $ (715,841) $ 2,166,116 $ - $ 837,427 $ - $ - $ 837,427 The accompanying notes to the basic financial statements are an integral part of this statement.

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QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF FIDUCIARY NET ASSETS

PRIVATE PURPOSE TRUST, OTHER POST-EMPLOYMENT BENEFIT TRUST, AND AGENCY FUNDS

JUNE 30, 2011

PRIVATE

PURPOSE

TRUST FUND OTHER

TAX SALE POST-EMPLOYMENT AGENCY

DEPOSITS BENEFIT TRUST FUND FUNDS

ASSETS

Cash and Cash Equivalents $ 97,367 $ 765,084 $ 3 27,024 Miscellaneous Receivables - - 1 24,671 Total Assets 97,367 765,084 $ 4 51,695

LIABILITIES

Due to Other Governments - 155,731 $ 1 42,755 Deposits and Escrows - - 3 08,940 Total Liabilities - 155,731 $ 4 51,695

NET ASSETS

Held in Trust $ 97,367 $ 609,353 The accompanying notes to the basic financial statements are an integral part of this statement.

- 54 -

QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

PRIVATE PURPOSE TRUST AND OTHER POST-EMPLOYMENT BENEFIT TRUST FUND

FOR THE YEAR ENDED JUNE 30, 2011

PRIVATE

PURPOSE

TRUST FUND

TAX SALE

DEPOSITS

ADDITIONS

Total Additions - Tax Sale Collections in Excess of Tax Due $ 134,012

DEDUCTIONS

Distributions to Property Holders 3 16,900 Change in Assets ( 182,888)

NET ASSETS HELD IN TRUST

Net Assets-Beginning of Year 2 80,255 Net Assets-End of Year $ 9 7,367

OTHER

POST-EMPLOYMENT

BENEFIT TRUST FUND

ADDITIONS

CONTRIBUTIONS

Employers $ 2,188,722 Members 7 80,197

TOTAL CONTRIBUTIONS 2,968,919

Investment Income 1 ,736 Total Additions 2,970,655

DEDUCTIONS

Claims Paid 3,393,916 Change in Assets ( 423,261)

NET ASSETS HELD IN TRUST

Net Assets-Beginning of Year 1,032,614 Net Assets-End of Year $ 609,353 The accompanying notes to the basic financial statements are an integral part of this statement.

- 55 -

QUEEN ANNE'S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

INDEX

Note 1 Summary of Significant Accounting Policies 57-68 2 Budgets and Budgetary Accounting 68-69 3 Cash, Investments and Investment Income 69-71 4 Accounts Receivable 72-73 5 Deferred and Unearned Revenue 74 6 Capital Assets 75-80 7 Interfund Receivables and Payables 81 8 Interfund Transfers 82 9 Noncurrent Liabilities 83-92 10 Restricted Assets and Liabilities and Fund Balances 93-95 11 Risk Management 96

12 Retirement Plans 97-99 13 Deferred Compensation Plan 99 14 Other Post-Employment Benefits 100-105 15 Deficit Equity Balances 106 16 Commitments and Contingencies 107 17 Joint Venture 108 18 Pollution Remediation Obligations 109 19 Subsequent Events 110

- 56 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of the County conform to accounting principles generally accepted in the United States of America (GAAP) applicable to local government entities. The following is a summary of significant policies.

A. REPORTING ENTITY

Queen Anne’s County, Maryland (the County) was founded in 1706. The County is governed by five Commissioners who are elected to serve four-year terms. This board assumes responsibilities conferred upon them by the Maryland General Assembly under Code Home Rule and provides the following services: public safety, public facility/infrastructure maintenance and improvements, sanitation, health and social services, education,

recreation and culture, library, conservation of natural resources, economic and community development, and general administrative services.

As required by GAAP, these financial statements present the primary government and its component units, which are entities for which the primary government is considered financially accountable. The decision to include a potential component unit in the financial reporting entity was made by applying the criteria set forth in the Government Accounting Standards Board (GASB) Statements No. 14 and 39. Blended component units, although

separate entities, are, in substance, part of the government’s operations. However, each discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for descriptions) to emphasize that it is legally separate from the government.

Blended Component Units The Queen Anne’s County Sanitary District serves all the citizens of the government and is governed by a board comprised of the government’s elected Commissioners. The rates for user charges and bond issuance authorizations are approved by the Board of Commissioners and the legal liability for the general obligation portion of the District’s debt remains with the government. The Sanitary District is reported as an enterprise fund.

The Queen Anne’s County Roads Board serves all the citizens of the government and is governed by a board comprised of the government’s elected Commissioners. All operations of the Roads Board are approved by the Board of Commissioners and the legal liability for any debt remains with the government. The Roads Board is reported as a special revenue fund.

Discretely Presented Component Units The Board of Education of Queen Anne’s County is a five-member body responsible for the operation of Queen Anne’s County Schools. Beginning with the November 2008 election, the members were elected by the County voters. The Board of Education is a component unit of Queen Anne’s County, Maryland by virtue of the Board’s fiscal dependency on the County through the County’s responsibility for levying taxes, issuing debt, and its

budgetary control over the Board of Education.

The Queen Anne’s County Free Library is a component unit of the Queen Anne’s County Government by virtue of the Library’s fiscal dependency on the County. The County levies taxes and approves the Library’s budget. The Library Board of Trustees governs the Library. Vacancies on the Board of Trustees are filled by vote of the remaining members of that Board.

The Queen Anne’s County Public Housing Authority is a component unit of the Queen Anne’s County Government because the County Commissioners appoint the members of the Housing Authority’s Board of Commissioners. In addition, the County contributes substantial financial and administrative resources to the Housing Authority on an on-going basis, including an annual appropriation, office space and utilities, and administrative services for human

resources, accounting, and other functions.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. REPORTING ENTITY (CONTINUED)

Complete financial statements of the discretely presented component units can be obtained from their respective administrative offices listed below:

Board of Education of Queen Anne’s County Queen Anne’s County Queen Anne’s County Housing Authority Free Library 202 Chesterfield Avenue c/o Queen Anne’s County 121 S. Commerce Street Centreville, Maryland 21617 Finance Office Centreville, MD 21617 107 N. Liberty Street Centreville, Maryland 21617

JOINT VENTURE

The operation of the Midshore Regional Landfill is considered a joint venture of the County. Disclosure of the County’s participation in this joint venture is presented in Note 17.

Complete financial statements can be obtained at the joint ventures’ administrative office listed below:

Maryland Environmental Service 259 Najoles Road Millersville, Maryland 21108

B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS

Government-Wide Financial Statements – The government-wide financial statements report information on all of the non-fiduciary activities of the Primary Government and its component units. Since, by definition, assets of fiduciary funds are held for the benefit of a third party (other local governments, private parties, etc.) and cannot be used to address activities or obligations of the County, these funds are not incorporated into the government-wide

statements.

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

Governmental activities of the Primary Government, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

Statement of Net Assets – This statement is designed to display the financial position of the reporting entity as of year-end. Governments report all capital assets, including infrastructure, in the government-wide Statement of Net Assets and report depreciation expense, the cost of “using up” capital assets, in the Statement of Activities. Net assets are divided into three categories: 1) invested in capital assets, net of related debt; 2) restricted; and 3)

unrestricted. Invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those capital assets. Restricted net assets are assets for which constraints are placed due to restrictions that are either (1) externally imposed by creditors,

grantors, contributors, or laws and regulations of the government, or (2) imposed by law through constitutional provisions or enabling legislation. Unrestricted net assets consist of net assets that do not meet the definition of restricted or invested in capital assets, net of related debt.

- 58 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (CONTINUED)

Statement of Activities – This statement demonstrates the degree to which the direct expenses of a given function for the fiscal year are offset by program revenues. Therefore, this statement reflects both the gross and net costs per functional category (general government; public safety; public works; health; social services; education; parks and recreation; library; conservation of natural resources; and economic/community development) that are

otherwise supported by general revenues. Direct expenses (including depreciation) are those that are clearly identifiable with a specific function. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. The

operating grants and contributions column includes operating-specific and discretionary (either operating or capital) grants, while the capital grants and contributions column reflects capital-specific grants. Taxes and other items not properly included among program revenues are reported as general revenues. The County does not allocate indirect expenses.

Fund Financial Statements – Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

In the fund financial statements, financial transactions and accounts of the County are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise assets, liabilities, fund balance/net assets, revenues, and expenditures/expenses.

Governmental Fund Budget-to-Actual Comparison Statements – Demonstrating compliance with the legally adopted budget is an important component of government’s accountability to the public. The County provides budget-to-actual comparisons of the General Fund and individual major special revenue funds as part of the required supplementary information subsection located after the Notes to the basic financial statements. In addition,

budget-to-actual comparisons are provided for the General Fund on a departmental level, and for all other individual funds with legally adopted budgets in the supplementary information subsection.

The County and many other governments revise their original budgets over the course of the year for a variety of reasons; the County’s amended budget is reflected in a separate column in the budget-to-actual comparison statements. Variances are calculated based on final budgets.

C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Measurement Focus and Basis of Accounting Full Accrual Basis Financial Statements – The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred,

regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year in which they are levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. Capital assets and related depreciation are recorded in these statements, as well as debt, accrued compensated absences, other post-employment benefits, and other accruals.

Modified Accrual Basis Financial Statements – Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting.

- 59 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION

(CONTINUED)

Revenues are recorded as soon as they are susceptible to accrual (i.e., when they are both measurable and available). Revenues are considered to be available when they are collectible within the current period, or soon enough thereafter to pay liabilities of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment has

matured and is due. Similarly, expenditures related to claims, judgments, compensated absences, and other postemployment benefits are recorded only to the extent that they are expected to be liquidated with expendable available financial resources. Capital assets, and related depreciation, as well as long-term liabilities are not recorded in these statements.

In applying the susceptible to accrual concept to income taxes (distributed by the State), property taxes, and intergovernmental revenues other than grants, the County defines “available” as received within 60 days after year-end.

In the State of Maryland, the State has assumed responsibility for the collection of all income taxes and for distributing those collections to the respective counties. The counties set their individual tax rates within limits provided by State law. However, collection and pursuit of delinquent taxes are the responsibility of the State. The County records estimated receivables relating to income taxes when the underlying income is earned. Amounts not

received within 60 days are reported as deferred revenue. At year-end, deferred revenue relating to income taxes primarily includes the final fiscal year distribution (which is normally received in September after the fiscal year-end) and amounts related to late filers, delinquent returns and audits, and unallocated withholding, all of which are not received within the County’s availability period. Most deferred revenue is expected to be received from the State

within the next fiscal year; however, collections related to delinquent returns and audits as well as unallocated withholding may not be remitted to the County for several years.

In applying the susceptible to accrual concept to operating and capital grants, which are classified with intergovernmental revenues in the fund financial statements, the County records receivables when the applicable eligibility requirements including time requirements are met. Related revenues are recognized to the extent that cash is expected to be received within one year of year-end. Resources received before the eligibility requirements

are met are reported as deferred revenue.

Licenses and permits, charges for services, and miscellaneous revenues (except earnings on investments) are generally recorded as revenues when received in cash during the year. At year-end, receivables are recorded for significant amounts due. If such amounts are received in cash after year-end within the County’s 60-day availability period, they are recognized as revenue. Benefit assessment receivables not billed at year end are reported as

deferred revenue.

Fiduciary Funds – The County’s trust fund financial statements are reported using the economic resources measurement focus and accrual basis of accounting, as is used by proprietary funds. Agency funds report only assets and liabilities; they do not report changes in net assets. Therefore, agency funds are reported using the accrual basis of accounting to recognize receivables and payables. Activity during the year is accounted for as

additions to and deductions from asset and liability accounts (for Agency Funds) and Net Assets (for Private Purpose and Other Post-Employment Benefit Trust Funds). Since fiduciary funds are, by their very nature, independent of the County, they are omitted from all government-wide statements.

Financial Statement Presentation - The County reports the following major governmental and proprietary funds, as well as fiduciary funds.

- 60 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION

(CONTINUED)

General Fund – This fund is the general operating fund of the County. It is used to account for all financial resources except those required or recommended, by GAAP, to be accounted for in another fund.

Capital Projects Funds – General Capital Projects - This fund accounts for financial resources to be used for the acquisition or construction of major capital facilities, as well as other large multi-year projects that relate to capital assets, that are financed from general governmental resources.

Roads Capital Projects - This fund accounts for financial resources to be used for the construction of County Road infrastructure, as well as other large multi-year projects that relate to capital assets, that are financed from grants received from State and Federal Governments and also Highway User Tax funds.

School Impact Fees - This fund accounts for financial resources generated by new residential construction and used for the construction of public school facilities or payment of school debt relating to such construction.

Roads Board - This fund accounts for financial resources received from the State, plus a substantial amount from the County, for the maintenance of County road infrastructure.

Non-Major Governmental Funds – There are fifteen non-major governmental funds, which are used to account for and report the proceeds of specific revenue sources. Included in the fifteen non-major governmental funds are special revenue funds and also two capital project funds.

Major Enterprise Funds - Enterprise Funds are used to account for those activities of the Primary Government that are financed and operated in a manner similar to private business enterprises in that all costs and expenses, including depreciation, are recovered primarily or partially through user charges. The Sanitary District Funds are intended to be self-supporting as a whole, while the Airport is intended to be

only partially self-supporting. The County reports the following major enterprise funds:

Sanitary District - Sewer Operations - This fund is used to account for the operation of the sewer system serving approximately 6,500 customers.

Water Operations - This fund is used to account for the operation of the water supply system serving approximately 4,000 customers.

Restricted Fund - This fund is used to account for the proceeds of sewer and water capacity charges (one-time allocation fees) and is used to fund capital and debt service expenses.

Debt Service Funds - This fund is used to account for the collection of special benefit assessments, and financial resources from other sources, to fund debt associated with construction of water and sewer facilities in accordance with debt covenants.

- 61 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION

(CONTINUED)

Bay Bridge Airport – This fund is used to account for the operation of the County’s airport that serves small, private aircraft.

Non-Major Enterprise Funds – Non-major Enterprise Funds account for activities which are commercial in nature and are primarily or partially intended to be self-supporting. The County has five non-major enterprise funds, of which none are meant to be fully self-supporting. These funds include the Golf Course, Recreation Programs, Public Landings, Property Management, and Public Marinas.

Fiduciary Funds – Fiduciary Funds are used to report assets held in a trustee or agency capacity for entities other than the County. The County reports the following fiduciary fund types:

Private-Purpose Trust Fund – This fund accounts for an arrangement under which monies received at tax sale, in excess of taxes due, are legally held in trust for property owners who have not been located within a legally-defined time frame.

Other Post-Employment Benefit Trust Fund– This fund accounts for the funding of retiree benefit plans of participating agencies, which are: (1) Queen Anne’s County, Maryland, including the Queen Anne’s County Public Housing Authority; (2) Queen Anne’s County Board of Education; and (3) Queen Anne’s County Free Library. Other agencies and political subdivisions have the right to participate in this Trust Fund also, as an investment vehicle for

their Other Post-Employment Benefit Plan through the pooling of investment resources.

Currently, the only other agency participating is Kent County, Maryland.

Agency Funds - These funds are used to account for assets, such as property taxes, held in a purely custodial capacity where the County receives, temporarily invests, and remits such resources to individuals, private organizations or other governments.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of GASB. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The

County has elected not to follow subsequent private-sector guidance.

In the process of aggregating data for the Statement of Net Assets and the Statement of Activities, some amounts reported as interfund activity and balances in the funds should be eliminated or reclassified. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. The effect of interfund services provided and used between functions has not been eliminated in the Statement of Activities, since

to do so would distort the direct costs and program revenues reported for the various functions concerned.

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 of the enterprise funds are charges to customers for sales and services. 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 definition are reported as non-operating revenues and expenses.

- 62 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY

1) Cash and Investments

Cash and Cash Equivalents – For Statement of Cash Flows reporting purposes, the County has defined “cash equivalents” as short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present an insignificant risk of changes in value because of changes in interest rates. Generally, only investments with maturities of three months or less at time of purchase meet this definition. The balance sheet classification for “cash and

cash equivalents” in the Statement of Cash Flows includes the following: “Equity in pooled cash and investments,” “Cash and cash equivalents,” and “Restricted Equity in pooled cash and investments.”

2) Receivables and Payables

Due From/To Other Funds and Internal Balances – Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the year are current and are referred to as “due to/from other funds.” On the Statement of Net Assets, these balances are referred to as “internal balances” and are reported as positive and negative “assets” that net to zero for the primary government as a whole.

Trade Accounts Receivable – Trade and other receivables are shown net of an allowance for uncollectible accounts. The allowance for uncollectible accounts is calculated based on historical collection data and, in some cases, specific account analysis.

3) Inventories, Prepaids, and Other Assets

Inventories of materials, parts and supplies are stated at the lower of cost or market as determined by the first-in, first-out method. For budgetary purposes, the cost is recorded as an expenditure at the time individual inventory items are purchased (purchase method). The consumption method is used for financial reporting purposes whereby expense is recognized as the items are used (consumed).

Reported inventories are equally offset by a fund balance reserve. Inventories in the Proprietary Funds are also recorded using the consumption method.

Prepaid items are payments made to vendors for services that will benefit periods beyond the end of the fiscal year.

4) Capital Assets

Capital assets, which include property, plant, equipment, intangibles, and infrastructure assets (e.g.

roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, lighting systems, and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The County defines capital assets as assets with an initial, individual cost of $5,000 ($1,000 for computers) or more and an estimated useful life in excess of one

year. Such assets are valued at cost where historical records are available and at estimated historical cost where no historical records exist. Donated capital assets are recorded at estimated fair market value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value or functionality of the asset, or materially extend asset lives, are not capitalized.

Land and other inexhaustible assets such as intangible property easements and other land usage rights are capitalized but not depreciated, as these assets are expected to have indefinite useful lives.

- 63 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (CONTINUED)

4) Capital Assets (continued)

Major outlays for capital assets and improvements are capitalized as the projects are constructed.

Interest is capitalized on proprietary fund assets acquired with tax-exempt debt. The amount of interest to be capitalized is calculated by offsetting interest expense, incurred from the date of the borrowing until completion of the project, with interest earned on invested proceeds over the same period. Capital projects that are under construction and not yet ready for their intended use at yearend are classified as “construction in progress” (CIP).

Capital assets are depreciated using the straight-line method over the following estimated useful lives:

Assets Years Buildings and structures 20 - 50 Improvements other than buildings 15 - 50 Infrastructure 20 - 50 Machinery and equipment 3 - 20 Office furniture, fixtures and equipment 5 - 15 Vehicles 7 - 10

5) Other Post-Employment Benefit Obligation

The Queen Anne’s County post-employment plan provides medical insurance benefits to retirees and their eligible dependents. The Plan’s financial information is prepared based on full accrual accounting. Expenses are recognized on the accrual basis as retirees’ insurance costs are incurred. Additional details regarding other post-employment benefits can be found in Notes 9 and 14.

Primary Government – In both the government-wide and enterprise funds, liability for other postemployment benefits is adjusted at the end of the fiscal year. For the year ended June 30, 2011, the other post-employment benefit obligation amounted to $16,531,461, including both governmental ($13,884,281) and business-type activities ($2,647,180).

Component Unit – Queen Anne’s County Housing Authority –For the year ended June 30, 2011, the other post-employment benefit obligation for the Housing Authority amounted to $345,072.

Component Unit - Board of Education – For the year ended June 30, 2011, the other postemployment benefit obligation for the Board of Education amounted to $14,794,329.

Component Unit – Free Library – For the year ended June 30, 2011, the other post-employment benefit obligation for the Library amounted to $561,264.

- 64 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (CONTINUED)

6) Compensated Absences

Primary Government – The County’s policy is to pay employees for any unused vacation time, up to a maximum of 65 days, upon termination of employment. Compensated absences are reported in governmental funds only if they have matured, such as payments upon termination of employment, vacation, and compensatory time paid as they are used during the year. Such time is paid as regular wages. Compensated absences are reported in enterprise funds as they are accrued. In the

government-wide statements, the liability for compensated absences is adjusted at the end of each fiscal year to current salary costs. Accumulated unpaid leave of the County amounted to $2,501,833 at June 30, 2011, including both governmental ($2,162,071) and business-type activities ($339,762).

Component Unit – Queen Anne’s County Housing Authority –The Housing Authority’s employees are employees of the primary government, which is ultimately liable for their salaries and benefits.

Therefore, for the year ended June 30, 2011 the County recognized a liability for compensated absences for these employees as part of its governmental activities in the amount of $20,713.

Component Unit - Board of Education – Accumulated unpaid annual leave is accrued when earned in the Unrestricted Current Expense Fund using the modified accrual basis of accounting. In fiscal year 1992, the Board adopted the practice of paying for any unused vacation time, up to the maximum number of days that employees can carry over from one year to the next, upon termination of employment. Maximum number of days varies from 20 to 30 days, depending on classification.

Liabilities for compensated absences are inventoried at the end of each fiscal year and adjusted to current salary costs. Accumulated compensated absences as of June 30, 2011 amounted to $823,162. Because payment of sick leave is contingent upon employees’ future illness or retirement, the Board of Education expects its commitment to provide sick leave to be met during the normal course of activities over the working lives of its present employees. Any accumulated unused sick

leave at retirement will ultimately be taken into consideration and paid through retirement benefits by the State of Maryland.

7) Long-Term Obligations

In 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 assets.

Bond premiums and discounts are deferred and amortized over the life of the bonds using the bonds outstanding method. Bonds payable in the proprietary fund financial statements and noncurrent liabilities in the government-wide financial statements are reported net of the applicable bond premium or discount. Bond issuance costs are generally reported as a deferred asset and amortized over the term of the related debt using the straight-line method.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of 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 reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures. When

debt is refunded, payments to the Bond Refunding Agent and associated bond issuance costs are reported as other financing uses.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (CONTINUED)

8) Net Assets/Fund Equity

In the government-wide financial statements, the County has reported negative unrestricted net assets of $61,193,944. This deficit is due to the fact that the County issues general obligation bonded debt for purposes of capital construction on behalf of the Queen Anne’s County Board of Education. The capital assets constructed with the proceeds of this debt are reported on the financial statements of

Queen Anne’s County Board of Education. This amount is also classified as net assets invested in capital assets, net of related debt, in the Board of Education column of the Component Units section of the County’s government-wide Statement of Net Assets. Since the Board of Education is not authorized to borrow funds, they do not have any debt.

Since the issuance of such debt has not resulted in capital assets owned by the Primary Government, the effect of this debt is reflected in a deficit balance in unrestricted net assets in the Governmental Activities column of the government-wide Statement of Net Assets. At June 30, 2011, the County has reported outstanding general obligation debt related to assets held by the Board of Education amounting to $72,437,047 (of which $60,933,189 has been spent and the remaining $11,503,858

relates to unspent bond proceeds). Absent the effect of this relationship, the County would have reported unrestricted net assets of governmental activities in the amount of $11,243,103.

The County reports a portion of its net assets in its government-wide financial statements as restricted.

In this context, restricted means that, as of June 30, 2011, this portion of net assets was restricted for a particular purpose either by external parties; by provision of the County Charter; or by enabling legislation. Net assets restricted by enabling legislation represent legislative restrictions that a party external to the government can compel the government to honor. For the County, such amounts

represent primarily accumulated net assets attributed to revenue streams that are restricted for specified purposes in the County Code. This generally includes Capital Projects Fund impact fee collections and developer exactions on hand for outside entities; ending fund balances of substantially all special revenue funds; and ending unrestricted net assets of the Sanitary District and other enterprise funds. Such amounts, which are restricted net assets in the government-wide statement of

Net Assets, are as follows at year-end:

Restricted Net Assets Governmental activities $ 22,399,514 Business-type activities:

Debt Service $ 3 ,288,572 Capital / Debt Service 6 ,388,195 Business-Type Operations 6 ,391,838 Capital Projects 7 53,300 16,821,905 Total Restricted Net Assets $ 39,221,419

- 66 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (CONTINUED)

8) Net Assets/Fund Equity (continued)

In the fund financial statements, fund balances of governmental funds are classified as follows:

Nonspendable – amounts that cannot be spent either because they are not in a spendable form or because they are legally or contractually required to be maintained intact. Nonspendable fund balances for the County include inventory and loans receivable.

Restricted – amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments.

Committed – amounts that can be used only for specific purposes determined by a formal action of the Queen Anne’s County Commissioners. The Commissioners are the highest level of decisionmaking authority for the County. Commitments may be established, modified, or rescinded only through formal actions approved by the County Commissioners.

Assigned – amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes.

Unassigned – all other spendable amounts; however, the General Fund is the only fund permitted to have a positive unassigned fund balance. Negative unassigned fund balances can occur in other governmental funds.

9) Property Tax

The County's real property tax is levied each July 1 on the assessed values certified as of that date for all taxable real property located in the County. The levy functions as a lien against the property.

Assessed values are established by the Maryland State Department of Assessments and Taxation at estimated market value. A revaluation of all property is required to be completed every three years.

Taxes are then billed to property owners and collected by the County. Property represented by delinquent taxes is sold at a public auction in May of the following calendar year, with title transferring after foreclosure proceedings have been completed.

For small businesses that meet certain criteria and also principal residences, an installment plan is offered whereby total tax is paid in two equal installments. The first installment is due by September

30. Beginning October 1, a 1% penalty is charged on the first day of each month that the installment

remains unpaid. This 1% penalty is based on the amount of the first installment only. The second installment is due by December 31. Beginning January 1, the 1% penalty would then include all outstanding balances. The County accepts partial payments.

For non-principal residences, payment is due in full by September 30. Beginning October 1, a penalty is charged for each month that taxes remain unpaid.

For new construction, completed and assessed between July 1 and December 31, a supplementary tax is levied equal to half of the full-year levy. Payment in full is due by March 31. Beginning April 1, a penalty is charged for each month that taxes remain outstanding.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (CONTINUED)

9) Property Tax (continued)

Real and personal property taxes are levied at rates enacted by the County Commissioners in the annual budget on the assessed value as determined by the Maryland Department of Assessments and Taxation. The rates of levy cannot exceed the constant yield rate furnished by the Maryland State Department of Assessments and Taxation without public notice and only after public hearings. The County tax rate for the fiscal year ended June 30, 2011 was $0.7671 per

$100 of assessed value.

NOTE 2 - BUDGETS AND BUDGETARY ACCOUNTING

Pursuant to the Code of Public Local Laws of Queen Anne's County, the County Commissioners adopt an annual operating budget and real property tax rate prior to July 1 each year. This action, taken after public hearings, provides the spending authority for the fiscal year beginning on July 1. Unexpended and unencumbered appropriation authority expires the following June 30, except in the case of Capital Projects

where appropriations lapse only upon completion or cancellation of each project by the County Commissioners.

The appropriated budgets are prepared at the fund, function, and department level. Expenditures/expenses may not legally exceed appropriations, based on the level at which they were adopted. For the General Fund, annual expenditure budgets are legally adopted at the Departmental level. For all other governmental Funds, for which annual budgets are adopted, expenditure budgets are legally adopted at the Fund level.

During the fiscal year, the Commissioners may adopt supplemental appropriations. For the year ended June 30, 2011, supplemental appropriations are as follows:

Original Final Increase / Supplemental Appropriations Budget Budget (Decrease) General Fund - expenditures and transfers $ 109,294,541 $ 113,892,277 $ 4 ,597,736 Special Revenue Funds that adopt annual budgets Major - Roads Board - expenditures $ 5,260,111 $ 5,273,843 $ 1 3,732 Non-Major that adopt annual budgets - Department of Aging - expenditures 2,694,221 2,739,167 4 4,946 Housing and Community Services - expenditures 680,142 1,670,439 990,297

Community Partnerships for Children - expenditures and transfers 1,526,697 1,443,205 (83,492) Law Library - expenditures 72,300 83,800 11,500 Rural Legacy - expenditures - 1,131,905 1,131,905 Purchase of Development Rights - expenditures and transfers - 307,390 307,390 Dredging Special Assessments - expenditures 42,189 44,425 2,236 Fire Company Impact Fees - expenditures - 296,873 296,873 Parks & Rec Impact Fees - transfers - 323,525 323,525

Total Special Revenue Funds that adopt annual budgets $ 10,275,660 $ 13,314,572 $ 3 ,038,912 All final budgets are presented as amended. The County Administrator may approve budget amendments of $10,000 or less throughout the year. Amendments greater than $10,000 require the approval of the County Commissioners.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 2 - BUDGETS AND BUDGETARY ACCOUNTING (CONTINUED)

Annual operating budgets are legally adopted for the General Fund, School Impact Fees Capital Projects Funds, Roads Board Operating Fund, and the following non-major governmental funds: Department of Aging, Housing and Community Services, Community Partnerships for Children, Dredging Special Assessments, Kent Narrows, Law Library, Inmate Welfare, Agricultural Transfer, Rural Legacy, Fire Impact Fee Capital Projects,

Parks and Recreation Impact Fee Capital Projects, and Purchase of Development Rights Funds. Proprietary Fund budgets are adopted for management control only and include all enterprise funds. Budgets are adopted using the same method of accounting as that used for Fund reporting purposes.

Budgets for the General Capital Projects Fund and the Roads Capital Projects Fund reflect multi-year appropriations at the individual project level. Expenditures may not legally exceed appropriations at that level and appropriations lapse at the completion or cancellation of individual projects. In that these capital projects funds do not adopt an annual budget per project, a Statement of Revenues, Expenditures, and Changes in

Fund Balances on a budget-to-actual basis is not presented for these funds.

GENERAL FUND

No General Fund Departments exceeded their legally adopted expenditure budgets for the year ended June 30, 2011. However, salary reversions are budgeted as a lump sum negative $610,000, but actual amounts are realized in the individual departments and are not reported as a lump sum in the Reversions activity.

NOTE 3 – CASH, INVESTMENTS AND INVESTMENT INCOME

A. DEPOSITS AND INVESTMENTS

PRIMARY GOVERNMENT, PUBLIC HOUSING AUTHORITY, AND FIDUCIARY FUNDS

Cash and investments were as follows at year-end:

Collected Primary Government, Public Housing & Fiduciary Carrying Bank Balances Total Cash and Investments Amount or Fair Value Collateral Demand Deposit Accounts, Short-Term Certificates of Deposit and Petty Cash $ 22,130,019 $ 22,821,164 $ 30,269,829 Investment in Maryland Local Government Investment Pool (MLGIP) 47,981,052 47,976,962 48,936,501 $ 70,111,071 $ 70,798,126 $ 79,206,330 Cash and investments reconcile to the basic financial statements as follows:

Primary Component Unit- Cash and Investments Government Housing Authority Fiduciary Total Unrestricted Equity in Pooled Cash and Investments $ 55,574,824 $ 2,123,122 $ 1,189,475 $ 58,887,421 Cash and Cash Equivalents - 334,490 - 334,490 Restricted Equity in Pooled Cash and Investments 10,789,829 - - 10,789,829 Investments - 99,331 - 99,331 $ 66,364,653 $ 2,556,943 $ 1,189,475 $ 70,111,071

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 3 – CASH, INVESTMENTS AND INVESTMENT INCOME (CONTINUED)

A. DEPOSITS AND INVESTMENTS (CONTINUED)

PRIMARY GOVERNMENT, PUBLIC HOUSING AUTHORITY, AND FIDUCIARY FUNDS (CONTINUED) At year-end, the carrying amount of combined deposits was $22,130,019. The collected bank balances were $22,861,164 and of those balances, $1,003,183 was insured by federal depository insurance (FDIC).

The uninsured balances were fully collateralized by securities placed with the respective banks’ escrow agents and held in the County’s name.

Statutes authorize the County to invest in obligations of the United States Government, Federal government agency obligations, secured time deposits in Maryland banks, bankers’ acceptances, the Maryland Local Government Investment Pool, money market mutual funds, commercial paper and repurchase agreements secured by direct government or agency obligations.

Of these options, the County participates in the Maryland Local Government Investment Pool (MLGIP), which provides all local government units of the state with a safe investment vehicle for short-term investment of funds. The State Legislature created MLGIP by enacting Section 22G of Article 94 of the Annotated Code of Maryland. PNC Financial manages the MLGIP, under administrative control of the State Treasurer. A MLGIP

Advisory Committee of current participants reviews the activities of the Fund on a quarterly basis and provides suggestions to enhance the pool. Standard and Poors rates the MLGIP as AAAm. The MLGIP seeks to maintain a constant value of $1 per unit. Unit value is computed using the amortized cost method. In addition, the net asset value of the pool, marked to market, is calculated and maintained on a weekly basis to ensure a

$1 per unit constant value.

As of June 30, 2011, the County’s investments, for both custodial and credit risk purposes, consisted solely of shares in the MLGIP. This investment is not deemed to have either risk and is in conformity with the County’s policy relating to minimal credit risk of investments.

COMPONENT UNITS (BOARD OF EDUCATION AND LIBRARY)

Component Unit - Board of Education - At year-end, the carrying amount of deposits was $13,772,461, including $300,000 in certificates of deposit and excluding the carrying amount of fiduciary funds. The bank balances were $14,490,468. At June 30, 2011, the Board’s bank deposits were approximately $1.1 million in excess of limits insured by federal deposit insurance. The uninsured balances were fully collateralized by

securities held by the agent of the Board, in the Board’s name. In addition, the Board had approximately $1,600 cash on hand at June 30, 2011.

Component Unit – Library - At year-end, the carrying amount of all bank deposits, including a $650,441 certificate of deposit, was $1,353,677, while collected bank balances were $1,358,069. Of the bank balances, $585,313 was secured by the FDIC and $772,756 was secured by collateral held by the pledging bank’s trust department but not in the Library’s name.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 3 – CASH, INVESTMENTS AND INVESTMENT INCOME (CONTINUED)

B. INVESTMENT INCOME

PRIMARY GOVERNMENT

Total investment income earned in all governmental and business-type funds was credited for use as follows:

Investment Governmental Funds Income General Fund $ 50,109 Other Funds 23,842 Unrestricted Revenue 73,951 Restricted Revenue 62,572 Total Investment Income $ 136,523 Business-Type Funds Major Enterprise Funds Sanitary District $ 407,404 Airport 225 Total Investment Income $ 407,629

- 71 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 4 - ACCOUNTS RECEIVABLE

Receivables as of June 30, 2011 for the governmental and business-type activities are as follows:

Total General Roads School Non-Major Total Total Governmental General Capital Capital Impact Fees Roads Governmental Governmental Enterprise and Enterprise Accounts Receivable Fund Projects Projects Capital Board Funds Funds Funds Funds Receivables Taxes - Real Property $ 1 59,513 $ - $ - $ - $ - $ - $ 159,513 $ - $ 159,513 Taxes - Other 9 4,691 122,022 - - - - 216,713 - 216,713 Subtotal Taxes 2 54,204 122,022 - - - - 376,226 - 376,226

Other Accounts Receivable:

Health Department 2 00,000 - - - - - 200,000 - 200,000 Retirees Insurance 2 7,547 - - - - - 27,547 - 27,547 Sheriff's Department 1 8,982 - - - - - 18,982 - 18,982 Board of Education - - - - 60,113 - 60,113 - 60,113 Governmental Funds - User Fees - - 1 9,518 - - - 19,518 - 19,518 Sanitary District - User and Septage Fees - - - - - - - 455,037 455,037 Purchase of Development Rights - - - - - 77,132 77,132 - 77,132

Airport - Fuel Sales and User and Rental Fees - - - - - - - 112,807 112,807 Miscellaneous Receivables 2 0,313 2 ,036 - - 2,724 37,137 62,210 61,162 123,372 Subtotal Other Accounts Receivable 2 66,842 2 ,036 1 9,518 - 62,837 114,269 465,502 629,006 1,094,508 Loans Receivable - - - 4 19,329 - 3,935,131 4,354,460 - 4,354,460 Subtotal Other Accounts and Loans Receivable 2 66,842 2 ,036 1 9,518 4 19,329 62,837 4,049,400 4,819,962 629,006 5,448,968

Special Assessments - - 455,933 - - 683,394 1,139,327 - 1,139,327 Intergovernmental Income Taxes Held by State 8 ,748,190 - - - - - 8,748,190 - 8,748,190 Grants Receivable 7 12,315 230,351 686,352 - 218,525 504,888 2,352,431 154,469 2,506,900 State-Shared Highway User Tax - - - - 47,816 - 47,816 - 47,816 Bonds Receivable 1 ,749,459 - - - - - 1,749,459 - 1,749,459 Subtotal Intergovernmental 1 1,209,964 230,351 686,352 - 266,341 504,888 12,897,896 154,469 13,052,365

Restricted Receivables Accounts Receivable - - - - - - - 47,578 47,578 Special Assessments - - - - - - - 2,770,611 2,770,611 Subtotal Restricted Receivables - - - - - - - 2,818,189 2,818,189 Total Receivables $ 1 1,731,010 $ 354,409 $ 1,161,803 $ 4 19,329 $ 329,178 $ 5,237,682 $ 19,233,411 $ 3,601,664 $ 22,835,075 Note that receivables from Component Units are not included in the above table.

- 72 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 4 - ACCOUNTS RECEIVABLE (CONTINUED)

The County expects to receive all receivables listed in the table within one year, excluding the following items.

Intergovernmental receivables include bonds receivable from four other counties. In years 1994, 2000, and 2003, Queen Anne’s County sold $1,000,000, $2,815,000, and $710,000, respectively, of its general obligation bonds for the purpose of providing the local share of capital projects at Chesapeake College. Five counties, including Queen Anne’s County, provide local support for the College. The other four counties supporting Chesapeake

College have provided their bonds to Queen Anne’s County as evidence of their requirement to reimburse their portion of the debt service. Bonds are amortized over the 20-year life of each of the original Queen Anne's County Bonds. The current carrying value for the bonds receivable from the other four counties are $182,400, $1,220,000, and $347,059, respectively, for a total of $1,749,459. The College bills and collects from the original

five counties an amount sufficient to cover this debt service and reimburses this amount to Queen Anne’s County on a semi-annual basis.

Loans receivable in the amount of $4,354,460 relate to the Housing, Impact Fees, and Revolving Loan Special Revenue Funds. Loans receivable in the amount of $3,664,409 for Housing and Community Services will be repaid when the homes are sold, in virtually all cases. These loans support housing rehabilitation and homeownership. When the loans are repaid to the County, the funds are then loaned out again to serve the same

purpose. Loans for the Revolving Loan Fund in the amount of $175,683 are also repaid over a number of years.

The remaining loan receivable balance of $514,368 relates to school, fire, and parks and recreation impact fees.

In July 2007, the County began accepting promissory notes for impact fees, in certain situations, with the understanding that when certificate of occupancy was obtained, these notes would be paid in full. To ensure repayment, the notes attach to the property incurring the impact fee; therefore, payment will be required automatically prior to legal transfer of title.

Income taxes held by the State in the amount of $8,748,190 have been estimated by the State as income tax due for “tax years” 2010 and prior. It may take five years or longer for the State to receive all amounts relating to these “tax years” and remit those monies to the County. However, the State indicates that this is a reasonable estimate of their liability to the County and the County reports this amount in accordance with GAAP.

Special Assessments in the amount of $1,139,327 represent receivables for governmental activities. Part of this amount consists of $455,933 for assessments levied on homeowners to reimburse the County for construction or upgrade of private roads prior to their acceptance into the County Roads System. The other part of this amount consists of $683,394 for assessments levied on homeowners relating to dredging costs. Payment of these

assessments is expected over a number of years.

Restricted Special Assessments in the amount of $2,770,611 represent restricted receivables for the Sanitary District. These receivables relate to assessments levied on homeowners for the construction of sewer and water lines, as well as for hook up costs. Only the current portion due is billed and the remaining balances are repaid over a number of years, as determined by the original agreement. As the funds are paid back, the County uses

the money to repay debt.

- 73 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 5 – DEFERRED OR UNEARNED REVENUE

Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. In addition, governmental funds and governmental activities defer revenue recognition in connection with resources that have been received, but unearned. At the end of the current fiscal year, the components of unavailable revenue and unearned

revenue were reported as follows:

Deferred Revenue Unavailable Unearned Total General Fund Income Taxes Due from State $ 6 ,213,478 $ - $ 6 ,213,478 Property Taxes Receivable 78,885 - 78,885 Property Tax Deferrals - 16,375 16,375 Inter-governmental Bonds Receivable 1,749,459 - 1,749,459 Grant Drawdowns in Excess of Expenditures - 9,314 9,314 Subtotal 8,041,822 25,689 8,067,511 General Capital Projects Fund Grant Drawdowns in excess of Expenditures - 80,307 80,307

Roads Capital Projects Fund Benefit Assessments Receivable Not Currently Due - 455,933 455,933 Benefit Assessments Paid in Advance - 59,967 59,967 Subtotal - 515,900 515,900 School Impact Fees Fund Impact Fees Loans Receivable Not Currently Due - 419,329 419,329 Roads Board Operating Fund Inspection Fees Collected In Advance - 586,402 586,402 Non-Major Governmental Funds Grant Drawdowns in Excess of Expenditures - 57,330 57,330

Benefit Assessments Receivable Not Currently Due - 683,394 683,394 Impact Fees Loans Receivable Not Currently Due - 95,039 95,039 Subtotal - 835,763 835,763 Total Deferred Revenue $ 8 ,041,822 $ 2,463,390 $ 1 0,505,212

- 74 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 6 – CAPITAL ASSETS

PRIMARY GOVERNMENT

Changes in the County’s capital assets for governmental activities for the year ended June 30, 2011 are summarized as follows, with depreciation shown separately. Assets resulting from completed capital projects are shown in the Construction in Progress Transfers column. Asset retirements are show in the Decreases column.

Construction Balance in Progress Balance Governmental Activities June 30, 2010 Increases Transfers Decreases June 30, 2011 Capital Assets, not being depreciated:

Land $ 3 7,867,259 $ - $ 1,385,365 $ ( 159,882) $ 39,092,742 Intangible Rights - Easements 1 3,390 - - - 13,390 Land Improvements 1 ,796,268 - - - 1,796,268 Construction in Progress 1 1,616,229 4 ,422,434 ( 7,668,861) ( 198,774) 8,171,028 Land - Inexhaustible Infrastructure Improvements 4 0,055,352 - 606,726 - 40,662,078 Total Capital Assets, not being depreciated 9 1,348,498 4 ,422,434 ( 5,676,770) ( 358,656) 89,735,506

Capital Assets, being depreciated:

Buildings and Building Improvements 3 5,066,000 3 5,040 4,959,022 ( 227,064) 39,832,998 Improvements other than Buildings 5 ,517,458 1 6,130 359,008 - 5,892,596 Vehicles 9 ,618,064 3 52,304 - (755,441) 9,214,927 Equipment 8,729,425 9 2,785 - (510,136) 8,312,074 Furniture and Fixtures 10,640,694 3 7,134 - ( 95,969) 10,581,859 Infrastructure Improvements - Depreciable 1 5,491,275 - 358,740 - 15,850,015

Total Capital Assets, being depreciated 8 5,062,916 5 33,393 5,676,770 ( 1,588,610) 89,684,469 Less Accumulated Depreciation for:

Buildings and Building Improvements 8 ,200,331 8 56,016 - (3,557) 9,052,790 Improvements other than Buildings 9 47,099 1 68,294 - - 1,115,393 Vehicles 5 ,736,190 6 87,325 - (668,557) 5,754,958 Equipment 5,808,965 4 85,331 - (508,889) 5,785,407 Furniture and Fixtures 6 ,065,898 1,081,613 - ( 95,969) 7,051,542 Infrastructure Improvements - Depreciable 6 ,528,714 2 55,213 - - 6,783,927 Total Accumulated Depreciation 3 3,287,197 3,533,792 - (1,276,972) 35,544,017

Total Capital Assets, being depreciated, net 5 1,775,719 (3,000,399) 5,676,770 ( 311,638) 54,140,452 Governmental activities Capital Assets, net $ 1 43,124,217 $ 1,422,035 $ - $ (670,294) $ 143,875,958

- 75 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 6 – CAPITAL ASSETS (CONTINUED)

PRIMARY GOVERNMENT (CONTINUED)

Changes in the County’s capital assets for business-type activities for the year ended June 30, 2011 are summarized as follows, with depreciation shown separately. Completed projects that were reclassified from construction in progress (CIP) to other asset accounts during the year are reported in the same column, as retirements from CIP and transfers to other asset accounts.

Construction Balance In Progress Balance Business-Type Activities June 30, 2010 Increases Transfers Decreases June 30, 2011 Capital Assets, not being depreciated:

Land $ 12,974,006 $ - $ - $ - $ 12,974,006 Land Improvements 16,162 - - - 16,162 Intangible Rights - 6,140 - - 6,140 Construction in Progress 5,199,865 1,737,157 (1,381,340) (69,310) 5,486,372 Land - Inexhaustible Infrastructure Improvements 1,219,298 - - - 1,219,298 Total Capital Assets, not being depreciated 19,409,331 1 ,743,297 (1,381,340) (69,310) 19,701,978 Capital Assets, being depreciated:

Buildings and Improvements to Buildings 18,218,809 1 3,451 15,497 (1,494,595) 1 6,753,162 Improvements other than Buildings 6,407,390 - 559,519 - 6,966,909 Vehicles 1,293,894 1 44,064 - (114,170) 1 ,323,788 Equipment 21,895,691 222,696 - (318,682) 2 1,799,705 Furniture and Fixtures 87,538 - - (3,344) 84,194 Infrastructure Improvements - Depreciable 68,224,214 837,427 806,324 (226,763) 6 9,641,202 Total Capital Assets, being depreciated 116,127,536 1 ,217,638 1,381,340 (2,157,554) 116,568,960

Less Accumulated Depreciation for:

Buildings and Improvements to Buildings 5,799,386 668,247 - (173,790) 6 ,293,843 Improvements other than Buildings 2,269,759 2 52,559 - - 2,522,318 Vehicles 884,181 89,594 - (111,842) 8 61,933 Equipment 6,565,209 1,038,220 - (275,885) 7 ,327,544 Furniture and Fixtures 65,710 4,352 - (3,344) 66,718 Infrastructure Improvements - Depreciable 19,591,850 1,651,037 - (31,374) 21,211,513 Total Accumulated Depreciation 35,176,095 3,704,009 - (596,235) 3 8,283,869

Total Capital Assets, being depreciated, net 80,951,441 (2,486,371) 1,381,340 (1,561,319) 78,285,091 Business-Type activities Capital Assets, net $ 100,360,772 $ (743,074) $ - $ (1,630,629) $ 97,987,069

- 76 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 6 – CAPITAL ASSETS (CONTINUED)

PRIMARY GOVERNMENT (CONTINUED)

Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental Activities Depreciation General Government $ 229,038 Public Safety 1,586,318 Public Works 905,611 Health 10,117 Social Services 354,639 Parks and Recreation 374,004 Library 23,611 Conservation of Natural Resources 15,739 Economic/Community Development 34,715 $ 3,533,792 Business-Type Activities Major Enterprise Funds:

Sanitary District $ 3,378,671 Airport 171,640 Non-Major Enterprise Funds:

Parks and Recreation $ 145,667 Public Marinas 8,031 153,698 $ 3,704,009

- 77 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 6 – CAPITAL ASSETS (CONTINUED)

COMPONENT UNITS

Board of Education: Capital asset activity for the year ended June 30, 2011 is as follows:

Balance Balance Board of Education June 30, 2010 Increases Decreases June 30, 2011 Capital Assets, not being depreciated:

Land $ 6,363,040 $ - $ - $ 6,363,040 Construction in Progress 4,650,425 14,295,149 (528,380) 18,417,194 Total Capital Assets, not being depreciated 11,013,465 14,295,149 (528,380) 24,780,234 Capital Assets, being depreciated:

Land Improvements 4,569,849 64,155 (12,000) 4,622,004 Buildings 150,217,309 387,290 - 150,604,599 Furniture and Equipment 9,652,126 640,380 (284,218) 10,008,288 Total Capital Assets, being depreciated 164,439,284 1,091,825 (296,218) 165,234,891 Less Accumulated Depreciation for:

Land Improvements 3,159,505 135,070 (12,000) 3,282,575 Building 31,213,651 2,913,316 - 34,126,967 Furniture and Equipment 6,827,241 530,889 (260,290) 7,097,840 Total Accumulated Depreciation 41,200,397 3,579,275 (272,290) 44,507,382 Total Capital Assets, being depreciated, net 123,238,887 (2,487,450) (23,928) 120,727,509 Capital Assets, net $ 134,252,352 $ 11,807,699 $ (552,308) $ 145,507,743

- 78 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 6 – CAPITAL ASSETS (CONTINUED)

COMPONENT UNITS (CONTINUED)

Queen Anne’s County Free Library: Capital asset activity for the year ended June 30, 2011 is as follows:

Balance Balance Library June 30, 2010 Increases Decreases June 30, 2011 Capital Assets, not being depreciated:

Artwork $ 29,850 $ - $ - $ 29,850 Capital Assets, being depreciated:

Books and Media 2,285,752 154,915 (48,304) 2,392,363 Building Improvements 239,072 - - 239,072 Total Capital Assets, being depreciated 2,524,824 154,915 (48,304) 2,631,435 Less Accumulated Depreciation for:

Books and Media 1,523,598 101,447 (43,474) 1,581,571 Building Improvements 97,285 6,130 - 103,415 Total Accumulated Depreciation 1,620,883 107,577 (43,474) 1,684,986 Total Capital Assets, being depreciated, net 903,941 47,338 (4,830) 946,449 Capital Assets, net $ 933,791 $ 47,338 $ (4,830) $ 976,299

- 79 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 6 – CAPITAL ASSETS (CONTINUED)

COMPONENT UNITS (CONTINUED)

Queen Anne's County Housing Authority: Capital asset activity for the year ended June 30, 2011 is as follows:

Construction Balance in Progress Balance Housing Authority June 30, 2010 Increases Transfers Decreases June 30, 2011 Capital Assets, not being depreciated:

Land $ 784,639 $ - $ - $ - $ 784,639 Land Improvements 212,722 - - - 212,722 Construction in Progress 354,366 728,785 (714,660) - 368,491 Total Capital Assets, not being depreciated 1,351,727 7 28,785 (714,660) - 1,365,852 Capital Assets, being depreciated:

Buildings and Improvements 20,991,738 - 524,096 - 21,515,834 Vehicles 23,490 - - - 23,490 Furniture, Fixtures, and Equipment 227,264 - 159,131 - 386,395 Infrastructure 141,396 - - - 141,396 Total Capital Assets, being depreciated 21,383,888 - 683,227 - 22,067,115 Less Accumulated Depreciation for:

Buildings and Improvements 3,316,894 4 42,994 (31,433) - 3,728,455 Vehicles 19,379 2,349 - - 21,728 Furniture, Fixtures, and Equipment 131,865 14,268 - - 146,133 Infrastructure 943 2,828 - - 3,771 Total Accumulated Depreciation 3,469,081 4 62,439 (31,433) - 3,900,087 Total Capital Assets, being depreciated, net 17,914,807 (462,439) 714,660 - 18,167,028 Capital Assets, net $ 19,266,534 $ 266,346 $ - $ - $ 19,532,880

- 80 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 7 - INTERFUND RECEIVABLES AND PAYABLES

Interfund receivables and payables are usually used by the County to cover temporary cash deficits in individual funds until grant or similar resources are received. Occasionally, these receivables and payables are used in lieu of short-term external borrowing, such as for capital lease agreements.

Intra-entity receivables and payables usually relate to capital construction projects, wherein the primary government records a liability to its component unit at year-end while the component unit records a payable to the contractor.

The interfund and intra-entity receivables and payables consist of the following at June 30, 2011:

Due from Fund Total Due From General Non-Major Sanitary Bay Bridge Non-Major Housing Authority Other Funds / Capital Projects Governmental District Airport Enterprise Subtotal Component Unit Component Units Due to Fund General Fund $ - $ 258,660 $ - $ 377,884 $ 3 73,629 $ 1,010,173 $ 120,082 $ 1,130,255 General Capital Projects - 68,775 - - - 68,775 - 68,775 Sanitary District - - 280,682 - - 280,682 - 280,682

Non-Major Enterprise - - - - 20,000 20,000 - 20,000 Board of Education - Component Unit 3 ,008,665 - - - - 3,008,665 - 3,008,665 Total Due to Other Funds $ 3 ,008,665 $ 3 27,435 $ 280,682 $ 3 77,884 $ 3 93,629 $ 4,388,295 $ 120,082 $ 4,508,377 Interfund receivables and payables are reported on the Statement of Net Assets as Internal Balances, net of transactions between the same types of funds.

- 81 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 8 - INTERFUND TRANSFERS

Interfund transfers represent a transfer of resources from one fund to another without expectation of repayment.

Usually, these transfers are undertaken to enable the receiving entity to provide services that the government has determined to be in the best interest of the County. The following interfund transfers were made during the fiscal year ended June 30, 2011:

Transfers in Fund Total General General Non-Major Major Non-Major Total Transfers Out Fund Capital Projects Governmental Enterprise Enterprise Transfers In Transfers Out Fund General Fund $ 2 ,922,343 $ - $ 125,000 $ 2,185,421 $ 1 43,812 $ 468,110 $ 2 ,922,343 General Capital Projects (1) 1 ,680,551 8 49,467 - 214,741 - - 1,064,208 Roads Capital Projects 1 0,000 - 10,000 - - - 1 0,000 Impact Fees - Schools 1 ,408,120 1 ,408,120 - - - - 1,408,120

Total Major Governmental Funds 6 ,021,014 2 ,257,587 1 35,000 2 ,400,162 1 43,812 468,110 5 ,404,671 Non-Major Governmental 5 93,507 6 2,982 5 30,525 - - - 5 93,507 Sanitary District - Restricted 1 ,131,894 - - - 1,131,894 - 1,131,894 Sanitary District - Debt Service 2 ,090,071 - - - 2,090,071 - 2,090,071 Total Major Enterprise Funds 3 ,221,965 - - - 3,221,965 - 3,221,965 Total Transfers Out $ 9 ,836,486 $ 2 ,320,569 $ 6 65,525 $ 2,400,162 $ 3 ,365,777 $ 468,110 $ 9 ,220,143

(1) In fiscal year 2011, the General Capital Projects Fund transferred 2009 bond proceeds in the amount of

$616,343 to various Enterprise Funds. Public Marinas received $594,171, the Airport received $11,104, and Public Landings received $11,068. The transaction was appropriately recorded on the Enterprise Fund books as an increase in debt liability and on the General Capital Projects Fund’s book as a transfer out. Since enterprise funds and governmental funds record such transactions differently, the $616,343 is reported in the

above table only as a transfer out with no corresponding transfer in.

- 82 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES

A. CHANGES IN NONCURRENT LIABILITIES

During the year ended June 30, 2011, the following changes occurred in the noncurrent liabilities of the primary government’s governmental activities:

PRIMARY GOVERNMENT Retirements Due in Balance Additions and Balance Due Within More than Governmental Activities June 30, 2010 of new debt Repayments June 30, 2011 One Year One Year General Bonds Payable $ 88,859,439 $ 21,532,570 $ 6,822,151 $ 103,569,858 $ 7 ,109,959 $ 9 6,459,899 Notes Payable 1 ,652,082 3 65,000 946,450 1,070,632 1 81,492 8 89,140 Bond Premiums, Net of Issuance Costs 5 97,952 9 ,465 66,070 541,347 6 5,729 4 75,618

Deferred Refunding Costs (1,489,959) - (170,483) (1,319,476) (170,483) (1,148,993) Capital Leases 1 05,884 - 51,795 54,089 5 4,089 - 8 9,725,398 21,907,035 7,715,983 103,916,450 7 ,240,786 9 6,675,664 Other Post-Employment Benefit Obligation 8 ,548,639 6,171,434 835,792 13,884,281 - 13,884,281 Compensated Absences 2 ,434,947 1,147,291 1,420,167 2,162,071 1,379,933 7 82,138 $ 1 00,708,984 $ 29,225,760 9,971,942 $ 119,962,802 $ 8 ,620,719 $ 1 11,342,083

Less College Reimbursements ( 239,495) $ 9,732,447 The reconciliation from retirements and repayments in the above table to the total principal payments on the Statement of Revenues, Expenditures, and Changes in Fund Balance is as follows:

Retirements and Repayments General Bonds Payable $ 6 ,822,151 Notes Payable 9 46,450 Capital Leases 5 1,795 LESS: Distributions of 2009 Bonds ( 616,343) LESS: College Reimbursements ( 239,495) Total Principal Payments $ 6 ,964,558 The County added amounts to several bond offerings on behalf of Chesapeake College, which cannot borrow money on its own. This year, the College reimbursed to the County $239,495 for this year’s principal and

interest payments. However, since the County is one of five Counties supporting the College, we paid the College $60,524 this year for our part of the debt.

- 83 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES (CONTINUED)

A. CHANGES IN NONCURRENT LIABILITIES (CONTINUED)

During the year ended June 30, 2011, the following changes occurred in the noncurrent liabilities of the primary government’s business-type activities:

PRIMARY GOVERNMENT Retirements Due in Balance Additions and Balance Due Within More than Business-Type Activities June 30, 2010 of new debt Repayments June 30, 2011 One Year One Year Golf Course $ 8 41,075 $ - $ 75,000 $ 766,075 $ 80,000 $ 686,075 Airport 6 73,127 13,534 41,919 644,742 42,721 602,021 Public Landings 2 9,936 11,068 1,228 39,776 1,624 38,152 Public Marinas 3 74,672 594,171 34,289 934,554 46,347 888,207

Sanitary District 1 9,782,739 - 1,952,382 1 7,830,357 1,946,420 15,883,937 Subtotal Debt 2 1,701,549 618,773 2,104,818 2 0,215,504 2,117,112 18,098,392 Bond Premiums, Net of Issuance Costs Golf Course 2 6,514 - 2,651 23,863 2,651 21,212 Airport 8 ,385 6 834 7,557 836 6,721 Public Landings 1 2 4 1 15 1 14 Public Marinas 1 29 248 30 347 18 329 Deferred Refunding Costs Golf Course (58,883) - (5,889) (52,994) (5,888) (47,106)

Airport (18,473) - (1,847) (16,626) (1,847) (14,779) Sanitary District (47,500) - (20,833) (26,667) (13,333) (13,334) Subtotal Bond Premiums, Issuance and Deferred Refunding Costs (89,816) 258 (25,053) (64,505) (17,562) (46,943) Subtotal Debt before Other Post-Employment Benefit Obligation and Compensated Absences 2 1,611,733 619,031 2,079,765 2 0,150,999 2,099,550 18,051,449 Other Post-Employment Benefit Obligation 1 ,562,119 1,085,061 - 2,647,180 - 2,647,180

Compensated Absences 2 96,788 216,074 173,100 339,762 216,852 122,910 $ 2 3,470,640 $ 1,920,166 $ 2,252,865 $ 23,137,941 $ 2,316,402 $ 20,821,539 Additions of new debt listed above in the amount of $618,773 represent distributions of the 2009 bonds in the amount of $616,343 (see comment in Note 8), and also distributions of the 2011 bonds in the amount of $2,430.

- 84 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES (CONTINUED)

A. CHANGES IN NONCURRENT LIABILITIES (CONTINUED)

During the year ended June 30, 2011, the following changes occurred in the noncurrent liabilities of the primary government’s Component Units:

COMPONENT UNITS Retirements Due in Board of Education, Free Library, Balance Additions and Balance Due Within More than and Housing Authority June 30, 2010 of new debt Repayments June 30, 2011 One Year One Year Queen Anne's County Board of Education Capital Lease $ 82,206 $ - $ 77,646 $ 4 ,560 $ 4,560 $ - Retirement Incentives - 282,531 - 282,531 2 57,694 24,837 Compensated Absences 926,197 97,326 200,361 823,162 2 29,848 593,314

Other Post-Employment Benefit Obligation 9,535,459 5,258,870 - 14,794,329 - 14,794,329 Subtotal 10,543,862 5,638,727 278,007 15,904,582 4 92,102 15,412,480 Free Library Other Post-Employment Benefit Obligation 339,566 221,698 - 561,264 - 561,264 Housing Authority Terrapin Grove Phase II Loan 654,314 - 40,908 613,406 40,908 572,498 Scattered Site Housing Reimbursement to County for Portion of 2003 Bonds 246,447 - 13,917 232,530 14,656 217,874

Repay Loan from County Housing Revolving Loan Fund 502,224 - - 502,224 - 502,224 Reimbursement to County for Portion of 2009 Bonds 626,712 - 21,383 605,329 22,222 583,107 2009 Bond Premiums 3,305 - 165 3,140 165 2,975 2009 Bond Issuance Costs (3,055) - (152) (2,903) (153) (2,750) Foxxtown Apartments Reimbursement to County for Portion of 2006 Bonds 361,286 - 14,878 346,408 15,566 330,842 Reimbursement to County for

Portion of 2009 Bonds 245,932 - 8,391 237,541 8,720 228,821 2009 Bond Premiums 1,297 - 65 1,232 65 1,167 2009 Bond Issuance Costs (1,199) - (60) (1,139) (60) (1,079) Other Post-Employment Benefit Obligation 291,066 118,504 64,498 345,072 - 345,072 Subtotal 2,928,329 118,504 163,993 2,882,840 1 02,089 2,780,751 Total Noncurrent Liabilites: Component Units $ 13,811,757 $ 5,978,929 $ 442,000 $ 19,348,686 $ 5 94,191 $ 18,754,495

- 85 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES (CONTINUED)

B. GENERAL OBLIGATION BONDS, NOTES, OTHER POST-EMPLOYMENT BENEFIT OBLIGATION, AND

COMPENSATED ABSENCES

PRIMARY GOVERNMENT

All general obligation bonds are valid and legally binding general obligations of Queen Anne’s County and constitutes an irrevocable pledge of its full faith and credit and unlimited taxing power. Governmental bonds are payable from ad valorem taxes, unlimited as to rate or amount on all real, tangible, personal, and certain intangible property subject to taxation at full rate for local purposes in the County.

Business-type bonds, while representing general obligations of the County government, are to be paid from income earned by the related enterprise fund. Enterprise funds that have such debt are: Water, Sewer, Bay Bridge Airport, Blue Heron Golf Course, Public Landings, and Public Marinas.

During fiscal year 2009, the County implemented the provisions of Governmental Accounting Standards Board (GASB) Statement 43, Financial Reporting for Post-Employment Benefit Plans Other than Pension Plans and GASB 45, Accounting and Financial Reporting by Employers for Post-Employment Benefits Other Than Pensions. For governmental funds, the other post-employment benefit obligations are reported in the

government-wide statements in the function in which that employee usually charges their productive time. For enterprise funds, these obligations are reported in the enterprise fund in which that employee charges the majority of their productive time. Additional information can be found in Note 14, Other Post-Employment Benefits.

Compensated absences that mature during the fiscal year, in that they are paid when the employee takes vacation leave upon the employee’s termination, are typically liquidated from the governmental or enterprise fund in which that employee charges the majority of their productive time. They are paid as regular wages.

Compensated absences that do not mature during the fiscal year are accrued at year-end as an adjustment to liability for compensated absences. For governmental funds, these adjustments are reported in the government-wide statements in the function in which that employee usually charges their productive time. For enterprise funds, these adjustments are reported in the enterprise fund in which that employee charges the

majority of their productive time. In the case of grant-funded activities that disallow compensated absences as an eligible cost, they are paid as administrative wages in the same Fund. Compensated absences in governmental funds are primarily charged to the General Fund or Special Revenue Funds; they are usually not charged to Capital Projects Funds.

- 86 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES (CONTINUED)

B. GENERAL OBLIGATION BONDS, NOTES, OTHER POST-EMPLOYMENT BENEFIT OBLIGATION, AND

COMPENSATED ABSENCES (CONTINUED)

PRIMARY GOVERNMENT (CONTINUED)

As of June 30, 2011, general obligation bonds and notes payable for governmental activities are comprised of the following, along with other post-employment benefits and accrued compensated absences:

Year Amount Outstanding Due in Paying Interest Series of Original June 30, Due Within More than Governmental Activities Fund Rate Matures Issue 2011 One Year One Year General Obligation Bonds Payable 2002 Refunding Bonds General 3.00%-5.00% 2013 6,310,000 $ 1,950,000 $ 920,000 $ 1,030,000 2003 Public Facilities General 3.50%-4.50% 2023 13,265,000 9 ,207,471 580,344 8,627,127 2005 Refunding Bonds General 3.00%-5.00% 2019 30,026,336 2 4,446,336 3,080,000 21,366,336

2006 Public Facilities General 4.000%-5.375% 2027 22,510,212 1 9,507,559 876,581 18,630,978 2009 Public Facilities General 1.400%-5.625% 2030 28,499,154 2 6,925,922 983,110 25,942,812 2011 Public Facilities General 2.00%-4.25% 2031 21,532,570 2 1,532,570 669,924 20,862,646 Subtotal Bonds Payable 1 03,569,858 7,109,959 96,459,899 Notes Payable 2009 CELP Loan General 2.00% 2015 122,780 8 0,880 17,353 63,527

State of Maryland - Price Ck. Spec. Rev. 0.00% 2021 625,000 2 40,000 24,000 216,000 State of Maryland - Grove Ck. Spec. Rev. 0.00% 2034 510,617 4 69,767 20,425 449,342 Frizz-King Property General Capital Projects 6.00% 2014 365,000 2 79,985 119,714 160,271 Subtotal Notes Payable 1 ,070,632 1 81,492 8 89,140 Subtotal Bonds and Notes Payable 1 04,640,490 7,291,451 97,349,039 2005 Bond Premiums 6 11,517 76,391 535,126

2005 Bond Issuance Costs (89,637) (11,668) (77,969) 2005 Deferred Refunding Costs (1,319,476) (170,483) (1,148,993) 2006 Bond Premiums 1 92,360 12,023 180,337 2006 Bond Issuance Costs (192,360) (12,023) (180,337) 2009 Bond Premiums 1 39,684 7,352 132,332 2009 Bond Issuance Costs (129,231) (6,797) (122,434) 2011 Bond Premiums 1 32,510 6,626 125,884 2011 Bond Issuance Costs (123,496) (6,175) (117,321)

Total Governmental Activities 1 03,862,361 7,186,697 96,675,664 Long-term Obligation under Capital Lease Agreements General 4.38% 2012 248,460 5 4,089 54,089 - Other Post-Employment Benefit Obligation 1 3,884,281 - 13,884,281 Compensated Absences 2 ,162,071 1,379,933 782,138 $ 1 19,962,802 $ 8,620,719 $ 111,342,083 Details relating to the capital lease obligation can be found in Note 9, Section D – Capital Lease Obligations.

- 87 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES (CONTINUED)

B. GENERAL OBLIGATION BONDS, NOTES, OTHER POST-EMPLOYMENT BENEFIT OBLIGATION, AND

COMPENSATED ABSENCES (CONTINUED)

PRIMARY GOVERNMENT (CONTINUED)

The annual requirements to amortize general obligation bonds and notes payable outstanding as of June 30, 2011 for governmental activities are as follows:

Governmental Activities Year Ending Governmental Bonds Payable Governmental Notes Payable June 30, Principal Interest Total Principal Interest Total 2012 $ 7,109,959 $ 4,219,182 $ 11,329,141 $ 181,492 $ 15,670 $ 197,162 2013 6,955,964 3,946,104 10,902,068 189,187 7,975 197,162 2014 7,265,781 3,696,364 10,962,145 95,695 1,325 97,020 2015 7,010,750 3,438,303 10,449,053 62,844 464 63,308 2016 6,720,445 3,186,643 9,907,088 53,772 93 53,865

2017-2021 29,567,441 11,995,985 41,563,426 222,125 - 222,125 2022-2026 22,764,799 6,589,302 29,354,101 102,125 - 102,125 2027-2031 16,174,719 1,823,481 17,998,200 102,125 - 102,125 2032-2034 - - - 61,267 - 61,267 $ 103,569,858 $ 38,895,364 $ 142,465,222 $ 1,070,632 $ 25,527 $ 1,096,159 These repayment schedules exclude bond premiums ($1,076,071), issuance costs (negative $534,724), and deferred refunding costs (negative $1,319,476).

For the year ended June 30, 2011, total principal, debt issuance costs, and interest incurred by governmental funds relating to general obligation bonds and notes payable, less College reimbursements, were $6,964,558, $129,671, and $3,629,426, respectively.

A portion of the County’s 2009 Bond offering was issued using Build America Bonds. As an incentive to use these bonds, the Federal government offered an interest reimbursement grant, which offsets the County’s debt service for interest expense. As a result, the County received interest reimbursements of $454,166 during fiscal year 2011, which are reported separately as a specific intergovernmental grant. The net effect of this

reimbursement is shown below.

Net Effect of Federal Build America Bonds Interest Reimbursement on Interest Expense Interest Expense Interest Net Interest on 2009 Bonds Reimbursement Expense Governmental Activities $ 1,241,218 $ (434,386) $ 806,832 Business-Type Activities Airport 8,271 (2,894) 5,377 Public Landings 1 ,842 (645) 1,197 Public Marinas 4 6,404 (16,241) 30,163 Total Business-Type Activities 5 6,517 (19,780) 36,737 Total $ 1 ,297,735 $ (454,166) $ 843,569

- 88 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES (CONTINUED)

B. GENERAL OBLIGATION BONDS, NOTES, OTHER POST-EMPLOYMENT BENEFIT OBLIGATION, AND

COMPENSATED ABSENCES (CONTINUED)

PRIMARY GOVERNMENT (CONTINUED)

General obligation bonds and notes payable outstanding as of June 30, 2011 for business-type activities are comprised of the following, as well as other post-employment benefits and accrued compensated absences:

Year Amount Outstanding Due in Interest Series of Original June 30, Due Within More than Business -Type Activities Rate Matures Issue 2011 One Year One Year Golf Course 2005 Refunding Bonds 3.00%-5.00% 2019 $ 1,076,075 $ 766,075 $ 80,000 $ 686,075 2005 Bond Premiums 27,370 3,041 24,329 2005 Bond Issuance Costs (3,507) (390) (3,117) 2005 Deferred Refunding Costs (52,994) (5,888) (47,106) Subtotal Golf Course 736,944 76,763 660,181

Bay Bridge Airport 2005 Refunding Bonds 3.00%-5.00% 2019 337,588 217,588 25,000 192,588 2006 Public Facilities Bonds 4.000%-5.375% 2027 288,928 250,388 11,251 239,137 2009 Public Facilities Bonds 1.400%-5.625% 2030 180,501 174,336 6,394 167,942 2011 Public Facilities Bonds 2.00%-4.25% 2031 2,430 2,430 76 2,354 2005 Bond Premiums 8,587 954 7,633 2005 Bond Issuance Costs (1,100) (122) (978) 2005 Deferred Refunding Costs (16,626) (1,847) (14,779)

2006 Bond Premiums 2,469 154 2,315 2006 Bond Issuance Costs (2,469) (154) (2,315) 2009 Bond Premiums 904 48 856 2009 Bond Issuance Costs (836) (44) (792) 2011 Bond Premiums 18 1 17 2011 Bond Issuance Costs (16) (1) (15) Subtotal Airport 635,673 41,710 593,963 Public Landings 2009 Public Facilities Bonds 1.400%-5.625% 2030 29,936 39,776 1,624 38,152 2009 Bond Premiums 205 11 194 2009 Bond Issuance Costs (190) (10) (180)

Subtotal Public Landings 39,791 1,625 38,166 Public Marinas 2006 Public Facilities Bonds 4.000%-5.375% 2027 41,132 35,645 1,602 34,043 2009 Public Facilities Bonds 1.400%-5.625% 2030 918,040 892,095 37,931 854,164 State of Maryland - Shore Erosion Loan 0% 2015 102,208 6,814 6,814 - 2006 Bond Premiums 352 22 330 2006 Bond Issuance Costs (352) (22) (330) 2009 Bond Premiums 4,599 242 4,357 2009 Bond Issuance Costs (4,252) (224) (4,028)

Subtotal Marinas 934,901 46,365 888,536 Sanitary District 2002 Refunding Bonds 3.00%-5.00% 2013 3,385,000 1,145,000 500,000 645,000 Maryland Water Quality-Cloverfields 5.09% 2013 4,282,209 428,221 214,110 214,111 Maryland Water Quality-Digester 4.41% 2013 1,121,377 186,277 91,116 95,161 Maryland Water Quality-Bay City 3.50% 2015 3,476,961 972,685 230,771 741,914 Maryland Water Quality-2005 Enhancement 1.00% 2027 18,252,291 14,871,723 862,592 14,009,131

Queenstown Bank-Cloverfields Hookup 8.13% 2015 435,000 142,435 33,592 108,843 Queenstown Bank-Bay City Hookup 7.90% 2015 205,000 84,016 14,239 69,777 Subtotal Debt 17,830,357 1,946,420 1 5,883,937 Prior Issue Deferred Refunding Costs (26,667) (13,333) (13,334) Subtotal Sanitary District 17,803,690 1,933,087 15,870,603 Total Enterprise Debt before Other Post-Employment Benefit Obligation and Compensated Absences 20,150,999 2,099,550 18,051,449

Other Post-Employment Benefit Obligation 2,647,180 - 2,647,180 Accrued Compensated Absences 339,762 216,852 122,910 Total Enterprise Funds $ 23,137,941 $ 2,316,402 $ 2 0,821,539

- 89 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES (CONTINUED)

B. GENERAL OBLIGATION BONDS, NOTES, OTHER POST-EMPLOYMENT BENEFIT OBLIGATION, AND

COMPENSATED ABSENCES (CONTINUED)

PRIMARY GOVERNMENT (CONTINUED)

The annual requirements to amortize business-type bonds and notes outstanding at June 30, 2011, are as follows:

Business-Type Activities Year Ending Business-Type Bonds Payable Business-Type Notes Payable June 30, Principal Interest Total Principal Interest Total 2012 $ 663,877 $ 143,276 $ 807,153 $ 1,453,235 $ 297,422 $ 1,750,657 2013 475,364 118,034 593,398 1,471,183 267,198 1,738,381 2014 492,721 96,971 589,692 1,183,289 219,140 1,402,429 2015 170,007 82,479 252,486 1,195,544 197,010 1,392,554 2016 172,367 75,972 248,339 917,106 163,082 1,080,188

2017-2021 798,659 271,174 1,069,833 4,624,715 674,021 5,298,736 2022-2026 424,582 145,486 570,068 4,860,431 438,121 5,298,552 2027-2031 325,756 35,661 361,417 986,668 58,267 1,044,935 $ 3,523,333 $ 969,053 $ 4,492,386 $ 16,692,171 $ 2,314,261 $ 19,006,432 For the year ended June 30, 2011, total principal and interest of $2,104,818 and $463,510, respectively, was incurred by business-type activities relating to bonds and notes payable.

- 90 -

QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES (CONTINUED)

C. ISSUANCE OF NEW DEBT

PRIMARY GOVERNMENT

GOVERNMENTAL ACTIVITIES

On March 16, 2011, Queen Anne’s County issued Public Facilities Bonds of 2011 for $21,535,000 ($21,532,570 for Governmental Activities and $2,430 for Business-Type Activities). These General Obligations Bonds carry interest rates of 2.000 to 4.250 percent and mature serially through 2031. The primary use of the bond proceeds is to provide funding for construction and renovation of public school facilities, with minor amounts earmarked for construction of general government and enterprise capital

projects. Moody’s Investors Service has assigned the rating of Aa2 and Fitch Ratings has assigned a rating of AA+ to the Queen Anne’s County 2011 Bonds.

In July 2010, the County entered into a promissory note with Frizz-King Enterprises, LLC in order to purchase development rights as part of the Agricultural Transfer Program. The terms of the agreement specify a total purchase price of $1,387,000, of which Queen Anne’s County will contribute $572,000 and the federal Natural Resource Conservation Service (NRCS) will cover the balance of $815,000 for the rights on the 267.383 acre

Frizz-King property. At the settlement in July 2010, the County paid $207,000 and signed a promissory note for the balance of $365,000, plus 6% interest. Terms of the note require $33,463 to be paid quarterly beginning in October 2010 and ending in July 2013. The purchase did not result in an asset as the Eastern Shore Conservancy, Inc. will own the entire easement right.

D. LEASE OBLIGATIONS

CAPITAL LEASE - PRIMARY GOVERNMENT

Queen Anne’s County entered into a capital lease agreement for two roll-off trucks for the Solid Waste Department. This lease agreement qualifies as a capital lease and has been recorded at the present value of future minimum lease payments at the inception of the lease. The lease is a five year note and expires in January 2012.

As of June 30, 2011, the assets acquired and placed in service, net of depreciation, are as follows:

Vehicles $ 2 48,460 Less accumulated depreciation (113,877) Total asset value for capital lease $ 1 34,583 The future minimum lease obligations and the net present value of the minimum lease payments as of June 30, 2011, are as follows:

Fiscal Year Ending lease June 30, payments 2012 $ 5 5,872 Less amount representing interest (1,783) Net present value of minimum lease payments $ 5 4,089

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 9 – NONCURRENT LIABILITIES (CONTINUED)

D. LEASE OBLIGATIONS (CONTINUED)

OPERATING LEASE - PRIMARY GOVERNMENT

In October 2009, Queen Anne’s County entered into an operating lease agreement as lessor for ground space at the Bay Bridge Airport. The Airport leased a parcel of land approximately 9,000 square feet to CSP Properties, LLC beginning in November 2009 for a term of twenty-five years, ending in fiscal year 2035.

Included in the lease agreement is the requirement that the lessee, CSP Properties, LLC, construct an aircraft hangar at its sole expense, subject to certain criteria. At the end of the lease, the aircraft hangar and any improvements made to it become the sole property of the Bay Bridge Airport.

Lease revenues for the year ended June 30, 2011 amounted to $5,310. Future lease revenues are as follows:

Fiscal Year Ending lease June 30, payments 2012 $ 5,310 2013 5,381 2014 5,416 2015 5,416 2016 5,488 2017-2021 27,918 2022-2026 28,893 2027-2031 29,824 2032-2035 20,453 Minimum Future Rental Revenue $ 134,099

E. LOCAL DEBT POLICY

PRIMARY GOVERNMENT

In August 2009, Queen Anne’s County adopted Resolution No. 09-13, establishing a local debt policy in compliance with Article 95, Section 22F of the Annotated Code of Maryland. This policy requires that the County’s Director of Budget and Finance: (1) prepare a five-year capital project plan each year; (2) propose an amount to be transferred from the General Fund operating balances to the General Capital Projects Fund to

serve as pay-as-you-go funding in the latter Fund, in order to lessen the need for future County debt; (3) limit the County’s non-bonded indebtedness to $8.0 million for general operating expenses or capital improvements;

(4) certify that the sum of outstanding general bonded debt and any new general obligation debt is 2.5% or less

of the total taxable assessable base and is $3,000 or less per capita; and (5) review and revise this Debt Policy as necessary no later than September 1, 2012.

Queen Anne’s County has complied with the above policy, and has not had any violations.

For calculations relating to this local debt policy, see Table 12-b in the Statistical Section of this document, page 200.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 10 – RESTRICTED ASSETS AND LIABILITIES AND FUND BALANCES

A. RESTRICTED ASSETS AND RELATED LIABILITIES

PRIMARY GOVERNMENT

BUSINESS-TYPE ACTIVITIES

Queen Anne’s County Sanitary District Restricted Fund - The County Commissioners created a restricted fund within the Sanitary District Enterprise Fund in November of 1989 by enabling legislation. Revenue sources to the fund are sales of water and sewer allocations and interest earned on investments. Authorized uses of restricted funds are major capital expenses for repairs, construction, plant expansion, debt service, or other similar uses within the Sanitary District. To

date, such funds have been used almost exclusively for debt service.

Debt Service Fund - Principal and interest payments for water and wastewater debt used to expand the service area are payable primarily from water and sewer special benefit assessments. These assessments, made at the time the expansion is ready for use, are created by enabling legislation and amortized over the same life as underlying debt. They constitute a lien on the served property and may be prepaid at any time.

The amount of assessments collectable in future years is recorded as benefit assessments receivable. A portion of those assessments receivable is not due currently and is recorded as unearned revenue.

Water Quality Revolving Loan Fund debt covenants stipulate that sufficient financial resources must be available in the Debt Service Fund as of June 30 of each year to cover the subsequent year’s debt service payments. If such resources are not available at that time, the covenants require that the County increase service rates, impose benefit assessments, or otherwise increase financial resources so that debt service

payments are covered before they are due throughout the year.

The assets and related liabilities restricted for the above purposes at June 30, 2011 are as follows:

Sanitary District Business -Type Activities Restricted Debt Service Total Current Restricted Assets Equity in Pooled Cash $ 7,131,635 $ 3,658,194 $ 10,789,829 Accounts Receivable (Net) 9,860 37,718 47,578 Subtotal 7,141,495 3,695,912 10,837,407 LESS Current Liabilities Associated with Restricted Assets Current Portion of Bonds Payable from Restricted Assets - (54,371) (54,371) Net Current Restricted Assets 7,141,495 3,641,541 10,783,036

Noncurrent Restricted Assets Special Assessments Receivable (Net) 1,199,203 1,571,408 2,770,611 LESS Noncurrent Liabilities Payable from Noncurrent Restricted Assets Unearned Revenue ( 1,199,203) ( 1,462,309) (2,661,512) Net Noncurrent Restricted Assets - 109,099 109,099 Net Restricted Assets $ 7,141,495 $ 3,750,640 $ 10,892,135

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 10 – RESTRICTED ASSETS AND LIABILITIES AND FUND BALANCES (CONTINUED)

B. RESTRICTED NET ASSETS

PRIMARY GOVERNMENT

GOVERNMENTAL ACTIVITIES

Net Assets Invested in Capital Assets, Net of Related Debt, for governmental activities, is calculated as follows:

Governmental Activities Total Debt excluding Compensated Absences and OPEB Obligation $ (103,916,450) Add back: Debt relating to Board of Education Assets $ 60,933,189 Add back: Unspent portion of Bond Proceeds for Board of Education debt 11,503,858 Add back: Unspent portion of Bond Proceeds for Governmental debt 5 ,168,212 Add back: Debt relating to non-capital assets (Dredging) 709,766 Add back debt unrelated to Capital Assets 78,315,025

Net Assets Invested in Capital Assets 143,875,958 Total Capital Assets, net of related debt $ 118,274,533

BUSINESS-TYPE ACTIVITIES

Net Assets Invested in Capital Assets, Net of Related Debt; Restricted; and Unrestricted Net Assets, for business-type activities, are as follows:

Sanitary District Non-Major Total Sewer Water Restricted Debt Service Total Bay Bridge Enterprise Enterprise Business-Type Activities Operating Operating Fund Fund Sanitary Airport Funds Funds Capital Assets, net of Accumulated Depreciation $ 58,827,296 $ 1 5,828,968 $ - $ - $ 74,656,264 $ 14,551,312 $ 8,779,493 $ 97,987,069 Less: Debt excluding Compensated Absences and OPEB Obligation ( 16,524,298) (1,046,401) - - (17,570,699) ( 635,673) (1,711,636) ( 19,918,008)

Invested in Capital Assets, Net of Related Debt 42,302,998 1 4,782,567 - - 57,085,565 13,915,639 7 ,067,857 78,069,061 Restricted Net Assets Debt Service - - - 3,288,128 3,288,128 - 444 3,288,572 Capital Projects - - 753,300 - 753,300 - - 753,300 Total Restricted Net Assets - - 753,300 3,288,128 4,041,428 - 444 4,041,872 Total Unrestricted Net Assets 4,420,675 2 ,495,554 6,388,195 - 13,304,424 ( 389,429) (134,962) 12,780,033

Total Net Assets $ 46,723,673 $ 1 7,278,121 $ 7,141,495 $ 3,288,128 $ 74,431,417 $ 13,526,210 $ 6,933,339 $ 94,890,966 Sanitary District debt, excluding compensated absences and OPEB obligation of $17,570,699 above, also excludes $232,991 from the Debt Service Fund, as there are no capital assets related to that debt.

Unrestricted Net Assets total $12,780,033 above for business-type activities. However, these assets become restricted when included in the Government-Wide Financial Statements found on pages 36 to 37.

The Sanitary District’s Unrestricted Net Assets found in the Restricted Fund of $6,388,195 are restricted in that these resources can only be used for capital purchases or debt payments; hence, they are reported in the Restricted Fund. However, the remaining unrestricted net assets noted in the other business-type funds total $6,391,838 and are restricted when reported in the Government-Wide Financial Statements because

they may be used for business-type operations but not for governmental operations.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 10 – RESTRICTED ASSETS AND LIABILITIES AND FUND BALANCES (CONTINUED)

C. FUND BALANCES

PRIMARY GOVERNMENT

Governmental fund balances are composed of the following:

School Total General General Roads Impact Fees Roads Non-Major Governmental Governmental Funds Fund Capital Capital Capital Board Governmental Funds Nonspendable Inventory $ 4,000 $ - $ - $ - $ 561,391 $ - $ 565,391 Loans Receivable - - - - - 3,840,092 3,840,092 Subtotal Nonspendable 4,000 - - - 561,391 3 ,840,092 4,405,483 Restricted Donor-Specified Purposes 2,525 - - - - 4 ,072 6,597 Mosquito Control - - - - 167,827 - 167,827

Unspent Bond Proceeds - 16,672,070 - - - - 16,672,070 Impact Fees - 248,663 - 416,209 - 3 35,570 1,000,442 Other 331,273 - - - - 4,221,305 4,552,578 Subtotal Restricted 333,798 16,920,733 - 416,209 167,827 4 ,560,947 22,399,514 Committed Encumbrances 14,660 - - - - - 14,660 Developer Exactions - 76,741 777,909 - - - 854,650 Other 642,408 966,168 - - - - 1,608,576 Subtotal Committed 657,068 1,042,909 777,909 - - - 2,477,886

Assigned Capital Projects - 5,807,147 675,262 - - - 6,482,409 Encumbrances - 3,082,962 2,608,087 - - - 5,691,049 Subsequent Years' Expenditures 70,000 1,500,000 - - - - 1,570,000 Other - - - - 869,351 2 02,406 1,071,757 Subtotal Assigned 70,000 10,390,109 3,283,349 - 869,351 2 02,406 14,815,215 Unassigned General Fund 4,753,656 - - - - - 4,753,656 Other - - - - - (172,381) (172,381) Subtotal Unassigned 4,753,656 - - - - (172,381) 4,581,275

Total Governmental Funds Balances $ 5,818,522 $ 28,353,751 $ 4,061,258 $ 416,209 $ 1,598,569 $ 8 ,431,064 $ 48,679,373

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 11 - RISK MANAGEMENT

The County is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;

errors and omissions; and natural disasters. The government carries commercial insurance to cover such risks. Certain assets of the County such as roads, bridges, and other infrastructure are not insurable due to their nature.

General Insurance Coverage - The County is a participant in the Local Government Insurance Trust (LGIT), which is a consortium of Maryland local governments created to provide insurance coverage and services to Maryland local governments. The LGIT provides general liability, public officials’ liability, fleet insurance, and building and property insurance to its members.

Workmen’s compensation and fidelity insurance are obtained from various commercial insurance companies.

Risk Sharing - Subscribers to coverage provided by LGIT share the risk among participants of the pools. As a result, the County's annual premium requirements will be affected by the loss experience of the various insurance pools in which it participates. Also, the County may be subject to additional assessments from time to time. These amounts would be recorded as expenditures when they are probable and can be

reasonably estimated. Conversely, favorable performance of certain insurance pools may result in reduced premiums.

Health Insurance - Effective with the 1996 fiscal year, the County joined together with other Eastern Shore county governments, libraries, and Boards of Education to form the Eastern Shore of Maryland Education Consortium Health Insurance Alliance (ESMEC), a public entity risk pool currently operating as a common risk management and insurance program for health insurance coverage. CareFirst BlueCross BlueShield, of

Maryland, administers this program.

The agreement for formulation of the alliance provides that the pool will be self-sustaining through member premiums. In addition to the annual premiums, the pooling agreement provides for additional assessments, if needed, but not to exceed certain limits. No additional assessments were needed for fiscal 2011 and, as of the date of this report, it is believed that there are no outstanding claims in excess of the equity of the

trust.

Settlements - For the last three years, settlements have not exceeded insurance coverage for any type of policy in effect.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 12 - RETIREMENT PLANS

Virtually all full and eligible part-time employees of Queen Anne's County, Maryland, and its related agencies including the Housing Authority, are covered by one of the statewide contributory pension systems of the State of Maryland.

PRIMARY GOVERNMENT AND PUBLIC HOUSING AUTHORITY

COST-SHARING MULTIPLE-EMPLOYER DEFINED BENEFIT PENSION PLANS

Description of Plans The County participates in the following cost-sharing multiple-employer pension plans that are administered by the State of Maryland.

The Employees Pension System of the State of Maryland (Pension System) was established January 1, 1980. The Pension System covers employees hired after December 31, 1979, as well as Retirement System participants who have voluntarily joined the Pension System.

The Employees Contributory Pension System of the State of Maryland (Contributory Pension System) was established July 1, 1998. As of July 1, 1999, and retroactively to July 1, 1998, the County elected to participate in the Contributory Pension System for all service earned on or after July 1, 1998.

Effective the first payroll in fiscal year 2007, the County elected to provide its employees with the “Alternate Contributory Pension Selection Plan of the State of Maryland” (Alternate Contributory Pension System), under

Title 23

of the State Pension Article. This plan is an enhanced version of the two pension systems described above, and, as such, includes provisions that originate in those plans. Eligible employees not covered by LEOPS, which is described below, are required to participate in this alternate plan in lieu of other plans previously offered. At this time, all current employees not covered by LEOPS participate in the Alternate

Contributory Pension System.

The Law Enforcement Officers Pension System (LEOPS) was established July 2, 1990 and adopted by the County on July 1, 2004. LEOPS currently covers uniformed law enforcement officers of the Sheriff’s Department.

Under the terms of the Alternate Contributory Pension System, a member may retire after 30 years of service regardless of age; at age 65 with two years of service; at age 64 with three years of service; at age 63 with four years of service; or at age 62 with at least five years of service. An employee may also take early retirement with reduced benefits at age 55 with 15 years of service. A member terminating

employment before attaining retirement age, but after completing five years of eligible service, becomes eligible for a vested pension allowance upon reaching age 62.

Under the terms of the LEOPS, a member may retire with full benefits upon attaining age 50 or after completing 25 years of eligible service regardless of age. LEOPS members are not eligible for early service retirement allowances. A member terminating employment before attaining retirement age, but after completing five years of eligible service, becomes eligible for a vested pension allowance upon reaching age

50.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 12 - RETIREMENT PLANS (CONTINUED)

PRIMARY GOVERNMENT AND PUBLIC HOUSING AUTHORITY (CONTINUED)

On retirement from service, a member of any of these plans shall receive an annual service retirement allowance based on the member's average final compensation (based on the highest three years’ wages) and years of creditable service multiplied by a factor. This factor varies from 1.2% to 1.8% for the Alternate Plan or 2.0% for LEOPS. The factor is applied per eligible service year, depending on employee/employer

contributions and other plan-specific provisions. Early retirement, where available, is subject to provisions that reduce the benefit received.

Benefits under these plans are established under the State Personnel and Pensions Article of the Annotated Code of Maryland.

The State Retirement and Pension System of Maryland issues a comprehensive annual financial report that includes disclosures regarding: actuarial value of assets; total actuarial accrued liability; unfunded actuarial accrued liability, if any; and funded liability ratio. This report can be obtained from the agency’s office as follows:

State Retirement and Pension System of Maryland 120 E. Baltimore St, Suite 1601 Baltimore, Maryland 21202-1600 Funding Policy Obligations to contribute to the plans are established under the Annotated Code of Maryland. Employees who are members of these two plans contribute a percentage of their gross employee compensation. Members of the Alternate Contributory Pension System contribute 5 percent and LEOPS members contribute 4 percent.

Required contributions under the plans, which are not funded by employee contributions, are funded entirely by the County. Contributions by the County to both State plans take place during the fiscal year and are based upon salaries for the preceding fiscal year. The County contribution for the year ending June 30, 2011 is based on salaries for the year ending June 30, 2010. The contribution requirements of plan members of the reporting

entity are established and may be amended by the Maryland State Pension System Board of Trustees. The County’s contributions for the fiscal years ending June 30th were equal to the actuarially determined amounts as follows:

Fiscal Year Ending Retirement Plan Contributions June 30, 2011 June 30, 2010 June 30, 2009 Total Payroll $ 28,037,262 $ 27,860,546 $ 27,725,213 Covered Payroll Pension System 20,585,096 21,932,213 2 1,756,765

LEOPS 2 ,642,996 2,743,928 2,646,509

Expenditure/Expense Pension System 2,415,867 1,633,860 1,540,473

LEOPS 7 34,768 6 52,045 4 90,008

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 12 - RETIREMENT PLANS (CONTINUED)

OTHER COMPONENT UNITS

Queen Anne’s County Board Of Education The employees of the Board of Education (other than part-time employees not eligible for participation in the plans) are covered by one of four defined-benefit retirement plans that are administered by the State Retirement and Pension System of Maryland. The Board’s share of contributions for teachers and administration employees is primarily the responsibility of the State. In fiscal year 2011, State contributions

on behalf of the Board are approximately $6,590,974. This contribution is recognized as both revenue and expenditure for the Board. An additional $919,174 is contributed by the Board of Education for other covered employees.

Detailed information concerning the Queen Anne's County Board Of Education retirement plan is presented in their June 30, 2011 financial statements, which are publicly available.

Queen Anne’s County Free Library The employees of the Library (other than part-time employees not eligible for participation in the plans) are covered under one of four defined-benefit retirement plans that are administered by the State Retirement and Pension System of Maryland. The Library’s share of contributions for employees is primarily the responsibility of the State. In fiscal year 2011, State contributions on behalf of the Library are approximately

$112,894. These contributions are recognized as both revenue and expenditures for the Library. An additional $40,702 is contributed by the Library for other covered employees.

Detailed information concerning the Queen Anne's County Free Library retirement plan is presented in their June 30, 2011 financial statements, which are publicly available.

NOTE 13 - DEFERRED COMPENSATION PLAN

The County offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Plan, available to all County employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency.

All amounts of compensation deferred under the plan; all property and rights purchased with those amounts;

and all income attributable to those amounts, property or rights are solely the property and rights of the participants. The County has no liability for losses under the plan.

Investments are managed by the plan’s administrator based on several different investment options, or combinations thereof. The choice of the investment option(s) to be used is made by each participant. The County has no management control over the assets of the plan. Accordingly, per GASB Statement No. 32, the assets of the plan are not included in these financial statements.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 14 - OTHER POST-EMPLOYMENT BENEFITS

Other Post-Employment Benefit Trust (OPEB Trust) On June 23, 2009, the County enacted County Ordinance No. 09-12, which establishes a Trust entity entitled “Other Post-Employment Benefit Trust – County Commissioners of Queen Anne’s County, County Commissioners of Kent County, and Participating Agencies” (OPEB Trust). The purpose of the OPEB Trust is to: (1) fund costs of health insurance and other post-employment benefits to eligible retirees of the primary

government (including the Queen Anne’s County Public Housing Authority), the Queen Anne’s County Board of Education, and the Queen Anne’s County Free Library; (2) accumulate and invest financial resources for this purpose; (3) provide health insurance and other post-employment benefits for eligible retirees; and (4) provide related administrative services.

Other agencies and political subdivisions have the right to participate in this Trust now and in the future.

Such unrelated entities may deposit funds with the Trust for investment purposes related to their OPEB plans. At June 30, 2011, funds in the amount of $155,731 were reported as a liability of the Trust to Kent County, Maryland. Kent County is holding these assets for the benefit of their plan participants.

OPEB Trustees have exclusive authority to manage the assets of the Trust. The Board of Trustees consists of five members: two representing Queen Anne’s County Government; two representing the Queen Anne’s County Board of Education; and one representing Kent County. In lieu of separate financial statements for the OPEB Trust, Queen Anne’s County presents the Trust entity’s complete financial statements within this

document.

Plan Description The County’s Other Post-Employment Benefit Plan (OPEB Plan) is an agent multiple-employer defined benefit healthcare plan that covers retired employees of the primary government, the Queen Anne’s County Board of Education, and the Queen Anne’s County Free Library. The Plan was established as specified in County Ordinance No. 09-12.

Plan descriptions and actuarial assumptions for each participant are described: (1) as follows below for the primary government and (2) in financial statements issued separately for all other participants, which are component units of the primary government. Addresses for other participants are noted below in this Note.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 14 - OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

Plan Description (Continued) Primary Government The County’s post-employment plan provides medical insurance benefits to retirees and their eligible dependents. Depending on the years of County service, the retiree is eligible for a subsidy provided by the County for a specific portion of the cost of the health insurance. The following table describes the primary government’s health insurance post-employment benefit plan in effect for employees who retire on or after

September 2, 2011. For employees who retired prior to September 2, 2011, the plan remains the same, except that the percentages for PPO health plans are the same as shown below for the EPO plans.

Years of County Service Prior to Retirement and eligible Subsidy Level Description retiree hired prior to July 1, 2010 Retiree retired with 15 years of County service Retiree and eligible dependents shall be entitled to receive fifty-four percent (54%) of selected County health insurance premium costs.

Retiree retired with 16 years of County service but less than 25 Retiree and eligible dependents shall be entitled to receive three and years of County Service one tenths percent (3.1%) for the PPO or three and six tenths percent (3.6%) for the EPO of selected County health insurance premium costs for every full year of County service.

Retiree with 25 years or more of County Service or a person in Retiree and eligible dependents shall be entitled to receive eighty-five receipt of a special death benefit under the Maryland State percent (85%) of selected County health insurance premium costs for Retirement/Pension System the PPO health plan and ninety percent (90%) for the EPO health plan.

Retiree retired with less than 15 years of County service Retiree and eligible dependents shall be entitled to remain in the County's health insurance plan if they pay the full rate to cover all County health insurance premium costs.

All eligible retirees hired prior to July 1, 2010 Coverage may include the retiree, spouse and dependents. Coverage does not cease upon death of the retiree.

Years of County Service Prior to Retirement and eligible Subsidy Level Description retiree hired on or after July 1, 2010 All eligible retirees hired or rehired on or after July 1, 2010 Retiree shall receive a health insurance subsidy based on the retiree's years of service as outlined above but shall pay the full additional cost for coverage of any eligible dependant.

Component Units The other participating entities provide medical benefits to eligible employees who retire from employment with each respective agency. Benefits and eligibility requirements vary among the different agencies. Each agency pays a percentage of the health insurance premium based on certain criteria, including length of service. In addition to medical benefits, the Board of Education pays the cost of providing term life insurance

for its retirees in varying amounts, depending upon length of service and date of retirement.

For detailed information on plan benefits provided by other participating agencies, as well as actuarial assumptions used to estimate OPEB obligations, see the agencies’ separately-issued financial statements, which can be obtained from their administrative offices as listed below:

Board of Education of Queen Anne’s County Queen Anne’s County Queen Anne’s County Housing Authority Free Library 202 Chesterfield Avenue c/o Queen Anne’s County 121 S. Commerce Street Centreville, Maryland 21617 Finance Office Centreville, MD 21617 107 N. Liberty Street Centreville, Maryland 21617

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 14 - OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

Plan Membership Plan membership as of the date of the most recent actuarial valuation consisted of the following:

Plan Membership Active Retirees County and Housing Authority 477 72 Board of Education 890 247 Library 12 2 Total 1 ,379 321 Basis of Accounting and Financial Statements The Plan’s financial information is prepared on the full accrual basis accounting. Expenses are recognized as retirees’ insurance costs are incurred.

For further financial information, Summary and Combining financial statements may be found on pages 54 to 55 and 158 to 159, respectively. Required Supplementary Information may be found after these Notes, on pages 112 to 113.

Contributions Each participating agency has the authority to establish and amend benefit provisions that result in contribution requirements of the plan members and the agency. The Plans are contributory plans in which the agencies and their retired members and beneficiaries contribute certain amounts toward the current cost of the healthcare benefits, based on an actuarial valuation. During fiscal year 2011, as shown in the table below, plan members

and beneficiaries receiving benefits contributed a total of $780,197 (26.3 percent of current contributions). In addition, the primary government and its component units contributed a total of $2,188,722 (73.7 percent). This amount consisted of $2,124,224 for current premiums, claims, and administrative expenses incurred on behalf of current retirees; plus another $64,498 was contributed by the Housing Authority towards pre-funding of future

benefits during fiscal year 2011.

Total Retiree Employer Contributions Retirees Employer Contributions Percentage Percentage County $ 1 74,196 $ 8 31,222 $ 1,005,418 17.3% 82.7% Housing Authority 3,364 69,068 72,432 4.6% 95.4% Board of Education 595,319 1 ,276,130 1,871,449 31.8% 68.2% Library 7,318 12,302 19,620 37.3% 62.7% Total $ 7 80,197 $ 2,188,722 $ 2,968,919 26.3% 73.7%

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 14 - OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

Contributions (Continued) Net assets held in trust for above entities as of June 30, 2011 consisted of $609,353. This is a decrease of $423,261 from the June 30, 2010 balance of $1,032,614. The decrease was a result of $489,495 relating to Queen Anne’s County being withdrawn during the year in order to fund current post-employment benefits. Due to the challenging financial situation the County faced in fiscal year 2011, the County developed two retirement

incentive plans for the year, which included termination pay, deferred compensation and other benefits payable resulting from terminations of employee contracts. All of the retirement incentives were paid out during the 2011 fiscal year, with the exception of a benefit relating to health insurance, which was part of the first incentive plan and offered to employees with a length of service of thirty years of more. For those employees, the health

insurance benefit stated they would receive health insurance at no cost for three years. After the three years passed, the retirees will be treated the same as a regular County retiree. The County determined that health and life insurance, incentive and termination pay and deferred compensation associated with the Retirement Incentive Plans and contract terminations constitute post-employment benefits and a “Retirement Benefit Plan”

of the County within the meaning of the OPEB Trust Agreement and was eligible for funding from the Trust. The County Commissioners determined that under the current economic conditions, funding these post-employment benefits from the OPEB Trust was in the best interest of the County.

However, since the transaction detailed above, newly elected Commissioners took office and decided to reinstate the OPEB funds that were withdrawn. The previously withdrawn funds of $489,495 were deposited back into the Trust in October 2011.

To avoid reporting a liability for the current year’s contribution, each employer must contribute its annual required contribution (ARC), which is an amount actuarially determined to be in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities over a period not to

exceed 30 years. The annual OPEB cost of $14,144,000, the amounts actually contributed to the trust of $2,188,722, and the unfunded net OPEB obligation (NOO) of $32,232,126 for the year ended June 30, 2011 were as follows:

County and Total Housing Board of for All Funding Progress / Net OPEB Obligation Authority Education Library Employers Beginning of the Year NOO $ 10,401,823 $ 9 ,535,459 $ 339,566 $ 20,276,848 Annual Required Contribution (ARC) 7 ,375,000 6,535,000 234,000 14,144,000 Employer Contributions (900,290) (1,276,130) (12,302) (2,188,722) End of the Year NOO $ 16,876,533 $ 14,794,329 $ 561,264 $ 32,232,126

Percentage of ARC Contributed 12.21% 19.53% 5.26% 15.47% The unfunded Net OPEB Obligation (NOO) of $16,876,533 at the end of the year for the County and Housing Authority consisted of liabilities of $16,531,461 for the County ($13,884,281 for Governmental Activities and $2,647,180 for Business Type Activities) and $345,072 for the Housing Authority.

Note that in fiscal year 2010, the Library based their calculations on the actuarial valuation for fiscal year 2011, instead of the valuation for 2010. For fiscal year 2011, the Library adjusted the net assets at the beginning of the year for the overstatement in the post-employment benefit obligations for fiscal year 2010. Those adjustments are reflected in the figures above.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 14 - OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

Funding Status and Funding Progress As of the most recent actuarial valuation date, the total actuarial accrued liability (AAL) for all plans, as shown below, was $146,532,000. There was a total of $1,030,000 actuarial plan assets at that time; therefore the unfunded actuarial accrued liability (UAAL) was $145,502,000. The annual covered payroll of all active employees covered by the respective plans was $49,994,523 and the ratio of the unfunded actuarial accrued

liability to covered payroll was 291 percent for the Trust as a whole.

Value of Unfunded UAAL as a Assets at Accrued Accrued Percentage Valuation Valuation Liability Liability Funded Covered of Covered Funding Progress Date Date (AAL) (UAAL) Ratio Payroll Payroll County and Housing Authority July 1, 2010 $ 5 00,000 $ 70,570,000 $ 70,070,000 0.71% $ 20,439,972 343% Board of Education July 1, 2010 500,000 73,060,000 72,560,000 0.68% 28,329,494 256% Library July 1, 2010 30,000 2,902,000 2,872,000 1.03% 1,225,057 234%

Total July 1, 2010 $ 1,030,000 $ 146,532,000 $ 145,502,000 0.70% $ 49,994,523 291% The schedule of funding progress, presented as required supplementary information (RSI) on page 112 following the Notes, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. This relationship is represented by the funded ratio.

Annual OPEB Cost and Net OPEB Obligation For fiscal year 2011, the annual required contribution (ARC), or annual OPEB cost, was based on actuarial valuations as of July 1, 2010.

As noted in the table below, the total ARC for all plans was $14,144,000 for fiscal year 2011. Actual funding was $2,188,722, or 15.47 percent of the ARC, resulting in an increase to the Net OPEB Obligation (NOO) of $11,955,278 for the year.

Annual Increase in Amortization of Required Net OPEB ARC Actuarial Unfunded Actuarial Unfunded Normal Contribution ARC Obligation Percentage Based on Accrued Liablility Accrued Liablility Cost (ARC) Funding (NOO) of ARC Interest Net OPEB Obligation (1) (2) (3) (2)+(3) (4) (2)+(3)-(4) Contributed Rate County and Housing Authority $ 70,070,000 $ 2,956,000 $ 4,419,000 $ 7,375,000 $ 9 00,290 $ 6,474,710 12.21% 4.00%

Board of Education 72,560,000 3,041,000 3,494,000 6,535,000 1,276,130 5,258,870 19.53% 4.00% Library 2 ,872,000 1 22,000 112,000 234,000 12,302 221,698 5.26% 4.00% Total $ 145,502,000 $ 6,119,000 $ 8,025,000 $ 14,144,000 $ 2,188,722 $ 11,955,278 15.47% The increase in net OPEB Obligation (NOO) for Queen Anne’s County and the Housing Authority, listed above in the amount of $6,474,710, consists of $6,420,704 for the Queen Anne’s County portion and $54,006 for the

Housing Authority.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 14 - OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

Actuarial Methods and Assumptions The actuarial valuations of the individual plans involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, such as future employment, mortality, and healthcare costs. The actuarially determined amounts regarding the funded status of the plans and the annual required contributions (ARC) of the County and other participating agencies are subject to continual

revision, as actual results are compared to past expectations and new estimates are made about the future.

Projections of benefits for financial reporting purposes are based on the substantive plan (as understood by the employer and plan members) and include the types of benefits provided at the time of valuation and the historical pattern of sharing benefit costs between employers and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial

accrued liabilities and the actuarial value of the assets, consistent with the long-term perspective of the calculations.

Actuarial assumptions used in the actuarial valuation for the County’s plan were:

Actuarial Assumptions for Primary Government Actuarial valuation date July 1, 2010 Actuarial cost method Projected unit credit Amortization method Closed Amortization period 28 years (as of July 1, 2010) Interest Assumptions 4.00% investment rate of return Asset valuation method Market value of assets Salary increases 3% per year Mortality RP 2000, separate tables for males and females Actuarial trend assumptions Based on Society of Actuaries Long Term

Medical Trend and baseline assumptions - Initial rate of 8% decreasing gradually. The rate in 2050 is 5.9%.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 15 – DEFICIT EQUITY BALANCES

The following Non-Major Governmental Funds ended the year with deficit balances in unassigned fund balance:

Housing and Community Services Fund The Housing and Community Services Fund has a negative unassigned fund balance of $102,013 as of June 30, 2011. This negative balance will clear itself as the balance of outstanding loans receivable in Housing and Community Services Fund decreases.

Law Library Fund The Law Library Fund has a negative unassigned fund balance of $1,593 as of June 30, 2011. However, the fund balance was positive by August 2011.

Capital Projects – Fire Company Impact Fees Fund The Capital Projects – Fire Company Impact Fees Fund has a negative unassigned fund balance of $68,775 as of June 30, 2011. This negative fund balance is the result of an overpayment to a particular fire department, and will decrease over time as the incoming revenues offset the overpayment.

The following Enterprise Funds ended the year with deficit equity balances:

Bay Bridge Airport Enterprise Fund The Bay Bridge Airport Enterprise Fund has a deficit balance in unrestricted net assets of $389,429 as of June 30, 2011.

Parks and Recreation – Golf Course Enterprise Fund The Golf Course Enterprise Fund has a deficit balance in unrestricted net assets of $297,050 as of June 30, 2011.

Parks and Recreation – Property Management Enterprise Fund The Property Management Enterprise Fund has a deficit balance in unrestricted net assets of $430,890 as of June 30, 2011.

Note that during the fiscal year 2013 budget process, the County Commissioners established the guideline that the Enterprise Funds should be self-supporting, to the extent possible. Therefore, a variety of measures are being evaluated in order to attempt the goal of balancing the Enterprise Funds.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 16 - COMMITMENTS AND CONTINGENCIES

PRIMARY GOVERNMENT

Grants - The County and its component units are recipients of various federal and state grant and/or loan programs, which are governed by various rules and regulations of the grantor agencies. Costs charged to the respective grant programs are subject to audit and adjustment by these grantor agencies. If the County has not complied with the rules and regulations governing the programs, refunds of money received may be

required and the collectability of any related receivable as of June 30, 2011 may be impaired. The County’s management believes that there are no significant contingent liabilities that must be recorded relating to compliance with the rules and regulations governing these programs.

Further, certain grants for capital projects, such as various park projects funded by the State, must be used for the intended purpose of the grant. If, at any time during the useful lives of these projects, the facilities cease to operate in their intended capacity, the County may be required to reimburse the granting agency that portion of the grant or note that is equal to the percentage of useful life remaining. The County’s

Management believes that no such grant reimbursements will be needed.

In fiscal year 2010, the County’s Department of Housing and Community Services received a grant of $350,000 from the Maryland Department of Housing and Community Development. This Maryland Neighborhood Conservation Initiative (NCI) Grant provided funding to be used for the acquisition and purchase of foreclosed properties for resale to qualifying homebuyers, as well as the issuance of zero percent deferred payment loans to eligible critical service workers. Per the terms of the agreement, the

grantee may reuse funds for these same activities until June 30, 2013. Funds returned to the County from program participants after June 30, 2013 must be returned to the state. Therefore, this grant has been recorded as a pass-through grant, with the County contingently liable for the return of these funds to the state at some point in time after June 30, 2013.

In accordance with the provisions of GASB Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions, the County has committed certain fund balances for future construction projects. In the General Capital Projects Fund, a total of $1,042,909 million has been committed, including $692,234 for the construction of a new County Courthouse, $273,934 for infrastructure improvements in the Matapeake

Business Park, and $76,741 for site improvements pursuant to agreements with local developers. In the Roads Capital Projects Fund, $777,909 has been contributed by developers and is committed to fund infrastructure improvements.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 17 – JOINT VENTURE

In 1991, the County Commissioners, in conjunction with Talbot, Caroline, and Kent Counties, entered into a regional partnership known as the Midshore Regional Landfill Joint Venture. This venture was formed to provide a long-term, solid waste management solution for the four-county area. As part of the agreement, each of the four Counties agreed to host a solid waste facility for a twenty year period, giving the venture a total duration of

eighty years. In 1991, the Midshore Regional Landfill opened in Talbot County and served the waste management needs of the four-County area for twenty years. This facility, owned and operated by the Maryland Environmental Service (MES), closed on December 31, 2010. The second Midshore facility, Midshore II, opened in Caroline County and is fully operational. It began accepting waste in January 2011. After the facility

in Caroline County reaches capacity, another landfill will be constructed in Queen Anne's County, with Kent County to follow in turn. Each County is required to, and has, set aside sufficient land to construct a landfill within their borders. The agreement expires when the last of the four landfills is closed.

Queen Anne’s County has a 31.04% financial interest in the Midshore Regional Landfill. In the event that expenditures exceed revenues, the County is obligated to cover the deficiency in proportion to its financial interest; however, to date additional funding from the County has not been required nor does management anticipate it.

During fiscal year 2011, the landfill located in Talbot County, Midshore I, was closed. As of June 30, 2011, total closure and post closure costs were estimated at approximately $9.6 million. Midshore II, located in Caroline County, was 1.76% filled. Closure and post closure costs for Midshore II are estimated at approximately $13.9 million. Therefore, the total closure and post closure costs for both landfills are $23.5 million, with approximately

$7.3 million attributable to Queen Anne’s County. These costs are paid from tipping fees of acceptable waste delivered by or for the account of the counties. It is currently expected that sufficient funds will be available from landfill revenues to pay future closure and post closure costs. MES has accrued and reported a long-term liability of $9.2 million as of June 30, 2011, determined by the estimated useful life of the landfill.

Similar to the post closure costs, each of the participating Counties is contingently liable for the debt related to the new facility, Midshore II. Midshore II was funded with project revenue bonds totaling $20.3 million. As of June 30, 2011, $6.3 million is attributable to Queen Anne’s County in the event of a default.

Each County is required to place its municipal waste in the landfill. The facility is also available to commercial waste disposal firms at the same price per ton as charged to the County governments. Queen Anne's County paid $426,145 in tipping fees to the facility during fiscal 2011.

MES has satisfied its financial assurance requirements based upon the local government financial ratio tests of the project participants as of June 30, 2010. MES expects to satisfy these requirements as of June 30, 2011 using the same criteria.

Due to inflation and changes in technology, laws, and regulations, estimated closure and post closure care costs may change in the future. Financial Statements of the Landfill can be obtained from MES located at 259 Najoles Road, Millersville, MD 21108.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 18 – POLLUTION REMEDIATION OBLIGATIONS

During fiscal year 2009, the County implemented the provisions of Governmental Accounting Standards Board (GASB) Statement 49, Accounting and Financial Reporting for Pollution Remediation Obligations.

During a prior fiscal year, 2008, the County agreed to a voluntary Methyl Tertiary Butyl Ether (MTBE) testing program for underground fuel tanks located at the County’s Department of Public Works’ fuel depot. This testing program was and still is approved by the Maryland Department of Environment (MDE).

Since the testing program began in 2008, the County incurred a total of $219 thousand in expenses, including $20 thousand in fiscal year 2011, to comply with the provisions of the program. Costs covered remediation work and consulting fees; the latter for testing, studies, and monitoring. Remediation efforts included demolition and removal of the existing fuel depot at the Public Works Centreville Shop; remediation of the soils via

excavation; offsite controlled disposal and backfill; installation of monitoring wells; and miscellaneous environmental consulting services.

In May 2010, MDE requested the County devise a Corrective Action Plan (CAP) to address contamination concerns at the fuel depot site. In August 2010, MDE approved the County’s CAP work which included the installation of additional monitoring wells and one year of monitoring, sampling, testing and furnishing of those reports to MDE.

In November 2011, due to uneven results from the prior year’s monitoring tests, MDE requested the County submit a technical plan to conduct an initial site injection, a measure which will include the application of decontaminating chemicals to the soil in an effort to determine the dosage rate and the corresponding reduction in pollutants that can be achieved. Upon plan approval by MDE, the County plans to award a contract for the

initial injection by March 2012, with work to begin in April 2012. The results of this initial injection will be assessed, and a follow up plan for a final injection will be prepared. The contract duration for the final injection will depend on the scope of work; however the County expects it to be completed by the end of fiscal year 2013.

No liability has been recorded at this time since costs for both the initial and final site injections cannot be reliably estimated. None of these outlays met the requirements for capitalization noted in GASB Statement 49 and they were not capitalized.

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QUEEN ANNE’S COUNTY, MARYLAND

NOTES TO BASIC FINANCIAL STATEMENTS

JUNE 30, 2011

NOTE 19 – SUBSEQUENT EVENTS

Changes in Homestead Tax Credit:

To help homeowners deal with large assessment increases, Maryland statute has established the Homestead Property Tax Credit, which limits the increase in taxable assessments each year to a fixed percentage. The County, along with all other jurisdictions in Maryland, is required to limit taxable assessment increases to 10% or less each year. This Credit applies only to the principal residence of the property owner; is based on the

dwelling and land associated with the dwelling; and is subject to certain conditions.

For the taxable year beginning July 1, 2012, the County increased the Homestead Property Tax Credit from 0% to 5%, which means taxable increases on homeowner occupied properties is limited to 5% per year.

Changes in Property Tax Rate:

The County’s property tax rate is calculated per $100 of assessed value of real property, based on the full cash value of that property. The County Commissioners adopt the property tax rate for the following fiscal year during the annual budget process.

The property tax rates that were adopted for the last two fiscal years, as well as for the upcoming fiscal year, are as follows:

Fiscal Years Adopted Tax Rates 2012 2011 2010 County Property Tax Rate per $100 of assessed value of real property $ 0 .8471 $ 0 .7671 $ 0.770 Changes in Income Tax Rate:

In accordance with subsection 10-106 of the tax-general article of the annotated code of Maryland, the County Commissioners may set, by resolution, a county income tax rate during the annual budget process.

For tax year 2011, the income tax rate was set at 2.85%. For all taxable years effective beginning January 1, 2012 and thereafter, the income tax rate for the County shall be 3.2%.

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Required Supplementary Information

- 111 -

QUEEN ANNE’S COUNTY, MARYLAND

REQUIRED SUPPLEMENTARY INFORMATION

JUNE 30, 2011

OTHER POST-EMPLOYMENT BENEFITS TRUST

The following required supplementary information relates to OPEB plan described in Note 14. This information is intended to help users assess the system’s funding status on a going-concern basis; assess progress made in accumulating assets to pay benefits when due; and make comparisons among employers.

SCHEDULE OF FUNDING PROGRESS

The Schedule of Funding Progress presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Value of Unfunded UAAL as a Assets at Accrued Accrued Percentage Valuation Valuation Liability Liability Funded Covered of Covered Funding Progress Date Date (AAL) (UAAL) Ratio Payroll Payroll County and Housing Authority July 1, 2008 $ - $ 49,107,000 $ 49,107,000 0.00% $ 23,690,163 207% July 1, 2009 500,000 63,935,000 63,435,000 0.78% 23,778,696 267% July 1, 2010 500,000 70,570,000 70,070,000 0.71% 20,439,972 343%

Board of Education July 1, 2008 - 62,759,000 62,759,000 0.00% 24,267,735 259% July 1, 2009 500,000 67,450,000 66,950,000 0.74% 28,421,068 236% July 1, 2010 500,000 73,060,000 72,560,000 0.68% 28,329,494 256% Library July 1, 2008 - 2,010,000 2,010,000 0.00% 1,050,748 191% July 1, 2009 30,000 2,614,000 2,584,000 1.15% 1,128,084 229% July 1, 2010 30,000 2,902,000 2,872,000 1.03% 1,225,057 234% Total July 1, 2008 - 113,876,000 113,876,000 0.00% 49,008,646 232%

July 1, 2009 1 ,030,000 133,999,000 132,969,000 0.77% 53,327,848 249% July 1, 2010 $ 1,030,000 $ 146,532,000 $ 145,502,000 0.70% $ 49,994,523 291% Analysis of the dollar amounts of plan net assets, actuarial accrued liability, and unfunded actuarial liability in isolation can be misleading. Expressing the assets as a percentage of the actuarial accrued liability (Funded Ratio) provides one indication of the system’s funding status on a going-concern basis. Analysis of this

percentage over time indicates whether the system is becoming financially stronger or weaker. Generally, the greater this percentage, the stronger the system is becoming. In this fiscal year, the Funded Ratio is 0.70 percent, down from 0.77 percent the year before.

Trends in the unfunded actuarial accrued liability and annual covered payroll are both affected by inflation.

Expressing the unfunded accrued liability as a percentage of annual covered payroll approximately adjusts for the effects of inflation and aids analysis of the system’s progress made in accumulating sufficient assets to pay benefits when due. Generally, the smaller this percentage, the stronger the system is becoming. In this fiscal year, the UAAL as a percentage of covered payroll is 291 percent, up from 249 percent the year before.

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QUEEN ANNE’S COUNTY, MARYLAND

REQUIRED SUPPLEMENTARY INFORMATION

JUNE 30, 2011

OTHER POST-EMPLOYMENT BENEFITS TRUST (CONTINUED)

SCHEDULE OF PARTICIPATING AGENCIES’ CONTRIBUTIONS

The Schedule of Participating Agencies’ Contributions presents multiyear trend information that shows whether the actual ARC contributed is increasing or decreasing over time relative to the annual required contribution (ARC), as shown by the percentage of ARC contributed. Generally, the greater this percentage, the stronger the system is becoming. In this fiscal year, the Percentage of ARC Contributed is

15.47 percent, up from 13.53 percent the year before.

Annual Fiscal Required Percentage Net OPEB Year Ended Contribution ARC of ARC Obligation Percentage of ARC Contributed June 30 (ARC) Contributed Contributed (NOO) County and Housing Authority 2009 $ 5 ,312,000 $ 1 ,007,955 18.98% $ 4,304,045 2010 6,702,000 604,222 9.02% 6 ,097,778 2011 7,375,000 900,290 12.21% 6 ,474,710 1 9,389,000 2,512,467 12.96% 16,876,533 Board of Education 2009 5,907,000 1,534,955 25.99% 4 ,372,045

2010 6,340,000 1,176,586 18.56% 5 ,163,414 2011 6,535,000 1,276,130 19.53% 5 ,258,870 1 8,782,000 3,987,671 21.23% 14,794,329 Library 2009 178,000 38,234 21.48% 139,766 2010 212,000 12,200 5.75% 199,800 2011 234,000 12,302 5.26% 221,698 624,000 62,736 10.05% 561,264 Totals 2009 1 1,397,000 2,581,144 22.65% 8 ,815,856 2010 1 3,254,000 1,793,008 13.53% 11,460,992 2011 1 4,144,000 2,188,722 15.47% 11,955,278

$ 38,795,000 $ 6 ,562,874 16.92% $ 32,232,126 Note that the Net OPEB Obligation (NOO) of $16,876,533 at the end of the year for the County and Housing Authority consisted of a total liability of $16,531,461 for the County and $345,072 for the Housing Authority.

Note also that in fiscal year 2010, the Library based their calculations on the actuarial valuation for fiscal year 2011, instead of the valuation for 2010. Therefore, the information presented for the Library in fiscal year 2010 was one year ahead of schedule. For fiscal year 2011, the Library adjusted the net assets at the beginning of the year for the overstatement in the post-employment benefit obligations for fiscal year 2010. Those

adjustments are reflected in the figures above.

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QUEEN ANNE’S COUNTY, MARYLAND

REQUIRED SUPPLEMENTARY INFORMATION

JUNE 30, 2011

BUDGETARY COMPARISONS FOR GENERAL AND MAJOR SPECIAL REVENUE FUNDS

Required Supplementary Information provides budget-to-actual comparisons for the General Fund and those major special revenue funds that adopt annual budgets.

Budget-to-actual variances are presented on the following pages for the General Fund and the Roads Board Operating Fund, both of which adopt annual budgets.

For the General Fund, the Schedules provide summary budgetary information, followed by detailed information reported separately by revenues and expenditures with budget variances.

For the Roads Board Operating Fund, the Schedules provide summary budgetary information.

For the School Impact Fees Capital Projects Fund, the budget-to-actual variances are presented in the Capital Projects section of this report.

Budgets are adopted using the same method of accounting as that used for reporting purposes, i.e. according to generally accepted accounting principles as used in the United States of America (GAAP).

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QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

GENERAL FUND

FOR THE YEAR ENDED JUNE 30, 2011

ORIGINAL FINAL POSITIVE

BUDGET BUDGET ACTUAL (NEGATIVE)

REVENUES

Taxes Local Property Tax $ 59,934,809 $ 59,934,809 $ 60,061,951 $ 1 27,142 Local Income Tax 32,980,024 32,980,024 29,527,496 (3,452,528) Admission and Amusement Taxes 175,000 175,000 1 41,536 (33,464) Recordation Taxes 2,650,000 2,650,000 2 ,426,641 (223,359) Hotel Taxes 420,000 420,000 4 41,123 21,123 Licenses and Permits 767,165 767,165 9 19,663 152,498 Intergovernmental 1,409,576 2,102,332 1 ,933,743 (168,589)

Bond Interest Reimbursement - Build America Bond 425,278 425,278 4 38,022 12,744 Charges for Current Services 1,710,573 1,720,583 1 ,553,687 (166,896) Fines and Forfeitures 32,250 32,250 3 6,244 3,994 Investment Income 227,181 227,181 5 0,109 (177,072) Donations 10,300 30,925 3 5,335 4,410 Miscellaneous 55,958 631,396 5 10,843 (120,553) Total Revenues 100,798,114 102,096,943 98,076,393 (4,020,550)

EXPENDITURES

Current General Government 10,691,978 10,790,071 9 ,789,937 1 ,000,134 Public Safety 21,419,657 22,093,033 20,657,018 1 ,436,015 Public Works 3,559,023 3,602,414 2 ,938,771 663,643 Health 1,866,559 1,916,559 1 ,670,222 246,337 Social Services 284,859 295,144 2 84,865 10,279 Education 49,691,877 49,691,877 49,691,877 - Parks 2,613,876 2,660,769 2 ,373,537 287,232 Library 1,423,851 1,433,851 1 ,433,725 126

Conservation of Natural Resources 591,121 591,121 5 31,968 59,153 Economic/Community Development 1,119,150 1,107,225 1 ,027,499 79,726 Miscellaneous 1,848,805 4,704,186 4 ,699,452 4,734 Reversions (610,000) (610,000) - (610,000) Capital Outlay 545,980 511,757 2 38,195 273,562 Debt Service Principal 7,595,213 8,170,213 6 ,835,118 1 ,335,095 Interest and Fiscal Charges 3,528,175 3,618,175 3 ,614,051 4,124

Total Expenditures 106,170,124 110,576,395 105,786,235 4 ,790,160 Excess of Revenues Over Expenditures (5,372,010) (8,479,452) (7,709,842) 769,610

OTHER FINANCING SOURCES (USES)

Insurance Proceeds - 67,579 9 9,028 31,449 Transfers In 1,482,121 2,326,199 2 ,320,569 (5,630) Transfers Out (3,124,417) (3,315,882) (2,922,343) 393,539 Total Other Financing Sources (Uses) (1,642,296) (922,104) (502,746) 419,358 Net Increase (Decrease) in Fund Balance $ (7,014,306) $ (9,401,556) (8,212,588) $ 1 ,188,968 Fund Balances, July 1 14,031,110 Fund Balances, June 30 $ 5,818,522

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QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES AND OTHER FINANCING SOURCES - BUDGETARY BASIS

GENERAL FUND

FOR THE YEAR ENDED JUNE 30, 2011

VARIANCE

ORIGINAL FINAL ACTUAL POSITIVE

TAXES - LOCAL BUDGET BUDGET REVENUES (NEGATIVE)

Local Property Taxes Real and Personal Property (Net) $ 58,594,809 $ 58,594,809 $ 58,639,133 $ 44,324 Railroad and Public Utilities 1,240,000 1,240,000 1,127,738 (112,262) Penalties and Interest 100,000 100,000 295,080 195,080 Total Local Property Taxes 59,934,809 59,934,809 60,061,951 127,142 Local Income Tax 32,980,024 32,980,024 29,527,496 (3,452,528) Other Local Taxes Admission and Amusement Tax 175,000 175,000 141,536 (33,464)

Recordation Tax 2,650,000 2,650,000 2,426,641 (223,359) Hotel Tax 420,000 420,000 441,123 21,123 Total Other Local Taxes 3,245,000 3,245,000 3,009,300 (235,700) Total Taxes - Local 96,159,833 96,159,833 92,598,747 (3,561,086)

LICENSES AND PERMITS

Beer, Wine and Liquor 102,000 102,000 103,980 1,980 Traders 53,415 53,415 76,476 23,061 Marriage Licenses - - 3,740 3,740 Animal Control 39,500 39,500 43,816 4,316 Electrical Board of Examiners 20,000 20,000 31,430 11,430 Electrical Inspections 7,500 7,500 7,475 ( 25) Cable TV 315,000 315,000 328,830 13,830 Zoning Permits 50,000 50,000 62,092 12,092 Plumbing Permits 65,250 65,250 87,724 22,474 Sediment Fees 12,000 12,000 27,020 15,020

Building Permits 101,500 101,500 144,715 43,215 Other 1,000 1,000 2,365 1,365 Total Licenses and Permits 767,165 767,165 919,663 152,498

INTERGOVERNMENTAL

Police Protection 341,068 341,068 225,490 (115,578) Fire/Rescue/Ambulance 591,216 524,964 516,518 (8,446) Conservation of Natural Resources 14,000 7,000 7,000 - Bond Interest Reimbursement - Build America Bond 425,278 425,278 438,022 12,744 Other 463,292 1,229,300 1,184,735 (44,565) Total Intergovernmental 1,834,854 2,527,610 2,371,765 (155,845)

CONTINUED

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QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES AND OTHER FINANCING SOURCES - BUDGETARY BASIS

GENERAL FUND

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

VARIANCE

ORIGINAL FINAL ACTUAL POSITIVE

BUDGET BUDGET REVENUES (NEGATIVE)

CHARGES FOR CURRENT SERVICES

Discovery Fees $ 2,000 $ 2,000 $ 1,425 $ ( 575) Rezoning Filings 1,000 1,000 390 ( 610) Zoning Appeals 4,500 4,500 4,575 75 Development Review 99,000 155,000 115,262 (39,738) Sheriff 84,518 85,018 55,670 (29,348) Ambulance Fee 716,000 660,000 659,510 ( 490) Detention Center Fees 24,500 24,500 41,223 16,723 Recycling 107,000 107,000 178,203 71,203 Disposal Fees 491,915 491,915 334,475 (157,440) Inspection Fees 62,000 62,000 45,134 (16,866)

Recreation Fees 58,040 67,550 85,561 18,011 Johnsongrass Spraying 60,000 60,000 25,963 (34,037) Merchandise Sales 100 100 1,096 996 4-H Park Fees - - 4,700 4,700 Miscellaneous User Fees - - 500 500 Total Charges for Current Services 1,710,573 1,720,583 1,553,687 (166,896)

FINES AND FORFEITURES

Court Fines 32,250 32,250 36,054 3,804 Confiscated Assets - - 190 190 Total Fines and Forfeitures 32,250 32,250 36,244 3,994

INVESTMENT INCOME 227,181 227,181 50,109 (177,072)

MISCELLANEOUS REVENUES AND DONATIONS

Rental Income 15,000 21,000 23,459 2,459 Donations 10,300 30,925 35,335 4,410 Miscellaneous 40,958 610,396 487,384 (123,012) Total Miscellaneous Revenues and Donations 66,258 662,321 546,178 (116,143)

OTHER FINANCING SOURCES

Insurance Proceeds - 67,579 99,028 31,449 Transfers In:

Impact Fees - School 1,408,120 1,408,120 1,408,120 - General Capital Projects - 850,000 849,467 ( 533) Kent Narrows 39,987 39,987 39,987 - Community Partnerships 18,014 22,092 16,995 ( 5,097) Inmate Welfare 10,000 - - - Economic Development Commission 6,000 6,000 6,000 - Total Transfers In 1,482,121 2,326,199 2,320,569 ( 5,630) Total Other Financing Sources 1,482,121 2,393,778 2,419,597 25,819 Total General Fund Revenues and Other Financing Sources

Before Appropriated Fund Balance 102,280,235 104,490,721 100,495,990 (3,994,731) Fund Balance - Appropriation (Surplus) 7,014,306 9,401,556 - (9,401,556) Total General Fund Revenues, Other Financing Sources and Fund Balance Appropriation $ 109,294,541 $ 113,892,277 $ 100,495,990 $ (13,396,287)

- 117 -

QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES - BUDGETARY BASIS

GENERAL FUND

FOR THE YEAR ENDED JUNE 30, 2011

ACTUAL VARIANCE

PERSONNEL OTHER CAPITAL ORIGINAL FINAL POSITIVE

COSTS OPERATING OUTLAY TOTAL BUDGET BUDGET (NEGATIVE)

GENERAL GOVERNMENT

Legislative $ 565,530 $ 127,025 $ - $ 692,555 $ 789,340 $ 789,340 $ 96,785 Judicial Circuit Court/Macro Mediation/Family Services/Court Master 261,566 152,655 - 414,221 470,734 465,327 51,106 Orphan's Court 72,936 6,008 - 78,944 70,690 79,690 746 State's Attorney/Victim Witness/Cease Fire 1,110,779 53,972 - 1,164,751 1,240,711 1,253,211 88,460 Executive County Administrator 355,099 8,512 - 363,611 459,638 446,638 83,027

Elections Board of Election Supervisors 25,791 466,393 - 492,184 542,073 542,073 49,889 Financial Administration 838,897 171,665 - 1,010,562 1,075,030 1,075,030 64,468 Human Resources Administration 448,467 70,396 - 518,863 604,925 604,925 86,062 Planning 523,587 9,435 - 533,022 692,760 619,458 86,436 Zoning 1,177,348 305,862 - 1,483,210 1,598,296 1,666,598 183,388 Management Information Systems 470,282 150,821 - 621,103 673,524 673,524 52,421

General Services 627,967 1,333,551 - 1,961,518 2,030,994 2,065,994 104,476 Other General Government Liquor Board 39,240 4,533 - 43,773 83,053 83,053 39,280 Electrical Board 453 795 - 1,248 9,915 9,915 8,667 Legal 119,239 291,133 - 410,372 350,295 415,295 4,923 Total General Government 6,637,181 3,152,756 - 9,789,937 10,691,978 10,790,071 1,000,134

PUBLIC SAFETY

Sheriff's Office 5,132,321 795,834 144,608 6,072,763 6,562,060 6,466,560 393,797 Volunteer Fire and Rescue Services - 2,888,607 - 2,888,607 2,970,918 2,970,918 82,311 Detention Center 3,234,103 854,133 - 4,088,236 4,560,503 4,560,503 472,267 Animal Control 728,220 137,502 16,130 881,852 933,477 954,102 72,250 Eastern Shore Alliance 336 363,858 - 364,194 - 364,194 - Emergency Services 5,661,325 860,779 27,464 6,549,568 6,888,679 7,163,866 614,298

Total Public Safety 14,756,305 5,900,713 188,202 20,845,220 21,915,637 22,480,143 1,634,923

PUBLIC WORKS

Administration 390,623 6,693 - 397,316 528,433 528,433 131,117 Other Public Roads - 17,029 - 17,029 25,824 25,824 8,795 Solid Waste Disposal 1,085,533 741,498 49,993 1,877,024 2,296,473 2,416,857 539,833 Engineering Division 661,880 35,515 - 697,395 758,293 751,293 53,898 Total Public Works 2,138,036 800,735 49,993 2,988,764 3,609,023 3,722,407 733,643

HEALTH

Health Department 117,954 1,552,268 - 1,670,222 1,866,559 1,916,559 246,337

SOCIAL SERVICES

MEAP - MD Energy Assistance Program 122,267 - - 122,267 121,505 127,790 5,523 Other Social Services 129,248 33,350 - 162,598 163,354 167,354 4,756 Total Social Services 251,515 33,350 - 284,865 284,859 295,144 10,279

CONTINUED

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QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF EXPENDITURES AND OTHER FINANCING USES - BUDGETARY BASIS

GENERAL FUND

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

ACTUAL VARIANCE

PERSONNEL OTHER CAPITAL ORIGINAL FINAL POSITIVE

COSTS OPERATING OUTLAY TOTAL BUDGET BUDGET (NEGATIVE)

EDUCATION

Board of Education $ - $ 47,957,462 $ - $ 47,957,462 $ 47,957,462 $ 47,957,462 $ - Chesapeake College - 1,734,415 - 1,734,415 1,734,415 1,734,415 - Total Education - 49,691,877 - 4 9,691,877 49,691,877 4 9,691,877 -

PARKS

Parks 1,465,658 416,759 - 1,882,417 1,995,205 2,046,752 164,335 Administration 462,804 28,316 - 491,120 618,671 618,671 127,551 Total Parks 1,928,462 445,075 - 2,373,537 2,613,876 2,665,423 291,886

LIBRARY

Queen Anne's County Free Library - 1,433,725 - 1,433,725 1,423,851 1,433,851 126

CONSERVATION OF NATURAL RESOURCES

Cooperative Extension Services 48,147 198,842 - 246,989 260,192 260,192 13,203 Soil Conservation Services 126,947 - - 126,947 139,749 139,749 12,802 Weed Control 80,703 10,318 - 91,021 118,002 118,002 26,981 4-H Park - 67,011 - 67,011 73,178 73,178 6,167 Total Conservation of Natural Resources 255,797 276,171 - 531,968 591,121 591,121 59,153

ECONOMIC AND COMMUNITY DEVELOPMENT

Public Housing Authority - 318,319 - 318,319 318,319 318,319 - Business & Tourism 551,622 157,558 - 709,180 800,831 788,906 79,726 Total Economic and Community Development 5 51,622 475,877 - 1 ,027,499 1,119,150 1 ,107,225 7 9,726

DEBT SERVICE

Debt Service - Principal - 6,835,118 - 6,835,118 7,595,213 8,170,213 1,335,095 Debt Service - Interest and Fiscal Charges - 3,614,051 - 3,614,051 3,528,175 3,618,175 4,124 Total Debt Service - 10,449,169 - 10,449,169 11,123,388 11,788,388 1,339,219

MISCELLANEOUS

Aid to Municipalities - 234,171 - 234,171 228,686 234,686 515 Aid to Other Agencies - 50,904 - 50,904 35,904 50,904 - Insurance & Benefits / (Reimbursements) 3,361,393 985,179 - 4,346,572 1,533,350 4,347,731 1,159 Contingencies - 67,805 - 67,805 50,865 70,865 3,060 Total Miscellaneous 3,361,393 1,338,059 - 4,699,452 1,848,805 4,704,186 4,734

REVERSIONS

Salary Reversions - - - - (610,000) (610,000) ( 610,000)

OTHER FINANCING USES

Transfers Out To:

Law Library - 9,744 - 9,744 13,275 13,275 3,531 Department of Aging - 1,439,319 - 1,439,319 1,703,430 1,696,784 257,465 Department of Housing and Community Services - 381,931 - 381,931 464,656 464,656 82,725 Agricultural Transfer Tax Fund - 10,000 - 10,000 10,000 10,000 - Roads Board Operating - - - - 31,500 31,500 31,500 Sanitary District - Sewer/Admin - - - - 4,725 4,725 4,725 Sanitary District - Water - 81,072 - 81,072 81,072 81,072 -

Impact Fees - Fire Companies/Contingencies - 40,159 - 40,159 25,000 40,159 - General Capital Projects Fund - 125,000 - 125,000 - 125,000 - Parks & Recreation Enterprise - Airport - 62,740 - 62,740 65,149 65,149 2,409 Parks & Recreation Enterprise - Programs - 443,110 - 443,110 443,110 443,110 - Parks & Recreation Enterprise - Property Mgmt - 25,000 - 25,000 25,000 25,000 - Community Partnerships (Admin) - 204,269 - 204,269 157,500 215,452 11,183

Community Partnerships (Education program) - 99,999 - 99,999 100,000 100,000 1 Total Transfers Out - 2,922,343 - 2,922,343 3,124,417 3,315,882 393,539 Total Expenditures and Other Financing Uses $ 29,998,265 $ 78,472,118 $ 238,195 $ 108,708,578 $ 109,294,541 $ 113,892,277 $ 5,183,699

- 119 -

QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

ROADS BOARD SPECIAL REVENUE FUND

FOR THE YEAR ENDED JUNE 30, 2011

VARIANCE

ORIGINAL FINAL POSITIVE

BUDGET BUDGET ACTUAL (NEGATIVE)

REVENUES

State Shared Taxes $ 154,217 $ 154,217 $ 1 97,776 $ 4 3,559 Intergovernmental 1,299,936 1,299,936 3 28,943 (970,993) Charges for Current Services 205,000 205,000 2 90,779 8 5,779 Investment Income 50,000 50,000 4,797 (45,203) Miscellaneous - - 86,264 8 6,264 Total Revenues 1,709,153 1,709,153 9 08,559 (800,594)

EXPENDITURES

Current Public Works 5,190,111 5,190,111 3 ,493,027 1,697,084 Capital Outlay 70,000 83,732 13,732 7 0,000 Total Expenditures 5,260,111 5,273,843 3 ,506,759 1,767,084 Excess of Revenues Over (Under) Expenditures (3,550,958) (3,564,690) (2,598,200) 9 66,490

OTHER FINANCING SOURCES (USES)

Proceeds of Sale of Capital Assets - - 2,208 2,208 Transfers In 629,524 629,524 - (629,524) Total Other Financing Sources (Uses) 629,524 629,524 2,208 (627,316) Net Increase (Decrease) in Fund Balances $ (2,921,434) $ (2,935,166) (2,595,992) $ 339,174 Fund Balances, July 1 4 ,194,561 Fund Balances, June 30 $ 1,598,569

- 120 -

Combining and Individual Fund Statements and Schedules The Combining and Individual Fund Statements and Schedules provide detailed information concerning the financial position, results of operations, and budgetary comparisons for the non-major funds, capital projects, and fiduciary funds.

- 121 -

- 122 -

Non-Major Governmental Funds Non-Major Governmental Funds are used to account for the proceeds of specific revenue sources (other than capital projects and debt service funds) that are legally restricted to expenditures for specific purposes.

- 123 -

NON-MAJOR GOVERNMENTAL FUNDS

Non-major governmental funds are special revenue funds, unless otherwise noted:

Department of Aging – This fund accounts for activities funded primarily by grants to provide services for the elderly and is included in the social services function.

Housing and Community Services – This fund accounts for activities funded mostly by grants and revolving loan funds that support housing rehabilitation and home-ownership and is included in the economic and community development function.

Revolving Loan Fund – This fund accounts for activities funded by community donations and grants to promote and provide economic development loans to local businesses and is included in the economic and community development function.

Community Partnerships for Children – This fund accounts for activities funded by grants allocated to the County that provide services for children and families and is included in the social services function.

Critical Areas – This fund accounts for activities funded by payments in lieu of performance bonds that support efforts to mitigate and preserve critical areas along the shoreline of tidal waters within the County and is included in the conservation of natural resources function.

Law Library – This fund accounts for activities funded by court fees, fines, and contributions from local attorneys to update legal reference materials housed in the courthouse and is included in the general government function.

Sheriff’s Drug Task Force – This fund accounts for activities funded by drug-related forfeitures that support drug interdiction efforts by a multi-faceted task force and is included in the public safety function.

Inmate Welfare Fund – This fund accounts for activities funded by profits earned from Detention Center inmate-related services that promote the welfare of the inmates and is included in the public safety function.

Agricultural Transfer Tax – This fund accounts for activities funded primarily by the Agricultural Transfer Tax to purchase agricultural easements that preclude development and is included in the conservation of natural resources function.

Rural Legacy – This fund accounts for activities funded primarily by Maryland’s Rural Legacy Program to purchase easements that preclude development and is included in the conservation of natural resources function.

- 124 -

Purchase of Developments Rights Fund – This fund accounts for activities funded by Queen Anne’s County to acquire easements to restrict the use of agricultural land and woodland and is included in the conservation of natural resources function.

Dredging Special Assessments – This fund accounts for activities funded by special assessment funds collected to repay loans for specific dredging projects that benefited Price’s Creek and Grove Creek and is included in the conservation of natural resources function.

Kent Narrows – This fund accounts for activities funded by tax revenues to repay parking improvement bonds and is included in the economic and community development function.

Capital Projects – Fire Company Impact Fees – This fund accounts for activities funded by impact fees specifically earmarked to enhance local volunteer fire company preparedness resulting from new construction and is included in the public safety function.

Capital Projects – Parks and Recreation Impact Fees – This fund accounts for activities funded by impact fees specifically earmarked to enhance parks and recreation and is included in the parks and recreation function.

- 125 -

QUEEN ANNE'S COUNTY, MARYLAND

COMBINING BALANCE SHEET

NON-MAJOR GOVERNMENTAL FUNDS

JUNE 30, 2011

COMMUNITY

HOUSING AND PARTNERSHIPS

DEPARTMENT COMMUNITY REVOLVING FOR CRITICAL

OF AGING SERVICES LOAN FUND CHILDREN AREAS

ASSETS

Cash and Cash Equivalents $ 148,979 $ 786,552 $ 397,864 $ 313,620 $ 131,343 Prepaid Items - 247 - - - Receivables Accounts Receivable (Net) - 4,551 9,522 - - Loans Receivable - 3,664,409 175,683 - - Special Assessments (Net) - - - - - Due from Other Governments 206,361 29,911 - 268,616 - Total Assets $ 355,340 $ 4,485,670 $ 583,069 $ 582,236 $ 131,343

LIABILITIES AND FUND BALANCES

Liabilities Accrued Liabilities $ 92,862 $ 12,599 $ - $ 190,304 $ - Due to Other Funds 130,522 119,727 - 8,411 - Due to Other Governmental Agencies - - - 307,952 - Deferred Revenue 1,047 56,283 - - - Total Liabilities 224,431 188,609 - 506,667 - Fund Balances Nonspendable - 3,664,409 175,683 - - Restricted 4,072 734,665 407,386 - 131,343 Assigned 126,837 - - 75,569 - Unassigned - (102,013) - - - Total Fund Balances 130,909 4,297,061 583,069 75,569 131,343

Total Liabilities and Fund Balances $ 355,340 $ 4,485,670 $ 583,069 $ 582,236 $ 131,343

- 126 -

QUEEN ANNE'S COUNTY, MARYLAND

COMBINING BALANCE SHEET

NON-MAJOR GOVERNMENTAL FUNDS

JUNE 30, 2011

(CONTINUED)

SHERIFF'S

DRUG INMATE PURCHASE OF

LAW TASK WELFARE AGRICULTURAL RURAL DEVELOPMENT

LIBRARY FORCE FUND TRANSFER LEGACY RIGHTS

$ 3,664 $ 165,875 $ 250,812 $ 178,350 $ 1,025,176 $ 1,097,185

- - - - - -

5,811 - 4 ,537 - - 77,132

- - - - - -

- - - - - -

- - - - - -

$ 9,475 $ 165,875 $ 255,349 $ 178,350 $ 1,025,176 $ 1,174,317 $ 11,068 $ 78,572 $ 4 ,971 $ 1,257 $ - $ -

- - - - - -

- - 11,854 - - -

- - - - - -

11,068 78,572 16,825 1,257 - -

- - - - - -

- 87,303 238,524 177,093 1,025,176 1,174,317

- - - - - -

(1,593) - - - - - (1,593) 87,303 238,524 177,093 1,025,176 1,174,317 $ 9,475 $ 165,875 $ 255,349 $ 178,350 $ 1,025,176 $ 1,174,317

CONTINUED

- 127 -

QUEEN ANNE'S COUNTY, MARYLAND

COMBINING BALANCE SHEET

NON-MAJOR GOVERNMENTAL FUNDS

JUNE 30, 2011

(CONTINUED)

CAPITAL

CAPITAL PROJECTS -

DREDGING PROJECTS - PARKS AND TOTAL

SPECIAL KENT FIRE COMPANY RECREATION NON-MAJOR

ASSESSMENTS NARROWS IMPACT FEES IMPACT FEES GOVERNMENTAL

ASSETS

Cash and Cash Equivalents $ 16,016 $ 2 17,175 $ 234,859 $ 100,711 $ 5,068,181 Prepaid Items - - - - 247 Receivables Accounts Receivable (Net) 265 12,451 - - 114,269 Loans Receivable - - 49,320 45,719 3,935,131 Special Assessments (Net) 683,394 - - - 683,394 Due from Other Governments - - - - 504,888 Total Assets $ 699,675 $ 2 29,626 $ 284,179 $ 146,430 $ 10,306,110

LIABILITIES AND FUND BALANCES

Liabilities Accrued Liabilities $ - $ 409 $ - $ - $ 392,042 Due to Other Funds - - 68,775 - 327,435 Due to Other Governmental Agencies - - - - 319,806 Deferred Revenue 683,394 - 49,320 45,719 835,763 Total Liabilities 683,394 409 118,095 45,719 1,875,046 Fund Balances Nonspendable - - - - 3,840,092 Restricted 16,281 229,217 234,859 100,711 4,560,947 Assigned - - - - 202,406 Unassigned - - (68,775) - (172,381)

Total Fund Balances 16,281 229,217 166,084 100,711 8,431,064 Total Liabilities and Fund Balances $ 699,675 $ 2 29,626 $ 284,179 $ 146,430 $ 10,306,110

- 128 -

- 129 -

QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NON-MAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

COMMUNITY

HOUSING AND PARTNERSHIPS

DEPARTMENT COMMUNITY REVOLVING FOR CRITICAL

OF AGING SERVICES LOAN FUND CHILDREN AREAS

REVENUES

Taxes Local Property Tax $ - $ - $ - $ - $ - Other Local Taxes - Admission and Amusement Taxes - - - - - Recordation Taxes - 97,408 - - - State Shared Taxes - - - - - Intergovernmental 872,160 300,281 - 1,010,975 - Charges for Current Services 69,382 - - - 513 Fines and Forfeitures - - - - - Investment Income 156 6,150 9 ,538 44 - Donations 60,203 - - 1,000 - Miscellaneous 1,133 - - 47,075 - Total Revenues 1,003,034 403,839 9 ,538 1,059,094 513

EXPENDITURES

Current General Government - - - - - Public Safety - - - - - Social Services 2,440,871 - - 1,346,322 - Conservation of Natural Resources - - - - - Economic/Community Development - 683,014 - - - Capital Outlay 7,555 - - - - Debt Service Principal - - - - - Interest and Fiscal Charges - - - - - Total Expenditures 2,448,426 683,014 - 1,346,322 - Excess of Revenues Over (Under) Expenditures (1,445,392) (279,175) 9 ,538 (287,228) 513

OTHER FINANCING SOURCES (USES)

Proceeds of Capital Asset Disposals 15,651 - - - - Transfers In 1,439,319 596,672 - 304,268 - Transfers Out - - - (16,995) - Other Financing Sources (Uses) 1,454,970 596,672 - 287,273 - Net Increase (Decrease) in Fund Balances 9,578 317,497 9 ,538 45 513 Fund Balances, July 1 121,331 3,979,564 573,531 75,524 1 30,830 Fund Balances, June 30 $ 130,909 $ 4,297,061 $ 583,069 $ 75,569 $ 1 31,343

- 130 -

QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NON-MAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

SHERIFF'S

DRUG INMATE PURCHASE OF

LAW TASK WELFARE AGRICULTURAL RURAL DEVELOPMENT

LIBRARY FORCE FUND TRANSFER LEGACY RIGHTS

$ - $ - $ - $ - $ - $ -

- - - - - -

- - - - - 723,801

- - - 32,625 - -

- - - - 518,300 -

11,282 - 63,257 - - - 15,699 26,402 - - - - 67 309 429 282 1,772 2,349

- - - - - -

23,120 - 31,995 - - - 50,168 26,711 95,681 32,907 520,072 726,150 83,535 - - - - -

- 57,918 105,769 - - -

- - - - - -

- - - - 1,112,562 -

- - - - - -

- 3,870 - - - -

- - - - - 85,015

- - - - - 15,375

83,535 61,788 105,769 - 1,112,562 100,390 (33,367) (35,077) (10,088) 32,907 (592,490) 625,760

- - - - - -

9,744 - - 10,000 - -

- - - - - (207,000)

9,744 - - 10,000 - (207,000) (23,623) (35,077) (10,088) 42,907 (592,490) 418,760 22,030 122,380 248,612 134,186 1,617,666 755,557 $ (1,593) $ 87,303 $ 238,524 $ 177,093 $ 1,025,176 $ 1,174,317

CONTINUED

- 131 -

QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

NON-MAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

CAPITAL

CAPITAL PROJECTS -

DREDGING PROJECTS - PARKS AND TOTAL

SPECIAL KENT FIRE COMPANY RECREATION NON-MAJOR

ASSESSMENTS NARROWS IMPACT FEES IMPACT FEES GOVERNMENTAL

REVENUES

Taxes Local Property Tax $ - $ 36,008 $ - $ - $ 36,008 Other Local Taxes - Admission and Amusement Taxes - 47,179 - - 47,179 Recordation Taxes - - - - 821,209 State Shared Taxes - - - - 32,625 Intergovernmental - - - - 2,701,716 Charges for Current Services 4 4,178 - 195,461 100,071 484,144 Fines and Forfeitures - - - - 42,101 Investment Income 651 - 529 639 22,915 Donations - - - - 61,203 Miscellaneous - - - - 103,323

Total Revenues 4 4,829 83,187 195,990 100,710 4,352,423

EXPENDITURES

Current General Government - - - - 83,535 Public Safety - - 296,873 - 460,560 Social Services - - - - 3,787,193 Conservation of Natural Resources - - - - 1,112,562 Economic/Community Development - 5,011 - - 688,025 Capital Outlay - - - - 11,425 Debt Service Principal 4 4,425 - - - 129,440 Interest and Fiscal Charges - - - - 15,375 Total Expenditures 4 4,425 5,011 296,873 - 6,288,115 Excess of Revenues Over (Under) Expenditures 404 78,176 (100,883) 100,710 (1,935,692)

OTHER FINANCING SOURCES (USES)

Proceeds of Capital Asset Disposals - - - - 15,651 Transfers In - - 40,159 - 2,400,162 Transfers Out - (45,987) - (323,525) (593,507) Other Financing Sources (Uses) - (45,987) 40,159 (323,525) 1,822,306 Net Increase (Decrease) in Fund Balances 404 32,189 (60,724) (222,815) (113,386) Fund Balances, July 1 1 5,877 197,028 226,808 323,526 8,544,450 Fund Balances, June 30 $ 1 6,281 $ 229,217 $ 166,084 $ 100,711 $ 8,431,064

- 132 -

- 133 -

QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGETARY BASIS

NON-MAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

DEPARTMENT OF AGING HOUSING AND COMMUNITY SERVICES

VARIANCE VARIANCE

ORIGINAL FINAL POSITIVE ORIGINAL FINAL POSITIVE

BUDGET BUDGET ACTUAL (NEGATIVE) BUDGET BUDGET ACTUAL (NEGATIVE)

REVENUES

Taxes Local Property Tax $ - $ - $ - $ - $ - $ - $ - $ - Other Local Taxes - Admission and Amusement Taxes - - - - - - - - Recordation Taxes - - - - 50,000 5 0,000 9 7,408 47,408 State Shared Taxes - - - - - - - - Intergovernmental 8 78,626 915,223 872,160 ( 43,063) 165,486 3 58,042 3 00,281 ( 57,761) Charges for Current Services 6 1,811 61,811 69,382 7,571 - - - - Fines and Forfeitures - - - - - - - -

Investment Income - - 156 156 - - 6 ,150 6,150 Donations 5 6,000 56,690 60,203 3,513 - - - - Miscellaneous 1 ,000 1,433 1,133 ( 300) - - - - Total Revenues 9 97,437 1,035,157 1,003,034 ( 32,123) 215,486 4 08,042 4 03,839 ( 4,203)

EXPENDITURES

Current Operating Expenditures 2 ,692,721 2,727,321 2,440,871 286,450 680,142 1 ,670,439 6 83,014 987,425 Capital Outlay 1 ,500 11,846 7,555 4,291 - - - - Debt Service Principal - - - - - - - - Interest and Fiscal Charges - - - - - - - - Total Expenditures 2 ,694,221 2,739,167 2,448,426 290,741 680,142 1 ,670,439 6 83,014 987,425 Excess of Revenues Over (Under) Expenditures (1,696,784) (1,704,010) (1,445,392) 258,618 ( 464,656) (1,262,397) (279,175) 983,222

OTHER FINANCING SOURCES (USES)

Proceeds of Capital Asset Disposals - 7,226 15,651 8,425 - - - - Transfers In 1 ,696,784 1,696,784 1,439,319 ( 257,465) 464,656 6 79,397 5 96,672 ( 82,725) Transfers Out - - - - - - - - Total Other Financing Sources (Uses) 1 ,696,784 1,704,010 1,454,970 ( 249,040) 464,656 6 79,397 5 96,672 ( 82,725) Net Increase (Decrease) in Fund Balances $ - $ - 9,578 $ 9,578 $ - $ (583,000) 3 17,497 $ 900,497 Fund Balances, July 1 121,331 3 ,979,564

Fund Balances, June 30 $ 130,909 $ 4 ,297,061

- 134 -

QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGETARY BASIS

NON-MAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

COMMUNITY PARTNERSHIPS FOR CHILDREN LAW LIBRARY INMATE WELFARE FUND

VARIANCE VARIANCE VARIANCE

ORIGINAL FINAL POSITIVE ORIGINAL FINAL POSITIVE ORIGINAL FINAL POSITIVE BUDGET BUDGET ACTUAL (NEGATIVE) BUDGET BUDGET ACTUAL (NEGATIVE) BUDGET BUDGET ACTUAL (NEGATIVE) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

- - - - - - - - - - - -

- - - - - - - - - - - -

- - - - - - - - - - - -

1,253,967 1,074,457 1,010,975 (63,482) - - - - - - - -

- - - - 13,000 13,000 11,282 (1,718) 90,000 90,000 63,257 (26,743)

- - - - 21,000 21,000 15,699 (5,301) - - - -

- - 44 44 25 25 6 7 42 5,250 5,250 429 (4,821)

- - 1,000 1,000 - - - - - - - -

15,230 52,296 47,075 (5,221) 25,000 25,000 23,120 (1,880) 40,000 40,000 31,995 (8,005) 1,269,197 1,126,753 1,059,094 (67,659) 59,025 59,025 50,168 (8,857) 135,250 135,250 95,681 (39,569) 1,508,682 1,421,113 1,346,322 74,791 72,300 83,800 83,535 265 125,250 125,250 105,769 19,481

- - - - - - - - 40,000 40,000 - 40,000

- - - - - - - - - - - -

- - - - - - - - - - - -

1,508,682 1,421,113 1,346,322 74,791 72,300 83,800 83,535 265 165,250 165,250 105,769 59,481 (239,485) (294,360) ( 287,228) 7,132 (13,275) (24,775) (33,367) (8,592) (30,000) (30,000) (10,088) 19,912

- - - - - - - - - - - -

257,500 315,452 304,268 (11,184) 13,275 13,275 9,744 (3,531) - - - - (18,015) (22,092) ( 16,995) 5,097 - - - - - - - - 239,485 293,360 287,273 (6,087) 13,275 13,275 9,744 (3,531) - - - - $ - $ (1,000) 45 $ 1,045 $ - $ (11,500) (23,623) $ (12,123) $ (30,000) $ (30,000) (10,088) $ 19,912 75,524 22,030 248,612 $ 75,569 $ (1,593) $ 238,524

CONTINUED

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QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGETARY BASIS

NON-MAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

AGRICULTURAL TRANSFER RURAL LEGACY

VARIANCE VARIANCE

ORIGINAL FINAL POSITIVE ORIGINAL FINAL POSITIVE

BUDGET BUDGET ACTUAL (NEGATIVE) BUDGET BUDGET ACTUAL (NEGATIVE)

REVENUES

Taxes Local Property Tax $ - $ - $ - $ - $ - $ - $ - $ - Other Local Taxes - Admission and Amusement Taxes - - - - - - - - Recordation Taxes - - - - - - - - State Shared Taxes 155,000 155,000 32,625 (122,375) - - - - Intergovernmental - - - - - 518,299 518,300 1 Charges for Current Services - - - - - - - - Fines and Forfeitures - - - - - - - - Investment Income - - 282 282 - - 1,772 1,772 Donations - - - - - - - -

Miscellaneous - - - - - - - - Total Revenues 155,000 155,000 32,907 (122,093) - 518,299 520,072 1,773

EXPENDITURES

Current Operating Expenditures 165,000 165,000 - 165,000 - 1,131,905 1,112,562 19,343 Capital Outlay - - - - - - - - Debt Service Principal - - - - - - - - Interest and Fiscal Charges - - - - - - - - Total Expenditures 165,000 165,000 - 165,000 - 1,131,905 1,112,562 19,343 Excess of Revenues Over (Under) Expenditures (10,000) (10,000) 32,907 42,907 - (613,606) (592,490) 21,116

OTHER FINANCING SOURCES (USES)

Proceeds of Capital Asset Disposals - - - - - - - - Transfers In 10,000 10,000 10,000 - - - - - Transfers Out - - - - - - - - Total Other Financing Sources (Uses) 10,000 10,000 10,000 - - - - - Net Increase (Decrease) in Fund Balances $ - $ - 42,907 $ 42,907 $ - $ (613,606) (592,490) $ 21,116 Fund Balances, July 1 134,186 1,617,666 Fund Balances, June 30 $ 177,093 $ 1,025,176

- 136 -

QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGETARY BASIS

NON-MAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

PURCHASE OF DEVELOPMENT RIGHTS DREDGING SPECIAL ASSESSMENTS KENT NARROWS

VARIANCE VARIANCE VARIANCE

ORIGINAL FINAL POSITIVE ORIGINAL FINAL POSITIVE ORIGINAL FINAL POSITIVE BUDGET BUDGET ACTUAL (NEGATIVE) BUDGET BUDGET ACTUAL (NEGATIVE) BUDGET BUDGET ACTUAL (NEGATIVE) $ - $ - $ - $ - $ - $ - $ - $ - $ 22,000 $ 22,000 $ 36,008 $ 14,008

- - - - - - - - 48,000 48,000 47,179 (821)

- 100,390 723,801 623,411 - - - - - - - -

- - - - - - - - - - - -

- - - - - - - - - - - -

- - - - 48,625 44,425 44,178 ( 247) - - - -

- - 2,349 2,349 - - - - - - - -

- - - - - - 651 651 - - - -

- - - - - - - - - - - -

- - - - - - - - - - - -

- 100,390 726,150 625,760 48,625 44,425 44,829 404 70,000 70,000 83,187 13,187

- - - - - - - - 8,500 8,500 5,011 3,489

- - - - - - - - - - - -

- 85,015 85,015 - 42,189 44,425 44,425 - - - - -

- 15,375 15,375 - - - - - - - - -

- 100,390 100,390 - 42,189 44,425 44,425 - 8,500 8,500 5,011 3,489

- - 625,760 625,760 6,436 - 404 404 61,500 61,500 78,176 16,676

- - - - - - - - - - - -

- - - - - - - - - - - -

- (207,000) (207,000) - - - - - (45,987) (45,987) (45,987) -

- (207,000) (207,000) - - - - - (45,987) (45,987) (45,987) -

$ - $ (207,000) 418,760 $ 625,760 $ 6,436 $ - 404 $ 404 $ 15,513 $ 15,513 32,189 $ 16,676 755,557 15,877 197,028 $ 1,174,317 $ 16,281 $ 229,217

CONTINUED

- 137 -

QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGETARY BASIS

NON-MAJOR GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

CAPITAL PROJECTS - FIRE COMPANY IMPACT FEES CAPITAL PROJECTS - PARKS & RECREATION IMPACT FEES

VARIANCE VARIANCE

ORIGINAL FINAL POSITIVE ORIGINAL FINAL POSITIVE

BUDGET BUDGET ACTUAL (NEGATIVE) BUDGET BUDGET ACTUAL (NEGATIVE)

REVENUES

Taxes Local Property Tax $ - $ - $ - $ - $ - $ - $ - $ - Other Local Taxes - Admission and Amusement Taxes - - - - - - - - Recordation Taxes - - - - - - - - State Shared Taxes - - - - - - - - Intergovernmental - - - - - - - - Charges for Current Services 4 50,000 450,000 195,461 (254,539) 80,000 8 0,000 100,071 20,071 Fines and Forfeitures - - - - - - - - Investment Income 6 ,000 6,000 529 (5,471) 6,000 6 ,000 639 (5,361)

Donations - - - - - - - - Miscellaneous - - - - - - - - Total Revenues 4 56,000 456,000 195,990 (260,010) 86,000 8 6,000 100,710 14,710

EXPENDITURES

Current Operating Expenditures - 296,873 296,873 - - - - - Capital Outlay - - - - - - - - Debt Service Principal - - - - - - - - Interest and Fiscal Charges - - - - - - - - Total Expenditures - 296,873 296,873 - - - - - Excess of Revenues Over (Under) Expenditures 4 56,000 159,127 ( 100,883) (260,010) 86,000 8 6,000 100,710 14,710

OTHER FINANCING SOURCES (USES)

Proceeds of Capital Asset Disposals - - - - - - - - Transfers In - 40,160 40,159 (1) - - - - Transfers Out - - - - - (323,525) ( 323,525) - Total Other Financing Sources (Uses) - 40,160 40,159 (1) - (323,525) ( 323,525) - Net Increase (Decrease) in Fund Balances $ 4 56,000 $ 199,287 ( 60,724) $ (260,011) $ 86,000 $ (237,525) ( 222,815) $ 14,710 Fund Balances, July 1 226,808 323,526 Fund Balances, June 30 $ 166,084 $ 100,711

- 138 -

CAPITAL PROJECTS FUNDS

Capital Projects Funds are used for the acquisition or construction of major capital facilities, as well as other large multi-year projects that relate to capital assets, that are financed from general governmental resources.

We do not amend closed projects in the General Capital Projects Fund or Roads Capital Projects Fund. The names of these projects begin with a CLS. Once the project is closed, it is considered null and void and there is no remaining authority, and therefore we do not amend those after the fact.

Force in kind capital projects do not contain any budget authority. These projects are only intended as a tracking tool. Most costs associated with force in kind projects are related to staff costs and the project is attached to the employee’s normal activity, which contains the budget authority.

General Capital Projects – This fund accounts for capital project activities funded by all governmental resources, except those reserved for use in the Roads Capital Projects Fund, noted below.

Roads Capital Projects - This fund accounts for capital project activities funded by governmental resources specifically reserved for use in the Roads Capital Projects Fund. These resources consist of State-Shared Highway User Tax, which is mandated for this use, plus federal, state, and local roads-related grants and transfers.

School Impact Fees Capital Projects - This fund accounts for financial resources generated by new residential construction and used for the construction of public school facilities or payment of school debt relating to such construction.

- 139 -

QUEEN ANNE'S COUNTY MARYLAND

CAPITAL PROJECTS FUNDS

SCHEDULE OF APPROPRIATIONS AND EXPENDITURES

FOR THE YEAR ENDED JUNE 30, 2011

EXPENDITURES INCLUDED IN CAPITALIZED

TOTAL PRIOR CURRENT UNEXPENDED CONSTRUCTION CURRENT

PROJ # GENERAL CAPITAL PROJECTS: APPROPRIATION YEARS YEAR TOTAL APPROPRIATIONS IN PROGRESS YEAR

GENERAL GOVERNMENT

400003 County Facilities Program $ 851,446 $ 774,133 $ 44,559 $ 818,692 $ 3 2,754 $ - $ - 400007 GASB/Tax System Update 84,000 13,990 1 ,487 15,477 6 8,523 - 1,309 400009 CLS - Finance System (See Transfers) 753,476 731,409 19,265 750,674 2,802 - - 400015 County Wide Mapping 815,000 646,096 - 646,096 1 68,904 - - 400027 Strategic Planning 576,602 386,834 - 386,834 1 89,768 - - 400029 CLS - Comp & Community Plans 715,000 556,821 55,614 612,435 1 02,565 - -

400031 Mgt Info Systems Network 812,375 682,831 20,175 703,006 1 09,369 - 4,491 400051 CLS - Historic Sites Survey 116,986 108,913 8 ,073 116,986 - - - 400233 Rec Mgmt Sys - Non Fin 205,000 159,661 - 159,661 4 5,339 - - 400269 Tax Ditches - Beaverdam 64,500 43,496 - 43,496 2 1,004 - - 400271 Tax Ditches - Longmarsh 64,000 53,140 - 53,140 1 0,860 - - 400359 Public Drainage 200,000 - - - 2 00,000 - -

400363 Church Hill Pond Stabilization 200,000 17,682 52,431 70,113 1 29,887 - - 400375 Sustainable Communities Council 5,000 1 ,649 52 1,701 3,299 - - 400377 BNR Septic Retrofit Grant 5,000 - - - 5,000 - - 400443 CLS - Kennard Alumni Association 345,000 225,000 120,000 345,000 - - - 400449 Nesbit Road ER Infrastructure 3,000,000 2,448,484 25,639 2,474,123 5 25,877 1,743,847 25,639 400457 GIS & Strategic Plan Land Use 65,000 20,821 - 20,821 4 4,179 - -

400461 CLS - Courthouse Basement 25,214 10,783 - 10,783 1 4,431 - - 400483 2009 Bond Issuance - Consultant and Advertising Expense 182,863 157,507 - 157,507 2 5,356 - - 400483 2009 Bond Issuance - Allocation of Prior Years Debt Issuance 145,884 145,884 (3,155) 142,729 3,155 - - 400557 Security Upgrade & Generator 170,000 - 84,750 84,750 8 5,250 84,750 84,750 400561 CLS - Courthouse Property Acquisition (See Transfers) 1,586,284 1,314,231 - 1,314,231 2 72,053 - -

400613 2011 Bond Issuance - Consultant & Advertising Expense 152,454 - 130,112 130,112 2 2,342 - - 400615 Grasonville Community Center 50,000 - 50,000 50,000 - - - 400619 DNR Natural Filters 100,000 - 23,288 23,288 7 6,712 23,288 23,288 400635 Coastal Bays Grant - Town of Centreville 70,000 - 14,640 14,640 5 5,360 - - 400637 Coastal Bays Grant - Corsica River Conservancy 200,000 - 16,532 16,532 1 83,468 - -

Total General Government 11,561,084 8,499,365 663,462 9,162,827 2 ,398,257 1,851,885 139,477

PUBLIC SAFETY

400217 Transfer to VFDs 1,157,390 1,084,689 - 1,084,689 7 2,701 - - 400281 Detention Center Furniture & Carpet 30,000 - - - 3 0,000 - - 400313 County Wide Mapping - 911 815,530 794,469 - 794,469 2 1,061 - - 400499 Railroad Avenue Building Renovation 625,000 21,464 581,084 602,548 2 2,452 602,548 581,084 400525 Animal Services - Quarantine Facility 119,127 54,590 64,537 119,127 - 119,127 64,537 400535 CLS - DES Hanger Doors & Site Work 45,000 - 44,783 44,783 217 - 35,040

Total Public Safety 2,792,047 1,955,212 690,404 2,645,616 1 46,431 721,675 680,661

PUBLIC WORKS

400077 Wetlands Mitigation 216,560 142,998 9 ,931 152,929 6 3,631 - - 400079 Roof Repair / Replacement 454,647 452,586 - 452,586 2,061 - - 400083 CLS - Renovation/Transit Garage (See Transfers) 4,776,629 4,731,339 - 4,731,339 4 5,290 - - 400087 CLS - Fuel Depot Demolition/MTBE 198,774 198,774 - 198,774 - - - 400091 DPW - Fee In Lieu 20,000 20,000 - 20,000 - - - 400235 Solid Waste Capital Equipment 174,001 173,039 - 173,039 962 - -

400241 Cash Deposit Agreements 35,748 35,748 - 35,748 - - - 400471 Bio-Swale Drainage Ditch 75,000 7 ,763 7 ,008 14,771 6 0,229 14,771 7,008 400501 DPW Yard MTBE Remediation 200,000 - 19,889 19,889 1 80,111 - - 400509 Solid Waste Loader Replacement 63,626 - - - 6 3,626 - - 400521 County Complex Land 2,184,120 7 ,735 1,599,483 1,607,218 5 76,902 - 1,377,630 400541 Sudlersville Middle Infrastructure 873,017 219,583 251,246 470,829 4 02,188 249,484 45,619

400623 Energy Efficiency Upgrades 283,692 - - - 2 83,692 - - 400625 Coastal Bays - Health Dept. Parking 200,000 - 6 94 694 1 99,306 694 694 400629 Kirwan Creek - WMP IMPL 170,000 - 13,864 13,864 1 56,136 13,864 13,864 Total Public Works 9,925,814 5,989,565 1,902,115 7,891,680 2 ,034,134 278,813 1,444,815

SOCIAL SERVICES

400487 CLS - MTA Capital Grant Equipment 196,646 196,646 - 196,646 - - - 400511 Aging - Vehicle Replacement 35,000 - - - 3 5,000 - - 400531 CLS - Kramer Center Rain Garden 27,592 1 ,000 26,592 27,592 - - - 400601 ARRA Capital Grant Equipment 628,143 428,939 199,204 628,143 - - 199,204 Total Social Services 887,381 626,585 225,796 852,381 3 5,000 - 199,204

CONTINUED

- 140 -

QUEEN ANNE'S COUNTY MARYLAND

CAPITAL PROJECTS FUNDS

SCHEDULE OF APPROPRIATIONS AND EXPENDITURES

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

EXPENDITURES INCLUDED IN CAPITALIZED

TOTAL PRIOR CURRENT UNEXPENDED CONSTRUCTION CURRENT

PROJ # GENERAL CAPITAL PROJECTS: APPROPRIATION YEARS YEAR TOTAL APPROPRIATIONS IN PROGRESS YEAR

EDUCATION

700003 Chesapeake College Admin Bldg $ 798,485 $ 798,485 $ - $ 798,485 $ - $ - $ - 700171 Ches Coll Kent Humanities Bldg 685,295 624,195 61,100 685,295 - - - 700219 Ches Coll Learning Resource Center 108,188 108,188 - 108,188 - - - Subtotal Chesapeake College 1,591,968 1,530,868 61,100 1,591,968 - - -

EDUCATION - CONTINUED

ALLOCATIONS TO COMPONENT UNIT -

BOARD OF EDUCATION

400543 Sudlersville Middle Infrastructure 519,083 6 ,307 512,776 519,083 - - - 700061 Matapeake Middle 16,909,456 16,830,904 7 ,367 16,838,271 7 1,185 - - 700089 CLS - Kent Island Elementary Renovation 10,262,322 10,257,725 4 ,597 10,262,322 - - - 700107 CLS - Schools - Carpet & Tile 270,000 240,513 29,487 270,000 - - - 700111 CLS - BOE Office Building Upgrade 7,100 7 ,100 - 7,100 - - - 700113 CLS - Schools - Painting 280,000 259,337 20,663 280,000 - - -

700115 CLS - Playfields - Church Hill & Kent Island Elementary 24,544 24,544 - 24,544 - - - 700117 Playground Repairs - Kent Island Elem School 140,660 104,677 35,983 140,660 - - - 700141 CLS - Acoustical Tiles 28,800 28,800 - 28,800 - - - 700151 Bayside Elementary HVAC 1,064,153 1,038,960 8 29 1,039,789 2 4,364 - - 700157 QACHS Field Upgrades 519,532 367,276 109,422 476,698 4 2,834 - - 700161 Financial Hardware System 60,000 50,501 6 ,149 56,650 3,350 - -

700165 Generator - BOE Bldg 50,000 1 ,275 47,970 49,245 755 - - 700167 CLS - Electronic Visitor Register 20,000 20,000 - 20,000 - - - 700169 New Sudlersville Middle School 28,585,930 2,667,827 6,177,805 8,845,632 19,740,298 - - 700177 BOE Security Entrance & Cameras 160,000 81,838 76,142 157,980 2,020 - - 700179 Centreville Middle Boiler 224,917 21,052 70,296 91,348 1 33,569 - - 700181 Bayside Elementary Parking Lot 150,000 - 116,205 116,205 3 3,795 - -

700183 Centreville Elementary - Resurface Playcourts 35,000 3 ,100 26,416 29,516 5,484 - - 700187 Kennard Elementary Addition 2,538,354 102,519 50,913 153,432 2 ,384,922 - - 700189 CLS - BOE - Slate Roof Repairs 82,991 6 ,291 76,700 82,991 - - - 700191 Carpet & Tile Replacement 80,000 62,791 17,209 80,000 - - - 700193 Security Entrance & Cameras 65,000 62,132 1 ,375 63,507 1,493 - - 700195 Equipment & Vehicles 700,000 661,564 34,060 695,624 4,376 - -

700201 CLS - KIHS Stage Curtain 11,150 10,550 6 00 11,150 - - - 700203 Textbooks 300,000 279,937 19,704 299,641 359 - - 700205 BOE Phone System 60,000 - 54,664 54,664 5,336 - - 700207 QACHS Bleachers 145,000 3 08 131,376 131,684 1 3,316 - - 700209 Energy Management System Upgrade 44,050 21,895 18,825 40,720 3,330 - - 700211 CLS - BOE Meeting Room Video System 2,115 8 40 1 ,275 2,115 - - - 700213 CLS - BOE Relocatables 218,000 118,310 99,690 218,000 - - -

700215 KIHS Roof Repairs 65,700 6 ,967 2 ,926 9,893 5 5,807 - - 700221 Warehouse Lot Paving 100,000 - - - 1 00,000 - - 700223 BOE Parking Lot Expansion 25,000 - - - 2 5,000 - - 700225 BOE Portables 67,149 - 62,464 62,464 4,685 - - Subtotal Board of Education 63,816,006 33,345,840 7,813,888 41,159,728 22,656,278 - - Total Education 65,407,974 34,876,708 7,874,988 42,751,696 22,656,278 - -

PARKS AND RECREATION

400215 Preventive Park Maintenance 770,480 669,883 92,809 762,692 7,788 - - 400303 CLS - Ferry Point Trail 158,361 156,629 1 ,732 158,361 - - 1,732 400305 White Marsh Park 2,360,763 2,150,345 178,337 2,328,682 3 2,081 2,328,682 178,337 400391 Cross County Connec Trail PS1 1,932,688 60,823 1 12 60,935 1 ,871,753 60,935 112 400393 Davidson Property Improvements 323,525 34,047 43,065 77,112 2 46,413 77,112 43,065

400459 CLS - Ferry Point/CEC Canal Bridge 146,350 144,303 - 144,303 2,047 - - 400513 Bay City/Matapeake Trail 30,000 - - - 3 0,000 - - 400519 Talisman/Kudner Improvements 6,855 - - - 6,855 - - 400529 Chesapeake Pool Improvements 100,000 69,421 7 ,935 77,356 2 2,644 - - 400607 Grasonville Tennis Courts 40,000 - - - 4 0,000 - - 400611 CLS - Mower Equipment 29,997 - 29,997 29,997 - - 29,997 400617 YMCA Feasibility Study 50,000 - 46,894 46,894 3,106 - -

400621 YMCA Fundraising Study 25,000 - - - 2 5,000 - - 400627 Coastal Bays - Bloomfield Parking 50,000 - - - 5 0,000 - - 400633 Bloomfield Info Kiosk 15,385 - 10,186 10,186 5,199 10,186 10,186 Total Parks and Recreation 6,039,404 3,285,451 411,067 3,696,518 2 ,342,886 2,476,915 263,429

CONSERVATION

400293 4-H Park Improvements 597,555 462,750 62,392 525,142 7 2,413 525,142 62,392 400553 Ag Preservation - Emerson Property 416,861 - - - 4 16,861 - - 400555 Ag Preservation - Frizz King Property 572,000 - 572,000 572,000 - - - 400571 Ag Preservation - Brown's Branch 968,166 - 968,166 968,166 - - - 400631 CREP Easements 1,425,079 - 1,405,171 1,405,171 1 9,908 716,951 716,951 Total Conservation 3,979,661 462,750 3,007,729 3,470,479 5 09,182 1,242,093 779,343

CONTINUED

- 141 -

QUEEN ANNE'S COUNTY MARYLAND

CAPITAL PROJECTS FUNDS

SCHEDULE OF APPROPRIATIONS AND EXPENDITURES

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

EXPENDITURES INCLUDED IN CAPITALIZED

TOTAL PRIOR CURRENT UNEXPENDED CONSTRUCTION CURRENT

PROJ # GENERAL CAPITAL PROJECTS: APPROPRIATION YEARS YEAR TOTAL APPROPRIATIONS IN PROGRESS YEAR

ECONOMIC/COMMUNITY DEVELOPMENT

400201 Land Sales Proceeds (See Transfers) $ 3 0,345 $ 30,345 $ - $ 3 0,345 $ - $ - $ - 400573 Housing - NCI - 107 Watkins (See Transfers) 2 30,159 198,882 18,018 2 16,900 13,259 - 1 8,018 400583 Matapeake Business Park 1 ,640,000 - 76,066 7 6,066 1,563,934 7 6,066 7 6,066 Subtotal Economic/Community Development 1 ,900,504 229,227 94,084 3 23,311 1,577,193 7 6,066 9 4,084

ECONOMIC/COMMUNITY DEVELOPMENT -

ALLOCATION TO COMPONENT UNIT - PHA

400207 Housing & Community Service Transfer (See Transfers) 1 00,000 100,000 - 1 00,000 - - - 400209 PHA Allocation 6 06,642 606,642 - 6 06,642 - - - 400485 Restricted Allocation-Scattered Site 1 00,000 100,000 - 1 00,000 - - - Subtotal Allocation to Component Unit - PHA 8 06,642 806,642 - 8 06,642 - - - Total Economic/Community Development 2 ,707,146 1,035,869 94,084 1 ,129,953 1,577,193 7 6,066 9 4,084

DEBT SERVICE

400613 2011 Bond Issuance Costs 1 29,689 - 129,671 1 29,671 18 - -

TRANSFERS TO OTHER FUNDS

400009 CLS-Finance System - to Sanitary District 1 ,719 1,719 - 1 ,719 - - - 400045 Land Preservation Transfers 4 05,000 405,000 - 4 05,000 - - - 400083 CLS - Renovation/Transit Garage - to Roads Cap Proj 4 8,300 48,300 - 4 8,300 - - - 400127 Public Landings Allocation 2 00,000 200,000 - 2 00,000 - - - 400167 Enterprise Transfer/Allocation 3 ,336,695 3,236,490 - 3 ,236,490 100,205 - - 400201 Land Sale Proceeds 1 25,000 125,000 - 1 25,000 - - -

400207 Housing & Comm Svc Transfer - to Housing Services 4 50,000 450,000 - 4 50,000 - - - 400213 Loan Fund Transfers 4 60,000 460,000 - 4 60,000 - - - 400217 Transfer to VFD's 1 62,410 162,410 - 1 62,410 - - - 400573 Transfer to Housing & Community Services Fund 2 14,741 - 214,741 2 14,741 - - - 400551 Transfer to/from General Fund 8 ,310,000 8,310,000 - 8 ,310,000 - - - 400561 Transfer to General Fund - Courthouse Property 8 49,467 - 849,467 8 49,467 - - -

400469 Sanitary District Transfer/Allocation 2 33,000 233,000 - 2 33,000 - - - 400483 2009 Bond Issuance - Transfers 6 16,343 - 616,343 6 16,343 - - - Total Transfers 1 5,412,675 13,631,919 1,680,551 1 5,312,470 100,205 - - Total General Capital Projects $ 1 18,842,875 $ 70,363,424 $ 16,679,867 $ 8 7,043,291 $ 31,799,584 $ 6 ,647,447 $ 3 ,601,013

PROJ # ROADS BOARD CAPITAL PROJECTS:

PUBLIC WORKS

820005 Asphalt Overlays - Upgrade $ 3 ,030,336 $ 986,282 $ - $ 9 86,282 $ 2,044,054 $ - $ - 820151 Island Creek Road Bridge 3 ,105,000 71,261 2,157 7 3,418 3,031,582 7 3,418 2 ,157 820221 Taylor Mill Road Bridge 1 97,500 450 - 4 50 197,050 4 50 - 820243 CLS - DPW Route 301 Yard Paving 3 88,669 - 388,669 3 88,669 - - - 820251 CLS-Traffic Barrier Installation 1 92,383 947 191,436 1 92,383 - - 1 91,436

820271 Tanyard Road Improvements 6 89,302 350 686,002 6 86,352 2,950 6 86,352 6 86,002 820291 Carmichael Road Improvements - 6,094 713 6 ,807 (6,807) 6 ,807 7 13 820295 Fogwell Road Improvements 5 3,215 - - - 53,215 - - 820297 Rt 18-552 Improvements 1 ,574,248 167,472 65,777 2 33,249 1,340,999 2 33,249 6 5,777 820301 Heron View 2 8,131 - 28,131 2 8,131 - - 2 8,131 Total Public Works - Roads 9 ,258,784 1,232,856 1,362,885 2 ,595,741 6,663,043 1 ,000,276 9 74,216

TRANSFERS TO OTHER FUNDS

820187 To Roads Operating 1 ,841,877 1,019,487 - 1 ,019,487 822,390 - - 820209 County Wide Mapping II 8 0,000 70,000 10,000 8 0,000 - - - 820299 To Roads Operating 5 98,024 - - - 598,024 - - Total Transfers to Other Funds 2 ,519,901 1,089,487 10,000 1 ,099,487 1,420,414 - - Total Roads Board Capital Projects $ 1 1,778,685 $ 2,322,343 $ 1,372,885 $ 3 ,695,228 $ 8,083,457 $ 1 ,000,276 $ 9 74,216 Total General and Roads Capital Projects $ 1 30,621,560 $ 72,685,767 $ 18,052,752 $ 9 0,738,519 $ 39,883,041 $ 7 ,647,723 $ 4 ,575,229

Force in Kind Capital Projects reported in non-capital projects Funds and added to CIP 400304 CLS - Ferry Point Project FIC $ - $ 14,160 $ 2,863 $ 1 7,023 $ (17,023) $ - $ 2 ,863 400306 White March Park FIC - 370,617 37,192 4 07,809 (407,809) 4 07,809 3 7,192 400392 Cross County Conn II FIC - 15,666 12,349 2 8,015 (28,015) 2 6,092 1 2,349 400394 Davidson Property FIC - 8,348 35,021 4 3,369 (43,369) 4 3,369 3 5,021

400460 CLS - Ferry Point/CEC Canal Bridge - 62,756 - 6 2,756 (62,756) - - 400472 Bio Swale Drainage Ditch - FIC - 16,214 9,219 2 5,433 (25,433) 2 5,433 9 ,219 400612 CLS - Mower Equipment - FIC - - 7,374 7 ,374 (7,374) - - 400626 Coastal Bays Health Dept Parking - FIC - - 3,981 3 ,981 (3,981) 3 ,981 3 ,981 400630 Kirwan Creek WMP IMPL - FIC - - 14,716 1 4,716 (14,716) 1 4,716 1 4,716 400634 Bloomfield Kiosk - FIC - - 1,905 1 ,905 (1,905) 1 ,905 1 ,905

$ - $ 487,761 $ 124,620 $ 6 12,381 $ (612,381) $ 5 23,305 $ 1 17,246 Total Construction in Progress and Capitalized Current Year $ 8 ,171,028 $ 4 ,692,475

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QUEEN ANNE'S COUNTY, MARYLAND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL

SCHOOL IMPACT FEES CAPITAL PROJECTS FUND

FOR THE YEAR ENDED JUNE 30, 2011

VARIANCE

ORIGINAL FINAL POSITIVE

BUDGET BUDGET ACTUAL (NEGATIVE)

REVENUES

Charges for Current Services $ 600,000 $ 600,000 $ 755,443 $ 1 55,443 Investment Income 20,000 20,000 220 (19,780) Total Revenues 620,000 620,000 755,663 135,663

EXPENDITURES

Total Expenditures - - - - Excess of Revenues Over Expenditures 620,000 620,000 755,663 135,663

OTHER FINANCING (USES)

Transfers Out (1,408,120) (1,408,120) (1,408,120) - Total Other Financing (Uses) (1,408,120) (1,408,120) (1,408,120) - Net (Decrease) in Fund Balances $ (788,120) $ (788,120) (652,457) $ 1 35,663 Fund Balances, July 1 1,068,666 Fund Balances, June 30 $ 416,209

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- 144 -

NON-MAJOR ENTERPRISE FUNDS

Non-Major Enterprise funds account for activities which are commercial in nature and are primarily or partially intended to be self-supporting. Each fund sets its rates and service charges at a level sufficient to: (1) meet all of its operating expenses; (2) provide for depreciation from wear and obsolescence; and (3) to the extent that funds are not borrowed, finance the cost of expansion of physical facilities. For Queen Anne’s County, the following enterprise funds are not

meant to be fully self-supporting.

- 145 -

NON-MAJOR ENTERPRISE FUNDS

Non-major enterprise funds include the following funds:

Public Marinas – This fund accounts for operation, maintenance, and major repairs of public marinas. For a fee, the general public has access to these marinas for temporary mooring.

Parks and Recreation:

Blue Heron Golf Course – This fund accounts for operation and maintenance of an 18- hole public golf course that is owned and operated by the County.

Recreation Programs – This fund accounts for self-supporting recreation programs wherein user charges cover the majority of operating expenditures.

Public Landings – This fund accounts for operation, maintenance, and major repairs of public landings and bulkheads. For a fee, the general public has access to these landings to launch small craft into the many waterways that surround the County.

Property Management – This fund accounts for the operation, maintenance and major repairs associated with the County’s many parks and public facilities.

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QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF NET ASSETS

NON-MAJOR ENTERPRISE FUNDS

JUNE 30, 2011

GOLF RECREATION PUBLIC

ASSETS COURSE PROGRAMS LANDINGS

Current Assets Equity in Pooled Cash $ - $ 3 85,587 $ 1 36,883 Accounts Receivable (Net) - - 9 ,127 Due from Other Funds - 2 0,000 - Due from Other Governments - - 9 5,280 Bond Interest Reimbursement Receivable - Build America Bond - - 1 62 Inventories 8 ,737 - - Total Current Assets 8 ,737 4 05,587 2 41,452 Capital Assets Land, Improved and Unimproved 1 ,904,522 - 5 59,862 Buildings and Improvements to Buildings 3 13,443 - -

Improvements Other Than Buildings 1 22,268 - 2 ,453,629 Automotive Equipment 2 2,835 - 1 0,880 Equipment 5 80,346 - 5 6,814 Furniture and Fixtures - 2 4,023 4 ,979 Construction in Progress - - 1 27,040 Capital Assets before Depreciation 2 ,943,414 2 4,023 3 ,213,204 Less Accumulated Depreciation (600,237) (15,533) (294,822) Total Capital Assets, Net of Accumulated Depreciation 2 ,343,177 8 ,490 2 ,918,382

Total Noncurrent Assets 2 ,343,177 8 ,490 2 ,918,382 Total Assets 2 ,351,914 4 14,077 3 ,159,834

LIABILITIES

Current Liabilities Accounts Payable 1 0,799 2 2,013 1 1,485 Accrued Interest Payable 5 ,291 - 4 62 Escrow Deposits - 3 ,297 - Due to Other Funds 2 79,425 - - Unearned Revenue 1 ,993 - 6 98 Current Portion of Compensated Absences 5 ,001 1 8,429 2 1,801 Current Portion of Bonds/Notes Payable 7 6,763 - 1 ,625 Total Current Liabilities 3 79,272 4 3,739 3 6,071 Noncurrent Liabilities Compensated Absences 2 ,834 1 0,445 1 2,357

Other Post-Employment Benefit Obligation - 1 77,440 7 8,513 Bonds/Notes Payable 6 60,181 - 3 8,166 Total Noncurrent Liabilities 6 63,015 1 87,885 1 29,036 Total Liabilities 1 ,042,287 2 31,624 1 65,107

NET ASSETS

Invested in Capital Assets, Net of Related Debt 1 ,606,233 8 ,490 2 ,878,591 Restricted for:

Donations 4 44 - - Unrestricted (297,050) 1 73,963 1 16,136 Total Net Assets $ 1 ,309,627 $ 1 82,453 $ 2 ,994,727

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QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF NET ASSETS

NON-MAJOR ENTERPRISE FUNDS

JUNE 30, 2011

(CONTINUED)

TOTAL TOTAL

PROPERTY PARKS AND PUBLIC NON-MAJOR

MANAGEMENT RECREATION MARINAS ENTERPRISE

$ - $ 522,470 $ 316,989 $ 839,459 1,251 10,378 - 10,378

- 20,000 - 20,000

647 95,927 - 95,927

- 162 3,622 3,784

- 8,737 - 8,737

1,898 657,674 320,611 978,285 49,335 2,513,719 209,248 2,722,967 867,429 1,180,872 - 1,180,872 99,013 2,674,910 401,542 3,076,452 49,730 83,445 - 83,445 154,359 791,519 - 791,519 1,748 30,750 - 30,750

- 127,040 2,150,839 2,277,879

1,221,614 7,402,255 2,761,629 10,163,884 ( 399,754) (1,310,346) ( 74,045) (1,384,391) 821,860 6,091,909 2,687,584 8,779,493 821,860 6,091,909 2,687,584 8,779,493 823,758 6,749,583 3,008,195 9,757,778 41,276 85,573 1,010 86,583

- 5,753 11,046 16,799

7,650 10,947 - 10,947 114,204 393,629 - 393,629 25,000 27,691 - 27,691

- 45,231 - 45,231

- 78,388 46,365 124,753

188,130 647,212 58,421 705,633

- 25,636 - 25,636

244,658 500,611 5,676 506,287

- 698,347 888,536 1,586,883

244,658 1,224,594 894,212 2,118,806 432,788 1,871,806 952,633 2,824,439 821,860 5,315,174 1,752,683 7,067,857

- 444 - 444

( 430,890) (437,841) 302,879 (134,962) $ 390,970 $ 4,877,777 $ 2,055,562 $ 6,933,339

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QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS

NON-MAJOR ENTERPRISE FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

GOLF RECREATION PUBLIC

COURSE PROGRAMS LANDINGS

OPERATING REVENUES

Charges for Services $ 295,587 $ 370,149 $ 327,239 Intergovernmental - 5,261 18,308 Bond Interest Reimbursement - Build America Bond - - 645 Material Sales 43,644 - - Miscellaneous Revenues 1,813 21,809 30,030 Total Operating Revenues 341,044 397,219 376,222

OPERATING EXPENSES

Cost of Sales and Services Parks and Recreation 368,173 837,518 345,765 Public Marinas - - - Total Cost of Sales and Services 368,173 837,518 345,765 Other Post-Employment Benefit Contributions - 87,131 28,989 Depreciation 45,364 2,403 46,113 Total Operating Expenses 413,537 927,052 420,867 Operating Income (Loss) ( 72,493) (529,833) (44,645)

NON-OPERATING (EXPENSES)

Interest Expense ( 43,797) - - Loss on Disposal of Capital Assets ( 622) - (11,044) Total Non-Operating (Expenses) ( 44,419) - (11,044) Gain (Loss) Before Contributions and Transfers (116,912) (529,833) (55,689) Capital Contributions, Fees and Grants 15,747 - 180,740 Transfers In - 443,110 - Change in Net Assets (101,165) (86,723) 125,051 Total Net Assets - Beginning of Year 1,410,792 269,176 2,869,676

Total Net Assets - End of Year $ 1,309,627 $ 182,453 $ 2,994,727

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QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS

NON-MAJOR ENTERPRISE FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

TOTAL TOTAL

PROPERTY PARKS AND PUBLIC NON-MAJOR

MANAGEMENT RECREATION MARINAS ENTERPRISE

$ 575,252 $ 1,568,227 $ 84,987 $ 1,653,214 15,358 38,927 - 38,927

- 645 16,241 16,886

9,552 53,196 - 53,196 17,274 70,926 143 71,069 617,436 1,731,921 101,371 1,833,292 814,364 2,365,820 - 2,365,820

- - 55,504 55,504

814,364 2,365,820 55,504 2,421,324 108,232 224,352 3,860 228,212 51,787 145,667 8,031 153,698 974,383 2,735,839 67,395 2,803,234 (356,947) (1,003,918) 33,976 (969,942)

- (43,797) - (43,797)

(1,308,205) (1,319,871) - (1,319,871) (1,308,205) (1,363,668) - (1,363,668) (1,665,152) (2,367,586) 33,976 (2,333,610)

- 196,487 588,326 784,813

25,000 468,110 - 468,110 (1,640,152) (1,702,989) 622,302 (1,080,687) 2,031,122 6,580,766 1,433,260 8,014,026 $ 390,970 $ 4,877,777 $ 2,055,562 $ 6,933,339

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QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF CASH FLOWS

NON-MAJOR ENTERPRISE FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

GOLF RECREATION PUBLIC

COURSE PROGRAMS LANDINGS

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers and users $ 2 95,056 $ 3 63,913 $ 318,386 Receipts from other operating revenues 45,457 27,070 63,989 Receipts from Build America Bond interest reimbursement - - 602 Payments to suppliers (322,368) (316,296) (71,381) Payments to employees and on behalf of employees (56,596) (497,458) (277,002) Net Cash Provided (Used) by Operating Activities (38,451) (422,771) 34,594

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES

Transfers from other funds - 4 43,110 - Loan proceeds from interfund loans 2 79,425 10,000 - Principal paid on interfund loans (125,147) - - Net Cash Provided by Noncapital Financing Activities 1 54,278 4 53,110 -

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Proceeds from the disposition of capital assets - - - Receipts from capital grants and contributions 15,747 - 180,740 Principal paid on capital debt (75,000) - (1,228) Receipts from bonds, including premiums, net of issuance costs - - 11,073 Interest paid on capital debt (41,078) - 121 Acquisition and Construction of Capital Assets (15,496) - (184,499) Net Cash Provided (Used) by Capital and Related Financing Activities (115,827) - 6,207

CASH FLOWS FROM INVESTING ACTIVITIES

Net Cash Provided (Used) by Investing Activities - - - Net increase (decrease) in cash and cash equivalents - 30,339 40,801 Balances - Beginning of year - 3 55,248 96,082 Balances - End of year $ - $ 3 85,587 $ 136,883 Reconciliation of operating income (loss) to net cash provided by operating activities Operating income (loss) $ (72,493) $ (529,833) $ (44,645) Adjustments to reconcile operating income (loss)

to net cash provided (used) by operating activities:

Depreciation 45,364 2,403 46,113 Changes in assets and liabilities:

Accounts receivable, net - - (8,647) Operating grants receivable - - 15,651 Build America Bonds Interest receivable - - (43) Inventories and Prepaid Expenses (2,314) 4,950 - Vendor accounts payable (15,988) (10,060) (3,791) Compensated absences 7,511 28,874 1,174 Other Post-Employment Benefit Obligation - 87,131 28,988 Escrow deposits payable - (961) - Deferred revenue collected in advance (531) (5,275) (206)

Net Cash Provided (Used) by Operating Activities $ (38,451) $ (422,771) $ 34,594

- 152 -

QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF CASH FLOWS

NON-MAJOR ENTERPRISE FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

TOTAL TOTAL

PROPERTY PARKS AND PUBLIC NON-MAJOR

MANAGEMENT RECREATION MARINAS ENTERPRISE

$ 602,025 $ 1,579,380 $ 8 4,987 $ 1 ,664,367 41,537 178,053 143 1 78,196

- 602 13,910 14,512

( 337,634) (1,047,679) (202,925) (1,250,604) ( 460,339) (1,291,395) (30,917) (1,322,312) ( 154,411) (581,039) (134,802) (715,841) 25,000 468,110 - 4 68,110 114,204 403,629 - 4 03,629

- (125,147) - (125,147)

139,204 746,592 - 7 46,592 15,000 15,000 - 15,000

- 196,487 9 32,299 1 ,128,786

- (76,228) (34,289) (110,517)

- 11,073 5 94,420 6 05,493

- (40,957) (41,262) (82,219)

(8,519) (208,514) (1,053,629) (1,262,143) 6 ,481 (103,139) 3 97,539 2 94,400

- - - -

(8,726) 62,414 2 62,737 3 25,151 8 ,726 460,056 54,252 5 14,308 $ - $ 522,470 $ 3 16,989 $ 8 39,459 $ ( 356,947) $ (1,003,918) $ 3 3,976 $ (969,942) 51,787 145,667 8,031 1 53,698 7 73 (7,874) - (7,874) (647) 15,004 - 15,004

- (43) (2,331) (2,374)

- 2,636 6,738 9,374

16,391 (13,448) (185,076) (198,524)

- 37,559 - 37,559

108,232 224,351 3,860 2 28,211 1 ,000 39 - 39 25,000 18,988 - 18,988 $ ( 154,411) $ (581,039) $ (134,802) $ (715,841)

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FIDUCIARY FUNDS

Fiduciary funds account for assets held for others, in a trustee or agency capacity, which cannot be used to support other government programs.

Pension and Other Employee Benefit Trust Funds account for resources that are required to be held in trust for the members and beneficiaries of defined benefit pension plans, defined contribution plans, other post-employment benefit plans, or other employee benefit plans. The County’s one Other Post-Employment Benefit (OPEB) Trust Fund accounts for retiree benefit plans and is reported as part of the Basic Financial Statements. Additional combining schedules

for the OPEB Trust Fund are included in this section.

Agency Funds account for assets held by the County on behalf of individuals, private organizations, or other governments and/or funds. Additional combining schedules for the County’s Agency Funds are included in this section.

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OTHER POST-EMPLOYMENT BENEFIT (OPEB) TRUST FUND

The County established a Trust entity, entitled “Other Post-Employment Benefit Trust – County Commissioners of Queen Anne's County, County Commissioners of Kent County, and Participating Agencies” (OPEB Trust), to accumulate resources and account for and report retiree benefit plans for the participating agencies.

Participating agencies in the OPEB Trust Fund are as follows:

Queen Anne's County & Public Housing Authority Queen Anne's County Board of Education Queen Anne’s County Library Kent County

AGENCY FUNDS

Agency funds are as follows:

Tax Ditch – This fund accounts for special taxing district revenues that are used to maintain drainage ditches located in parts of the County.

Zoning Deposits – This fund accounts for performance deposits required under various sections of the Zoning Ordinance.

State and Town Tax Collections – This fund accounts for collections received by the County on behalf of the State of Maryland and incorporated towns located within the County. These taxes are collected by the County along with County taxes and are then remitted to the proper jurisdiction.

Motor Vehicle Administration Deposits – This fund accounts for funds collected by the County for State vehicle registration fees.

Mid-shore Regional Recycling Program (MRRP) – This fund accounts for activities of the regional recycling effort that is supported by four counties, including Queen Anne’s County.

Escheat – Abandoned Property – This fund accounts for stale-dated County payroll and disbursements checks that are voided by the County and remitted to the State after three years as abandoned property. In accordance with State statutes, these funds are available to be claimed by the original payee or they revert to the State.

- 157 -

QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF FIDUCIARY NET ASSETS

OTHER POST-EMPLOYMENT BENEFIT TRUST FUND

JUNE 30, 2011

QUEEN ANNE'S QUEEN ANNE'S TOTAL

COUNTY COUNTY QUEEN ANNE'S OPEB

QUEEN ANNE'S PUBLIC HOUSING BOARD OF COUNTY KENT TRUST

COUNTY AUTHORITY EDUCATION LIBRARY COUNTY FUND

ASSETS

Cash and Cash Equivalents $ 4 81 $ 7 6,372 $ 5 02,358 $ 3 0,142 $ 1 55,731 $ 765,084 Total Assets 4 81 7 6,372 5 02,358 3 0,142 1 55,731 765,084

LIABILITIES

Due to Other Governments - - - - 1 55,731 155,731 Total Liabilities - - - - 1 55,731 155,731 NET ASSETS HELD IN TRUST $ 4 81 $ 7 6,372 $ 5 02,358 $ 3 0,142 $ - $ 609,353

- 158 -

QUEEN ANNE'S COUNTY, MARYLAND

COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

OTHER POST-EMPLOYMENT BENEFIT TRUST FUND

FOR THE YEAR ENDED JUNE 30, 2011

QUEEN ANNE'S QUEEN ANNE'S TOTAL

COUNTY COUNTY QUEEN ANNE'S OPEB

QUEEN ANNE'S PUBLIC HOUSING BOARD OF COUNTY TRUST

COUNTY AUTHORITY EDUCATION LIBRARY FUND

ADDITIONS

Contributions Employers $ 831,222 $ 69,068 $ 1 ,276,130 $ 12,302 $ 2,188,722 Members 174,196 3,364 5 95,319 7,318 780,197 Total Contributions 1,005,418 72,432 1 ,871,449 19,620 2,968,919 Investment Income 4 81 1 00 1 ,089 66 1 ,736 Total Additions 1,005,899 72,532 1 ,872,538 19,686 2,970,655

DEDUCTIONS

Claims Paid 1,494,913 7,934 1 ,871,449 19,620 3,393,916 Change in Assets ( 489,014) 64,598 1 ,089 66 (423,261)

NET ASSETS HELD IN TRUST

Net Assets - Beginning of Year 489,495 11,774 501,269 30,076 1,032,614 Net Assets - End of Year $ 481 $ 76,372 $ 502,358 $ 30,142 $ 609,353

- 159 -

QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF AGENCY FUNDS ASSETS AND LIABILITIES

AGENCY FUNDS

JUNE 30, 2011

STATE MOTOR

TAX & TOWN VEHICLE MIDSHORE ESCHEAT - TOTAL

DITCH ZONING TAX ADMIN REGIONAL ABANDONED AGENCY

FUND DEPOSITS COLLECTIONS DEPOSITS RECYCLING PROPERTY FUNDS

ASSETS

Cash and Cash Equivalents $ 121,288 $ 1 87,652 $ 1 ,575 $ 5,414 $ 6,761 $ 4 ,334 $ 3 27,024 Miscellaneous Receivables - - - - 124,671 - 1 24,671 Total Assets $ 121,288 $ 1 87,652 $ 1 ,575 $ 5,414 $ 131,432 $ 4 ,334 $ 4 51,695

LIABILITIES

Due to Other Governments $ - $ - $ 1 ,575 $ 5,414 $ 131,432 $ 4 ,334 $ 1 42,755 Deposits and Escrows 121,288 1 87,652 - - - - 3 08,940 Total Liabilities $ 121,288 $ 1 87,652 $ 1 ,575 $ 5,414 $ 131,432 $ 4 ,334 $ 4 51,695

- 161 -

QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF CHANGES IN AGENCY FUNDS ASSETS AND LIABILITIES

AGENCY FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

Miscellaneous Total Cash Receivables Assets

TAX DITCH FUND

Balance 7-1-10 $ 1 38,243 $ - $ 138,243 Additions 20,170 - 20,170 Deductions (37,125) - ( 37,125) Balance 6-30-11 $ 1 21,288 $ - $ 121,288

ZONING DEPOSITS

Balance 7-1-10 $ 1 66,024 $ - $ 166,024 Additions 45,083 - 45,083 Deductions (23,455) - ( 23,455) Balance 6-30-11 $ 1 87,652 $ - $ 187,652

STATE AND TOWN TAX COLLECTIONS

Balance 7-1-10 $ 7 8,034 $ - $ 78,034 Additions 12,652,367 - 12,652,367 Deductions (12,728,826) - (12,728,826) Balance 6-30-11 $ 1,575 $ - $ 1,575

MOTOR VEHICLE ADMIN DEPOSITS

Balance 7-1-10 $ 7,218 $ - $ 7,218 Additions 3 76,265 - 376,265 Deductions (378,069) - (378,069) Balance 6-30-11 $ 5,414 $ - $ 5,414

MIDSHORE REGIONAL RECYCLING

Balance 7-1-10 $ 2 6,635 $ 2 6,149 $ 52,784 Additions 9 18,093 1 24,671 1,042,764 Deductions (937,967) (26,149) (964,116) Balance 6-30-11 $ 6,761 $ 1 24,671 $ 131,432

ESCHEAT - ABANDONED PROPERTY

Balance 7-1-10 $ 1,302 $ - $ 1,302 Additions 5,783 - 5,783 Deductions (2,751) - ( 2,751) Balance 6-30-11 $ 4,334 $ - $ 4,334

TOTALS - ALL AGENCY FUNDS

Balance 7-1-10 $ 4 17,456 $ 2 6,149 $ 443,605 Additions 14,017,761 1 24,671 14,142,432 Deductions (14,108,193) (26,149) (14,134,342) Balance 6-30-11 $ 3 27,024 $ 1 24,671 $ 451,695

- 162 -

QUEEN ANNE'S COUNTY, MARYLAND

STATEMENT OF CHANGES IN AGENCY FUNDS ASSETS AND LIABILITIES

AGENCY FUNDS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

Due to Other Escrow Total Governments Deposits Liabilities $ - $ 1 38,243 $ 138,243

- 20,170 20,170

- (37,125) (37,125)

$ - $ 1 21,288 $ 121,288 $ - $ 1 66,024 $ 166,024

- 45,083 45,083

- (23,455) (23,455)

$ - $ 1 87,652 $ 187,652 $ 78,034 $ - $ 78,034 12,652,367 - 12,652,367 (12,728,826) - (12,728,826) $ 1,575 $ - $ 1,575 $ 7,218 $ - $ 7,218 368,802 - 368,802 (370,606) - (370,606) $ 5,414 $ - $ 5,414 $ 52,784 $ - $ 52,784 493,591 - 493,591 (414,943) - (414,943) $ 131,432 $ - $ 131,432 $ 1,026 $ 276 $ 1,302 6,059 - 6,059 (2,751) (276) (3,027) $ 4,334 $ - $ 4,334 $ 139,062 $ 3 04,543 $ 443,605 13,520,819 65,253 13,586,072

(13,517,126) (60,856) (13,577,982) $ 142,755 $ 3 08,940 $ 451,695

- 163 -

Community Partnerships for Children Community Partnerships for Children is reported as a Non-Major Special Revenue Fund in the County’s financial statements. In lieu of preparing separate audited financial statements for the Partnership, additional schedules have been added to the County’s financial statements to meet requirements of the Partnership’s grantor agencies.

- 165 -

QUEEN ANNE'S COUNTY

COMMUNITY PARTNERSHIPS FOR CHILDREN SPECIAL REVENUE FUND

COMBINING BALANCE SHEETS

BY GRANTOR

JUNE 30, 2011 (with Summarized Totals as of June 30, 2010) Fed/State Federal GOCCP Family State State Admin GOC Support Ctr CSAFE OTHER

ASSETS

Cash and cash equivalents $ 64,191 $ 205,985 $ 4,131 $ - $ 33,908 Accounts receivable - - - - - Due from State governmental agencies 11,050 86,764 - 8,411 - Due from Federal governmental agencies - 162,391 - - - Total Assets $ 75,241 $ 455,140 $ 4,131 $ 8,411 $ 33,908

LIABILITIES AND FUND BALANCES

LIABILITIES

Accounts payable and accrued expenditures $ 5,507 $ 184,797 $ - $ - $ - Due to other funds - - - 8,411 - Due to State governmental agencies 2,175 267,738 4,131 - 33,908 Total Liabilities 7,682 452,535 4,131 8,411 33,908

FUND BALANCES

Restricted - - - - - Assigned 67,559 2,605 - - - Total Fund Balances 67,559 2,605 - - - Total Liabilities and Fund Balances $ 75,241 $ 455,140 $ 4,131 $ 8,411 $ 33,908

- 166 -

QUEEN ANNE'S COUNTY

COMMUNITY PARTNERSHIPS FOR CHILDREN SPECIAL REVENUE FUND

COMBINING BALANCE SHEETS

BY GRANTOR

JUNE 30, 2011 (with Summarized Totals as of June 30, 2010)

(CONTINUED)

Total Returned 2010 Community Reinvestment 2011 Summarized Partnerships Fund Total Total $ 308,215 $ 5,405 $ 313,620 $ 7 47,946

- - - 1,990

106,225 - 106,225 165,123 162,391 - 162,391 56,273 $ 576,831 $ 5,405 $ 582,236 $ 9 71,332 $ 190,304 $ - $ 190,304 $ 2 95,017 8,411 - 8,411 10,785 307,952 - 307,952 590,006 506,667 - 506,667 895,808

- - - 1,050

70,164 5,405 75,569 74,474 70,164 5,405 75,569 75,524 $ 576,831 $ 5,405 $ 582,236 $ 9 71,332

- 167 -

QUEEN ANNE'S COUNTY

COMMUNITY PARTNERSHIPS FOR CHILDREN SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

BY COMMUNITY PARTNERSHIP AGREEMENTS (CPA) and NON-COMMUNITY PARTNERSHIP AGREEMENTS (NON-CPA) FOR THE YEAR ENDED JUNE 30, 2011 (with Summarized Totals for the Year Ended June 30, 2010) Federal/State GOCCP/GOC Administrative Healthy Operating Fund CASA Resource Chesapeake Fam/Home Family Total Start Promotion Helps Visiting Navigators

REVENUES

CPA

Intergovernmental

GOC $ 6 3,337 $ 5 9,658 $ 9,509 $ 145,560 $ 52,489 $ 168,752

Non-CPA Intergovernmental Federal GOCCP Youth Strategies - 5 1,505 - - - - Federal SAMHSA Drug-Free Communities - - - - - - Federal MSDE Healthy Families - - - - 296,372 - GOC - non-CPA - - - - - - State GOCCP - non-CPA - 6 ,704 - - - - Other - - - - - - Investment Income - - - - - - Earned Reinvestment Donations - - - - - - Miscellaneous 4 7,075 - - - - - Subtotal Non-CPA 4 7,075 5 8,209 - - 296,372 -

Total Revenues 1 10,412 1 17,867 9,509 145,560 348,861 168,752

EXPENDITURES

CPA

Program Contracted Services - 5 9,658 9,509 145,560 - 168,752 Other Expenditures Salaries 6 0,540 - - - - - Fringe Benefit Costs 2 ,797 - - - - - Consultants - - - - - - Equipment Rental - - - - - - Postage - - - - - - Office Supplies - - - - - - Equipment Operation - - - - - - Business Travel - - - - - - Meetings & Conferences - - - - - - Advertising - - - - - - Marketing/Promotions - - - - - - Communications - - - - - -

Utilities - - - - - - Rent - - - - - - Other Charges - - - - 52,489 - Subtotal CPA Expenditures 6 3,337 5 9,658 9,509 145,560 52,489 168,752 Non-CPA Program Contracted Services - 5 6,494 - - 296,372 - Other Expenditures Salaries 1 26,576 1 ,403 - - - - Fringe Benefit Costs 7 9,883 3 12 - - - - Auditing 1 ,731 - - - - - Consultants 1 5,000 - - - - - Professional Groups 5 0 - - - - - Equipment Rental 3 ,198 - - - - -

Other Contracted Services 5 ,286 - - - - - Postage 7 90 - - - - - Office Supplies 2 ,688 - - - - - Equipment Operation 2 05 - - - - - Business Travel 2 15 - - - - - Meetings & Conferences - - - - - - Training - - - - - - Board's Expenditures 1 4,146 - - - - - Advertising 2 11 - - - - - Marketing/Promotions - - - - - - Communications 1 ,523 - - - - - Utilities 3 ,332 - - - - - Rent - - - - - - Other Charges - - - - - -

Subtotal Non-CPA Expenditures 2 54,834 5 8,209 - - 296,372 - Total Expenditures 3 18,171 1 17,867 9,509 145,560 348,861 168,752 Excess of Revenues Over (Under) Expenditures (207,759) - - - - -

OTHER FINANCING SOURCES (USES)

Transfers In within Partnerships 3 ,490 - - - - - Transfers (Out) within Partnerships - - - - - - Transfers In (Out) for Program Contracted Services - In 2 04,269 - - - - - Program Contracted Services - Out - - - - - - Other Financing Sources (Uses) 2 07,759 - - - - - Net Increase (Decrease) in Fund Balances $ - $ - $ - $ - $ - $ -

- 168 -

QUEEN ANNE'S COUNTY

COMMUNITY PARTNERSHIPS FOR CHILDREN SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

BY COMMUNITY PARTNERSHIP AGREEMENTS (CPA) and NON-COMMUNITY PARTNERSHIP AGREEMENTS (NON-CPA) FOR THE YEAR ENDED JUNE 30, 2011 (with Summarized Totals for the Year Ended June 30, 2010)

(CONTINUED)

Federal/State GOCCP/GOC MD Underage GOCCP/GOC After School Character Teen Drinking Operating Fund Opportunity Counts Court Campaign Total $ 52,244 $ 28,352 $ - $ - $ 516,564

- - 20,265 23,833 95,603

- - - - -

- - - - 296,372

- - - - -

- - - - 6,704

- - - - -

- - - - -

- 1,000 - - 1,000

- - - - -

- 1,000 20,265 23,833 399,679

52,244 29,352 20,265 23,833 916,243 52,244 - - - 435,723

- 20,496 - - 20,496

- 3,856 - - 3,856

- - - - -

- - - - -

- - - - -

- - - - -

- - - - -

- - - - -

- - - - -

- - - - -

- 4,000 - - 4,000

- - - - -

- - - - -

- - - - -

- 1,000 - - 53,489

52,244 29,352 - - 517,564 99,999 - 16,202 2,321 471,388

- - 2,134 13,071 16,608

- - 603 1,651 2,566

- - - - -

- - - - -

- - - - -

- - - - -

- - - - -

- - - - -

- - - 3,300 3,300

- - - - -

- - - - -

- - - - -

- - 1,325 - 1,325

- - - - -

- - - - -

- - - - -

- - - - -

- - - - -

- - - - -

- - - - -

99,999 - 20,264 20,343 495,187 152,243 29,352 20,264 20,343 1,012,751 (99,999) - 1 3,490 (96,508)

- - - - -

- - - (3,490) (3,490)

99,999 - - - 99,999

- - - - -

99,999 - - (3,490) 96,509 $ - $ - $ 1 $ - $ 1

CONTINUED

- 169 -

QUEEN ANNE'S COUNTY

COMMUNITY PARTNERSHIPS FOR CHILDREN SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

BY COMMUNITY PARTNERSHIP AGREEMENTS (CPA) and NON-COMMUNITY PARTNERSHIP AGREEMENTS (NON-CPA) FOR THE YEAR ENDED JUNE 30, 2011 (with Summarized Totals for the Year Ended June 30, 2010)

(CONTINUED)

Drug Free Community CSAFE Operating Fund Community All Programs Total Policing Subtotal

REVENUES

CPA

Intergovernmental

GOC $ - $ - $ 579,901

Non-CPA Intergovernmental Federal GOCCP Youth Strategies - - 95,603 Federal SAMHSA Drug-Free Communities 15,400 - 15,400 Federal MSDE Healthy Families - - 296,372 GOC - non-CPA - - - State GOCCP - non-CPA - - 6,704 Other - 16,995 16,995 Investment Income - - - Earned Reinvestment Donations - - 1,000 Miscellaneous - - 47,075 Subtotal Non-CPA 15,400 16,995 479,149 Total Revenues 15,400 16,995 1,059,050

EXPENDITURES

CPA

Program Contracted Services - - 435,723 Other Expenditures Salaries - - 81,036 Fringe Benefit Costs - - 6,653 Consultants - - - Equipment Rental - - - Postage - - - Office Supplies - - - Equipment Operation - - - Business Travel - - - Meetings & Conferences - - - Advertising - - - Marketing/Promotions - - 4,000 Communications - - - Utilities - - - Rent - - - Other Charges - - 53,489 Subtotal CPA Expenditures - - 580,901

Non-CPA Program Contracted Services 9,823 - 481,211 Other Expenditures Salaries 3,857 - 147,041 Fringe Benefit Costs 1,720 - 84,169 Auditing - - 1,731 Consultants - - 15,000 Professional Groups - - 50 Equipment Rental - - 3,198 Other Contracted Services - - 5,286 Postage - - 790 Office Supplies - - 5,988 Equipment Operation - - 205 Business Travel - - 215 Meetings & Conferences - - - Training - - 1,325

Board's Expenditures - - 14,146 Advertising - - 211 Marketing/Promotions - - - Communications - - 1,523 Utilities - - 3,332 Rent - - - Other Charges - - - Subtotal Non-CPA Expenditures 15,400 - 765,421 Total Expenditures 15,400 - 1,346,322 Excess of Revenues Over (Under) Expenditures - 16,995 ( 287,272)

OTHER FINANCING SOURCES (USES)

Transfers In within Partnerships - - 3,490 Transfers (Out) within Partnerships - - ( 3,490) Transfers In (Out) for Program Contracted Services - In - - 304,268 Program Contracted Services - Out - (16,995) ( 16,995) Other Financing Sources (Uses) - (16,995) 287,273 Net Increase (Decrease) in Fund Balances $ - $ - 1 Fund Balances, July 1 70,163 Fund Balances, June 30 $ 70,164

CONTINUED

- 170 -

QUEEN ANNE'S COUNTY

COMMUNITY PARTNERSHIPS FOR CHILDREN SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

BY COMMUNITY PARTNERSHIP AGREEMENTS (CPA) and NON-COMMUNITY PARTNERSHIP AGREEMENTS (NON-CPA) FOR THE YEAR ENDED JUNE 30, 2011 (with Summarized Totals for the Year Ended June 30, 2010)

(CONTINUED)

State Federal Total State GOC GOCCP GOCCP Federal Community Returned 2010 CPA Non-CPA Non-CPA Youth Drug Free Federal Partnerships Reinvestment 2011 Summarized Subtotal Subtotal Subtotal Strategies Community MSDE Other Operating Funds Fund Total Total $ 579,901 $ - $ - $ - $ - $ - $ - $ 579,901 $ - $ 579,901 $ 858,005

- - 44,098 51,505 - - - 95,603 - 95,603 49,108

- - - - 1 5,400 - - 15,400 - 15,400 53,317

- - - - - 2 96,372 - 296,372 - 296,372 296,372

- - - - - - - - - - 250,460

- - 6,704 - - - - 6,704 - 6,704 51,230

- - - - - - 16,995 16,995 - 16,995 17,864

- - - - - - - - 44 44 981

- - - - - - 1,000 1,000 - 1,000 58,884

- - - - - - 47,075 47,075 - 47,075 26,369

- - 50,802 51,505 1 5,400 2 96,372 65,070 479,149 44 479,193 804,585

579,901 - 50,802 51,505 1 5,400 2 96,372 65,070 1,059,050 44 1,059,094 1,662,590 435,723 - - - - - - 435,723 - 435,723 538,120 81,036 - - - - - - 81,036 - 81,036 163,432 6,653 - - - - - - 6,653 - 6,653 47,215

- - - - - - - - - - 10,000

- - - - - - - - - - 273

- - - - - - - - - - 1,370

- - - - - - - - - - 941

- - - - - - - - - - 121

- - - - - - - - - - 226

- - - - - - - - - - 2,868

- - - - - - - - - - 136

4,000 - - - - - - 4,000 - 4,000 4,676

- - - - - - - - - - 537

- - - - - - - - - - 1,773

- - - - - - - - - - 2,139

53,489 - - - - - - 53,489 - 53,489 142,563 580,901 - - - - - - 580,901 - 580,901 916,390

- - 25,227 49,790 9 ,823 2 96,372 99,999 481,211 - 481,211 724,998

- - 15,205 1,403 3 ,857 - 126,576 147,041 - 147,041 118,526

- - 2,254 312 1 ,720 - 79,883 84,169 - 84,169 48,775

- - - - - - 1,731 1,731 - 1,731 2,420

- - - - - - 15,000 15,000 - 15,000 13,528

- - - - - - 50 50 - 50 350

- - - - - - 3,198 3,198 - 3,198 5,679

- - - - - - 5,286 5,286 - 5,286 11,857

- - - - - - 790 790 - 790 900

- - 3,300 - - - 2,688 5,988 - 5,988 2,515

- - - - - - 205 205 - 205 153

- - - - - - 215 215 - 215 34

- - - - - - - - - - 2,614

- - 1,325 - - - - 1,325 - 1,325 -

- - - - - - 14,146 14,146 - 14,146 13,782

- - - - - - 211 211 - 211 5,091

- - - - - - - - - - 2,944

- - - - - - 1,523 1,523 - 1,523 775

- - - - - - 3,332 3,332 - 3,332 822

- - - - - - - - - - 21,926

- - - - - - - - - - 21,973

- - 47,311 51,505 1 5,400 2 96,372 354,833 765,421 - 765,421 999,662

580,901 - 47,311 51,505 1 5,400 2 96,372 354,833 1,346,322 - 1,346,322 1,916,052 (1,000) - 3,491 - - - (289,763) (287,272) 44 ( 287,228) (253,462)

- 3,490 - - - - - 3,490 - 3,490 -

- ( 3,490) - - - - - (3,490) - ( 3,490) -

99,999 - - - - - 204,269 304,268 - 304,268 257,264

- - - - - - (16,995) (16,995) - ( 16,995) (18,314)

99,999 - - - - - 187,274 287,273 - 287,273 238,950 98,999 - 3,491 - - - (102,489) 1 44 45 (14,512) 508,287 ( 6,429) - 1 (1,525) - (430,171) 70,163 5,361 75,524 90,036 $ 607,286 $ ( 6,429) $ 3,491 $ 1 $ (1,525) $ - $ (532,660) $ 70,164 $ 5,405 $ 75,569 $ 75,524

- 171 -

QUEEN ANNE'S COUNTY

COMMUNITY PARTNERSHIPS FOR CHILDREN SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGETARY BASIS

FOR THE YEAR ENDED JUNE 30, 2011

COMMUNITY PARTNERSHIPS FOR CHILDREN RETURNED REINVESTMENT FUND

Variance with Variance with Final Budget Final Budget Original Final Positive Original Final Positive Budget Budget Actual (Negative) Budget Budget Actual (Negative)

REVENUES

Intergovernmental GOC - CPA and Non-CPA $ 851,199 $ 5 86,886 $ 5 79,901 $ (6,985) $ - $ - $ - $ - State GOCCP Non-CPA 6,704 6,704 6,704 - - - - - Federal GOCCP Youth Strategies 50,822 1 47,002 95,603 (51,399) - - - - Federal SAMHSA Drug-Free Communities 30,855 15,401 15,400 (1) - - - - Federal MSDE Healthy Families 296,372 2 96,372 2 96,372 - - - - - Other 18,015 22,092 16,995 (5,097) - - - - Investment Income - - - - - - 44 44

Donations - - 1,000 1,000 - - - - Miscellaneous 15,230 52,296 47,075 (5,221) - - - - Total Revenues 1,269,197 1 ,126,753 1 ,059,050 (67,703) - - 44 44 -

EXPENDITURES

Program Contracted Services 975,733 9 64,029 9 16,934 47,095 - - - - Other Expenditures Salaries 310,254 2 28,753 2 28,077 676 - - - - Fringe Benefit Costs 125,962 1 12,071 90,822 21,249 - - - - Auditing 2,988 2,988 1,731 1,257 - - - - Consultants - 15,000 15,000 - - - - - Professional Groups 350 50 50 - - - - - Equipment Rental 3,698 3,198 3,198 - - - - - Other Contracted Services - - 5,286 (5,286) - - - -

Postage 3,000 2,500 790 1,710 - - - - Office Supplies 6,983 6,300 5,988 312 - - - - Equipment Operation 500 500 205 295 - - - - Business Travel 350 1,550 215 1,335 - - - - Meetings & Conferences 3,930 - - - - - - - Training - 4,000 1,325 2,675 - - - - Board's Expenditures 3,030 14,058 14,146 (88) - - - - Advertising 780 211 211 - - - - - Marketing/Promotions 3,849 3,000 4,000 (1,000) - - - - Communications 1,200 1,200 1,523 (323) - - - -

Utilities 3,089 3,089 3,332 (243) - - - - Other Charges 62,986 58,616 53,489 5,127 - - - - Total Expenditures 1,508,682 1 ,421,113 1 ,346,322 74,791 - - - - Excess of Revenues Over (Under) Expenditures (239,485) (294,360) (287,272) 7,088 - - 44 44

OTHER FINANCING SOURCES (USES)

Transfers In within Partnerships 30,855 3,490 3,490 - - - - - Transfers Out within Partnerships (30,855) (3,490) (3,490) - - - - - Transfers In (Out) for:

Program Contracted Services - In 257,500 3 15,452 3 04,268 (11,184) - - - - Program Contracted Services - Out (18,015) (22,092) (16,995) 5,097 - - - - Other Financing Sources (Uses) 239,485 2 93,360 2 87,273 (6,087) - - - - Net Increase (Decrease) in Fund Balances/Net Assets $ - $ (1,000) 1 $ 1,001 $ - $ - 44 $ 44 Fund Balances, July 1 70,163 5,361 Fund Balances, June 30 $ 7 0,164 $ 5,405

- 172 -

QUEEN ANNE'S COUNTY

COMMUNITY PARTNERSHIPS FOR CHILDREN SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGETARY BASIS

FOR THE YEAR ENDED JUNE 30, 2011

(CONTINUED)

TOTAL

Variance with Final Budget Original Final Positive Budget Budget Actual (Negative) $ 851,199 $ 586,886 $ 5 79,901 $ (6,985) 6,704 6,704 6,704 - 50,822 1 47,002 95,603 (51,399) 30,855 1 5,401 15,400 (1) 296,372 2 96,372 2 96,372 - 18,015 2 2,092 16,995 (5,097)

- - 44 44

- - 1,000 1,000

15,230 5 2,296 47,075 (5,221) 1,269,197 1 ,126,753 1 ,059,094 (67,659) 975,733 9 64,029 9 16,934 4 7,095 310,254 2 28,753 2 28,077 676 125,962 1 12,071 90,822 2 1,249 2,988 2,988 1,731 1,257

- 1 5,000 15,000 -

350 50 50 - 3,698 3,198 3,198 -

- - 5,286 (5,286)

3,000 2,500 790 1,710 6,983 6,300 5,988 312 500 500 205 295 350 1,550 215 1,335 3,930 - - -

- 4,000 1,325 2,675

3,030 1 4,058 14,146 (88) 780 211 211 - 3,849 3,000 4,000 (1,000) 1,200 1,200 1,523 (323) 3,089 3,089 3,332 (243) 62,986 5 8,616 53,489 5,127 1,508,682 1 ,421,113 1 ,346,322 7 4,791 (239,485) (294,360) (287,228) 7,132 30,855 3,490 3,490 - (30,855) (3,490) (3,490) - 257,500 3 15,452 3 04,268 (11,184) (18,015) (22,092) (16,995) 5,097 239,485 2 93,360 2 87,273 (6,087) $ - $ (1,000) 45 $ 1 ,045 75,524

$ 7 5,569

- 173 -

STATISTICAL SECTION

The Statistical Section, which fully incorporates information mandated by Governmental Accounting Standards Board (GASB) Statement No. 44, Economic Condition Reporting: The Statistical Section, presents detailed information for the primary government in the following areas, as a context for understanding what the information in the Financial Section says about the County’s overall financial health:

FINANCIAL TRENDS – Information to help the reader understand how the County’s financial performance and well-being have changed over time.

REVENUE CAPACITY – Information to help the reader assess the County’s most significant local revenue sources – the property tax and income tax.

DEBT CAPACITY – Information to help the reader assess the affordability of the County’s current levels of outstanding debt and the County’s ability to issue additional debt in the future.

DEMOGRAPHIC AND ECONOMIC INFORMATION – Indicators to help the reader understand the environment within which the County’s financial activities take place.

OPERATING INFORMATION – Service and infrastructure data to help the reader understand how the information in the County’s financial report relates to the services the County provides and the activities it performs.

Many of these tables cover more than two fiscal years and present data from outside the accounting records. Therefore, the Statistical Section is unaudited.

- 175 -

QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

NET ASSETS BY COMPONENT - GOVERNMENT-WIDE

(GOVERNMENTAL AND BUSINESS-TYPE ACTIVITIES)

LAST NINE FISCAL YEARS

Table 1 2003 2004 2005 2006 2007 Governmental Activities:

Invested in capital assets, net of related debt $ 111,710,606 $ 82,209,646 $ 85,784,267 $ 95,644,000 $ 103,657,227 Restricted 22,167,033 8,118,231 8,418,254 9,842,795 18,012,695 Unrestricted (deficit) (1) ( 29,783,476) ( 14,178,514) ( 6,161,281) 7,339,567 ( 3,740,905) Total Governmental Activities Net Assets 104,094,163 76,149,363 88,041,240 112,826,362 117,929,017 Business-type Activities:

Invested in capital assets, net of related debt 50,984,848 52,094,337 55,612,719 69,672,273 74,463,912 Restricted 6,482,894 7,857,202 7,742,890 11,733,254 19,133,485 Total Business-type Activities Net Assets 57,467,742 59,951,539 63,355,609 81,405,527 93,597,397 Primary Government:

Invested in capital assets, net of related debt 162,695,454 134,303,983 141,396,986 165,316,273 178,121,139 Restricted 28,649,927 15,975,433 16,161,144 21,576,049 37,146,180 Unrestricted (deficit) (1) ( 29,783,476) ( 14,178,514) ( 6,161,281) 7,339,567 ( 3,740,905) Total Primary Government Net Assets $ 161,561,905 $ 136,100,902 $ 151,396,849 $ 194,231,889 $ 211,526,414

NOTES:

* Government-wide net asset information is reported on the accrual basis of accounting.

* Accounting standards require that net assets be reported in three components in the financial

statements: invested in capital assets, net of related debt; restricted; and unrestricted. Net assets are considered restricted when (1) an external party, such as the state or federal government, places a restriction on how the resources may be used, or (2) enabling legislation is enacted by the County.

* Information prior to FY03 is not available, due to the FY03 implementation of GASB 34.

* Source: Statement of Net Assets, pages 36-37.

(1) In the government-wide financial statements, the County has reported negative unrestricted net assets for some years.

This is due to the fact that the County issues general obligation bonded debt for purposes of capital construction on behalf of the Queen Anne's County Board of Education. Absent the effect of this relationship, the County would have reported positive net assets for its governmental activities and for government-wide purposes. Governmentwide unrestricted net assets would have been:

Unrestricted (deficit) net assets reported above $ ( 29,783,476) $ ( 14,178,514) $ (6,161,281) $ 7,339,567 $ (3,740,905) Debt issued for capital on behalf of others 41,941,175 51,839,220 47,345,646 44,460,306 57,496,385 County net assets absent effect of this relationship $ 12,157,699 $ 37,660,706 $ 41,184,365 $ 51,799,873 $ 53,755,480

- 176 -

QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

NET ASSETS BY COMPONENT - GOVERNMENT-WIDE

(GOVERNMENTAL AND BUSINESS-TYPE ACTIVITIES)

LAST NINE FISCAL YEARS

Table 1

(CONTINUED)

2008 2009 2010 2011 $ 117,831,360 $ 123,217,989 $ 121,702,025 $ 118,274,533 15,376,330 16,582,660 22,290,307 22,399,514 ( 15,075,202) ( 26,672,299) ( 45,795,597) ( 61,193,944) 118,132,488 113,128,350 98,196,735 79,480,103 77,237,512 77,146,688 79,032,373 78,069,061 18,276,271 19,886,675 18,180,809 16,821,905 95,513,783 97,033,363 97,213,182 94,890,966 195,068,872 200,364,677 200,734,398 196,343,594

33,652,601 36,469,335 40,471,116 39,221,419 ( 15,075,202) ( 26,672,299) ( 45,795,597) ( 61,193,944) $ 213,646,271 $ 210,161,713 $ 195,409,917 $ 174,371,069 $ ( 15,075,202) $ ( 26,672,299) $ ( 45,795,597) $ ( 61,193,944) 53,758,049 50,291,243 57,677,186 72,437,047 $ 38,682,847 $ 23,618,944 $ 11,881,589 $ 11,243,103

- 177 -

QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

CHANGES IN NET ASSETS - GOVERNMENT-WIDE (GOVERNMENTAL AND BUSINESS-TYPE ACTIVITIES)

LAST NINE FISCAL YEARS

Table 2-a 2003 2004 2005 2006 2007 Expenses Governmental Activities:

General Government $ 7,537,390 $ 8,902,751 $ 8,774,831 $ 9,071,760 $ 9,854,468 Public Safety 10,161,429 13,064,686 14,255,183 17,534,652 19,149,388 Public Works 7,594,914 7,512,277 8,303,570 8,898,010 9,913,917 Health 952,194 1,123,795 1,284,216 1,377,717 1,450,866 Social Services 4,003,914 4,084,308 4,786,130 4,420,205 4,474,784 Education 43,050,433 46,142,006 40,377,624 42,303,087 56,118,585 Parks & Recreation 2,068,102 3,810,546 2,385,014 2,562,890 3,158,455

Library 975,549 1,020,653 1,073,222 1,168,232 1,266,183 Conservation of Natural Resources 892,015 537,207 591,986 478,426 497,926 Economic/Community Development 1,775,216 1,634,749 1,546,516 1,575,099 3,258,876 Interest and Fiscal Charges 2,649,524 2,981,403 2,288,442 2,508,070 2,864,493 Total Governmental Activities Expenses 81,660,680 90,814,381 85,666,734 91,898,148 112,007,941 Business-type Activities:

Water and Sewer 6,603,225 6,975,749 6,974,968 7,127,140 7,802,798 Parks & Recreation 1,929,891 2,007,419 2,524,904 2,509,783 3,273,986 Public Marinas - - - - 57,372 Airport 492,856 522,863 529,755 713,896 674,337 Total Business-type Activities Expenses 9,025,972 9,506,031 10,029,627 10,350,819 11,808,493 Total Primary Government Expenses 90,686,652 100,320,412 95,696,361 102,248,967 123,816,434 Program Revenues

Governmental Activities:

General Government Charges for Services 688,216 1,007,791 1,124,756 1,139,531 1,127,737 Operating Grants and Contributions 146,501 185,597 312,136 454,948 377,412 Capital Grants and Contributions 62,382 61,448 22,747 60,000 5,000 Total Revenue 897,099 1,254,836 1,459,639 1,654,479 1,510,149 Public Safety Charges for Services 720,580 1,197,844 968,857 1,595,738 1,642,258 Operating Grants and Contributions 1,265,912 887,519 1,443,474 1,743,073 1,255,307

Capital Grants and Contributions - 493,132 271,867 456,993 272,497 Total Revenue 1,986,492 2,578,495 2,684,198 3,795,804 3,170,062 Public Works Charges for Services 692,471 782,252 1,666,335 1,189,117 871,962 Operating Grants and Contributions 4,259,700 3,624,359 4,130,984 3,710,398 5,572,760 Capital Grants and Contributions 230,243 168,092 461,499 57,000 1,838,101 Total Revenue 5,182,414 4,574,703 6,258,818 4,956,515 8,282,823

Health Operating Grants and Contributions 5,241 - - 150,966 - Social Services Charges for Services 265,809 188,032 162,958 58,467 73,497 Operating Grants and Contributions 2,881,622 2,769,345 3,035,511 2,550,840 2,589,967 Capital Grants and Contributions 459,411 829,082 24,388 - 172,732 Total Revenue 3,606,842 3,786,459 3,222,857 2,609,307 2,836,196 Education Charges for Services 703,191 1,277,905 917,387 1,696,657 963,216

Operating Grants and Contributions - - - 18,000 - Capital Grants and Contributions - - - - - Total Revenue 703,191 1,277,905 917,387 1,714,657 963,216 Parks & Recreation Charges for Services 20,494 14,532 21,724 68,051 158,447 Operating Grants and Contributions 8,893 4,619 - 42,690 58,485 Capital Grants and Contributions 585,164 3,103,241 297,537 5,998,982 4,363,393 Total Revenue 614,551 3,122,392 319,261 6,109,723 4,580,325

Conservation of Natural Resources Charges for Services 89,691 109,527 150,052 119,580 100,488 Operating Grants and Contributions 250,078 324,573 371,960 680,396 597,613 Capital Grants and Contributions - 5,211 28,535 - - Total Revenue 339,769 439,311 550,547 799,976 698,101 Economic/Community Development Charges for Services 24,261 17,615 23,728 11,086 4,083 Operating Grants and Contributions 658,808 465,989 247,404 121,497 120,254

Capital Grants and Contributions 5,000 - - - - Total Revenue 688,069 483,604 271,132 132,583 124,337 Total Governmental Activities Program Revenues 14,023,668 17,517,705 15,683,839 21,924,010 22,165,209

- 178 -

QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

CHANGES IN NET ASSETS - GOVERNMENT-WIDE (GOVERNMENTAL AND BUSINESS-TYPE ACTIVITIES)

LAST NINE FISCAL YEARS

Table 2-a

(CONTINUED)

2008 2009 2010 2011 $ 11,167,743 $ 13,317,683 $ 14,089,387 $ 15,968,633 20,721,185 23,570,049 25,361,341 25,413,678 10,420,547 10,237,718 9,432,489 9,098,949 1,441,143 1,590,004 1,663,321 1,701,677 4,978,883 5,617,621 5,554,667 5,001,240 58,034,317 53,296,238 53,491,659 57,506,341 3,330,087 5,060,018 3,618,427 3,090,228 1,270,718 1,414,008 1,473,689 1,457,336 2,172,443 2,473,308 5,281,372 3,811,748

3,527,908 2,197,116 2,001,306 1,893,570 3,033,416 2,831,002 3,510,678 4,078,105 120,098,390 121,604,765 125,478,336 129,021,505 9,621,784 10,689,782 10,610,705 10,905,989 2,179,157 2,178,163 2,789,901 4,099,507 27,344 38,050 96,739 67,395 812,067 879,906 1,017,780 1,167,655 12,640,352 13,785,901 14,515,125 16,240,546 132,738,742 135,390,666 139,993,461 145,262,051 1,047,371 1,055,945 1,261,230 1,086,641

295,898 403,018 546,176 694,347 757,975 5,567 44,743 118,100 2,101,244 1,464,530 1,852,149 1,899,088 3,167,090 1,394,463 1,263,212 1,090,545 1,254,611 1,266,869 1,891,120 1,461,080 1,171 273,176 303,566 82,885 4,422,872 2,934,508 3,457,898 2,634,510 1,014,600 714,765 791,796 872,352 6,304,965 7,566,648 632,923 546,719 544,610 298,500 264,078 901,289 7,864,175 8,579,913 1,688,797 2,320,360

- - - -

64,041 68,386 67,423 69,382 2,911,796 2,928,291 2,666,917 2,050,062 613,804 348,124 2,688,245 215,748 3,589,641 3,344,801 5,422,585 2,335,192 1,011,013 740,213 852,201 755,443

- 8,050 433,000 -

- 161,673 - -

1,011,013 909,936 1,285,201 755,443 302,195 240,954 177,568 187,901 72,659 509 123,336 1,868 5,666,226 1,087,329 631,504 199,698 6,041,080 1,328,792 932,408 389,467 88,534 97,481 101,019 75,354 322,718 55,847 93,002 1,006,138

- 691,085 4,191,024 1,923,471

411,252 844,413 4,385,045 3,004,963 5,249 4,786 4,236 4,236 163,245 641,305 239,893 239,893

- - 110,561 110,561

168,494 646,091 354,690 354,690 25,609,771 20,052,984 19,378,773 13,693,713

CONTINUED

- 179 -

QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

CHANGES IN NET ASSETS - GOVERNMENT-WIDE (GOVERNMENTAL AND BUSINESS-TYPE ACTIVITIES)

LAST NINE FISCAL YEARS

Table 2-a

(CONTINUED)

2003 2004 2005 2006 2007 Business-type Activities:

Water and Sewer Charges for Services $ 6,738,431 $ 7,206,833 $ 6,704,817 $ 8,057,402 $ 12,169,440 Operating Grants and Contributions - - 541,052 - - Capital Grants and Contributions 2,506,457 868,581 994,303 12,576,490 5,015,603 Total Revenue 9,244,888 8,075,414 8,240,172 20,633,892 17,185,043 Parks & Recreation Charges for Services 883,297 1,051,908 1,099,161 1,576,001 1,581,030 Operating Grants and Contributions - - 330,204 387,270 1,279,648

Capital Grants and Contributions 658,120 145,975 4,000 469,624 144,844 Total Revenue 1,541,417 1,197,883 1,433,365 2,432,895 3,005,522 Public Marinas Charges for Services - - - - 108,100 Operating Grants and Contributions - - - - 92,348 Capital Grants and Contributions - - - - - Total Revenue - - - - 200,448 Airport Charges for Services 179,029 149,601 182,092 23,661 32,683 Operating Grants and Contributions - - - 4,448 1,112

Capital Grants and Contributions 41,190 23,636 69,595 6,368,327 667,166 Total Revenue 220,219 173,237 251,687 6,396,436 700,961 Total Business-type Activities Program Revenues 11,006,524 9,446,534 9,925,224 29,463,223 21,091,974 Total Primary Government Program Revenues 25,030,192 26,964,239 25,609,063 51,387,233 43,257,183 Net (Expense) Revenue (1) Governmental activities ( 67,637,012) ( 73,296,676) ( 69,982,895) ( 69,974,138) ( 89,842,732)

Business-type activities 1,980,552 ( 59,497) ( 104,403) 19,112,404 9,283,481 Total Primary Government Net Expense $ ( 65,656,460) $ ( 73,356,173) $ ( 70,087,298) $ ( 50,861,734) $ ( 80,559,251) General Revenues and Other Changes in Net Assets Governmental Activities:

Taxes (2) $ 66,274,065 $ 75,137,137 $ 80,932,258 $ 87,157,631 $ 90,910,849 Grants and Contributions Not Restricted to Specific Programs - - 88,750 - - Investment income 274,585 285,279 682,682 1,738,114 3,162,830 Gain (Loss) on Sale of Capital Assets 58,529 ( 452,997) - 2,983,087 13,605 Miscellaneous 608,688 724,069 1,063,336 997,032 1,928,398 Transfers In (Out) ( 554,940) ( 154,916) ( 3,055,362) 2,396,851 ( 1,070,297)

Special Items - Gain 832,718 215,000 - - - Extraordinary Loss ( 24,430) - - ( 477,707) - Total Governmental Activities 67,469,215 75,753,572 79,711,664 94,795,008 94,945,385 Business-type Activities:

Investment income 756,118 635,674 634,413 771,883 956,687 Gain (Loss) on Sale of Capital Assets ( 39,866) - - - 4,691 Miscellaneous 333,402 915,879 772,083 562,482 876,714 Transfers In (Out) 554,940 154,916 3,055,362 ( 2,396,851) 1,070,297 Special items - (Loss) - - ( 953,385) - - Extraordinary Gain - 951,460 - - - Total Business-type Activities 1,604,594 2,657,929 3,508,473 ( 1,062,486) 2,908,389

Total Primary Government 69,073,809 78,411,501 83,220,137 93,732,522 97,853,774 Change in Net Assets Governmental activities ( 167,797) 2,456,896 9,728,769 24,820,870 5,102,653 Business-type activities 3,585,146 2,598,432 3,404,070 18,049,918 12,191,870 Total Primary Government $ 3,417,349 $ 5,055,328 $ 13,132,839 $ 42,870,788 $ 17,294,523

NOTES:

* Government-wide net asset information is reported on the accrual basis of accounting.

* Information prior to FY03 is not available, due to the FY03 implementation of GASB34.

* Source: Statement of Activities, pages 38-39.

(1) Net (expense)/revenue is the difference between the expenses and program revenues of a function or program. It indicates

the degree to which a function or program is supported with its own fees and program-specific grants versus its reliance upon funding from taxes and general revenues. Numbers in parentheses indicate that expenses were greater than program revenues and therefore general revenues were needed to finance that function or program. Numbers without parentheses mean that program revenues were more than sufficient to cover expenses.

(2) See Table 2-b for detail of General Tax Revenues.

- 180 -

QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

CHANGES IN NET ASSETS - GOVERNMENT-WIDE (GOVERNMENTAL AND BUSINESS-TYPE ACTIVITIES)

LAST NINE FISCAL YEARS

Table 2-a

(CONTINUED)

2008 2009 2010 2011 $ 8,014,366 $ 7,695,100 $ 8,224,428 $ 8,192,471

- - 98,492 -

2,584,371 682,935 208,115 837,426 10,598,737 8,378,035 8,531,035 9,029,897 1,459,725 1,526,244 1,633,203 1,568,227 55,953 45,824 41,838 39,572 95,890 69,068 289,895 196,487 1,611,568 1,641,136 1,964,936 1,804,286 105,900 100,250 62,600 84,987 3,710 - 29,017 16,241

- - 545,123 588,326

109,610 100,250 636,740 689,554 46,960 34,907 50,585 37,955

- - 33,922 3,715

382,945 289,112 1,519,810 448,600 429,905 324,019 1,604,317 490,270 12,749,820 10,443,440 12,737,028 12,014,007 38,359,591 30,496,424 32,115,801 25,707,720 ( 94,488,619) ( 101,551,781) ( 106,099,563) ( 115,327,792) 109,468 ( 3,342,461) ( 1,778,097) ( 4,226,539) $ ( 94,379,151) $ (104,894,242) $ (107,877,660) $ (119,554,331) $ 91,853,216 $ 95,530,316 $ 90,469,883 $ 96,093,533

- - - -

2,128,509 642,472 144,553 136,523

- 1,540,404 26,731 281,158

721,946 2,182,525 786,719 711,868 ( 11,581) ( 3,348,074) ( 559,331) ( 611,922)

- - - -

- - - -

94,692,090 96,547,643 90,868,555 96,611,160 875,509 595,279 436,045 407,629

- - - -

919,828 918,688 962,540 884,772 11,581 3,348,074 559,331 611,922

- - - -

- - - -

1,806,918 4,862,041 1,957,916 1,904,323 96,499,008 101,409,684 92,826,471 98,515,483 203,471 ( 5,004,138) ( 15,231,008) ( 18,716,632) 1,916,386 1,519,580 179,819 ( 2,322,216) $ 2,119,857 $ (3,484,558) $ ( 15,051,189) $ ( 21,038,848)

- 181 -

QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

GENERAL TAX REVENUES - GOVERNMENTAL ACTIVITIES

LAST NINE FISCAL YEARS

Table 2-b 2003 2004 2005 2006 2007 Local Property Taxes $ 3 6,257,473 $ 3 9,784,933 $ 4 2,121,614 $ 4 4,688,709 $ 4 6,185,050 Local Income Tax 2 3,471,091 2 7,738,830 2 9,957,555 3 1,959,096 3 5,346,494 Other Local Taxes 6 ,545,501 7 ,613,374 8 ,853,089 1 0,509,826 9 ,379,305 Total Taxes - Governmental Activities $ 6 6,274,065 $ 7 5,137,137 $ 8 0,932,258 $ 8 7,157,631 $ 9 0,910,849 2008 2009 2010 2011

Local Property Taxes $ 5 0,021,587 $ 5 5,362,114 $ 5 9,267,240 $ 6 0,070,368 Local Income Tax 3 5,700,111 3 4,834,937 2 5,715,247 3 0,624,679 Other Local Taxes 6 ,131,518 5 ,333,265 5 ,487,396 5 ,398,486 Total Taxes - Governmental Activities $ 9 1,853,216 $ 9 5,530,316 $ 9 0,469,883 $ 9 6,093,533

NOTES:

* Government-wide general tax revenue information is reported on the accrual basis of accounting.

* Information prior to FY03 is not available, due to the FY03 implementation of GASB34.

* Source: Statement of Activities, pages 38-39.

- 182 -

QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

FUND BALANCES - GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS

Table 3 2002 2003 2004 2005 2006 General Fund:

Reserved $ 9 3,099 $ 5,578,543 $ 5,766,939 $ 5 ,705,316 $ 6,169,255 Unreserved 7,426,819 3,269,461 5,669,161 4,104,926 14,944,399 Total General Fund 7,519,918 8,848,004 11,436,100 9,810,242 21,113,654 All Other Governmental Funds:

Reserved 9,032,415 9,570,304 12,329,623 1 5,075,521 13,751,478 Unreserved, reported in:

Capital Projects Fund 12,097,123 6,465,484 11,835,783 1 1,706,521 13,579,649 Special Revenue Funds 3,127,711 2,972,713 2,698,617 3,156,479 2,810,027 Total All Other Governmental Funds 24,257,249 19,008,501 26,864,023 2 9,938,521 30,141,154 Total All Governmental Funds $ 31,777,167 $ 27,856,505 $ 38,300,123 $ 3 9,748,763 $ 51,254,808 2007 2008 2009 2010 2011 General Fund:

Reserved $ 7,140,303 $ 8,948,231 $ 8,643,600 $ 7 ,734,692 $ - Unreserved 15,302,827 3,972,847 6,381,843 6,296,418 - Nonspendable (1) - - - - 4,000 Restricted (1) - - - - 333,798 Committed (1) - - - - 657,068 Assigned (1) - - - - 70,000 Unassigned (1) - - - - 4,753,656 Total General Fund 22,443,130 12,921,078 15,025,443 1 4,031,110 5,818,522 All Other Governmental Funds:

Reserved 20,060,988 16,706,954 17,007,368 1 5,153,381 - Unreserved, reported in:

Capital Projects Funds 17,618,012 14,409,216 1,723,066 1 2,538,916 - Special Revenue Funds 3,019,522 2,185,304 2,751,120 7,842,939 - Nonspendable (1) - - - - 4,401,483 Restricted (1) - - - - 22,065,716 Committed (1) - - - - 1,820,818 Assigned (1) - - - - 14,745,215 Unassigned (1) - - - - ( 172,381) Total All Other Governmental Funds 40,698,522 33,301,474 21,481,554 3 5,535,236 42,860,851 Total All Governmental Funds $ 63,141,652 $ 46,222,552 $ 36,506,997 $ 4 9,566,346 $ 48,679,373

NOTES:

* Fund balance information for governmental funds is reported on the modified accrual basis of accounting.

* Source: Balance Sheet, pages 40-41.

(1) As of June 30, 2011, fund balance classifications changed due to the implementation of GASB 54.

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QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS

Table 4 2002 2003 2004 2005 2006 Revenues Taxes Local Property Taxes $ 3 3,760,455 $ 3 6,238,606 $ 3 9,771,711 $ 4 2,191,297 $ 4 4,657,603 Local Income Taxes 2 3,217,162 2 3,517,175 2 6,765,483 2 8,237,534 3 1,633,987 Other Local Taxes 3 ,987,371 6 ,545,501 7 ,613,374 8 ,853,089 1 0,509,826 State Shared Taxes 1 ,941,971 4 ,424,763 3 ,660,145 4 ,528,046 4 ,233,139 Licenses and Permits 2 ,152,720 1 ,410,491 6 47,633 8 29,784 8 24,917

Intergovernmental 1 0,471,381 6 ,351,125 9 ,261,854 6 ,049,496 1 1,476,325 Bond Interest Reimbursement - Build America Bond - - - - - Charges for Current Services 1 ,460,330 1 ,248,229 3 ,464,771 3 ,394,626 4 ,864,374 Fines and Forfeitures 1 5,861 2 9,443 3 8,798 4 8,654 7 7,008 Special Assessments 4 6,419 4 3,067 (7,528) - - Investment Income 1 ,042,194 4 65,164 4 10,845 9 07,275 1 ,738,139 Donations - 8 1,350 9 3,178 1 04,093 9 8,610

Miscellaneous (1) 1 ,020,802 8 53,309 9 54,621 1 ,567,883 1 ,346,669 Total Revenues 7 9,116,666 8 1,208,223 9 2,674,885 9 6,711,777 1 11,460,597 Expenditures Current General Government (2) 6 ,139,990 7 ,729,416 8 ,851,440 8 ,933,985 9 ,516,299 Public Safety 8 ,726,365 9 ,829,451 1 1,970,575 1 3,199,057 1 6,356,949 Public Works 6 ,126,407 6 ,790,032 7 ,872,914 9 ,055,472 9 ,168,186 Health 1 ,208,954 8 07,489 1 ,101,713 1 ,261,488 1 ,355,057

Social Services 3 ,105,830 4 ,303,930 4 ,922,755 4 ,367,736 4 ,294,781 Education (3) 3 9,713,371 4 3,050,433 4 6,689,001 4 0,421,109 4 2,346,958 Parks and Recreation 1 ,727,072 2 ,616,946 6 ,266,051 2 ,481,296 9 ,096,593 Library (4) 9 35,439 9 51,939 9 97,043 1 ,049,612 1 ,144,622 Conservation of Natural Resources 8 80,299 8 80,058 5 65,218 5 78,426 5 08,606 Economic/Community Development 1 ,267,138 1 ,848,707 1 ,809,329 1 ,552,689 1 ,558,978

Miscellaneous - - - - - Capital Outlay 8 ,001,582 1 ,488,726 1 ,173,687 1 ,280,650 1 ,049,361 Debt Service Principal 2 ,920,206 2 ,690,928 4 ,029,332 5 ,928,559 3 ,677,307 Debt Issuance Costs - - - - - Interest and Fiscal Charges 2 ,698,380 2 ,695,664 2 ,780,312 2 ,555,411 2 ,569,650 Total Expenditures 8 3,451,033 8 5,683,719 9 9,029,370 9 2,665,490 1 02,643,347 Excess (Deficiency) of Revenues over (under) Expenditures (4,334,367) (4,475,496) (6,354,485) 4 ,046,287 8 ,817,250

Other Financing Sources (Uses) Issuance of Debt 6 ,310,000 - 1 6,602,500 3 0,026,336 - Re-allocation of 2006 Bonds - - - - - Bond Premiums - - - 1 ,069,864 - Bond Issuance Costs - - - (159,647) - Proceeds of Capital Asset Disposals - 9 8,000 1 35,520 1 54,787 1 ,176,860 Insurance Proceeds - - - - - Capital Contributions - Developer - - - 8 8,750 - Transfers In (5) 6 ,137,635 3 ,806,476 9 ,647,582 1 0,661,440 8 ,578,135

Transfers Out (6) (7,115,841) (4,361,416) (9,802,498) (13,716,802) (6,181,284) Defeasance of debt (6,290,795) - - (30,722,375) - Total Other Financing Sources (Uses) (959,001) (456,940) 1 6,583,104 (2,597,647) 3 ,573,711 Special and Extraordinary Items Special Items - 8 85,140 2 15,000 - - Extraordinary Gains (Losses) - (24,430) - - (477,707) Total Special Items and Extraordinary Gains (Losses) - 8 60,710 2 15,000 - (477,707)

Net Increase (Decrease) in Fund Balances $ (5,293,368) $ (4,071,726) $ 1 0,443,619 $ 1,448,640 $ 1 1,913,254 Debt service as a percentage of non-capital expenditures (7, 8) 7.45% 6.40% 6.96% 9.28% 6.15%

NOTES:

* Governmental fund information is reported on the modified accrual basis of accounting.

* Source: Statement of Revenues, Expenditures and Changes in Fund Balances, pages 44-45,

and the Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities, pages 46-47.

(1) For FY02, "Miscellaneous Revenue" includes amounts previously classified as "Operating Transfers in" from Component Units.

(2) For all fiscal years, "General Government" includes amounts previously classified as "Miscellaneous," "Intergovernmental" and/or "Contingency."

(3) For FY02, "Education Expenditures" includes amounts previously classified as "Operating Transfers out" to Component Unit (Board of Education).

(4) For FY02, "Library Expenditures" includes amounts previously classified as "Operating Transfers out" to Component Unit (Library).

(5) For FY02, "Transfers In" exclude amounts previously classified as "Operating Transfers in" from Component Units.

(6) For FY02, "Transfers Out" exclude amounts previously classified as "Operating Transfers out" to Component Units (Board of Education and Library).

(7) Debt service represents debt service principal and interest expenditures and excludes amortization of debt issuance costs as presented above.

(8) Noncapital expenditures represents Total Expenditures above, less Capital Outlay.

- 184 -

QUEEN ANNE'S COUNTY, MARYLAND

FINANCIAL TRENDS

CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS

Table 4

(CONTINUED)

2007 2008 2009 2010 2011 $ 4 6,208,342 $ 5 0,007,054 $ 5 5,374,053 $ 5 9,242,742 $ 6 0,097,959 3 4,980,663 3 4,767,725 3 5,988,334 2 9,647,125 2 9,527,496 9 ,379,305 6 ,131,518 5 ,333,265 5 ,487,396 5 ,398,486 5 ,125,419 5 ,306,763 7 ,591,829 5 08,138 2 30,401 8 95,931 8 90,821 8 74,639 8 63,782 9 19,663 1 0,661,130 1 2,199,511 8 ,049,695 1 2,061,066 8 ,777,729

- - - 1 93,567 4 38,022

3 ,806,563 4 ,049,902 3 ,326,696 3 ,396,080 3 ,143,846 2 39,194 1 ,759,370 1 15,658 2 58,937 7 8,345

- - - - -

3 ,162,830 2 ,128,509 6 42,472 1 44,553 1 36,523 7 4,694 2 47,002 7 6,867 1 40,731 1 09,342 1 ,853,706 7 19,067 2 ,182,525 7 86,719 7 08,455 1 16,387,777 1 18,207,242 1 19,556,033 1 12,730,836 1 09,566,267 8 ,772,229 1 0,128,699 1 0,841,479 1 0,608,976 1 0,397,457 1 7,918,740 1 9,292,661 2 0,483,238 2 1,344,575 2 1,127,321 9 ,167,362 9 ,182,618 8 ,678,715 7 ,671,352 7 ,277,767 1 ,428,395 1 ,430,670 1 ,572,848 1 ,637,101 1 ,670,222

4 ,260,927 4 ,747,491 5 ,029,493 4 ,767,647 4 ,098,650 5 6,163,966 5 8,086,283 5 3,348,513 5 3,545,597 5 7,566,865 2 ,809,748 3 ,083,038 3 ,145,367 3 ,055,335 2 ,521,175 1 ,242,573 1 ,247,108 1 ,390,398 1 ,424,078 1 ,433,725 4 83,810 2 ,177,820 2 ,445,352 5 ,263,577 3 ,872,916 3 ,188,316 3 ,513,153 1 ,968,587 1 ,847,195 1 ,715,524 9 15,542 7 31,771 7 06,792 1 ,373,090 4 ,699,452 1 4,291,416 1 3,676,569 8 ,594,972 7 ,868,741 4 ,838,581

3 ,795,769 4 ,888,405 5 ,089,347 4 ,948,144 6 ,964,558 2 36,899 3 ,972 (423) 1 45,884 1 29,671 2 ,257,928 3 ,147,529 2 ,778,490 3 ,114,505 3 ,629,426 1 26,933,620 1 35,337,787 1 26,073,168 1 28,615,797 1 31,943,310 (10,545,843) (17,130,545) (6,517,135) (15,884,961) (22,377,043) 2 3,219,790 5 10,617 1 22,780 2 9,299,154 2 1,897,570

- (345,955) - - -

2 36,899 3 ,972 (423) 1 57,800 1 39,136

- - - - -

8 8,535 4 5,494 6 4,089 3 0,861 5 82,601

- 8 ,898 4 4,907 1 5,826 9 9,028

- - - - -

1 3,131,736 1 7,014,307 5 ,449,499 1 8,184,911 5 ,386,256 (14,202,033) (17,025,888) (8,879,272) (18,744,242) (6,614,521)

- - - - -

2 2,474,927 2 11,445 (3,198,420) 2 8,944,310 2 1,490,070

- - - - -

(42,242) - - - - (42,242) - - - - $ 1 1,886,842 $ (16,919,100) $ (9,715,555) $ 1 3,059,349 $ (886,973) 5.58% 6.61% 6.70% 6.80% 8.44%

- 185 -

QUEEN ANNE'S COUNTY, MARYLAND

ASSESSED VALUE OF TAXABLE AND EXEMPT PROPERTY

LAST TEN FISCAL YEARS

Table 5 Real Property (2) Personal Property Total Total Total Public Utility Taxable Taxable and Fiscal Commercial Residential (1) Total Direct Assessed Assessed Exempt Exempt Year Assessed Value Assessed Value Assessed Value Tax Rate (3) Value (2) (4) Value Property Property 2002 $ 6 92,030,001 $ 2,607,616,738 $ 3,299,646,739 $ 0.9760 $ 70,150,240 $ 3,369,796,979 $ 2 74,858,885 $ 3 ,644,655,864 2003 7 28,512,663 2,858,309,623 3,586,822,286 0.9760 64,201,229 3,651,023,515 2 76,953,744 3 ,927,977,259

2004 7 71,054,050 3,208,049,692 3,979,103,742 0.9760 59,945,270 4,039,049,012 2 97,843,389 4 ,336,892,401 2005 8 49,272,884 3,690,010,496 4,539,283,380 0.9260 57,382,490 4,596,665,870 3 30,840,259 4 ,927,506,129 2006 9 50,694,704 4,051,000,772 5,001,695,476 0.8700 59,360,390 5,061,055,866 3 69,542,935 5 ,430,598,801 2007 1 ,104,093,458 4,526,502,291 5,630,595,749 0.8000 63,168,480 5,693,764,229 4 19,303,486 6 ,113,067,715

2008 1 ,291,356,759 5,045,464,776 6,336,821,535 0.7700 61,729,010 6,398,550,545 4 74,798,401 6 ,873,348,946 2009 1 ,503,024,419 5,518,534,961 7,021,559,380 0.7700 61,513,370 7,083,072,750 5 47,163,868 7 ,630,236,618 2010 1 ,606,785,131 5,911,287,556 7,518,072,687 0.7700 62,858,590 7,580,931,277 5 96,219,654 8 ,177,150,931 2011 1 ,625,886,760 6,054,844,995 7,680,731,755 0.7671 59,364,960 7,740,096,715 6 44,654,739 8 ,384,751,454

NOTES:

* Tax exempt property is included for purposes of calculating total assessed value, which is used on Table 12-a.

(1) Residential real property includes single-family homes, townhouses, condominiums, and apartment dwellings. The assessed value shown

above has been reduced for the Homestead Credit assessment.

(2) Real property and personal property assessments are done every three years and every year, respectively, by the State

Department of Assessments and Taxation at 100% of estimated fair value.

(3) See Table 6-a for real property direct tax rates. Tax Rates are applied per $100 of assessed value.

(4) The personal property tax rate for Queen Anne's County is zero.

Source: State of Maryland, Department of Assessments and Taxation.

- 187 -

QUEEN ANNE'S COUNTY, MARYLAND

REAL PROPERTY TAX RATES - COUNTY DIRECT RATE

LAST TEN FISCAL YEARS

Table 6-a County Fiscal Direct Year Rate (1) 2002 $ 0 .9760 2003 0.9760 2004 0.9760 2005 0.9260 2006 0.8700 2007 0.8000 2008 0.7700 2009 0.7700 2010 0.7700 2011 0.7671

NOTES:

* No discounts are allowed.

* Taxes are levied as of July 1, are due by September 30, and become delinquent October 1.

* Owner occupied properties may elect to pay on an annual basis. If no election is made,

taxes are paid on a semi-annual basis with payment due by September 30 and December 31.

* Non-owner occupied properties must pay on an annual basis.

* Interest at one percent per month is assessed on delinquent tax bills.

* Revised tax bills based upon certifications from the State received after September 1

may be paid within thirty days without interest.

* Delinquent taxes on real property are collected by sale.

* Costs of tax sale, which vary, are added to the redemption.

* Tax sale date: Third Tuesday in May.

* The personal property tax rate for Queen Anne's County is zero.

(1) Tax Rates are applied per $100 of assessed value.

- 188 -

QUEEN ANNE'S COUNTY, MARYLAND

REAL PROPERTY TAX RATES - COUNTY SPECIAL TAXING DISTRICTS

LAST TEN FISCAL YEARS

Table 6-b Kent Narrows Commercial Management Fiscal and Waterfront Year Improvement District 2002 $ 0 .0600 2003 0.0600 2004 0.0600 2005 0.0600 2006 0.0600 2007 0.0600 2008 0.0600 2009 0.0600 2010 0.0600 2011 0.0600

NOTES:

* Tax rates are per $100 of assessed value.

* The personal property tax rate for Queen Anne's County is zero.

- 189 -

QUEEN ANNE'S COUNTY, MARYLAND

REAL PROPERTY TAX RATES - OVERLAPPING GOVERNMENTS - TOWNS

LAST TEN FISCAL YEARS

Table 6-c Fiscal Town of Town of Town of Town of Town of Year Centreville Barclay Church Hill Millington Queen Anne 2002 $ 0 .4800 $ 0 .1000 $ 0 .3400 $ 0 .2800 $ 0 .2100 2003 0.4800 0.1000 0 .3400 0.2800 0.1800 2004 0.4800 0.1000 0 .3400 0.2800 0.1800 2005 0.4800 0.1000 0 .3400 0.2800 0.1800 2006 0.4800 0.1000 0 .3400 0.2800 0.1800 2007 0.4700 0.1000 0 .3400 0.2800 0.1800 2008 0.4300 0.1000 0 .3400 0.2800 0.1800

2009 0.3950 0.1000 0 .3400 0.2800 0.1800 2010 0.3800 0.1000 0 .3400 0.2800 0.1800 2011 0.3800 0.1000 0 .3400 0.2800 0.1800

NOTES:

* Tax rates are per $100 of assessed value.

* The personal property tax rate for Queen Anne's County is zero.

* Taxes collected by the County for other fiscal units, including overlapping governments, are remitted

based on actual collections.

- 190 -

QUEEN ANNE'S COUNTY, MARYLAND

REAL PROPERTY TAX RATES - OVERLAPPING GOVERNMENTS - TOWNS

LAST TEN FISCAL YEARS

Table 6-c

(CONTINUED)

Town of Town of Town of Queenstown Sudlersville Templeville $ 0 .2000 $ 0 .1850 $ 0 .1610 0.2000 0.1760 0.1420 0.2000 0.1760 0.1420 0.2000 0.1670 0.1330 0.2000 0.1670 0.1220 0.2000 0.1670 0.2520 0.2000 0.1670 0.2520 0.2000 0.1670 0.3600 0.1810 0.1670 0.3600 0.1904 0.1670 0.3600

- 191 -

QUEEN ANNE'S COUNTY, MARYLAND

TEN HIGHEST COMMERCIAL PROPERTY TAXPAYERS

CURRENT FISCAL YEAR AND NINE YEARS AGO

Table 7 For the Fiscal Year Ended June 30, 2011 Ratio:

Taxpayer Base to Total Assessable Base Assessable Base Second Horizon Group Limited Partnership $ 51,409,800 0.66 % KRM Development Corporation 38,637,130 0.50 White's Heritage Partners 23,343,628 0.30 Great American Life Insurance Company 17,689,900 0.23 Beach Harbor Campers Cooperative Inc 13,653,800 0.18 Pasquale Didonato 12,546,432 0.16 Reliable Development Company 12,204,006 0.16 K. Hovnanian 11,908,826 0.15

Mears Point Association 11,310,900 0.15 Symphony Centre 10,951,000 0.14 Total $ 203,655,422 2.63 % Total Assessable Base $ 7 ,740,096,715 100.00 % For the Fiscal Year Ended June 30, 2002 Ratio:

Taxpayer Base to Total Assessable Base Assessable Base Second Horizon Group Limited Partnership $ 14,721,166 0.43 % KRM Development 13,614,218 0.40 Washington Brick & Terra Cotta Company 8,260,509 0.25 Mears Point Association 8,033,120 0.24 Bay Bridge Limited 6,805,982 0.20 TC Shopping Center 6,609,362 0.20 Pasquale Didonato 5,923,682 0.18 Gateway Partnership 5,733,900 0.17 C&E Enterprises 5,631,466 0.17

Hunters Oak LLC 5,515,513 0.16 Total $ 80,848,918 2.40 % Total Assessable Base $ 3,369,796,979 100.00 % Source: State of Maryland Department of Assessments and Taxation

- 192 -

QUEEN ANNE'S COUNTY, MARYLAND

REVENUE CAPACITY

PROPERTY TAX LEVIES AND COLLECTIONS

LAST TEN FISCAL YEARS

Table 8 Collected within the Taxes Levied Fiscal Year of the Levy Collections in Total Collections to Date Fiscal for the Percentage of Subsequent Percentage of Year Fiscal Year Amount Original Levy Years Amount Original Levy 2002 $ 31,834,978 $ 31,759,768 99.76% $ 75,210 $ 31,834,978 100.00% 2003 34,534,049 34,452,221 99.76% 81,828 34,534,049 100.00% 2004 38,135,222 38,052,633 99.78% 82,589 38,135,222 100.00%

2005 40,608,914 40,542,167 99.84% 66,527 40,608,694 100.00% 2006 43,208,732 43,107,941 99.77% 100,564 43,208,505 100.00% 2007 44,500,414 44,401,745 99.78% 98,450 44,500,195 100.00% 2008 48,575,431 48,505,180 99.86% 70,029 48,575,209 100.00% 2009 53,839,023 53,756,369 99.85% 81,588 53,837,957 100.00% 2010 57,788,231 57,720,564 99.88% 52,887 57,773,451 99.97% 2011 58,758,234 58,696,129 99.89% - 58,696,129 99.89%

NOTES:

* This table includes data for all property taxes billed applicable to all funds for Queen Anne's County, Maryland to include General,

Special Revenue, and Enterprise Funds. Property taxes billed for the State of Maryland and various municipalities are excluded.

- 193 -

QUEEN ANNE'S COUNTY, MARYLAND

RATIOS OF OUTSTANDING DEBT BY TYPE

LAST TEN FISCAL YEARS

Table 9 Governmental Activities General Total Fiscal Obligation Notes Capital Governmental Year Bonds Payable Leases Activities 2002 $ 55,490,000 $ 593,840 $ - $ 56,083,840 2003 52,800,000 457,912 - 53,257,912 2004 62,467,858 3,245,500 114,331 65,827,689 2005 60,689,541 684,000 - 61,373,541 2006 56,890,501 622,500 - 57,513,001 2007 75,938,286 561,000 248,460 76,747,746 2008 70,752,345 822,617 202,978 71,777,940

2009 65,420,921 913,183 155,482 66,489,586 2010 88,859,439 1,652,082 105,884 90,617,405 2011 103,569,858 1,070,632 54,089 104,694,579 Business-type Activities Ratios Debt to General Total Total Total Outstanding Fiscal Obligation Notes Capital Business-type Primary Personal Debt per Year Bonds Payable Leases Activities Government Income (1) Capita (1) 2002 $ 7,825,000 $ 6,912,388 $ - $ 14,737,388 $ 70,821,228 4.85% $ 1,707

2003 6,865,000 6,402,363 - 13,267,363 66,525,275 4.27% 1,584 2004 5,825,000 5,879,764 - 11,704,764 77,532,453 4.90% 1,789 2005 5,383,663 5,343,775 - 10,727,438 72,100,979 4.50% 1,624 2006 4,943,663 14,580,581 - 19,524,244 77,037,245 6.91% 1,695 2007 4,608,851 22,516,916 - 27,125,767 103,873,513 5.58% 2,246 2008 4,094,485 21,058,076 - 25,152,561 96,930,501 4.82% 2,024 2009 3,573,768 19,624,863 - 23,198,631 89,688,217 4.24% 1,905

2010 3,535,182 18,166,367 - 21,701,549 112,318,954 6.52% 2,309 2011 3,523,333 16,692,171 - 20,215,504 124,910,083 7.25% 2,608

NOTES:

* Amounts for 2002 represent debt relating to total governmental funds (from the General Long-Term

Obligations Account Group) and total enterprise funds, since the reporting of governmental activities and business-type activities in government-wide financial statements was implemented in FY03.

(1) See Table 14 for personal income and population data, which are used in calculating these ratios.

- 194 -

QUEEN ANNE'S COUNTY, MARYLAND

RATIOS OF GENERAL BONDED DEBT OUTSTANDING

LAST TEN FISCAL YEARS

Table 10 Percentage of Fiscal General Total Taxable Per Year Bonded Debt (1) Assessable Base (2) Capita (3) 2002 $ 63,315,000 1.88% $ 1,526 2003 59,665,000 1.63% 1,421 2004 68,292,858 1.69% 1,575 2005 66,073,204 1.44% 1,488 2006 61,834,164 1.22% 1,360 2007 80,547,137 1.41% 1,742 2008 74,846,830 1.17% 1,563 2009 68,994,689 0.97% 1,465 2010 92,394,621 1.22% 1,899 2011 107,093,191 1.38% 2,236

NOTES:

* General Bonded Debt includes all general obligation debt, regardless of

purpose or repayment source, and other bonded debt financed with general government resources. Other debt is excluded because it is not in the form of bonds.

(1) General Bonded Debt is comprised of both governmental and businesstype activities from Table 9.

(2) See Table 5 for taxable assessable base.

(3) See Table 14 for population data.

- 195 -

QUEEN ANNE'S COUNTY, MARYLAND

COMPUTATION OF NET DIRECT AND OVERLAPPING DEBT

AS OF JUNE 30, 2011

Table 11 Name of Jurisdiction Gross Debt Queen Anne's County:

County Government Total Net Direct Debt (1) $ 1 24,910,083 Towns: (2) Centreville 11,817,183 Millington 1,310,340 Queenstown 284,274 Sudlersville 2,138,000 Total Net Overlapping Debt 15,549,797 Total Net Direct and Overlapping Debt $ 1 40,459,880

NOTES:

(1) Net direct debt of the County includes general obligation bonds, notes payable, and capital leases. See Table 9.

Overlapping debt is the debt of other governmental entities located within the County that is payable in whole or in part by taxpayers of the County.

(2) Entities are located wholly within Queen Anne's County. Debt information reported by municipalities.

- 197 -

QUEEN ANNE'S COUNTY, MARYLAND

COMPUTATION OF LEGAL DEBT MARGIN

LAST TEN FISCAL YEARS

Table 12-a 2002 2003 2004 Computation of Legal Debt Margin - for Queen Anne's County Other than Debt related to the Sanitary District:

Authorized debt limit under Title 5 (Subtitle 4) (1) $ 8 ,000,000 $ 8 ,000,000 $ 8 ,000,000 Authorized bonded debt under specific public laws Enterprise Funds, excluding Sanitary District (4) 1 ,625,000 1 ,535,000 1 ,440,000 General Obligation Debt (4) 5 5,490,000 5 2,800,000 6 2,467,858 Subtotal 5 7,115,000 5 4,335,000 6 3,907,858 Total authorized debt under Title 5 and specific public laws 6 5,115,000 6 2,335,000 7 1,907,858

LESS Outstanding bonds, notes payable, and capital leases (5) 7 0,508,807 6 6,266,872 7 7,328,067 Less: Sanitary District debt (4) 1 2,731,829 1 1,412,635 1 0,005,867 Subtotal 5 7,776,978 5 4,854,237 6 7,322,200 Legal Debt Margin - Other than the Sanitary District $ 7 ,338,022 $ 7 ,480,763 $ 4 ,585,658 Debt related to the Sanitary District Proprietary Fund:

Total taxable assessed value (3) $ 3,369,796,979 $ 3,651,023,515 $ 4,039,049,012 Plus exempt property (3) 274,858,885 276,953,744 297,843,389 Total assessed value $ 3,644,655,864 $ 3,927,977,259 $ 4,336,892,401 Debt Limit - 6% of total assessed value (2) $ 218,679,352 $ 235,678,636 $ 260,213,544 LESS Sanitary District 1 2,731,829 1 1,412,635 1 0,005,867 Less: Restricted Cash and Investments in the

Debt Service Fund available for payment of principal 5 ,141,449 4 ,264,878 4 ,289,452 7 ,590,380 7 ,147,757 5 ,716,415 Legal Debt Margin - Sanitary District $ 211,088,972 $ 228,530,879 $ 254,497,129

NOTES:

(1) Title 5, Subtitle 4 (1), of the Code of Public Local Laws of Queen Anne's County authorizes the County to borrow up to $8,000,000 for

general operating and capital improvement expenditures. This authority is in addition to any bonded debt authorized under specific public local laws.

(2) Title 24, Subtitle 1, Section 24-146(A) of the Code of Public Local Laws of Queen Anne's County authorizes the County to borrow an amount not to

exceed 6% of the total value of property assessed. The proceeds of such borrowings must be used for sewer and water system construction payments.

(3) See Table 5.

(4) See Note 9, Section B.

(5) See Table 9.

- 198 -

QUEEN ANNE'S COUNTY, MARYLAND

COMPUTATION OF LEGAL DEBT MARGIN

LAST TEN FISCAL YEARS

Table 12-a

(CONTINUED)

2005 2006 2007 2008 2009 2010 2011 $ 8 ,000,000 $ 8 ,000,000 $ 8 ,000,000 $ 8 ,000,000 $ 8 ,000,000 $ 8 ,000,000 $ 8,000,000 1 ,413,663 1 ,413,663 1 ,538,851 1 ,509,485 1 ,493,768 1,905,182 2,378,333 6 0,689,541 5 6,890,501 7 5,938,286 7 0,752,345 6 5,420,921 8 8,859,439 1 03,569,858 6 2,103,204 5 8,304,164 7 7,477,137 7 2,261,830 6 6,914,689 9 0,764,621 1 05,948,191 7 0,103,204 6 6,304,164 8 5,477,137 8 0,261,830 7 4,914,689 9 8,764,621 1 13,948,191

7 2,100,979 7 7,037,245 103,625,053 9 6,727,523 8 9,688,217 1 12,318,954 1 24,910,083 9 ,266,078 1 8,069,698 2 5,552,847 2 3,615,821 2 1,684,421 1 9,782,739 1 7,830,357 6 2,834,901 5 8,967,547 7 8,072,206 7 3,111,702 6 8,003,796 9 2,536,215 1 07,079,726 $ 7 ,268,303 $ 7 ,336,617 $ 7 ,404,931 $ 7 ,150,128 $ 6 ,910,893 $ 6 ,228,406 $ 6,868,465 $ 4,596,665,870 $ 5,061,055,866 $ 5,693,764,229 $ 6,398,550,545 $ 7,083,072,750 $ 7,580,931,277 $ 7,740,096,715

330,840,259 369,542,935 419,303,486 474,798,401 547,163,868 5 96,219,654 6 44,654,739 $ 4,927,506,129 $ 5,430,598,801 $ 6,113,067,715 $ 6,873,348,946 $ 7,630,236,618 $ 8,177,150,931 $ 8,384,751,454 $ 295,650,368 $ 325,835,928 $ 366,784,063 $ 412,400,937 $ 457,814,197 $ 4 90,629,056 $ 5 03,085,087 9 ,266,078 1 8,069,698 2 5,552,847 2 3,615,821 2 1,684,421 1 9,782,739 1 7,830,357 4 ,105,842 3 ,940,626 4 ,746,865 4 ,551,821 4 ,180,188 3,925,026 3,658,194

5 ,160,236 1 4,129,072 2 0,805,982 1 9,064,000 1 7,504,233 1 5,857,713 1 4,172,163 $ 290,490,132 $ 311,706,856 $ 345,978,081 $ 393,336,937 $ 440,309,964 $ 4 74,771,343 $ 4 88,912,924

- 199 -

QUEEN ANNE'S COUNTY, MARYLAND

COMPUTATION OF LOCAL DEBT LIMIT

LAST THREE FISCAL YEARS

Table 12-b 2009 2010 2011 Computation of Local Debt Limit, as Authorized under Article 95, Section 22F of the Annotated Code of Maryland and per criteria established by Queen Anne's County Resolution No. 09-13, as adopted August, 2009.

CALCULATION PER FIRST FINANCIAL CRITERIA:

The sum of all outstanding and new general obligation and/or bonded debt is 2.5% or less of the total taxable assessed base.

Total Taxable Assessed Base (1) $ 7,083,072,750 $ 7,580,931,277 $ 7,740,096,715 2.5% 2.5% 2.5% 2.5% of Total Taxable Assessed Base $ 177,076,819 $ 189,523,282 $ 193,502,418 LESS Outstanding and New General Obligation Debt (2) (3) Enterprise Funds' Debt - Bonds and Notes $ 23,198,631 $ 21,701,549 $ 20,215,504 General Obligation Debt - Bonds and Notes 66,334,104 90,511,521 104,640,490 Total Outstanding and New General Obligation Debt $ 89,532,735 $ 112,213,070 $ 124,855,994

2.5% of Total Taxable Assessed Base in Excess of Total Outstanding and New General Obligation Debt $ 87,544,084 $ 77,310,212 $ 68,646,424

CALCULATION PER SECOND FINANCIAL CRITERIA:

The sum of all outstanding and new general obligation and/or bonded debt is $3,000 or less per capita.

Total County Population (4) 47,091 48,650 47,899 $3,000 Per Capita $ 3,000 $ 3,000 $ 3,000 $ 141,273,000 $ 145,950,000 $ 143,697,000 LESS Outstanding and New General Obligation Debt (1) $ 89,532,735 $ 112,213,070 $ 124,855,994 $3,000 Per Capita in Excess of Total Outstanding and New General Obligation Debt $ 51,740,265 $ 33,736,930 $ 18,841,006

NOTES:

(1) See Table 5 - Total Taxable Assessed Value.

(2) See Note 9 A - Changes in Noncurrent Liabilities.

(3) General Obligation Debt includes debt relating to the Sanitary District, because such debt is backed by the full faith

and credit of the County, but excludes all capital leases, which are collateralized by the equipment purchased with such leases.

(4) See Table 14 - Population.

In August, 2009, as described in Note 9 F, Queen Anne’s County adopted Resolution No. 09-13, thereby establishing a local debt policy in compliance with Article 95, Section 22F of the Annotated Code of Maryland. For comparative purposes, this policy has been calculated retroactively for FY09 data, as well as for FY10 data.

This policy requires that the County’s Director of Budget and Finance take the following steps:

(a) prepare a five-year capital project plan each year;

(b) propose an amount to be transferred from the General Fund operating balance to the General Capital Projects

Fund to serve as pay-as-you-go funding in the latter Fund, in order to lessen the need for future County debt;

(c) limit the County’s non-bonded indebtedness to $8.0 million for general operating expenses or capital

improvements;

(d) certify that the sum of outstanding general bonded debt and any new general obligation debt is 2.5% or less

of the total taxable assessed base and is $3,000 or less per capita; and

(e) review and revise this Debt Policy as necessary, but no later than September 1, 2012.

- 200 -

QUEEN ANNE'S COUNTY, MARYLAND

PRINCIPAL EMPLOYERS

CURRENT FISCAL YEAR AND NINE YEARS AGO

Table 13 For the Fiscal Year Ended June 30, 2011 Percentage of Total County Employer Employees Rank Employment Queen Anne's County Board of Education 941 1 8.92% Queen Anne's County Government 442 2 4.19% S.E.W. Friel 275 3 2.61% Paul Reed Smith Guitars 233 4 2.21% Chesapeake College 225 5 2.13% Safeway 180 6 1.71% River Plantation 175 7 1.66% Genesis Healthcare 150 8 1.42% Harris Seafood Company 150 9 1.42%

Acme Markets 149 10 1.41% Total 2,920 27.68% For the Fiscal Year Ended June 30, 2002 Percentage of Total County Employer Employees Rank Employment Queen Anne's County Board of Education 8 37 1 8.96% Queen Anne's County Government 4 49 2 4.81% S.E.W. Friel 2 75 3 2.95% Chesapeake College 2 00 4 2.14% Paul Reed Smith Guitars 1 77 5 1.90% Delmarva Sash & Door, Inc. 1 50 6 1.61% Sisk Mailing Service 1 45 7 1.55%

Conagra 1 31 8 1.40% Tidewater Publishing Corp. 1 30 9 1.39% United Shellfish Co, Inc. 65 10 0.70% Total 2,559 27.41% Source: Queen Anne's County Economic Development Office; Table 15.

- 201 -

QUEEN ANNE'S COUNTY, MARYLAND

DEMOGRAPHIC STATISTICS

LAST TEN FISCAL YEARS

Table 14 Average Total Registered Fiscal Personal Per Capita Unemployment Number of Year Population (1) Income (2) Income (3) Rate (3) Pupils (4) 2002 41,500 1,459,638,000 35,172 3.30% 7,266 2003 42,000 1,558,032,000 37,096 3.50% 7,457 2004 43,350 1,582,275,000 36,500 3.10% 7,530 2005 44,392 1,601,707,752 36,081 3.50% 7,649 2006 45,450 1,114,661,250 24,525 3.50% 7,162 2007 46,241 1,861,755,142 40,262 3.50% 7,774

2008 47,886 2,009,392,332 41,962 4.00% 7,790 2009 47,091 2,113,538,262 44,882 6.70% 7,774 2010 48,650 1,721,674,850 35,389 6.50% 7,723 2011 47,899 1,722,448,040 35,960 7.00% 7,722

NOTES:

(1) Source: Queen Anne's County Division of Land Use and Zoning

(2) Personal income derived by multiplying population by per capita income.

(3) Source: Maryland Department of Business and Economic Development

(4) Source: Queen Anne's County Board of Education.

- 202 -

QUEEN ANNE'S COUNTY, MARYLAND

OPERATING INFORMATION

COUNTY GOVERNMENT EMPLOYEES - FULL-TIME EQUIVALENTS

LAST TEN FISCAL YEARS

Table 15 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Number of Exempt Employees 3 1 3 3 3 3 3 5 3 5 3 6 3 1 29 29 26 Number of Full Time Employees 394 399 413 420 432 470 4 81 475 461 406 Number of Part Time Employees (FTE) 2 4 2 9 2 1 2 1 2 3 2 5 2 0 18 17 10 Total County Government Employees 449 461 467 476 490 531 5 32 522 507 442

NOTES:

Source: Queen Anne's County Finance Office.

- 204 -

QUEEN ANNE'S COUNTY, MARYLAND

COUNTY GOVERNMENT EMPLOYEES - FULL-TIME ONLY BY FUNCTION

LAST FIVE FISCAL YEARS

Table 16 2007 2008 2009 2010 2011 Governmental Activities:

General Government 90 90 89 87 77 Public Safety:

Police 49 53 52 50 49 Fire - Emergency Management Services 69 68 69 67 64 Corrections 37 38 42 42 41 Animal Services 11 11 8 8 10 Public Works 87 91 85 79 61 Health 1 1 1 1 1 Social Services 40 38 38 37 32 Parks (1) 39 40 38 38 20 Conservation of Natural Resources 3 3 3 3 3 Economic/Community Development 12 12 10 9 7 Total Governmental Activities 438 445 435 421 365 Business-Type Activities:

Sanitary District 47 46 45 45 44 Bay Bridge Airport 3 3 3 3 3 Recreation (1) - - - - 4 Public Landings 3 3 3 3 3 Property Management 5 4 7 7 7 Total Business-Type Activities 58 56 58 58 61 Component Unit:

Public Housing Authority 10 11 11 11 6 Total Full-Time County Employees 506 512 504 490 432

NOTES:

(1) Due to the County's reorganization, Parks and Recreation are reported separately starting in fiscal year 2011.

Only full-time County employees are represented in this Table; data relating to full-time equivalents for part-time employees is not available at this time.

County employees include the Public Housing Authority but exclude other component units. Therefore, no employees are listed for the Education or Library functions, which relate to the Board of Education and the Queen Anne's County Free Library component units, respectively.

As data becomes available in future years, this Table will be updated to include data for up to ten fiscal years.

Source: Queen Anne's County Finance Office.

- 205 -

QUEEN ANNE'S COUNTY, MARYLAND

OPERATING INFORMATION

OPERATING INDICATORS BY FUNCTION

LAST TEN FISCAL YEARS

Table 17 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Governmental Activities:

General Government:

Planning & Zoning:

Number of commercial permits issued 118 219 295 2 72 256 235 2 3 40 35 27 Number of residential permits issued:

Single Family Permits 406 326 271 2 47 224 160 1 38 90 153 106 Multi Family Permits 1 6 3 6 - 1 - - - 13 28 4 Renovations and Additions Permits 550 678 745 6 80 608 541 5 39 324 304 295 Total residential permits issued 972 1,040 1,016 9 28 832 701 6 77 427 485 405 Public Safety:

Fire and Rescue:

Number of volunteer members 577 650 649 6 30 630 600 6 63 663 689 689 Police:

Uniformed Police Officers 4 2 4 7 5 0 4 9 4 9 4 9 5 3 54 54 55 Number of law violations:

Physical arrests 987 1,021 1,112 1,536 1,115 1,413 1,373 1,429 917 1,216 Traffic violations 1,904 2,322 4,363 5,307 4,962 5,310 5,745 8,276 6,183 5,760 Detention Center:

Detention Center Officers 2 9 2 9 3 2 3 0 3 1 3 3 3 5 37 39 40 Average yearly prison population 8 0 9 2 9 2 9 6 99 113 1 12 97 102 103 Public Works:

Wastewater Treated - Daily (mgd) 1 .5 1 .6 1 .5 1 .5 1 .5 1 .5 1 .6 1.7 2.1 1.7 Education:

Number of Personnel Teachers 447 458 459 4 79 496 501 5 22 528 533 530 Administrators 4 1 3 9 3 9 3 9 3 9 4 0 4 0 38 37 37 Support 303 303 302 3 21 318 327 3 38 338 336 310 Other 4 6 4 6 4 3 5 3 5 9 5 5 7 7 76 76 64 Number of Students 7,266 7,457 7,530 7,649 7,162 7,774 7,790 7,774 7,723 7,722 Number of High School Graduates N/A N/A N/A N/A 514 563 5 60 590 562 566

NOTES:

N/A - Data not readily available, or not available in a manner consistent with this display.

Source: Various County departments.

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QUEEN ANNE'S COUNTY, MARYLAND

OPERATING INFORMATION

CAPITAL ASSET STATISTICS BY FUNCTION

LAST TEN FISCAL YEARS

Table 18 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Governmental Activities:

Public Safety:

Fire and Rescue:

Number of volunteer stations 9 9 9 1 0 10 10 1 0 10 10 10 Equipment:

Engines 1 7 1 3 1 6 1 7 17 16 1 6 16 17 17 Tankers 8 8 7 7 7 9 9 9 9 9 Aerial Units 4 3 4 4 4 4 4 4 5 5 Rescue Units 4 5 5 5 5 5 6 6 7 7 Brush Units 8 7 7 7 7 8 8 8 8 8 Air Units (MD State Police) 1 8 8 1 1 1 3 3 - - Boats 6 5 5 5 5 3 1 1 5 5 Ambulance/Medic Units 2 1 1 5 1 5 1 5 18 20 1 6 16 17 17 Cars/Other 1 9 1 5 2 0 2 0 20 16 1 7 17 22 22 Police:

Number of Stations 1 1 1 1 1 1 1 1 1 1 Number of Vehicles Patrol 3 8 4 8 5 8 4 3 3 4 5 4 5 7 64 60 53 Other 8 2 1 6 1 5 2 6 1 5 7 13 17 21 Detention Center Capacity 104 104 104 104 104 104 1 04 104 148 148 Public Works:

County Maintained Roads and Streets Paved (miles) 510 524 522 524 534 536 5 30 539 540 540 Unpaved (miles) 2 4 1 2 1 3 1 3 1 3 1 2 1 5 12 12 12 County Owned Water and Wastewater Facilities Water Miles of Mains 3 8 3 8 4 7 4 7 4 9 5 1 5 6 57 58 59 Water Treatment Plants 1 0 1 0 1 0 1 0 1 0 1 0 1 1 11 11 11 Booster Stations 3 2 2 2 2 2 2 2 2 2 Wastewater Miles of Mains 9 6 9 7 105 105 107 109 1 14 116 117 118

Wastewater Treatment Plants 1 1 1 1 1 1 1 1 1 1 Wastewater Collection, Lift, and Pumping Stations 2 8 2 8 2 9 2 9 2 9 2 9 3 1 31 31 31 Education:

Number of Schools High Schools 2 2 2 2 2 2 2 2 2 2 Middle Schools 3 3 3 3 3 3 3 4 4 4 Elementary Schools 7 7 7 8 8 8 8 8 8 8 Parks and Recreation:

Parks 2 4 2 4 2 4 2 4 2 8 2 9 3 2 33 33 33 Park Acreage 1,902 2,022 2,024 2,024 2,579 2,572 2,633 2,633 2,915 2,915 Public Landings 2 2 2 2 2 2 2 1 2 1 2 1 2 1 20 20 21 Library:

Number of Libraries 3 3 3 3 3 3 3 3 3 3

NOTES:

Source: Various County departments.

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