COMPREHENSIVE ANNUAL FINANCIAL REPORT · COMPREHENSIVE ANNUAL FINANCIAL REPORT Photographed by John Tidwell JULY 1, 2012 Of the NORTH SLOPE BOROUGH, ALASKA - JUNE 30, 2013. NORTH

COMPREHENSIVE ANNUAL FINANCIAL REPORT

Photographed by John Tidwell

Of the

NORTH SLOPE BOROUGH, ALASKA

JULY 1, 2012- JUNE 30, 2013

NORTH SLOPE BOROUGH, ALASKA Comprehensive Annual Financial Report

June 30, 2013

CHARLOTTE E. BROWERMayor

REED O’HAIRDirector of Administration & Finance

PEARL KIYAWN BROWER PEGGY COWANPresident of Ilisagvik College Superintendent of Schools

PREPARED BY:Department of Administration & Finance


Table of Contents

Page(s)

Introductory Section (Unaudited):Letter of Transmittal i – ivCertificate of Achievement for Excellence in Financial Reporting vOrganizational Chart viThe Principal Officials vii

Financial Section:Independent Auditors’ Report 1 – 2Management’s Discussion and Analysis (Unaudited) 3 – 15Basic Financial Statements:

Government-Wide Financial Statements:Statement of Net Position 16Statement of Activities 17

Fund Financial Statements:Balance Sheet – Governmental Funds 18Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position 19Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 20Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and

2122

Changes in Fund Balances to the Statement of Activities Statement of Net Position – Proprietary Funds – Enterprise Funds Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds –

Enterprise Funds 23Statement of Cash Flows – Proprietary Funds – Enterprise Funds 24Statement of Fiduciary Net Position – Fiduciary Fund – Pension Trust Fund 25Statement of Changes in Fiduciary Net Position – Fiduciary Fund – Pension Trust Fund 26

Notes to Financial Statements 27 - 53

Required Supplementary Information (Unaudited):Budgetary Comparison Schedule – General Fund 54

Supplementary Information:Nonmajor Governmental Funds:

Notes to Nonmajor Governmental Funds 55Combining Balance Sheet 56Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 57


Table of Contents

Page(s)

Special Revenue Funds:Notes to Special Revenue Funds 58Combining Balance Sheet 59Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 60

Capital Projects Funds:Notes to Capital Projects Funds 61Combining Balance Sheet 62 – 65Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 66 – 69

Nonmajor Enterprise Funds:707172

Notes to Nonmajor Enterprise Funds Combining Statement of Net Position Combining Statement of Revenues, Expenses, and Changes in Net Position Combining Statement of Cash Flows 73

Statistical Section (Unaudited):7475767778798081828384858687888990919293

Statistical Section Net Position by Component – Last Eight Fiscal Years Changes in Net Position – Last Eight Fiscal Years Fund Balances, Governmental Funds – Last Eight Fiscal Years Changes in Fund Balances, Governmental Funds – Last Ten Fiscal Years Assessed Value and Actual Value of Taxable Property – Last Ten Fiscal Years Property Tax Rates – Last Ten Fiscal Years Principal Taxpayers – Current Year and Nine Years Ago Property Tax Levies and Collections – Last Ten Fiscal Years Water Sold by Type of Customer – Last Ten Fiscal Years Water and Electric Rates – Last Ten Fiscal Years Ratios of Outstanding Debt by Type – Last Ten Fiscal Years Ratios of Net General Bonded Debt Outstanding – Last Ten Fiscal Years Governmental Activities Debt – June 30, 2013Legal Debt Margin Information – Last Ten Fiscal Years Pledged Revenue Coverage – Last Ten Fiscal Years Demographic and Economic Statistics – Last Ten Fiscal Years Demographic and Economic Statistics – 2012 Borough Employment by IndustryFull-Time Equivalent Borough Employees by Function/Program – Last Ten Fiscal Years Operating Indicators by Function/Program – Last Ten Fiscal Years Capital Asset Statistics by Function/Program – Last Ten Fiscal Years 94

v

vi


The Principal Officials

Assembly: President Mike Aamodt Vice President Forrest “Deano” Olemaun

John Hopson, Jr. Vernon J. Edwardsen Dorren Lampe Dwayne Hopson, Sr. Herbert Kinneeveauk

General Government: Mayor Charlotte E. Brower Chief Administrative Officer Jacob Adams, Sr. Borough Attorney Ehel Patkotak Director of Administration & Finance Reed O’Hair Borough Clerk Jeannie Brower

Superintendent of Schools Peggy Cowan

School Board: President Eva Kinneeveauk Clerk Amos J. Nashoopuk

Anold Bower, Jr. Debby Edwardson Mary Sage Roy Nageak, Sr. Della Tagarook

President of Ilisagvik College Pearl Kiyawn Brower

Ilisagvik College Board Chairperson Ida Angasan Vice Chairperson Elsie Itta Treasurer Amos Nashookpuk Secretary Lillian Lane

Ethel Akpik Roy Nageak Jack M. Smith, Jr. James Nageak JoAnne Neakok Kimberlee Brent Thomas Napageak

vii

FINANCIAL SECTION

Independent Auditors’ Report

The Honorable Mayor and Members of the Assembly

North Slope Borough, Alaska:

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 the North Slope Borough, Alaska (the Borough), as of and for the year

ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the

Borough’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with U.S. generally accepted accounting principles; this includes the design, implementation,

and maintenance of internal control relevant to the preparation and fair presentation of financial

statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not

audit the financial statements of the aggregate 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 aggregate discretely presented component

units, is based on the report of the other auditors. We conducted our audit in accordance with auditing

standards generally accepted in the United States of America. Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the financial statements are free from

material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

the financial statements. The procedures selected depend on the auditors’ judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation

and fair presentation of the financial statements in order to design audit procedures that are appropriate in

the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control. Accordingly, we express no such opinion. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of significant accounting estimates

made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinions.

KPMG LLP Suite 600 701 West Eighth Avenue Anchorage, AK 99501

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (“KPMG International”), a Swiss entity.

2

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 North Slope Borough, Alaska, as of June 30,

2013, and the respective changes in financial position, and where applicable, cash flows thereof for the

year then ended in accordance with U.S. generally accepted accounting principles.

Other Matters

Required Supplementary Information

U.S. generally accepted accounting principles require that the management’s discussion and analysis and

budgetary comparison information on pages 3-15 and 54 be presented to supplement the basic financial

statements. Such information, although not a part of the basic financial statements, is required by the

Governmental Accounting Standards Board who considers it to be an essential part of financial reporting

for placing the basic financial statements in an appropriate operational, economic, or historical context.

We have applied certain limited procedures to the required supplementary information in accordance with

auditing standards generally accepted in the United States of America, which consisted of inquiries of

management about the methods of preparing the information and comparing the information for

consistency with management’s responses to our inquiries, the basic financial statements, and other

knowledge we obtained during our audit of the basic financial statements. We do not express an opinion

or provide any assurance on the information because the limited procedures do not provide us with

sufficient evidence to express an opinion or provide any assurance.

Supplementary and Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively

comprise the Borough’s basic financial statements. The accompanying supplementary information, such

as the combining and individual nonmajor fund financial statements, and the introductory and statistical

sections are presented for purposes of additional analysis and are not a required part of the basic financial

statements.

The combining and individual nonmajor fund financial statements are the responsibility of management

and were derived from and relate directly to the underlying accounting and other records used to prepare

the basic financial statements. Such information has been subjected to the auditing procedures applied in

the audit of the basic financial statements and certain additional procedures, including comparing and

reconciling such information directly to the underlying accounting and other records used to prepare the

basic financial statements or to the basic financial statements themselves, and other additional procedures

in accordance with auditing standards generally accepted in the United States of America. In our opinion,

the combining and individual nonmajor fund financial statements are fairly stated in all material respects

in relation to the basic financial statements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in the

audit of the basic financial statements, and accordingly, we do not express an opinion or provide any

assurance on them.

December 19, 2013


Management’s Discussion and Analysis

June 30, 2013

(Unaudited)

As management of the North Slope Borough (Borough), we offer readers of the Borough’s financial statementsthis narrative overview and analysis of the financial activities of the Borough for the fiscal year ended June 30,2013. We encourage readers to consider the information presented here in conjunction with additionalinformation furnished in the letter of transmittal, which begins on page i of this report, and the financialstatements that begin on page 16.

Financial Highlights

The Borough’s total net position increased by $121,432,925 to $2,206,623,112 for FY 2013.

At the end of FY 2013, the Borough’s governmental funds reported combined ending fund balances of$870,247,970 an increase of $64,130,540 in comparison with the prior year. The increase is due to atiming difference: proceeds from the sale of General Obligation bonds. Additionally, there was a gainfrom investment earnings of the Permanent Fund of approximately $55 million.

At the end of FY 2013, unassigned fund balance for the General Fund was $111,582,443 or 28.8% of totalGeneral Fund expenditures.

The Borough’s long-term obligations decreased by approximately $38.8 million during FY 2013. This isprimarily due to a net decrease in the accreted principal on capital appreciation bonds outstanding of $15.3million, and a net decrease of $1 million in health claims incurred as well as a decrease of approximately$22.9 million in total bonds payable due to payments made on bonds.

Overview of the Financial Statements

Government-Wide Financial Statements

The government-wide financial statements are designed to provide readers with a broad overview of theBorough’s finances, in a manner similar to a private-sector business.

The statement of net position presents information about all of the Borough’s assets and liabilities, with thedifference between the two reported as net position. Over time, increases or decreases in net position is oneindicator of whether the financial position of the Borough is improving or deteriorating.

The statement of activities presents information showing how the government’s net position changed during themost recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to thechange occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in thisstatement for some items that will only result in cash flows in future fiscal periods.

Both of the government-wide financial statements distinguish functions of the Borough that are principallysupported by taxes and intergovernmental revenues (governmental activities) from other functions that areintended to recover all or a significant portion of their costs through user fees and charges (business-typeactivities). The governmental activities of the Borough include general government, public safety, municipalservices, housing, wildlife management, health and social services, and primary and secondary education. Thebusiness-type activities of the North Slope Borough include a solid waste disposal and treatment facility, arevolving loan program, a real property management program, and an electric utility.

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June 30, 2013

(Unaudited)

The government-wide financial statements include not only the Borough itself (known as the primarygovernment), but also a legally separate school district and a legally separate college for which the Borough isfinancially accountable. Financial information for these component units is reported separately from thefinancial information presented for the primary government itself.

The government-wide financial statements can be found on pages 16 – 17 of this report.

Fund Financial Statements

A fund is a grouping of related accounts that is used to maintain control over resources that have beensegregated for specific activities or objectives. The Borough, like other state and local governments, uses fundaccounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds ofthe Borough can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental funds – Governmental funds are used to account for essentially the same functions reported asgovernmental activities in the government-wide financial statements. However, unlike the government-widestatements, governmental fund financial statements focus on near-term inflows and outflows of spendableresources as well as on balances of spendable resources available at the end of the fiscal year. Such informationmay be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental fund financial statements is narrower than that of the government-widefinancial statements, it is useful to compare the information presented for governmental funds with similarinformation 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 thegovernmental fund balance sheet and governmental fund statement of revenues, expenditures, and changes infund balances provide a reconciliation to facilitate this comparison between governmental funds andgovernmental activities.

The Borough maintains 24 individual governmental funds. Information is presented separately in thegovernmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changesin fund balances for the General Fund, Power and Light Fund, Real Property Management Fund, and thePermanent Fund, all of which are considered to be major funds. Data from the other nonmajor funds arecombined into a single, aggregated presentation.

The Borough adopts an annual appropriated budget for its General Fund. A budgetary comparison statement hasbeen provided for the General Fund to demonstrate compliance with this budget.

The basic governmental financial statements can be found on pages 18 – 21 of this report.

Proprietary funds – The Borough maintains four different proprietary funds. Enterprise funds are used toreport the same functions presented as business-type activities in the government-wide financial statements. TheBorough uses enterprise funds to account for a Prudhoe Bay solid waste disposal and treatment facility (ServiceArea 10), a revolving loan fund (Home Assistance Loan), an electric utility (Power and Light), and the RealProperty Management Fund.

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(Unaudited)

Proprietary fund financial statements provide the same type of information as government-wide financialstatements, only in more detail. The proprietary fund financial statements provide separate information for eachmajor and combined nonmajor proprietary fund noted above.

The basic proprietary fund financial statements can be found on pages 22 – 24 of this report.

Fiduciary funds – Fiduciary funds are used to account for resources held for the benefit of parties outside thegovernment. Fiduciary funds are not reflected in the government-wide financial statements because the resourcesof those funds are not available to support the Borough’s own programs. The accounting used for fiduciaryfunds is much like that used for proprietary funds.

The Borough has only one fiduciary fund, the Pension Trust fund, whose basic fiduciary fund financial statements can be found on pages 25 – 26 of this report.

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 27 – 53 of this report.

Other information – In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. The Borough’s budgetary comparison schedule for the General Fund can be found on page 54.

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(Unaudited)

Government-Wide Financial Analysis

Statement of Net Position

As noted earlier, changes in net position over time may serve as a useful indicator of a government’s financialposition. In the case of the Borough, net position increased, growing by $121.4 million in FY 2013 to a total of$2.2 billion.

The reason for this upward growth is primarily due to investment earnings in the Permanent Fund ofapproximately $55 million in the current year.

The Permanent Fund was established in 1984 as a trust fund governed by the Assembly and administered by theMayor, to provide a savings account for the future when property taxes on oil and gas properties decline. Up to8% of the three-year rolling average total value of the fund is available to be transferred to the General Fund onan annual basis. The principal amount of contributions and growth of the fund in excess of annual transfer to theGeneral Fund remain in the fund. The overall fund performance was 12% for FY 2013, a significant gain ofapproximately $55 million. The Assembly set the FY 2013 transfer at 4% or $17.3 million. The combination ofmarket gains less transfers resulted in a $47.6 million increase in value of the Permanent Fund. The PermanentFund had an asset value of $507.7 million at fiscal year-end.

To understand the significance of the capital program, it is critical to understand the unique financial and taxstructure of the Borough. The legal right of the Borough to levy taxes for operations is limited by Alaska Statuteto a maximum of 225% of the average statewide per capita assessed value multiplied by the statutory maximumrate of 30 mills. For FY 2013, the operating tax cap was calculated as follows.

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(Unaudited)

Calculation of Operating Tax Cap:

Calculation of O&M Budget Tax Cap FY 2013Per capita average full property tax value $ 139,348Average value multiplier per Alaska statutes 225 %

Average full value 313,533NSB population 18,210Equivalent tax base 5,709,435,930Maximum O&M Mills per statute 30 %

Operating budget levy allowed $ 171,283,078

When the limit is applied to the actual full and true value of property within the Borough of $17.8 billion, theresult is an effective tax rate of 9.64 mills allowable for operations.

Statutory provisions, however, exempt tax revenues collected for the repayment of debt from the cap limitations.In order to take advantage of these tax revenues, the Borough systematically sells and repays General Obligationbonds on a 10-year repayment schedule. This allowed the Borough to levy an additional 8.86 mills for debtreimbursement in FY 2013. Because revenues collected for debt reimbursement cannot be used for any otherpurpose, and the proceeds of the General Obligation bonds must be used for capital improvements, the Boroughhas established a program of capital improvements that has offset depreciation and resulted in continual growthin net assets, even in years where the operating budget has been held stable or reduced.

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(Unaudited)

The largest portion of the Borough’s net position (72%) reflects its investment in capital assets (e.g., land,buildings, equipment, and infrastructure). The Borough uses these capital assets to provide services to citizens;consequently, these capital assets are not available for future spending. Although the Borough’s investment incapital assets is reported net of debt, it should be noted that the resources needed to repay this debt must beprovided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Anadditional portion of the Borough’s net position is restricted for Permanent Fund investments (22%). Thefollowing reflects the condensed statement of net position.

Governmental activities Business-type activities Total 2013 2012 2013 2012 2013 2012

Current and other assets $ 1,274,571,413 1,172,023,311 28,576,947 18,402,016 1,303,148,360 1,190,425,327Capital assets 1,430,767,410 1,411,163,558 309,389,581 308,034,242 1,740,156,991 1,719,197,800

Total assets $ 2,705,338,823 2,583,186,869 337,966,528 326,436,258 3,043,305,351 2,909,623,127

Long-term liabilities $ 410,400,179 450,011,754 5,356,248 4,566,839 415,756,427 454,578,593Other liabilities 399,730,652 357,543,514 21,195,160 12,346,546 420,925,812 369,890,060

Total liabilities $ 810,130,831 807,555,268 26,551,408 16,913,385 836,682,239 824,468,653

Net assets:Net Investment in capital assets $ 1,277,311,066 1,232,329,156 309,389,581 308,034,242 1,586,700,647 1,540,363,398Restricted 489,268,426 441,675,669 - - 489,268,426 441,675,669Unrestricted 128,628,500 101,662,489 2,025,539 1,488,631 130,654,039 103,151,120

Total net position $ 1,895,207,992 1,775,667,314 311,415,120 309,522,873 2,206,623,112 2,085,190,187

For more detailed information, see page 16 for the statement of net position.

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(Unaudited)

Statement of Activities

The following condensed table of changes in net position displays the revenues and expenses for the currentyear.

Governmental activities Business-type activities Total2013 2012 2013 2012 2013 2012

Revenues:Program revenues:

Charges for services $ 7,674,184 6,198,074 34,044,791 36,417,043 41,718,975 42,615,117Operating grants andcontributions 41,809,725 20,417,040 603,499 421,362 42,413,224 20,838,402Capital grants 23,713,020 5,805,944 - - 23,713,020 5,805,944

General revenues:Property taxes 328,846,618 317,906,077 - - 328,846,618 317,906,077Property tax judgment 51,184,896 - - - 51,184,896Investment earnings 55,825,691 4,934,970 784 642 55,826,475 4,935,612Economic impact assistance 5,000,000 5,000,000 - - 5,000,000 5,000,000State gas production tax credit - 4,884,379 - - - 4,884,379Grants and entitlements not

restricted to specific programs 1,135,374 1,162,044 - - 1,135,374 1,162,044Other 4,903,795 6,982,889 - - 4,903,795 6,982,889

Total revenues 468,908,407 424,476,313 34,649,074 36,839,047 503,557,481 461,315,360Expenses:

General government 67,472,759 73,647,851 - - 67,472,759 73,647,851Public works 127,446,812 106,341,341 - - 127,446,812 106,341,341Public safety 31,177,215 29,781,325 - - 31,177,215 29,781,325Health and social services 27,165,148 26,747,391 - - 27,165,148 26,747,391Wildlife management 7,999,441 6,172,284 - - 7,999,441 6,172,284Primary and secondary education 42,947,630 42,250,162 - - 42,947,630 42,250,162Higher education 10,844,513 8,929,228 - - 10,844,513 8,929,228Interest on long-term debt 17,854,348 21,138,351 - - 17,854,348 21,138,351Power and Light - - 27,220,964 25,914,894 27,220,964 25,914,894Service Area 10 - - 21,638,889 25,266,587 21,638,889 25,266,587Home Assistance Loan - - (2,146) (3,869) (2,146) (3,869)Real Property Management - - 358,983 370,344 358,983 370,344

Total expenses 332,907,866 315,007,933 49,216,690 51,547,956 382,124,556 366,555,889

Changes in net position before transfers 136,000,541 109,468,380 (14,567,616) (14,708,909) 121,432,925 94,759,471

Capital contributions - - - 245,951,069 - 245,951,069Transfers (16,459,863) (13,387,040) 16,459,863 13,387,040 - -

Change in net position 119,540,678 96,081,340 1,892,247 244,629,200 121,432,925 340,710,540

Net position, beginning of year 1,775,667,314 1,679,585,974 309,522,873 64,893,673 2,085,190,187 1,744,479,647

Net position, end of year $ 1,895,207,992 1,775,667,314 311,415,120 309,522,873 2,206,623,112 2,085,190,187

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(Unaudited)

Key Elements

The overall net costs for governmental activities decreased by $22.9 million in FY 2013 due primarily toincreased program revenues. In addition, property tax revenues increased by $10.9 million. Furthermore, asignificant gain into the Permanent fund of approximately $55M due to an improved equity market, alsocontributed to the increase in net position. The net increase in general revenues, while spending also increased,is largely what allowed for the increase in net position during the year. The cumulative impact of these changeswas an increase in the Borough’s governmental activities net position of $119.5 million in FY 2013.

Business-type revenues decreased by $2.4 million in FY 2013. Although the Power & Light and Real PropertyManagement revenues increased, this however was not sufficient to offset the effects of higher fuel costs,primarily in the Power and Light fund and increased operating costs at Service Area 10. The overall result was aloss of $14.6 million before transfers, which is comparable to prior year.

For more detailed information, see page 17 for the statement of activities.

Financial Analysis of the Government’s Funds

As noted earlier, the Borough uses fund accounting to ensure and demonstrate compliance with finance-relatedlegal requirements.

Governmental funds – The focus of the Borough’s governmental fund financial statements is to provideinformation on near-term inflows, outflows, and balances of spendable resources. Such information is useful inassessing the Borough’s financing requirements. In particular, unreserved fund balance may serve as a usefulmeasure of a government’s net resources available for spending at the end of the fiscal year.

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(Unaudited)

As of the end of the fiscal year, the Borough’s governmental funds reported a combined ending fund balance of$870,247,970, an increase of $64,130,540, in comparison to the beginning of the year, reflective of the$54,926,692, million gain on Permanent Fund investments as well a slight increase spending of capital projectfunds. Included in fund balances is $16,707,737, which is nonspendable fund balance as it is composed ofinventory, prepaid amounts, long-term notes receivable, and/or endowment funds. Governmental fund balanceincludes $489,191,686 restricted for the Permanent Fund. From this balance, $150,129,161 is expendable and$339,062,525 is nonexpendable. Addtionally, the Governmental fund balance includes $215,017,889, restrictedfor capital projects. Furthermore, $19,322,010, of the governmental funds fund balance is committed to use forlitigation, self-insurance, and other purposes. An additional $18,426,205, of government fund balance isassigned, primarily to liquidate encumbrances, and the remaining $111,582,443, of the total governmental fundbalance amount constitutes unassigned fund balance.

The General Fund is the main operating fund of the Borough. At the end of the fiscal year, unassigned fundbalance of the General Fund was $111,582,443, while total fund balance was $155,900,590, a decrease inunassigned fund balance of $22,356,697 from the prior fiscal year. This decrease in unassigned fund balance isprimarily due to a transfer of approximately $9.2 million into the Permanent fund. Additionally, a $10 milliondollar loan was made to the Service Area 10 Fund for the replacement of the water and sewer utility plant. As ameasure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and totalfund balance to total expenditures. Unassigned fund balance represents 28.8% of total General Fundexpenditures, while total fund balance represents 40.3% of that same amount.

The Permanent Fund had a total fund balance of $489,191,686, all of which is nonexpendable or restricted. Netposition in the Permanent Fund increased by $47,583,871 due to investment gains for the fiscal year as well asthe 4% withdrawal for operations.

Proprietary funds – The Borough’s proprietary fund financial statements provide the same type of informationfound in the government-wide financial statements, but in more detail.

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Total fund equity for the Power and Light fund decreased by $1,225,081 to $39,778,275. The electric utilitydecrease was due primarily to increased operating costs and no corresponding increase in revenues.

Total fund equity of Service Area 10, the solid waste disposal and treatment facility on Alaska’s North Slope,increased by $2,472,130 to a total of $9,901,939. The increase in fund equity is due largely to the increase in therate structure that went into effect in March 2011.

Total fund equity for the Real Property Management Fund increased by $642,396 to $260,625,234. This increaseis due to increased oil and gas exploration activity.

Other factors concerning the finances of these three funds have already been addressed in the discussion of theBorough’s business-type activities.

General Fund Budgetary Highlights

The budget process was predicted on holding the line on spending in order to preserve the long-term financialstability of the Borough. Over the course of the year, it became clear prior to finalizing the budget, thatadditional revenues would be available for government operations. The final expenditure budget was an increasefrom the original budget of $45.2 million, or about 6%. The increases in the final expenditure budget werespread across all departments with the largest increases being:

$35.4 million increase in General Government expenditures due to additional grant-related expenditures that were not adopted in the original budget because their amounts were as yet unknown.

$6.1 million increase in Public Works expenditures is due to increased energy costs and makingemergency repairs in response to winter storm damage.

$11.8 million increase in Wildlife Management expenditures was due to additional grant-relatedexpenditures that were not adopted in the original budget because their amounts were as yet unknown.

$3.2 million increase in Public Safety expenditures was due largely to additional grant-relatedexpenditures that were not adopted in the original budget because their amounts were as yet unknown.

$3.6 million increase in Health and Social services expenditures was due to additional grant-relatedexpenditures that were not adopted in the original budget because their amounts were as yet unknown.

Differences between the final budget and actual can be briefly summarized as follows:

Intergovernmental revenues were $15.7 million less than budgeted due to timing of related expenditures.

Investment earnings were $9.6 million less than expected due to the continued low interest rate policypromoted by the Federal Reserve.

State gas production tax credit revenue was $12.7 million higher than expected due to an NSB policydecision to defer budgeting this revenue until the tax credits were fully realizable.

Expenditures were $22.6 million under budget largely due to the timing differences in grant-relatedexpenditures. It is expected that these grant-related expenditures will occur in the following fiscal year.

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(Unaudited)

Other revenues were $21.7 million under budget due to timing of other revenue receipts.

Other financing sources had a significant variance due to the final budget not reflecting the transfer of fundsfrom the General Fund to the Capital Project Funds, Permanent Fund, and Real Property Management Fundduring FY 2013.

None of these variances will have a significant impact on the Borough’s futures services or liquidity.

Capital Asset and Debt Administration

Capital Assets – The Borough’s investment in capital assets for its governmental and business-type activities asof June 30, 2013 amounts to $1,740,156,991 (net of accumulated depreciation). This investment in capital assetsincludes land, gas fields, buildings and improvements, equipment, construction work-in-progress, sewer andwater treatment facilities, and roads. The total net increase in the Borough’s investments in capital assets for thefiscal year was $20,959,191 and was primarily due to additions to the infrastructure, and constructionwork-in-progress as noted below.

Major capital asset events during the fiscal year included the following:

Renovation to the Kali school in Point Lay totaling approximately $1.2 million. Additionally, renovationand improvements to the Nunamiut school in Anaktuvuk Pass totaling approximately $8.5 million.

Modernization and expansion on area wide Barrow water and sewer facilities totaling approximately $13.6million.

Approximately $12 million was invested in the new King Air Jet replacement.

The Atqasuk bridge was completed and put in service as of June 30, 2013 with a cost of approximately$2.7 million in FY2013.

The following table displays the capital assets (net of depreciation):


Land $ 31,646,147 31,646,147 258,231,048 258,231,048 289,877,195 289,877,195Construction work-in-progress 61,459,110 47,373,322 1,842,650 417,038 63,301,760 47,790,360Gas fields 158,042,676 158,815,239 - - 158,042,676 158,815,239Buildings and improvements 559,629,865 569,205,741 40,884,196 40,177,364 600,514,061 609,383,105Improvements other than buildings 36,041,227 37,313,149 - - 36,041,227 37,313,149Equipment 41,737,600 33,530,046 8,431,687 9,208,792 50,169,287 42,738,838Infrastructure 542,210,785 533,279,914 - - 542,210,785 533,279,914

$ 1,430,767,410 1,411,163,558 309,389,581 308,034,242 1,740,156,991 1,719,197,800

Additional information on the Borough’s capital assets can be found in note 5 to the financial statements on pages 40 – 42 of this report.

13 (Continued)



June 30, 2013

(Unaudited)

Long-Term Obligations – At the end of the fiscal year, the Borough had total bonded debt outstanding of$369,697,439. All of this amount is debt backed by the full faith and credit of the Borough and includes$15,711,518 of accreted principal on capital appreciation bonds. The remainder of the Borough’s debt representscapital leases, landfill postclosure care costs, compensated absences, and health claims incurred but not reported.The following table displays the long-term obligations:


General obligation bonds $ 353,985,921 377,824,819 - - 353,985,921 377,824,819Plus (less) deferred amounts:

For issuance premiums 15,178,150 14,330,002 - - 15,178,150 14,330,002On refunding - (118,434) - - - (118,434)

Total bonds payable 369,164,071 392,036,387 - - 369,164,071 392,036,387

Accreted principal on capitalappreciation bonds 15,711,518 31,018,672 - - 15,711,518 31,018,672

Capital lease obligations 1,517,202 2,833,014 - - 1,517,202 2,833,014Landfill closure and postclosure

care costs 18,082,637 17,517,320 5,165,759 4,371,236 23,248,396 21,888,556Compensated absences 4,574,751 4,221,361 190,489 195,603 4,765,240 4,416,964Health claims 1,350,000 2,385,000 - - 1,350,000 2,385,000

$ 410,400,179 450,011,754 5,356,248 4,566,839 415,756,427 454,578,593

A $22.9 million decrease in total bonds payable as well as a $15.3 million decrease in accreted principal oncapital appreciation bonds and a $1 million decrease in health claims that led to an overall decrease of$38.8 million in government-wide long-term obligations.

Major long-term debt activity during the year included the following: On October 16, 2012, the Borough issued general obligation bond Series 2012A in the amount of

$92,155,000 to finance various capital projects. During FY 2013, the Borough received upgrades in its ratings for its general obligation bonds as follows:

Standard & Poor Corporation AA- Fitch Investors Service AA Moody’s Investor Service Aa3

There is no general obligation debt limit imposed on the Borough by the State Constitution or statutes or theBorough’s charter or code.

Additional information on the Borough’s long-term debt can be found in note 7 on pages 44 – 49 of this report.

14 (Continued)



June 30, 2012

(Unaudited)

Economic Factors and Next Year’s Budgets and Rates

The principal source of property tax revenues historically has been, and is expected to continue to be,taxes upon oil- and gas-related property. Currently, the oil- and gas-related taxes account for 98% of theproperty tax revenue. Because of the decline in production of the North Slope oil fields, the property taxrevenues are projected to continue their moderate decline in future years. However, in the short term, it isanticipated that the increased level of development and exploration activity currently occurring willresult in a temporary stabilization or moderate increases in assessed values. Because of the tax capformula discussed earlier, this increased activity will affect both the operating budget, which is restrictedby the statutory tax cap, and the overall budget including debt reimbursement.

Despite retaining the tax levy at 18.5 mills, the FY 2014 General Fund budget revenues from taxesincreased by $9.6 million to a total of $332.3 million. This increase in property tax revenues will allowthe NSB to maintain the transfer rate from the Permanent Fund at 4%.

The net result is that additional general operating funds are available to address fixed cost increasesincluding, salary increases, fringe rate increases, insurance costs, and fuel price increases withoutimpacting government services. In addition, a portion of the revenues will be used for funding criticalnew programs, increasing support for education, paying down debt, and increasing savings.

Requests for Information

This financial report is designed to provide a general overview of the North Slope Borough’s finances forall those with an interest in government’s finances. Questions concerning any of the informationprovided in this report or requests for additional information should be addressed to the North SlopeBorough Department of Administration and Finance, P.O. Box 69, Barrow, Alaska 99723.

15

BASIC FINANCIAL STATEMENTS

NORTH SLOPE BOROUGH, ALASKAStatement of Net Position

June 30, 2013

Primary government Component UnitsGovernmental

activitiesBusiness-type

activities Total School District Ilisagvik CollegeAssets

Imprest cash $ 14,500 - 14,500 - -Cash and investments with central treasury 736,112,846 25,704,129 761,816,975 6,507,801 3,215,255Other cash and investments 506,290,063 - 506,290,063 - 3,392,923Accounts receivable, net:

Property taxes 3,205,031 - 3,205,031 - -Intergovernmental 18,432,804 - 18,432,804 1,930,564 1,361,990Trade - 2,872,818 2,872,818 - 214,296Other 1,297,138 - 1,297,138 831,981 -

Accrued interest 2,424,963 - 2,424,963 - -Prepaids and deposits 832,633 - 832,633 61,888 16,200Inventory 5,895,238 - 5,895,238 180,500 309,509Loan receivable, net 66,197 - 66,197 - -Capital assets:

Not being depreciated 93,105,257 260,073,698 353,178,955 - -Being depreciated, net 1,337,662,153 49,315,883 1,386,978,036 1,908,924 1,197,399

Total assets $ 2,705,338,823 337,966,528 3,043,305,351 11,421,658 9,707,572

Liabilities and Net PositionLiabilities:

Accounts payable $ 19,842,066 3,879,210 23,721,276 776,504 388,983Payable for unsettled investment trades 25,171,292 - 25,171,292 - -Accrued payroll and related benefits 4,459,728 238,927 4,698,655 1,809,009 777,885Matured bonds and interest payable 777 - 777 - -Unearned revenue:

Property tax 354,514,153 - 354,514,153 - -Intergovernmental 9,766,499 - 9,766,499 434,433 419,140Other unearned revenue 2,331,964 - 2,331,964 - -

Deposits payable and other liabilities 33,204 687,992 721,196 - -Internal balances (16,389,031) 16,389,031 - 103,780 -Non-current liabilities:

Due within one year 116,700,181 131,876 116,832,057 1,827,529 -Due in more than one year 293,699,998 5,224,372 298,924,370 - -

Total liabilities 810,130,831 26,551,408 836,682,239 4,951,255 1,586,008Net position:

Net investment in capital assets 1,277,311,066 309,389,581 1,586,700,647 1,908,924 1,197,399Restricted for:

Permanent fund, expendable 150,129,161 - 150,129,161 - -Permanent fund, nonexpendable 339,062,525 - 339,062,525 - -Museum purchases, expendable 76,740 - 76,740 - -School District programs, expendable - - - 10,879 -

Unrestricted 128,628,500 2,025,539 130,654,039 4,550,600 6,924,165Net position 1,895,207,992 311,415,120 2,206,623,112 6,470,403 8,121,564Total liabilities and net position $ 2,705,338,823 337,966,528 3,043,305,351 11,421,658 9,707,572

See accompanying notes to financial statements.

16

NORTH SLOPE BOROUGH, ALASKAStatement of Activities

For the year ended June 30, 2013

Program revenues Net (expense) revenue and changes in net positionPrimary government Component units

Functions/Programs ExpensesCharges for

Services

Operating Grantsand

Contributions

Capital Grantsand

ContributionsGovernmental

ActivitiesBusiness-type

Activities Total School District Ilisagvik CollegePrimary government:

Governmental activities:General government $ 67,472,759 4,371,029 13,098,118 $ (50,003,612) (50,003,612)Public works 127,446,812 3,069,042 12,888,507 21,971,502 (89,517,761) - (89,517,761) - -Public safety 31,177,215 - 689,175 1,741,518 (28,746,522) - (28,746,522) - -Health and social services 27,165,148 234,113 6,564,543 - (20,366,492) - (20,366,492) - -Wildlife management 7,999,441 - 2,510,090 - (5,489,351) - (5,489,351) - -Primary and secondary education 42,947,630 - - - (42,947,630) - (42,947,630) - -Higher education 10,844,513 - - - (10,844,513) - (10,844,513) - -Interest on long-term debt 17,854,348 - 6,059,292 - (11,795,056) - (11,795,056) - -

Total governmental activities 332,907,866 7,674,184 41,809,725 23,713,020 (259,710,937) (259,710,937) - -Business-type activities:

Power and Light 27,220,964 8,702,015 506,118 - - (18,012,831) (18,012,831) - -Service Area 10 21,638,889 24,030,572 80,447 - - 2,472,130 2,472,130 - -Home Assistance Loan (2,146) 656 - - - 2,802 2,802 - -Real Property Management 358,983 1,311,548 16,934 - - 969,499 969,499 - -

Total business-type activities 49,216,690 34,044,791 603,499 (14,568,400) (14,568,400) - -Total primary government $ 382,124,556 41,718,975 42,413,224 23,713,020 (259,710,937) (14,568,400) (274,279,337) - -

Component units:School District 74,319,269 4,167,542 15,977,819 36,735 (54,137,173) -Ilisagvik College 16,359,289 1,023,938 4,801,778 - - (10,533,573)

Total component units $ 90,678,558 5,191,480 20,779,597 36,735 (54,137,173) (10,533,573)

General revenues:Property taxes $ 328,846,618 - 328,846,618 - -Intergovernmental - - - - 322,139Grants and entitlement not restricted to specific programs 1,135,374 - 1,135,374 21,501,531 -Economic impact assistance 5,000,000 - 5,000,000 - -Investment earnings 55,825,691 784 55,826,475 - 254,742Support from primary government - - - 32,125,626 10,031,393Other 4,903,795 - 4,903,795 1,543,744 1,094,650

Transfers (16,459,863) 16,459,863 - - -Total general revenues and transfers 379,251,615 16,460,647 395,712,262 55,170,901 11,702,924

Change in net position 119,540,678 1,892,247 121,432,925 1,033,728 1,169,351

Net position, beginning of year 1,775,667,314 309,522,873 2,085,190,187 5,436,675 6,952,213

Net position, end of year $ 1,895,207,992 311,415,120 2,206,623,112 6,470,403 8,121,564


17

NORTH SLOPE BOROUGH, ALASKABalance Sheet - Governmental Funds

June 30, 2013

General Permanent

Othergovernmental

funds

Totalgovernmental

fundsAssets

Imprest cash $ 14,500 - - 14,500Cash and investments with central treasury 510,500,981 - 225,611,865 736,112,846Other cash and investments - 506,290,063 - 506,290,063Accounts receivable:

Property taxes, net 3,205,031 - - 3,205,031Intergovernmental 9,201,072 - 9,231,732 18,432,804Other 1,297,138 - - 1,297,138

Loan receivable, net 66,197 - - 66,197Accrued interest 1,683,272 741,691 - 2,424,963Due from other funds 35,283,793 619,900 - 35,903,693Prepaids and deposits 796,704 - 35,929 832,633Inventory 5,895,238 - - 5,895,238

Total assets $ 567,943,926 507,651,654 234,879,526 1,310,475,106Liabilities and Fund Balances

Liabilities:Accounts payable $ 11,373,225 - 8,468,841 19,842,066Payable from unsettled investment trades 25,010,742 160,550 - 25,171,292Accrued payroll 3,880,538 - - 3,880,538Payroll taxes withheld 1,929,190 - - 1,929,190General obligation bonds and supplemental coupons payable 777 - - 777Unearned revenue:

Property taxes 357,719,054 - - 357,719,054Intergovernmental 9,726,752 - 39,747 9,766,499Loans 37,890 - - 37,890Other 2,331,964 - - 2,331,964

Deposits payable 33,204 - - 33,204Due to other funds - 18,299,418 1,215,244 19,514,662

Total liabilities 412,043,336 18,459,968 9,723,832 440,227,136Fund balances:

Nonspendable:Prepaids and deposits 796,704 - - 796,704Inventory 5,895,238 - - 5,895,238Long-term notes receivable 10,000,000 - - 10,000,000Permanent fund corpus - 339,062,525 - 339,062,525Museum endowment - - 15,795 15,795

Restricted for:Permanent fund - 150,129,161 - 150,129,161Authorized projects - - 215,017,889 215,017,889

Committed to:Self-insurance 5,500,000 - - 5,500,000Litigation 1,500,000 - - 1,500,000Capital projects 2,200,000 - - 2,200,000Museum operations - - 76,740 76,740Loans - - 6,092,323 6,092,323Grants - - 174,885 174,885Energy program - - 3,697,733 3,697,733Public safety - - 80,329 80,329

Assigned 18,426,205 - - 18,426,205Unassigned 111,582,443 - - 111,582,443

Total fund balances 155,900,590 489,191,686 225,155,694 870,247,970Total liabilities and fund balances $ 567,943,926 507,651,654 234,879,526 1,310,475,106

See accompanying notes to financial statements.18


Reconciliation of Governmental Funds Balance Sheet to theStatement of Net Position

June 30, 2013

Amount reported as fund balance on the governmental funds balance sheet $ 870,247,970Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, 1,430,767,410 therefore, are not reported in the funds.

Long-term receivables, delinquent property taxes, and loans are not available to pay for current period expenditures and, therefore, are deferred in the funds: Property taxes 3,204,901 Loans receivable 37,890

3,242,791 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the funds: General obligation bonds payable (353,985,921)

Issuance premiums (15,178,150) Accreted principal on general obligation bonds (15,711,518) Landfill postclosure care costs (18,082,637) Capital lease obligation (1,517,202) Compensated absences (4,574,751)

(409,050,179) Net position of governmental activities $ 1,895,207,992


19

NORTH SLOPE BOROUGH, ALASKAStatement of Revenues, Expenditures, and

Changes in Fund Balances - Governmental FundsYear ended June 30, 2013

General Permanent

Othergovernmental

funds

Totalgovernmental

funds

Revenues:Property taxes $ 331,616,907 - - 331,616,907Intergovernmental 30,159,494 - 21,971,502 52,130,996Charges for services 7,674,184 - - 7,674,184Investment earnings 898,414 54,926,692 585 55,825,691State gas production tax credit 12,785,605 - - 12,785,605Economic impact assistance 5,000,000 - - 5,000,000Other 4,629,079 - 274,716 4,903,795

Total revenues 392,763,683 54,926,692 22,246,803 469,937,178

Expenditures:Current:

General government 59,583,559 - - 59,583,559Public works 69,369,354 - - 69,369,354Public safety 26,487,760 - - 26,487,760Health and social services 25,525,767 - - 25,525,767Wildlife management 7,824,154 - - 7,824,154Primary and secondary education 35,155,086 - - 35,155,086Higher education 11,946,284 - - 11,946,284

Debt service:Principal retirement 115,993,897 - - 115,993,897Interest on long-term debt 35,395,733 - - 35,395,733Bond issuance costs - - 761,159 761,159

Special revenues - - 1,840,361 1,840,361Capital projects - - 101,349,065 101,349,065

Total expenditures 387,281,594 - 103,950,585 491,232,179Excess (deficiency) of revenues overexpenditures 5,482,089 54,926,692 (81,703,782) (21,295,001)

Other financing sources (uses):Transfers in from other governmental funds 41,963,961 9,645,253 30,838,000 82,447,214Transfers in from enterprise funds - 327,887 - 327,887Transfers out to other governmental funds (40,483,253) (17,315,961) (24,648,000) (82,447,214)Transfers out to enterprise funds (12,895,022) - - (12,895,022)General obligation bonds issued - - 92,155,000 92,155,000Premium on issuance of debt - - 4,096,158 4,096,158Insurance proceeds 267,918 - 1,473,600 1,741,518

Total other financing sources (uses) (11,146,396) (7,342,821) 103,914,758 85,425,541Net change in fund balances (5,664,307) 47,583,871 22,210,976 64,130,540

Fund balances, beginning of year 161,564,897 441,607,815 202,944,718 806,117,430Fund balances, end of year $ 155,900,590 489,191,686 225,155,694 870,247,970


20


Reconciliation of Government Funds Statement of Revenues, Expenditures, andChanges in Fund Balances to the Statement of Activities

Year ended June 30, 2013

Net change in fund balance – total governmental funds $ 64,130,540

Amounts reported for governmental activities in the statement of activities aredifferent because:Governmental funds report capital outlays as expenditures. However, in the

statement of activities, the cost of those assets is allocated over their estimateduseful lives and reported as depreciation expense:

Capital outlay 70,832,070Transfer of completed projects to business-type activities (3,892,728)The net effect of various transactions involving capital assets such as sales and other disposals (982,134)Depreciation expense (46,353,356)

19,603,852Revenues in the statement of activities that do not provide current financial

resources and are deferred in the funds:Property taxes (2,770,289)

The issuance of long-term debt provides current financial resources togovernmental funds, while the repayment of the principal of long-term debtconsumes the current financial resources of governmental funds. Neithertransaction, however, has any effect on net position. Also, governmental fundsreport the effects of issuance costs, premiums, discounts, and similaritems when debt is first issued, whereas these amounts are deferred andamortized in the statement of activities:

Issuance of general obligation bonds (92,155,000)Principal repayments on general obligation debt and capital leases 117,309,709Bond premium (4,096,158)Amortization of deferred amounts 3,129,577

24,188,128Repayment of certain long-term liabilities is reported as an expenditure in

governmental funds while they are recorded as a reduction in liabilities in thestatement of net position:

Postclosure care costs (565,318)Compensated absences (353,389)Accreted principal 15,307,154

14,388,447Change in net position of governmental activities $ 119,540,678


21

NORTH SLOPE BOROUGH, ALASKAStatement of Net Position

Proprietary Funds - Enterprise FundsJune 30, 2013

Business-type activities - enterprise fundsReal

propertymanagement

Power andlight

Otherenterprise

funds

Totalenterprise

funds

AssetsCurrent assets:

Cash and investments with central treasury $ 4,320,383 - 21,383,746 25,704,129Accounts receivable, net of allowance foruncollectible accounts - 820,360 2,052,458 2,872,818

Total current assets 4,320,383 820,360 23,436,204 28,576,947Construction work in progress - - 1,842,650 1,842,650Capital assets, net 257,396,274 45,452,945 4,697,712 307,546,931

Total assets $ 261,716,657 46,273,305 29,976,566 337,966,528

Liabilities and Net PositionCurrent liabilities:

Accounts payable $ 7,857 521,526 3,349,827 3,879,210Compensated absences 2,990 137,987 49,512 190,489Accrued wages payable 9,870 183,578 45,479 238,927Other liabilities 450,806 198,904 38,282 687,992Due to other funds 619,900 5,453,035 10,316,096 16,389,031

Total current liabilities 1,091,423 6,495,030 13,799,196 21,385,649Non-current liabilities:

Accrued closure and postclosure costs - - 5,165,759 5,165,759Total non-current liabilities - - 5,165,759 5,165,759

Total liabilities 1,091,423 6,495,030 18,964,955 26,551,408Net position: Net investment in capital assets 257,396,274 45,452,945 6,540,362 309,389,581 Unrestricted 3,228,960 (5,674,670) 4,471,249 2,025,539

Total net position 260,625,234 39,778,275 11,011,611 311,415,120Total liabilities and net position $ 261,716,657 46,273,305 29,976,566 337,966,528


22

NORTH SLOPE BOROUGH, ALASKAStatement of Revenues, Expenses and Changes in Net Position

Proprietary Funds - Enterprise FundsYear ended June 30, 2013

Business-type activities - enterprise funds

Real propertymanagement

Power andlight

Otherenterprise

funds Total

Operating revenues:Service Area 10 - oilfield support services revenue $ - - 24,030,572 24,030,572Home Assistance Loan - revolving loan fund interest - - 656 656Real Property Management - rental revenues 1,311,548 - - 1,311,548North Slope Borough Power and Light - utility revenues - 8,702,015 - 8,702,015

Total revenues 1,311,548 8,702,015 24,031,228 34,044,791

Operating expenses:Salaries and benefits 195,019 6,214,627 954,240 7,363,886Contractual and professional fees 123,795 1,949,168 17,817,020 19,889,983Depreciation 14,664 4,066,377 478,490 4,559,531Closure and postclosure care costs - - 794,523 794,523Other operating expenses 25,505 14,990,792 1,592,470 16,608,767

Total operating expenses 358,983 27,220,964 21,636,743 49,216,690

Operating income (loss) 952,565 (18,518,949) 2,394,485 (15,171,899)

Nonoperating revenues (expenses):Investment earnings 784 - - 784Intergovernmental revenues 16,934 506,118 80,447 603,499

Income (loss) before transfers and capital contributions

970,283 (18,012,831) 2,474,932 (14,567,616)

Transfers out to governmental activities (327,887) - - (327,887)Transfers in from governmental activities - 12,895,022 - 12,895,022Contribution of capital assets - 3,892,728 - 3,892,728

Change in net position 642,396 (1,225,081) 2,474,932 1,892,247

Net position, beginning of year 259,982,838 41,003,356 8,536,679 309,522,873Net position, end of year $ 260,625,234 39,778,275 11,011,611 311,415,120


23


Statement of Cash FlowsProprietary Funds – Enterprise Funds


Business-type activities – enterprise fundsOther Total

Real property Power and enterprise enterprisemanagement Light funds funds

Cash flows from operating activities:Cash received from customers $ 1,261,122 8,337,164 23,910,221 33,508,507Payments to suppliers (155,392) (16,693,147) (21,887,978) (38,736,517)Payments to employees (172,877) (5,787,758) (836,839) (6,797,474)

Net cash provided by (used for) operating activities 932,853 (14,143,741) 1,185,404 (12,025,484)

Cash flows from noncapital financing activities:Internal activity – payments from other funds (1,057,371) 1,248,719 - 191,348 Transfers (to) from other funds - 12,895,022 - 12,895,022

Net cash provided by (used for) noncapitalfinancing activities (1,057,371) 14,143,741 - 13,086,370

Cash flows from capital and related financing activities:Purchase of capital assets - - (1,256,769) (1,256,769)Advances from other funds - - 10,000,000 10,000,000

Net cash used for capital and related financing activities - - 8,743,231 8,743,231

Cash flows from investing activities:Investment earnings 784 - - 784

Net increase (decrease) in cash and cash equivalents (123,734) - 9,928,635 9,804,901 Beginning cash and cash equivalents 4,444,117 - 11,455,111 15,899,228Ending cash and cash equivalents $ 4,320,383 - 21,383,746 25,704,129

Reconciliation of operating income (loss) to net cash provided by(used for) operating activities:

Operating income (loss) $ 952,565 (18,518,949) 2,394,485 (15,171,899)Adjustments to reconcile operating income (loss) to net cash

provided by (used for) operating activities:Depreciation 14,664 4,066,377 478,490 4,559,531 Bad debt expense - 81,210 - 81,210Non-cash expenses-PERS on-behalf payment 16,934 506,118 80,447 603,499 Changes in assets and liabilities that provided (used) cash:

Accounts receivable - (328,090) (123,153) (451,243)Accounts payable (6,092) 165,604 (2,476,342) (2,316,830)Accrued payroll and compensated absences 5,209 (79,250) 36,954 (37,087)Other liabilities (50,427) - - (50,427)Accrued closure and postclosure care costs - - 794,523 794,523 Other liabilities - (36,761) - (36,761)

Net cash provided by (used for) operating activities $ 932,853 (14,143,741) 1,185,404 (12,025,484)

Noncash capital and related financing activity:Contribution of capital assets $ - 3,892,728 - 3,892,728 Capital assets financed through accounts payable and accumulated interest included in due to other funds 765,370 765,370


24


Statement of Fiduciary Net PositionFiduciary Fund – Pension Trust Fund

June 30, 2013

AssetsInvestments, at fair value:

Cash and cash equivalents $ 581,536Mutual funds 12,203,108

Total assets $ 12,784,644Net position: Net position held in trust for retirement benefits $ 12,784,644


25


Statement of Changes in Fiduciary Net PositionFiduciary Fund – Pension Trust Fund


Additions:Investment income:

Net appreciation in fair value of investments $ 458,692Interest and dividends 295,046

Total investment income 753,738

Contributions:Participants 814,225

Total additions 1,567,963

Deductions:Benefits paid directly to participants 883,210Administrative expenses 6,181

Total deductions 889,391

Changes in net position 678,572

Net position held in trust for retirement benefits:Beginning of year 12,106,072End of year $ 12,784,644


26


Notes to Financial Statements

June 30, 2013

(1) Summary of Significant Accounting Policies

(a) Reporting Entity

The North Slope Borough (Borough) is a municipal corporation governed by an elected mayor and seven-member assembly. As defined by U.S. generally accepted accounting principles (GAAP) established by the Governmental Accounting Standards Board (GASB), the financial reporting entity consists of the primary government, as well as its component units, which are legally separate organizations for which the elected officials of the primary government are financially accountable. Financial accountability is defined as:

(1) appointment of a voting majority of the component unit’s board, and either (a) the ability to impose will by the primary government, or (b) the possibility that the component unit will provide a financial benefit to or impose a financial burden on the primary government; or

(2) fiscal dependency on the primary government.

The accompanying financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Each discretely presented component unit is reported in a separate column in the government-wide financial statements to emphasize that it is legally separate from the government.

Discretely Presented Component Units

The North Slope Borough School District (School District) is responsible for elementary and secondary education within the government’s jurisdiction. The members of the School District’s governing board are elected by the voters. However, the Borough is financially accountable for the School District because the responsibility for the budget, taxing, debt, and major capital project construction rests with the Borough. The School District is presented as a governmental fund type.

Ilisagvik College (the College) is a public college that conducts postsecondary education. The affairs of the College are managed by a separate board of trustees, appointed by the Borough Assembly. The Borough provided 57% of the funding for the College during the year ended June 30, 2013. The College's financial statements are reported as an enterprise fund using the economic resources measurement focus and the accrual basis of accounting.

Complete financial statements of the School District component unit can be obtained by contacting the School District at the following address: North Slope Borough School District, P.O. Box 169, Barrow, Alaska 99723. Complete financial statements of the College can be obtained by contacting the College at the following address: Ilisagvik College, P.O. Box 749, Barrow, Alaska 99723.

(b) Basis of Presentation

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on

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fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. 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 or segment; and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues.

Separate financial statements are provided for governmental funds, proprietary funds, and the fiduciary fund, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds, if applicable, are reported as separate columns in the financial statements for each fund type.

The government reports the following major governmental funds:

• The General Fund is the government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

• The Permanent Fund contains assets that are to be held in perpetuity except that an annual transfer may be made to the General Fund from the accumulated earnings in an amount up to 8% of the average total fair value of the fund at the end of the three preceding fiscal years. Funds may be appropriated to the Permanent Fund from any source. Income of the fund is to be added to the fund. The amount transferred may not be used to pay debt service on the Borough’s debt.

The government reports the following major proprietary funds:

• The Real Property Management Fund accounts for the management and disposition of revenues associated with real property.

• The Power & Light Fund includes the power-generating activities for the North Slope communities of Anaktuvuk Pass, Kaktovik, Nuiqsut, Point Hope, Point Lay, Wainwright, and Atqasuk.

Additionally, the government reports the following fiduciary fund:

• The Pension Trust Fund accounts for the activities of the Borough's Employee Thrift Plan, which accumulates resources for employees’ before- and after-tax savings.

(c) Measurement Focus and Basis of Accounting

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is

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incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the fiscal year when use is first permitted; matching requirements, in which the Borough must provide local resources to be used for a specified purpose; and expenditure requirements, in which the resources are provided to the Borough on a reimbursement basis.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as 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. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when the liability is incurred, as under accrual accounting. However, principal and interest on general long-term debt, claims and judgments, and compensated absences are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources.

Property taxes, grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the government’s various utility functions and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and/or 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. Power and Light also recognizes as operating revenue the portion of fees intended to recover the cost of connecting new customers. 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 nonoperating revenues and expenses.

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(d) Assets, Liabilities, and Fund Equity

Cash and Investments

Certain investments of the Permanent Fund are deposited or invested in individual segregated bank accounts. Moneys of all other funds are maintained or invested in a common group of bank accounts. Collectively, these common bank accounts and investments represent the central treasury. Each fund whose moneys are included in the central treasury has equity therein. Each fund’s portion of the central treasury is displayed on the balance sheet as “cash and investments with central treasury” or is included in “due to other funds” if negative.

Imprest cash and certificates of deposits, and repurchase agreements with original maturities of 90 days or less, are considered to be cash equivalents. For purposes of the statements of cash flows, cash and investments with central treasury held by enterprise funds are treated as cash equivalents.

Investments are reported at fair value. For marketable debt and equity securities, including real estate investment trusts, fair values are obtained from independent sources using published market prices, quotations from national security exchanges, and security pricing services. Fair values of alternative investments are determined by management using information prepared by the investment manager. Investment income earned from central treasury investments is allocated to the various funds as follows: General Fund – $898,414, Autaaqtuq Special Revenue Fund – $0, Walakpa Special Revenue Fund – $585, Museum Endowment Fund – $0, Real Property Management Fund – $784, and Service Area 10 – $0. Approximately $273,102 of the investment earnings from central treasury investments are associated with funds other than the General Fund.

Receivables and Payables

Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due to/from other funds.” All amounts due to/from other funds are short term in nature.

All trade and property taxes receivable, including those for Service Area 10 and Power and Light, are shown net of an allowance for uncollectibles. Trade accounts receivable in excess of 90 days comprise the trade accounts receivable allowance for uncollectibles, including those for Service Area 10 and Power and Light. The property taxes receivable allowance is equal to approximately 3% of outstanding property taxes at June 30, 2013.

Inventories and Prepaid Items

Inventory in the General Fund consists primarily of fuel. Inventories in the enterprise funds consist of supplies and materials. All inventories are valued at cost using the first-in, first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

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Capital Assets

Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, utilidors, streetlights, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the Borough as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation.

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

Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Total interest capitalized during the year was $316,096.

Property, plant, and equipment of the primary government, as well as the component units, are depreciated using the straight-line method over the following estimated useful lives:

Buildings and improvements 15 – 25 years Property and Plant: Treatment, general plant, and landfill 5 –15 years Utility plant 25 – 30 years Power generators 14 years Equipment 3 – 10 years Infrastructure 10 – 100 years Gas fields 50 years

Compensated Absences

It is the Borough’s policy to permit employees to accumulate earned but unused annual leave benefits. All annual leave pay is accrued when incurred in the government-wide and proprietary fund financial statements. The liability for compensated absences reported in the government-wide and proprietary fund statements consists of unpaid, accumulated vacation and sick leave balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who currently are eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. During 2013 and prior years, the General Fund has liquidated the liability for matured compensated absences except for those related to proprietary funds.

Bond Premiums, Discounts, Issuance Cost, and Deferred Loss on Refunding

In the government-wide and proprietary fund financial statements, bond premiums and discounts, as well as issuance costs and deferred loss on refunding, are deferred and amortized over the life of the

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bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount and deferred loss on refunding. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums 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 debt service expenditures.

Arbitrage

The Tax Reform Act of 1986 requires governmental entities issuing tax-exempt bonds to refund to the U.S. Treasury interest earnings on bond proceeds in excess of the yield on those bonds. Governmental entities must comply with arbitrage rebate requirements in order for their bonds to maintain tax-exempt status. Entities are required to remit arbitrage rebate payments for nonpurpose interest to the federal government at least once every five-year period that the debt is outstanding and at maturity. Arbitrage liabilities are recorded as a reduction in investment earnings in the General Fund. At June 30, 2013, the Borough estimated the total arbitrage rebate liability to be $0.

(e) Fund Equity

Fund Balance Components

The fund balance amounts for governmental funds are displayed in five components as follows:

Nonspendable – Includes amounts either not in spendable form or legally or contractually required to be maintained intact. Amounts not in spendable form would include long-term notes receivable, inventory, and prepaids.

Restricted – Reflects the same definition as restricted net assets: constraints placed on the use of amounts are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. This would generally include amounts in bonded capital projects funds.

Committed – Includes amounts that are committed for specific purposes by formal action of the Assembly, the Borough’s highest level of decision making authority. This formal action is the passage of an ordinance. Amounts classified as committed are not subject to legal enforceability like restricted fund balance; however, those amounts cannot be used for any other purpose unless the Assembly removes or changes the limitation by taking the same form of action it employed to previously impose the limitation.

Assigned – Includes amounts that are intended by the Assembly to be used for specific purposes, but the Assembly itself or the Director of Administration and Finance possesses the authority to assign amounts to be used for specific purposes in accordance with policy established by the Assembly. This would include any activity reported in a fund other than the General Fund that is not otherwise restricted more narrowly by the above definitions.

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Unassigned – Includes any remaining amounts after applying the above definitions and includes planned spending in the subsequent year’s budget.

Spending Policy – The Borough’s spending policy is to spend restricted fund balance first, followed by committed, assigned, and unassigned fund balance.

Encumbrances – Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded in order to reserve that portion of the applicable appropriations, is employed as an extension of formal budgetary integration in the Borough’s governmental funds. Encumbrances, if any, outstanding at year-end are reported as appropriate constraints of fund balance if they meet the criteria and definitions outlined above and are generally reported as assigned fund balance.

General Fund encumbrances at June 30, 2013 were $18,426,205 Capital project fund encumbrances are reported in note (5)(b).

Net Position

In the government-wide and proprietary fund financial statements, equity is displayed in three components as follows:

Net investment in Capital Assets – This consists of capital assets, net of accumulated depreciation, less the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets.

Restricted – This consists of net assets that are legally restricted by outside parties or by law through constitutional provisions or enabling legislation. When both restricted and unrestricted resources are available for use, generally it is the Borough’s policy to use restricted resources first, then unrestricted resources when they are needed.

Unrestricted – This consists of net assets that do not meet the definition of “restricted” or “net investment in capital assets.”

(f) Revenues, Expenditures, and Expenses

Property Taxes

Property taxes are levied on the assessed value of taxable property as of January 1, and are payable June 30 (June 30 and August 31 for residential property) for the subsequent year’s appropriations. An enforceable lien is attached on all taxable property as of January 1. Deferred revenue is recorded in an amount equal to the property taxes due June 30, as significantly all such amounts are levied for the subsequent year’s budget.

Property taxes billed and collected by the Borough include the portion attributable to the School District.

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Sales Taxes/Economic Impact Assistance

Effective September 12, 1991, the Borough repealed its sales tax ordinance. At the same time, the Borough entered into an agreement with major property owners whereby the Borough would receive annual Economic Impact Assistance payments. In April 2013, a new agreement was negotiated with seven major property owners providing for annual payments totaling $5,000,000 through June 30, 2014. Efforts to negotiate a new agreement will begin in earnest during December 2013.

Grant Revenue

Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met.

Lease Revenue

Leasing activities consist principally of leasing vacant land for oil and gas exploration. All of the lease agreements are classified as operating leases. Lease revenue is recognized when earned and lease payments received in advance are deferred and amortized to revenue over the life of the lease.

Insurance Recoveries

Insurance recoveries are recognized when realized.

(g) Recently Issued Accounting Pronouncements

On July 1, 2012, the Borough also adopted GASB Statement No. 61, The Financial Reporting Entity: Omnibus – an amendment of GASB Statement No. 14 and No. 34. Issued in November 2010, this Statement modifies certain requirements for inclusion of component units in the financial reporting entity; it amends the criteria for reporting component units as if they were part of the primary government in certain circumstances, it also clarifies the reporting of equity interests in legally separate organizations. This Statement had no significant impact on the financial statements as of or for the fiscal year ended June 30, 2013. On July 1, 2012, the Borough also adopted GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Issued in December 2010, this Statement incorporates into the GASB’s authoritative literature certain accounting and financial reporting guidance from all sources of generally accepted accounting principles for state and local governments so that they derive from a single source. This Statement had no significant impact on the financial statements as of or for the fiscal year ended June 30, 2013. On July 1, 2012, the Borough adopted GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. Issued in June 2011, this Statement provides guidance for deferred outflows of resources and deferred inflows of resources. Deferred outflows and deferred inflows of resources are defined as a consumption of net assets by the government that is applicable to a future reporting period and the acquisition of net assets by the government that is applicable to a future reporting period. Net position is defined as the residual of

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all other elements presented in a statement of financial position. This Statement had no significant impact on the financial statements as of or for the fiscal year ended June 30, 2013. The Borough is currently reviewing its accounting practices to determine the potential impacts on the financial statements for the following GASB Statements: • GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. Issued in March

2012, this Statement establishes accounting and financial reporting standards that reclassify as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. This Statement is effective for the Borough’s financial statements for fiscal year ending June 30, 2014.

• GASB Statement No. 66, an Amendment of GASB Statement No. 10 and No. 62. Issued in

March 2012, this Statement resolves the conflicting guidance that resulted from the issuance of two pronouncements. The statement amends Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, by removing the provision that limits fund based reporting of an entity’s risk financing activities to the general fund and the internal service fund type. It also amends Statement No. 62, Fund Balance Reporting and Governmental Fund Type Definition, by providing specific guidance on accounting for operating lease payments, purchased loan or group of loans, and service fees related to mortgaged loans. This Statement is effective for the Borough’s financial statements for fiscal year ending June 30, 2014.

• GASB Statement No. 68, this Statement provides guidance for employers offering defined

benefit pensions through plans administered as trusts or equivalent arrangements. It replaces certain requirements related to plan trusts in Statement No. 27 Accounting for Pension by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures. This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. For defined benefit pensions, this Statement identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. This Statement is effective for the Borough’s financial statements for fiscal year ending June 30, 2014. The Borough expects the implementation of this statement to be material.

(2) Stewardship, Compliance, and Accountability

(a) Budgets and Budgetary Accounting

In accordance with the North Slope Borough Code of Ordinances (Code), the Borough follows these procedures in establishing the budgetary data reflected in the financial statements:

1. The Mayor submits to the Borough Assembly, by March 1, a proposed operating budget for the General Fund, Power and Light Enterprise Fund, and Service Area 10 Enterprise Fund of the Borough for the following fiscal year and a capital improvements program for the next

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six fiscal years. Proposed expenditures and the means of financing them are included in the operating budget and capital improvements program.

2. By May 1, a public hearing is conducted by the Assembly to obtain the comments of the residents of the Borough.

3. The Assembly, by ordinance, shall adopt an operating budget and capital improvements program by May 1 of the current fiscal year. If it fails to do so, the operating budget and capital improvements program submitted by the Mayor shall be deemed adopted by the Assembly.

4. The Assembly may, by ordinance, amend the appropriation during the year if available revenues exceed or are insufficient to meet the amount appropriated.

The Mayor may transfer part or all of any unencumbered balance between expenditure classifications within a department or from one department to another excluding the education function, debt service, or for cash deficits. Transfers may be made between Capital Projects funds on projects utilizing general obligation bond proceeds only upon voter approval.

Budgeting for the General Fund is on a modified accrual basis in accordance with the Code. No other governmental funds have legally adopted annual budgets. The Borough’s Power and Light and Service Area 10 enterprise funds have legally adopted annual budgets prepared on the accrual basis.

The books of the Borough remain open until such time as the Assembly authorizes their closure. As such, amendments to the appropriation may be made subsequent to June 30.

Expenditures may not legally exceed the total operating budget appropriation. Several supplementary appropriations were made during the year in accordance with the Code. Appropriations in governmental funds are encumbered upon issuance of purchase orders, contracts, or other forms of legal commitments. Even though goods and services have not been received, the transactions are reported as an assignment of fund balances in the year that the commitment is made. While appropriations lapse at the end of the fiscal year, the succeeding year’s budget ordinance specifically provides for the reappropriation of year-end encumbrances, which have been approved for carryover by the Borough Administration and the Mayor. Appropriations for capital improvement programs and various governmental grants carry over at year-end.

(b) Excess of Expenditures over Appropriations

The Borough expenditures did not exceed the appropriations during the year.

(c) Deficit Fund Equity

The Borough had no individual fund with deficit fund equity at June 30, 2013.

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(3) Deposits and Investments

As of June 30, 2013, the Borough had the following investments:

Investment maturities (in years) No scheduled

Investment type Fair value maturity Less than 1 1 to 5 6 to 10 More than 10

Central treasury: Money market funds $ 268,071,052 268,071,052 - - - - Commercial Paper 19,992,557 - 19,992,557 - - - Debt securities:

U.S. Treasuries 305,009,618 - 90,859,617 180,094,074 34,055,927 - U.S. agencies 3,942,124 - - - 339,735 3,602,389 Foreign government bonds 2,175,225 - 1,501,500 673,725 - - Foreign corporate bonds 17,250,053 - 5,753,658 11,496,395 - - Corporate bonds 131,575,528 - 61,534,478 39,568,328 20,038,992 10,433,730

748,016,157 268,071,052 179,641,810 231,832,522 54,434,654 14,036,119

Permanent fund: Money market funds 2,195,403 2,195,403 - - - - Debt securities:

U.S. Treasuries 14,448,578 - - 2,094,180 8,285,945 4,068,453 U.S. agencies 10,328,674 - - 428,586 408,478 9,491,610 Foreign government bonds 674,622 - - 674,622 - - Foreign corporate bonds 5,098,883 - 759,108 4,339,775 - - Domestic corporate bonds 31,448,911 - 1,033,970 13,318,997 9,053,279 8,042,665

Equity securities: Common stocks 205,740 205,740 - - - - Mutual funds 135,712,604 135,712,604 - - - -

Alternative investments 133,847,505 133,847,505 - - - - Common collective funds 172,111,429 172,111,429 - - - -

506,072,349 444,072,681 1,793,078 20,856,160 17,747,702 21,602,728 $ 1,254,088,506 712,143,733 181,434,888 252,688,682 72,182,356 35,638,847

(a) Interest Rate Risk

The Borough does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

(b) Credit Risk

Code authorizes investments in the following: U.S. Treasury bills, notes, and bonds; any debt instrument with a direct U.S. government guarantee; U.S. government agencies securities or agency-sponsored securities; repurchase agreements, secured by obligations consisting only of those investment instruments authorized by Code; banker’s acceptances; commercial paper with a rating not less than A-1, P-1, or F-1; Certificates of Deposit; bonds or other taxable yield debt instruments of this state, its agencies, municipalities, any other state, or domestic corporation, which at the time of investment have an investment grade rating of a nationally recognized rating agency; any investment instrument authorized in terms of any trusts the Borough may administer; shares of mutual funds with portfolios consisting exclusively of assets that are direct obligations of the U.S. government; government-backed securities; mortgage-related securities; asset-backed securities having one of the two highest ratings of a nationally recognized rating agency; and investment pools as authorized by the Alaska Statutes.

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In addition to the above, certain additional investments are authorized for the Permanent Fund only. They are as follows: common stock, preferred stock, interest-bearing obligations of corporations having an option to convert into common stock; bond, note, or other debt securities of nondomestic governments, agencies, and corporations with a domestic rating of investment grade of a nationally recognized rating agency; securities of nondomestic corporations, including common and preferred stock; closed- or open-end mutual funds whose assets are invested in similar obligations; and private equity, absolute return, and real asset funds, and the sale (writing) and repurchase of call options, provided the Permanent Fund owns the security in which the options are written.

At June 30, 2013, the Borough’s foreign currency denominated government bonds and corporate bonds were rated as follows:

Moody’s Standard & Investor’s

Investment Poor’s Service Foreign government bonds AA- to AAA Aa2 to Aaa Foreign corporate bonds BBB to AA Baa2 to Aaa Domestic corporate bonds BBB- to AAA Baa2 to Aaa

(c) Concentration of Credit Risk

The Borough places no limit on the amount it may invest in any one issuer; however, no more than 60% of the Permanent Fund may be invested in nondomestic investments. The Borough has no investments from any one issuer that represents 5% or more of total investments other than U.S. government securities or external investment pools such as collective trusts. The Permanent Fund does have two investments that exceed 5% of its total investment as follows:

Investment Amount Adage Capital Partners, L.P. $ 29,703,100 Angeles Absolute Return Fund, L.T.D. 52,935,448

(d) Custodial Credit Risk – Deposits

In the case of deposits, this is the risk that, in the event of a bank failure, the Borough’s deposits may not be returned to it. The Borough’s deposit policy for custodial credit risk is to collateralize its primary demand deposit account for 100% of the uninsured balance. As of June 30, 2013, the Borough’s deposits were covered by federal depository insurance or by collateral held by the Borough’s agent or pledging financial institution’s trust department or agent in the name of the Borough and, thus, had no deposits that were exposed to custodial credit risk.

(e) Custodial Credit Risk – Investments

For an investment, this is a risk that, in the event of the failure of the counterparty, the Borough will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Borough had no debt securities exposed to custodial credit risk at June 30, 2013 because the investments were held by a custodian in the name of the Borough.

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(f) Foreign Currency Risk

The Borough’s exposure to foreign currency risk derives from its positions in foreign currency denominated debt and equity securities. The Borough’s investment policy permits the Permanent Fund to invest up to 20% of total Permanent Fund investments in foreign currency denominated investments. The Borough holds no foreign currency denominated debt or equity securities at June 30, 2013, and thus, is not exposed to any foreign currency risk at June 30, 2013.

(g) Reconciliation to Statement of Net Position

Deposits and investments of the primary government are reported as follows on the statement of net position, as of June 30, 2013:

Cash and investments Other cash with central and treasury investments Total

Cash $ 13,800,818 217,714 14,018,532 Investments 748,016,157 506,072,349 1,254,088,506

Total primary government $ 761,816,975 506,290,063 1,268,107,038

(4) Property Taxes, Loans, Trade Accounts, and Other Receivables

Property taxes, loans, trade accounts, and other receivables as of June 30, 2013 for the Borough’s individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows:

Governmental Business type activities

General Nonmajor Power &

Light Nonmajor Total Property taxes $ 3,336,031 - - - 3,336,031 Loans 66,197 2,492,071 - 98,076 2,656,344 Trade accounts - - 1,986,645 2,052,458 4,039,103 Other 2,616,980 - - - 2,616,980 6,019,208 2,492,071 1,986,645 2,150,534 12,648,458 Allowance for uncollectible

accounts (1,450,842) (2,492,071) (1,166,285) (98,076) (5,207,274) $ 4,568,366 - 820,360 2,052,458 7,441,184

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(5) Capital Assets

Capital asset activity for the year ended June 30, 2013 was as follows:

(a) Primary Government

Beginning Transfers Ending balance Increase and deletions balance

Governmental activities: Capital assets, not being depreciated:

Land $ 31,646,147 - - 31,646,147 Construction work-in-

progress 47,373,322 50,030,617 35,944,829 61,459,110

Total 79,019,469 50,030,617 35,944,829 93,105,257

Capital assets, being depreciated:

Gas fields 177,732,096 2,770,529 - 180,502,625 Buildings and

improvements 944,205,364 11,158,039 - 955,363,403 Improvements other

than buildings 55,584,203 - - 55,584,203 Equipment 117,744,329 18,540,393 1,121,754 135,162,968 Infrastructure 757,709,495 20,384,593 - 778,094,088

Total 2,052,975,487 52,853,554 1,121,754 2,104,707,287

Less accumulated depreciation for:

Gas fields 18,916,857 3,543,092 - 22,459,949 Buildings and improvements 374,999,623 20,733,915 - 395,733,538

Improvements other than buildings 18,271,054 1,271,922 - 19,542,976

Equipment 84,214,283 9,350,705 139,620 93,425,368 Infrastructure 224,429,581 11,453,722 - 235,883,303

Total 720,831,398 46,353,356 139,620 767,045,134

Total capital assets being depreciated 1,332,144,089 6,500,198 982,134 1,337,662,153

Total governmental activities, net $ 1,411,163,558 56,530,815 36,926,963 1,430,767,410

40 (Continued)



June 30, 2013

Beginning Transfers Ending balance Increase and deletions balance

Business-type activities: Capital assets, not being depreciated:

Land $ 258,231,048 - - 258,231,048 Construction work-in-

progress 417,038 1,842,650 417,038 1,842,650

Total 258,648,086 1,842,650 417,038 260,073,698

Capital assets, being depreciated:

Property and plant 133,992,233 3,279,232 - 137,271,465 Equipment 40,996,492 1,210,026 90,000 42,116,518

Total 174,988,725 4,489,258 90,000 179,387,983

Less accumulated depreciation for:

Property and plant 93,814,869 2,572,400 - 96,387,269 Equipment 31,787,700 1,987,131 90,000 33,684,831

Total 125,602,569 4,559,531 90,000 130,072,100

Total capital assets being depreciated 49,386,156 (70,273) - 49,315,883

Total business-type activities, net $ 308,034,242 1,772,377 417,038 309,389,581

41 (Continued)



June 30, 2013

Depreciation expense was charged to the departments and functions of the primary government as follows:

Governmental activities: General government $ 5,971,214 Public works 25,737,247 Public safety 4,689,455 Health and social services 1,639,381 Wildlife management 175,287 Primary and secondary education 7,792,544 Higher education 348,228

Total governmental activities $ 46,353,356

Business-type activities: Service Area 10 $ 478,490 Power and Light 4,066,377 Real Property Management 14,664

Total business-type activities $ 4,559,531

(b) Construction Commitments

The Borough has active construction projects as of year-end. At year-end, the Borough’s commitments with contractors are as follows:

Expended Encumbered Project through at June 30, authorization June 30, 2013 2013

Education and service center facilities $ 65,243,000 50,728,054 7,998,589

Public roads, streets, watercourse, and flood control facilities 153,504,000 104,529,593 10,339,480

Public housing 6,836,000 5,647,122 31,914 Water facilities 121,826,000 84,705,092 16,871,934 Sewage treatment disposal facilities 29,039,000 22,841,411 749,717 Airport and airport terminal facilities 66,629,000 41,981,958 5,404,533 Light, power, and heating systems 113,040,000 72,570,531 13,615,602 Public safety facilities 43,362,000 34,062,250 2,053,455 Sanitary facilities 39,431,000 31,687,381 656,434 Communications 24,231,000 5,366,578 443,220 General capital projects 240,113,000 200,430,133 8,936,735 Health facilities 8,512,000 5,024,037 1,298,707 Library and cultural facilities 5,750,000 3,844,022 649,213 Administration facilities 8,253,000 4,659,746 381,735 Total $ 925,769,000 668,077,908 69,431,268

42 (Continued)



June 30, 2013

(6) Interfund Receivables, Payables, and Transfers

(a) Interfund Receivables and Payables

A summary of individual interfund receivables and payables is as follows:

Payable

Real

property Power Nonmajor Permanent management & governmental fund fund Light funds Total

Receivable: General fund: Due to (from) $ 18,299,418 - 5,453,035 1,215,244 24,967,697 Advances to - - - 10,316,096 10,316,096 Permanent fund - 619,900 - - 619,900 Total $ 18,299,418 619,900 5,453,035 11,531,340 35,903,693

The interfund General Fund receivable comprises Central Treasury cash owed to the General Fund by the Power and Light Enterprise Fund, RELI Loan Program Fund, and Public Housing Fund of $5,453,035, $1,215,244 and $1,220,621, respectively, and the $18,299,418 payable owed to General Fund by the Permanent Fund, representing the annual Assembly-approved transfer. The $619,900 receivable of the Permanent Fund represents earnings of the Real Property Management Fund that are to be invested in the Permanent Fund. These receivables also explain the offsetting payables recorded for the respective funds noted. All balances are expected to be settled within the next fiscal year.

On July 10, 2012, the Assembly approved a long-term advance from the General Fund to the Nonmajor Enterprise Fund Service Area 10 in the principal amount of $10,000,000 as well as interest at a rate of 3.25%. The principal balance is due in full on June 30, 2013. Interest will accumulate on the outstanding balance but no payments will be required until January 1, 2014. The acculumated interest as of June 30, 2013 was $316,096.

(b) Transfers

A summary of interfund transfers is as follows:

Transfers out Real Property Nonmajor Management Governmental General Permanent Fund Funds Total

Transfers in: General fund $ - 17,315,961 - 24,648,000 41,963,961 Permanent fund 9,645,253 - 327,887 - 9,973,140 Nonmajor governmental funds 30,838,000 - - - 30,838,000 Major enterprise fund Power & Light 12,895,022 - - - 12,895,022 $ 53,378,275 17,315,961 327,887 24,648,000 95,670,123

43 (Continued)



June 30, 2013

Significant transfers were as follows:

• General Fund transferred $ 30,838,000 to Capital Projects Funds for the acquisition and construction of capital assets;

• General Fund transferred $ 12,895,022 to Power and Light to subsidize operations;

• General Fund transferred $ 9,645,253 to the Permanent Fund to increase the fund balance;

• Capital Projects Funds transferred $ 24,648,000 to the General Fund to repay advances awaiting bond proceeds to be received during the year ending June 30, 2013; and

• Permanent Fund accrued its annual transfer of $ 17,315,961 to the General Fund.

(c) Interfund Charges

In the governmental statements, the General Fund has charged an administration support fee to Service Area 10 and Power and Light based on estimated actual cost during the year ended June 30, 2013 in the amount of $1,383,090 and $1,924,266 respectively.

(7) Long-Term Obligations

(a) General Obligation Bonds

The Borough issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the Borough. These bonds generally are issued as 10-year current interest bonds with amounts of principal maturing in varying increments. General obligation bonds currently outstanding are as follows:

Bond principal

$75,808,318 2004 Series A for construction of capital projects consisting of remaining capital appreciation bonds of $35,685,921 with a maturity value of $53,605,000 due in a final annual installment of $53,605,000 on June 30, 2014, interest at 4.25% $ 35,685,921

$28,405,000 2005 Series A for construction of capital projects and for refund of general obligation bonds consisting of a remaining single current interest bond of $28,405,000 due in semiannual installments ranging from $703,694 to $29,108,694 on December 30 and June 30, through June 30, 2015, interest at 4.96%. 28,405,000

$38,855,000 2006 Series A for construction of capital projects consisting of remaining current interest bonds of $33,945,000 with a maturity value of $38,297,300 due in semiannual installments ranging from $505,000 to $20,705,000 on December 30 and June 30, through June 30, 2016, interest at 4.00% to 5.00% 33,945,000

44 (Continued)



June 30, 2013

Bond principal

$51,360,000 2007 Series A for construction of capital projects consisting of remaining current interest bonds of $50,715,000 with a maturity value of $59,678,474 due in semiannual installments ranging from $771,875 to $31,646,875 on December 30 and June 30, through June 30, 2017, interest at 4.25% to 5.00% 50,715,000

$44,485,000 2008 Series A for construction of capital projects consisting of remaining current interest bonds of $29,405,000 with a maturity value of $38,146,675 due in semiannual installments ranging from $305,775 to $19,258,013 due on December 30 and June 30, through June 30, 2019, interest at 5.50% to 5.75% 29,405,000

$38,505,000 2009 Series A and $45,320,000 Series B for construction of capital projects consisting of remaining current interest bonds of

$45,320,000 with a maturity value of $62,090,834 due in semiannual installments ranging from $39,203 to $15,737,486 due on December 30 and June 30, through June 30, 2023, interest at 4.926% to 5.426%. 45,320,000

$83,110,000 2010 Series A for construction of capital projects consisting of remaining current interest bonds of $18,135,000 with a maturity value of $21,186,350 due in semiannual installments ranging from $60,725 to $2,965,725 due on December 30 and June 30, through June 30, 2020, interest at 4.00% to 4.181% 18,135,000

$33,020,000 2011 Series A for construction of capital projects consisting of remaining current interest bonds of $16,355,000 with a maturity value of $17,342,800 due in semiannual installments ranging from $166,800 to $8,506,800 due on December 30 and June 30, through June 30, 2015, interest at 4.00% 16,355,000

$74,790,000 2011 Series B for construction of capital projects consisting of remaining current interest bonds of $46,425,000 with a maturity value of $50,441,400 due in semiannual installments ranging from $351,600 to $18,851,750 due on December 30 and June 30, through June 30, 2016, interest at 4.00% to 5.00% 46,425,000

$92,155,000 2012 Series A for construction of capital projects consisting of remaining current interest bonds of $49,595,000 with a maturity value of $54,113,275 due in semiannual installments ranging from $35,625 to $26,823,238 due on December 30 and June 30, through June 30,2022 interest at 2.50% to 5.00%. 49,595,000 353,985,921 Accreted principal on capital appreciation bonds 15,711,518 $ 369,697,439

45 (Continued)



June 30, 2013

Annual debt service requirements to maturity for general obligation bonds are as follows:

Debt service by fiscal year Principal accretion General on capital obligation appreciation bonds bonds Interest Total

Fiscal year(s) ending:

2014 $ 90,785,921 15,711,518 32,395,827 138,893,266 2015 73,170,000 - 12,663,798 85,833,798 2016 61,105,000 - 9,299,348 70,404,348 2017 39,285,000 - 6,469,248 45,754,248 2018 26,470,000 - 4,589,098 31,059,098 2019 – 2023 63,170,000 - 6,718,644 69,888,644

$ 353,985,921 15,711,518 72,135,963 441,833,402

(b) Build America Bonds

In October 2009, the Borough issued $45,320,000 of Taxable Build America Bonds (Series 2009B). The Borough is reimbursed for 35% of the interest associated with these bonds by the U.S. Treasury through the American Recovery and Reinvestment Act.

(c) Capital Leases

The Borough has a noncancelable 20-year lease for rental of certain buildings with a net book value of $1,846,097 ($17,411,316 less accumulated amortization of $15,565,219). The Borough accounts for this lease as a capital lease in its governmental-type funds. Total amortization expense for the lease was $348,226 during the year ended June 30, 2013.

Following is a schedule of future lease payments under the leases together with the present value of lease payments as of June 30, 2013:

Fiscal year ending June 30:

2014 $ 1,450,000 2015 120,833

Total lease payments 1,570,833 Less amount representing interest 53,631

Present value of required lease payments $ 1,517,202

(d) Solid Waste Landfill Closure and Postclosure Care Costs

State and federal laws and regulations require the Borough to place a final cover on all of the Borough’s landfill sites when they stop accepting waste and to perform certain maintenance and monitoring functions at each site for 5 to 15 years after closure depending upon the type of landfill.

46 (Continued)



June 30, 2013

Although closure and postclosure care costs will be paid only near or after the date that each landfill stops accepting waste, the Borough reports a portion of these closure and postclosure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date.

Governmental Activities

Barrow Landfills

The Borough stopped accepting solid waste for its Barrow landfill on June 30, 2008. The Borough has recorded a liability of $4,393,838 in the government-wide financial statements for closure and 30 years of postclosure care costs. As owner and operator of the landfill, the Borough is required to provide the financial assurance for the full amount of the estimated costs of closure. In accordance with a Compliance Order by Consent with the Alaska Department of Environmental Conservation, the Borough has provided a financial assurance of $15 million for the closure of the Barrow landfill. However, since agencies of the U.S. government were the original owners of the landfill, the Borough negotiated with the Department of Defense (DOD) for assistance in funding the costs of the landfill closure. During 2005, a settlement was reached with the DOD whereby the Borough received $15,930,000 in exchange for assuming all liabilities related to the cost of closure and postclosure care. The settlement proceeds were received in August 2005. The Borough has opened a second landfill in Barrow and has recorded a liability of $780,042 equal to 100% of the closure and postclosure care costs for the first cell.

Village Landfills

The Borough has seven village landfill sites – Anaktuvuk Pass, Atqasuk, Kaktovik, Nuiqsut, Point Hope, Point Lay, and Wainwright – for which they are required to perform certain maintenance and monitoring functions at each site for five years after closure. The $12,908,757 reported as village landfill closure and postclosure care liability at June 30, 2013 represents the total cumulative amount reported to date based on the use of the estimated capacity of the landfills as noted below:

Percentage

of landfill capacity used at June 30,

Village 2013 Anaktuvuk Pass 11 % Atqasuk 62 Kaktovik 63 Nuiqsit 66 Point Hope 92 Point Lay 72 Wainwright 80

The Borough will recognize the remaining estimated cost of closure and postclosure care of $5,551,154 as the remaining estimated capacity of each landfill is filled. These amounts are based on what it would cost to perform all closure and postclosure care in 2013. Actual costs may differ due to inflation, changes in technology, or changes in regulations. The Borough expects to begin closing these landfills in the year 2020.

47 (Continued)



June 30, 2013

Business-Type Activities – Service Area 10

The Borough has a landfill in Service Area 10 for which they are required to perform certain maintenance and monitoring functions at the site for 30 years after closure. The $5,165,759 reported as landfill closure and postclosure care liability at June 30, 2013 represents the total cumulative amount reported to date based on the use of 82% of the estimated capacity of the landfill.

The Borough will recognize the remaining estimated cost of closure and postclosure care of $1,125,738 as the remaining estimated capacity is filled. These amounts are based on what it would cost to perform all closure and postclosure care, for the current cell in 2013. Actual costs may differ due to inflation, changes in technology, or changes in regulations. The Borough has acquired land adjacent to the existing landfill for which it expects to develop a second cell.

The Borough is required by state and federal laws and regulations to demonstrate financial assurance for closure, postclosure, and/or corrective action by satisfying the local government financial test and government guarantee. The Borough satisfies the financial and public notice components of this test.

(e) Changes in Long-Term Obligations

Long-term liability activity for the year ended June 30, 2013 was as follows:

Balance Balance

June 30, June 30, Due within 2012 Additions Reductions 2013 one year

Governmental activities: Bonds payable: General obligation bonds $ 377,824,819 92,155,000 115,993,898 353,985,921 90,785,921 Plus (less) deferred amounts: For issuance of premiums 14,330,002 4,096,158 3,248,010 15,178,150 3,426,661 On refunding (118,434) - (118,434) - - Total bonds payable 392,036,387 96,251,158 119,123,474 369,164,071 94,212,582 Accreted principal on capital appreciation bonds 31,018,672 - 15,307,154 15,711,518 15,711,518 Capital leases 2,833,014 - 1,315,812 1,517,202 1,396,969 Barrow landfill closure and postclosure care costs 5,727,628 13,792 567,540 5,173,880 1,589,798 Village landfill closure and postclosure care costs 11,789,692 1,119,065 - 12,908,757 - Compensated absences 4,221,361 8,731,985 8,378,595 4,574,751 2,439,314 Health claims incurred but not reported 2,385,000 17,678,354 18,713,354 1,350,000 1,350,000 Total governmental activities $ 450,011,754 123,794,354 163,405,929 410,400,179 116,700,181

Business-type activities: Service Area 10 postclosure care costs $ 4,371,236 794,523 - 5,165,759 - Compensated absences 195,603 531,971 537,085 190,489 131,876 Total business-type activities $ 4,566,839 1,326,494 537,085 5,356,248 131,876

48 (Continued)



June 30, 2013

For governmental activities, compensated absences and health claims incurred but not reported are generally liquidated by the General Fund.

(8) Retirement Commitments

(a) Alaska Public Employees’ Retirement System (PERS)

Plan Description

Employees hired prior to July 1, 2006, and employees hired after July 2, 2006 who have PERS enrollment from prior employment, participate in PERS Tiers I-III, a defined benefit cost sharing plan. Employees hired after July 1, 2006 who have no prior PERS participating employment participate in PERS Tier IV, a defined contribution plan. Both plans were established and are administered by the State of Alaska (State) to provide pension, postemployment healthcare, and death and disability benefits to eligible employees.

The Alaska Legislature Senate Bill 125, signed into law April 9, 2008, converted the Public Employees Retirement System to a cost sharing plan and provided for an integrated system of accounting for all employers. Under the integrated system, the PERS defined benefit plans’ unfunded liability will be shared among all employers. The Borough’s net pension and OPEB obligation of $4,474,072 was eliminated on July 1, 2008 because it is no longer a liability of the employer under the new plan. The Alaska Legislature Senate Bill 125 also established a uniform PERS contribution rate of 22% of participating employees’ covered payroll. The conversion was effective July 1, 2008.

PERS acts as a common investment and administrative agent for political subdivisions within the State. Benefit and contribution provisions are established by Chapter 35 of Alaska Statute Title 39, and may be amended only by state legislature. Employee participation in the plan is mandatory for permanent employees scheduled to work at least 15 hours a week. There is no optional participation for other employees.

PERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to State of Alaska, Department of Administration, Division of Retirement and Benefits, P.O. Box 110203, Juneau, Alaska 99811-0203 or by calling 907-465-4460.

Benefits are vested after five years of credited service. Employees enrolled prior to July 1, 1986 with five or more years of credited service are entitled to annual pension benefits beginning at normal retirement age 55 or early retirement age 50. For employees enrolled after June 30, 1986, the normal and early retirement ages are 60 and 55, respectively. Employees with 30 (20 for police and fire personnel) or more years of credited service may retire at any age and receive a normal benefit.

The system also provides death and disability benefits and major medical benefits. Major medical benefits are provided without cost to all members first enrolled before July 1, 1986. Members first enrolled after June 30, 1986 who have not reached age 60 may elect to pay for major medical benefits.

49 (Continued)



June 30, 2013

Funding and Annual Cost

Under State law, covered employees are required to contribute 6.75% (7.50% for police and fire personnel) of their annual covered payroll and the Borough is now required to contribute a flat rate of 22%. In accordance with the provisions of GASB Statement No. 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, the Borough has recorded the State PERS on-behalf payment in the amount of $8,964,284 as revenue and expenditures/expenses. However, because the Borough is not statutorily obligated for these payments, this amount is excluded from pension and other postemployment benefit (OPEB) cost below. The Borough’s contributions for 2013 were determined as part of the June 30, 2010 actuarial valuation and are as follows:

Annual Annual pension OPEB

Year ended June 30 cost cost Total 2013 $ 5,933,162 7,565,242 13,498,404 2012 6,040,288 7,355,511 13,395,799 2011 4,732,870 7,402,695 12,135,565

The Borough’s contributions to PERS for the years ended June 30, 2013, 2012, and 2011 was equal to the required contributions for each year.

(b) Alaska Public Employees’ Tier IV Defined Contribution Retirement Plan

During fiscal year 2007, the State introduced the Public Employees’ Tier IV Defined Contribution Retirement Plan. This plan is a hybrid plan that includes the defined contribution retirement account and benefits that are traditionally associated with defined benefit retirement plans, such as occupational death and disability benefits. These plans are intended to qualify under the Internal Revenue Code §401(a) and 414(k). Also included in the plan are a retiree medical insurance plan and a separate Health Reimbursement Arrangement (HRA) account that will help retired members pay medical premiums and other eligible medical expenses not covered by the medical plan. This plan is for employees of participating employers who enter service on or after July 1, 2006 and meet the participant criteria. For the year ended June 30, 2013, the Borough contributed $111,956 for retirement and retiree medical and it contributed $678,534 for the health reimbursement arrangement and death/disability on behalf of its employees.

50 (Continued)



June 30, 2013

(9) Employee Savings Plans

(a) Employee Thrift Plan

The Borough has a defined contribution Employee Thrift Plan covering all Borough and School District employees. This plan is exempt from income tax under Internal Revenue Code Section 401(a). Benefit and contribution provisions are established by the Borough and may be amended only by the Borough. In accordance with this plan document, Borough employees that meet eligibility criteria and decide to participate in the plan must make a mandatory 4% before-tax contribution and may make voluntary after-tax contributions up to 10% of annual compensation. Permanent employees who are at least 18 and have completed 90 days of employment are eligible to participate. Participants are immediately 100% vested in their employee contributions plus the actual earnings thereon. The Borough is the administrator of the plan.

(b) Deferred Compensation Plan

The Borough has a deferred compensation plan created and amended in accordance with Internal Revenue Code Section 457. This plan is available to all Borough employees who have completed 30 days of service. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. The Borough is the administrator of the plan.

All amounts deferred under this plan are held in a trust that was established for the exclusive benefit of plan participants.

The Borough believes that the plan does not meet the reporting criteria for inclusion as a fiduciary fund.

(10) Risk Management and Self-Insurance

The Borough is self-insured for various risks with coverage in excess thereof provided by private carriers. The Borough retains risk of loss for up to a maximum of $250,000 for general, auto, and professional liability claims, $500,000 for each property damage claim, and $1,000,000 lifetime per individual for health benefit claims. Settled claims have not exceeded commercial coverage in any of the past three fiscal years.

51 (Continued)



June 30, 2013

The self-insurance program is accounted for primarily in the General Fund. Health benefit and general liability expenditures are accrued in the government-wide statements, including estimates of losses incurred but not reported based on historical experience adjusted for current trends. Other losses incurred but not reported are not material. In addition, the Borough has designated $5,500,000 of the unreserved fund balance in the General Fund to cover self-insured retention in the event of multiple losses. Changes in the balances for claims liabilities for the years are as follows:

2013 2012

Claims liabilities, July 1 $ 2,385,000 1,160,000 Incurred claims 17,678,354 16,842,190 Claims payments (18,713,354) (15,617,190)

Claims liabilities, June 30 $ 1,350,000 2,385,000

(11) Commitments and Contingent Liabilities

(a) Litigation

There are various lawsuits pending in courts within the State to which the Borough is a party. In the opinion of management and the Borough attorney, no litigation is pending, or to their knowledge, threatened, which is likely to result, either individually or in the aggregate, in final judgments against the Borough, which would have a material effect on its financial statements, other than noted below.

Outside counsel has been retained to provide legal representation on matters involving the annual assessed value of the Trans Alaska Pipeline System (TAPS). Beginning in 2005, the methodology used by the State to determine the assessed value of TAPS was changed and resulted in an increased assessed value. The owners of TAPS and certain municipalities other than the Borough appealed the assessment as too high and as too low, respectively. In 2012, the Superior Court ruled in favor of the Borough and the Borough levied and received $51.2 million in additional taxes and interest. If the Supreme Court overturns that judgment, the Borough may have to refund property taxes for tax years 2006 – 2013 in an amount up to $120 million. Management and legal counsel for the Borough believe that there is a high likelihood of the Supreme Court upholding the Superior Court’s judgment; however, the ultimate outcome is not presently determinable.

Outside counsel has been retained to provide legal representation on a matter involving the State of Alaska, Department of Revenue's (State) claim that the Borough was not entitled to receive approximately $60 million in property taxes related to the above TAPS matter. The State claims the Borough exceeded the State's tax cap for supplemental levies and filed a complaint for declaratory judgment requiring the Borough to pay the State $60 million. A trial is scheduled for this matter in August 2014. Management and legal counsel for the Borough believe that there is a high likelihood that the Borough will prevail in this matter, however, the ultimate outcome is not presently determinable.

(b) Environmental Contingencies

In October 2012, the North Slope Borough was notified by the Environmental Protection Agency about contamination at an industrial site (South Pad) in Barrow, Alaska. Preliminary testing of facilities, materials and soils located on the site has been accomplished, and the Borough is now

52 (Continued)



June 30, 2013

working with qualified vendors to develop mitigation plans for any identified areas of contamination. Draft mitigation plans will then be submitted to the Environmental Protection Agency for review and approval, after which the Borough will contract with qualified vendors to complete work required under the plans. As of the date of this report, management and legal counsel for the Borough are unable to accurately determine the scope of the contamination and the associated cost of any required remediation efforts. On November 5, 2012, the Borough Assembly approved a $1 million appropriation for preliminary cleanup work and that work is ongoing. Additionally, in FY14, the Borough voters approved an additional $2,500,000 in capital funds dedicated to advance mitigation efforts at South Pad.

(c) Grants

The Borough receives numerous grants, which are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursement for expenditures disallowed under the terms of the grant. Management believes that such disallowances, if any, would not be material to the financial statements.

(12) Related Parties

In the normal course of business, the Borough may contract for goods or services from vendors whose shareholders, officers, or employees may also be associated with the Borough as an official, assembly member, or employee. Such purchases during 2013 in aggregate was approximately $91 million. Additionally, the aggregate balance of amounts payable to the associated parties during 2013 was $8,244,241.

(13) Subsequent Events

(a) Sale of General Obligation Bonds

In October 2013, the Borough issued $100,775,000 of general obligation bonds to finance capital improvements. These bonds consisted of current interest term bonds maturing in ten installments as follows:

Principal Interest amounts rate

Maturity dates, June 30: 2014 $ 56,780,000 1.00 % 2015 21,115,000 3.00 2016 4,210,000 2.00 2017 4,290,000 2.00 2018 4,380,000 2.25 2019 4,475,000 5.00 2020 1,280,000 5.00 2021 1,345,000 5.00 2022 1,415,000 5.00 2023 1,485,000 5.00

53

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)


Budgetary Comparison Schedule – General Fund


Variance withfinal budget –

Budget Budget positiveoriginal final Actual (negative)

Revenues:Property taxes $ 323,177,334 323,177,334 331,616,907 8,439,573 Intergovernmental 14,137,986 45,870,500 30,159,494 (15,711,006)Charges for services 8,486,494 5,826,705 7,674,184 1,847,479 Investment earnings 10,500,000 10,532,450 898,414 (9,634,036)State gas production tax credit - - 12,785,605 12,785,605Economic impact assistance 5,000,000 5,000,000 5,000,000 -Other revenues - 26,329,200 4,629,079 (21,700,121)

Total revenues 361,301,814 416,736,189 392,763,683 (23,972,506)

Expenditures:Current:

General government 55,453,052 90,836,477 59,583,559 (31,252,918)Public works 60,958,256 67,057,166 69,369,354 2,312,188 Public safety 25,454,009 28,637,361 26,487,760 (2,149,601)Health and social services 23,966,672 27,572,474 25,525,767 (2,046,707)Wildlife management 4,115,081 15,961,263 7,824,154 (8,137,109)Primary and secondary education 32,125,626 32,125,626 35,155,086 3,029,460 Higher education 10,031,393 10,031,393 11,946,284 1,914,891

Debt service:Principal retirement 116,914,168 99,668,583 115,993,897 16,325,314Interest 35,676,555 37,984,195 35,395,733 (2,588,462)

Total expenditures 364,694,812 409,874,538 387,281,594 (22,592,944)Excess (deficiency) of revenues

over expenditures (3,392,998) 6,861,651 5,482,089 (1,379,562)

Other financing sources (uses):Transfers in from other governmental funds 16,288,020 25,304,983 41,963,961 16,658,978Transfers out to other governmental funds - - (40,483,253) (40,483,253)Transfer out to enterprise funds (12,895,022) - (12,895,022) (12,895,022)Proceeds from insurance - - 267,918 267,918 Appropriation of fund balance - 13,067,636 - (13,067,636)

Total other financing sources (uses), net 3,392,998 38,372,619 (11,146,396) (49,519,015)

Net change in fund balance - 45,234,270 (5,664,307) (50,898,577)Fund balance, beginning of year 161,564,897 132,861,339 161,564,897 28,703,558

Fund balance, end of year $ 161,564,897 178,095,609 155,900,590 (22,195,019)

See accompanying independent auditors' report.

54

SUPPLEMENTARY INFORMATION


Nonmajor Governmental Funds

June 30, 2013

Special Revenue – See special revenue section of report.

Capital Projects – See capital projects section of report.

Permanent Fund

Museum Endowment Fund -Assets in this fund may be used at the discretion of the Hans Van Der Laan BrooksRange Library. Income derived from the assets of the Museum Endowment Fund is to be transferred to theMuseum Special Revenue Fund.

55

NORTH SLOPE BOROUGH, ALASKANonmajor Governmental Funds

Combining Balance SheetJune 30, 2013

Specialrevenue funds

Capitalprojects funds

PermanentFund Museum

Endowment

Totalnonmajor

governmentalfunds

AssetsCash and investments with central treasury $ 11,343,847 214,252,223 15,795 225,611,865Accounts receivable:

Intergovernmental receivable - 9,231,732 - 9,231,732Prepaids and deposits - 35,929 - 35,929

Total $ 11,343,847 223,519,884 15,795 234,879,526

Liabilities and Fund BalancesLiabilities:

Accounts payable $ 6,593 8,462,248 - 8,468,841Unearned intergovernmental revenue - 39,747 - 39,747Due to other funds 1,215,244 - - 1,215,244

Total liabilities 1,221,837 8,501,995 - 9,723,832Fund balances:

Nonspendable:Museum endowment - - 15,795 15,795

Restricted for:Authorized projects - 215,017,889 - 215,017,889

Committed to:Museum operations 76,740 - - 76,740Loans 6,092,323 - - 6,092,323Grants 174,885 - - 174,885Energy program 3,697,733 - - 3,697,733Public safety 80,329 - - 80,329

Total fund balances 10,122,010 215,017,889 15,795 225,155,694Total liabilities and fund balances $ 11,343,847 223,519,884 15,795 234,879,526


56

NORTH SLOPE BOROUGH, ALASKANonmajor Governmental Funds

Statement of Revenues, Expenditures, and Changes in Fund BalancesYear ended June 30, 2013

Specialrevenue funds

Capitalprojects funds

PermanentFund Museum

Endowment

Totalnonmajor

governmentalfunds

Revenues:Intergovernmental $ - 21,971,502 - 21,971,502Investment earnings 585 - - 585Other 274,716 - - 274,716

Total revenues 275,301 21,971,502 - 22,246,803Expenditures:

Contractual and professional fees 525,661 - - 525,661Other operating expenses 1,314,700 - - 1,314,700Capital projects - 101,349,065 - 101,349,065Bond issuance costs - 761,159 - 761,159

Total expenditures 1,840,361 102,110,224 - 103,950,585Deficiency of revenues over expenditures (1,565,060) (80,138,722) - (81,703,782)

Other financing sources (uses):Transfers in from other governmental funds - 30,838,000 - 30,838,000Transfers out to other governmental funds - (24,648,000) - (24,648,000)General obligation bonds issued - 92,155,000 - 92,155,000Premium on issuance of debt - 4,096,158 - 4,096,158Insurance proceeds - 1,473,600 - 1,473,600

Total other financing sources (uses) - 103,914,758 - 103,914,758Net change in fund balances (1,565,060) 23,776,036 - 22,210,976

Fund balances, beginning of year 11,687,070 191,241,853 15,795 202,944,718Fund balances, end of year $ 10,122,010 215,017,889 15,795 225,155,694


57


Special Revenue Funds

June 30, 2013

Special Revenue Funds are used to account for specific revenue sources, which are designated for specifiedpurposes.

Museum – This fund accounts for donations received from private organizations, which are restricted for thepurchase of artifacts and exhibit construction for the museum.

RELI Loan Program – This fund accounts for interest free loans made to homeowners for residential plumbingimprovements, bedroom additions, and furnace upgrades.

Autaaqtuq – This fund accounts for donations from private organizations, which are restricted for the purposeof providing grants to programs, schools, and nonprofit organizations for the improvement of health, education,training, and the workplace skills of Borough's residents.

Walakpa Lease – This fund accounts for lease income from certain lands in the Walakpa and Barrow gas fields,which are committed to the purpose of subsidizing the delivery of energy to the Borough communities.

Forfeiture – This fund accounts for amounts received through court order relating to the seizure of assets,which were either utilized in, or represented profits from, illicit or illegal activities. The amounts are thenutilized for activities that are related to the investigation of crimes involving controlled substances.

58

NORTH SLOPE BOROUGH, ALASKASpecial Revenue Funds


MuseumRELI Loan

ProgramAutaaqtuq

FundWalakpa

LeaseForfeiture

Fund Total

AssetsCash and investments with central treasury $ 76,740 7,307,567 174,885 3,697,733 86,922 11,343,847

Total assets $ 76,740 7,307,567 174,885 3,697,733 86,922 11,343,847

Liabilities and Fund Balances

Liabilities:Accounts payable $ - - - - 6,593 6,593Due to other funds - 1,215,244 - - - 1,215,244

Total liabilities - 1,215,244 - - 6,593 1,221,837

Fund balances:Committed to:

Museum operations 76,740 - - - - 76,740Loans - 6,092,323 - - - 6,092,323Grants - - 174,885 - - 174,885Energy program - - - 3,697,733 - 3,697,733Public safety - - - - 80,329 80,329

Total fund balances 76,740 6,092,323 174,885 3,697,733 80,329 10,122,010Total liabilities and fundbalances $ 76,740 7,307,567 174,885 3,697,733 86,922 11,343,847


59

NORTH SLOPE BOROUGH, ALASKASpecial Revenue Funds

Combining Statement of Revenues, Expenditures, and Changes in Fund BalancesYear ended June 30, 2013

MuseumRELI Loan

ProgramAutaaqtuq

FundWalakpa

LeaseForfeiture

Fund Total

Revenues:Investment earnings $ - - - 585 - 585Other 8,886 48,625 185,327 - 31,878 274,716

Total revenues 8,886 48,625 185,327 585 31,878 275,301Expenditures:

Contractual and professional fees - - 525,661 - - 525,661Other operating expenses - 1,257,898 - - 56,802 1,314,700

Total expenditures - 1,257,898 525,661 - 56,802 1,840,361Excess (deficiency) of revenues over expenditures 8,886 (1,209,273) (340,334) 585 (24,924) (1,565,060)

Fund balances, beginning of year 67,854 7,301,596 515,219 3,697,148 105,253 11,687,070Fund balances, end of year $ 76,740 6,092,323 174,885 3,697,733 80,329 10,122,010


60


Capital Projects Funds

June 30, 2013

The Capital Projects Funds account for the receipt and disbursement of moneys used for the acquisition orconstruction of capital facilities other than those acquired or constructed by the Enterprise Funds. These CapitalProjects Funds are as follows:

Education and Service Center Facilities Fund

Public Roads, Streets, Watercourse, and Flood Control Facilities Fund

Public Housing Fund

Water Facilities Fund

Sewage Treatment Disposal Facilities Fund

Airport and Airport Terminal Facilities Fund

Urban Development Projects Fund

Light, Power, and Heating Systems Fund

Public Safety Facilities Fund

Sanitary Facilities Fund

Industrial Parks Fund

Communications Fund

General Capital Projects Fund

Health Facilities Fund

Library/Cultural Facilities Fund

Administration Facilities Fund

61

NORTH SLOPE BOROUGH, ALASKACapital Projects Funds


Educationand Service

CenterFacilities

Fund

Public Roads,Streets,

Watercourse,and FloodControlFacilities

Fund

PublicHousing

FundAssets

Cash and investments with central treasury $ 15,961,300 25,610,832 1,220,622Accounts receivable:

Intergovernmental - 2,226,096 288,913Prepaids and deposits 35,929 - -

Total $ 15,997,229 27,836,928 1,509,535


Accounts payable $ 1,572,188 1,077,864 -Intergovernmental - - -

Total liabilities 1,572,188 1,077,864 -Fund balances:

Restricted for authorized projects 14,425,041 26,759,064 1,509,535Total fund balances 14,425,041 26,759,064 1,509,535Total liabilities and fund balances $ 15,997,229 27,836,928 1,509,535


62

WaterFacilities

Fund

SewageTreatmentDisposalFacilities

Fund

Airport andAirport

TerminalFacilities

Fund

UrbanDevelopment

ProjectsFund

Light, Power,and Heating

SystemsFund

Public SafetyFacilities Fund

SanitaryFacilities Fund

34,405,857 5,661,801 3,559,874 53,769 28,628,337 21,290,973 9,936,802

5,378 - 6,192,390 - 71,084 35,962 -- - - - - - -

34,411,235 5,661,801 9,752,264 53,769 28,699,421 21,326,935 9,936,802

3,292,981 12,818 212,272 - 721,691 25,447 206,385- - 1,902 - 37,845 - -

3,292,981 12,818 214,174 - 759,536 25,447 206,385

31,118,254 5,648,983 9,538,090 53,769 27,939,885 21,301,488 9,730,41731,118,254 5,648,983 9,538,090 53,769 27,939,885 21,301,488 9,730,41734,411,235 5,661,801 9,752,264 53,769 28,699,421 21,326,935 9,936,802

(Continued)

63



IndustrialParks Fund

CommunicationsFund

General CapitalProjects

AssetsCash and investments with central treasury 74,211 13,999,830 45,546,608Accounts receivable:

Intergovernmental - - 207,319Prepaids and deposits - - -

Total 74,211 13,999,830 45,753,927


Accounts payable - 55,190 1,116,199Intergovernmental - - -

Total liabilities - 55,190 1,116,199Fund balances:

Restricted for authorized projects 74,211 13,944,640 44,637,728Total fund balances 74,211 13,944,640 44,637,728Total liabilities and fund balances 74,211 13,999,830 45,753,927


64

HealthFacilities Fund

Library/CulturalFacilities Fund

AdministrationFacilities Total

2,694,078 2,308,454 3,298,875 214,252,223

204,590 - - 9,231,732- - - 35,929

2,898,668 2,308,454 3,298,875 223,519,884

124,988 25,114 19,111 8,462,248- - - 39,747

124,988 25,114 19,111 8,501,995

2,773,680 2,283,340 3,279,764 215,017,8892,773,680 2,283,340 3,279,764 215,017,8892,898,668 2,308,454 3,298,875 223,519,884

65



Educationand Service

CenterFacilities

Fund

Public Roads,Streets,

Watercourse,and FloodControlFacilities

Fund

PublicHousing

FundRevenues:

Intergovernmental $ - 3,555,750 773,979Total revenues - 3,555,750 773,979

Expenditures:Capital projects 10,778,337 5,812,603 649,295Bond issuance costs 106,063 74,801 -

Total expenditures 10,884,400 5,887,404 649,295Excess (deficiency) of revenues over expenditures (10,884,400) (2,331,654) 124,684

Other financing sources (uses):Transfers in:

General fund - 1,364,000 -Transfers out:

General fund - (364,000) -General obligation bonds issued 12,841,286 9,056,262 -Premium on issuance of debt 570,777 402,538 -Insurance proceeds - - 1,473,600

Total other financing sources (uses) 13,412,063 10,458,800 1,473,600

Net change in fund balances 2,527,663 8,127,146 1,598,284Fund balances, beginning of year 11,897,378 18,631,918 (88,749)Fund balances, end of year $ 14,425,041 26,759,064 1,509,535


66

WaterFacilities

Fund

SewageTreatmentDisposalFacilities

Fund

Airport andAirport

TerminalFacilities

Fund

UrbanDevelopment

ProjectsFund

Light, Power,and Heating

SystemsFund

Public SafetyFacilities Fund

- - 15,065,131 - 856,031 108,097- - 15,065,131 - 856,031 108,097

18,185,292 1,601,113 16,611,227 - 16,340,307 3,944,47350,983 14,396 34,722 - 126,764 127,043

18,236,275 1,615,509 16,645,949 - 16,467,071 4,071,516(18,236,275) (1,615,509) (1,580,818) - (15,611,040) (3,963,419)

- 308,000 - - 2,277,000 11,444,000

- - - - (2,127,000) (11,094,000)6,172,619 1,742,925 4,203,866 - 15,347,586 15,381,363

274,364 77,471 186,856 - 682,178 683,680- - - - - -

6,446,983 2,128,396 4,390,722 - 16,179,764 16,415,043

(11,789,292) 512,887 2,809,904 - 568,724 12,451,62442,907,546 5,136,096 6,728,186 53,769 27,371,161 8,849,86431,118,254 5,648,983 9,538,090 53,769 27,939,885 21,301,488

(Continued)

67



SanitaryFacilities Fund

IndustrialParks Fund

CommunicationsFund

Revenues:Intergovernmental - - -

Total revenues - - -Expenditures:

Capital projects 1,173,719 - 389,158Bond issuance costs - - 8,824

Total expenditures 1,173,719 - 397,982Excess (deficiency) of revenues over expenditures (1,173,719) - (397,982)

Other financing sources (uses):Transfers in:

General fund 2,000,000 - -Transfers out:

General fund - - -General obligation bonds issued - - 1,068,338Premium on issuance of debt - - 47,486Insurance proceeds - - -

Total other financing sources (uses) 2,000,000 - 1,115,824

Net change in fund balances 826,281 - 717,842Fund balances, beginning of year 8,904,136 74,211 13,226,798Fund balances, end of year 9,730,417 74,211 13,944,640


68

General CapitalProjects

HealthFacilities Fund

Library/CulturalFacilities Fund

AdministrationFacilities Total

97,249 1,266,468 248,797 - 21,971,50297,249 1,266,468 248,797 - 21,971,502

22,442,807 2,537,274 305,592 577,868 101,349,065183,973 14,643 - 18,947 761,159

22,626,780 2,551,917 305,592 596,815 102,110,224(22,529,531) (1,285,449) (56,795) (596,815) (80,138,722)

12,553,000 110,000 - 782,000 30,838,000

(10,553,000) (110,000) - (400,000) (24,648,000)22,273,929 1,772,843 - 2,293,983 92,155,000

990,044 78,800 - 101,964 4,096,158- - - - 1,473,600

25,263,973 1,851,643 - 2,777,947 103,914,758

2,734,442 566,194 (56,795) 2,181,132 23,776,03641,903,286 2,207,486 2,340,135 1,098,632 191,241,85344,637,728 2,773,680 2,283,340 3,279,764 215,017,889

69


Nonmajor Enterprise Funds

June 30, 2013

The Enterprise Funds, which account for all activities necessary for the operation of each entity, are financedand operated in a manner similar to private business enterprise. These Nonmajor Enterprise Funds are:

Service Area 10 Fund

Prudhoe Bay solid waste disposal and treatment facility

Home Assistance Loan Fund

Loan fund for down payments on residential property

70

NORTH SLOPE BOROUGH, ALASKANonmajor Enterprise Funds

Combining Statement of Net PositionJune 30, 2013

HomeAssistance

LoanServiceArea 10 Total

AssetsCurrent assets:

Cash and investments with central treasury $ 1,109,672 20,274,074 21,383,746Accounts receivable, net of allowance for uncollectibleaccounts - 2,052,458 2,052,458

Total current assets 1,109,672 22,326,532 23,436,204Capital assets:

Construction work in progress - 1,842,650 1,842,650Land, plant, and equipment in service,

net of accumulated depreciation - 4,697,712 4,697,712Total assets 1,109,672 28,866,894 29,976,566

Liabilities and Net PositionCurrent liabilities:

Accounts payable - 3,349,827 3,349,827Compensated absences - 49,512 49,512Accrued wages payable - 45,479 45,479Other liabilities - 38,282 38,282Due to other funds - 10,316,096 10,316,096

Total current liabilities - 13,799,196 13,799,196Non-current liabilities:

Accrued closure and postclosure costs - 5,165,759 5,165,759Total non-current liabilities - 5,165,759 5,165,759Total liabilities - 18,964,955 18,964,955

Net position: Net investment in capital assets - 6,540,362 6,540,362 Unrestricted 1,109,672 3,361,577 4,471,249

Total net position 1,109,672 9,901,939 11,011,611Total liabilities and net position 1,109,672 28,866,894 29,976,566


71

$

NORTH SLOPE BOROUGH, ALASKANonmajor Enterprise Funds

Combining Statement of Revenues, Expenses, and Changes in Net PositionYear ended June 30, 2013

HomeAssistance

LoanServiceArea 10 Total

Operating revenues:Service Area 10 - oilfield support services revenue $ - 24,030,572 24,030,572Home Assistance Loan - revolving

loan fund interest 656 - 656Total operating revenues 656 24,030,572 24,031,228

Operating expenses:Salaries and benefits - 954,240 954,240Contractual and professional fees - 17,817,020 17,817,020Depreciation - 478,490 478,490Closure and postclosure care costs - 794,523 794,523Other operating expenses (2,146) 1,594,616 1,592,470

Total operating expenses (2,146) 21,638,889 21,636,743Operating income 2,802 2,391,683 2,394,485

Nonoperating revenues (expenses):Intergovernmental revenues - 80,447 80,447

Change in net position 2,802 2,472,130 2,474,932Net position, beginning of year 1,106,870 7,429,809 8,536,679Net position, end of year $ 1,109,672 9,901,939 11,011,611


72


Nonmajor Enterprise FundsCombining Statement of Cash Flows

Year End June 30, 2013

HomeAssistance Service

Loan Area 10 TotalCash flows from operating activities: Cash received from customers $ 2,802 23,907,419 23,910,221 Payments to suppliers - (21,887,978) (21,887,978) Payments to employees - (836,839) (836,839)

Net cash provided by (used for) operating activities 2,802 1,182,602 1,185,404 Cash flows from capital and related financing activities:New borrowings - 10,000,000 10,000,000Purchase of capital assets - (1,256,769) (1,256,769)

Net cash used for capital and related financing activities - 8,743,231 8,743,231

Net increase in cash and cash equivalents 2,802 9,925,833 9,928,635 Beginning cash and cash equivalents 1,106,870 10,348,241 11,455,111Ending cash and cash equivalents $ 1,109,672 20,274,074 21,383,746

Reconciliation of operating income (loss) to net cash provided by (used for) operating activities: Operating income (loss) $ 2,802 2,391,683 2,394,485 Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation - 478,490 478,490 Bad debt expense - - - Intergovernmental revenue - 80,447 80,447 Changes in assets and liabilities that provided (used) cash: Accounts receivable - (123,153) (123,153) Accounts payable - (2,476,342) (2,476,342) Accrued payroll and compensated absences - 36,954 36,954 Accrued closure and postclosure care costs - 794,523 794,523 Net cash provided by (used for) operating activities $ 2,802 1,182,602 1,185,404

Noncash capital and related financing activity: Capital assets financed through accounts payable and

accumulated interest including due to other funds 765,370 765,370


73

STATISTICAL SECTION (UNAUDITED)

Exhibit A-1NORTH SLOPE BOROUGH, ALASKA

Statistical Section

This part of the North Slope Borough’s comprehensive annual financialreport presents detailed information as a context for understanding what the

information in the financial statements, note disclosures, and requiredsupplementary information says about the Borough’s overall financial health.

Contents Pages

Financial Trends:These schedules contain trend information to help the reader understandhow the Borough’s financial performance and well-being have changed over time. 75 – 78

Revenue Capacity:These schedules contain information to help the reader assess the Borough’smost significant local revenue source, the property tax. 79 – 84

Debt Capacity:These schedules present information to help the reader assess the affordability ofthe Borough’ s current levels of outstanding debt and the Borough’s ability toissue additional debt in the future. 85 – 89

Demographic and Economic Information:These schedules offer demographic and economic indicators to help the readerunderstand the environment within which the Borough’s financial activities take place. 90 – 91

Operating Information:These schedules contain service and infrastructure data to help the readerunderstand how the information in the Borough’s financial report relates tothe services the Borough provides and the activities it performs. 92 – 94

Sources: Unless otherwise noted, the information in these schedules is derived fromthe comprehensive annual financial reports (CAFR) for the relevant year. The Borough implemented GASB Statement 34 in the fiscal year ended June 30, 2002; schedules presenting Borough-wide information include information beginning in that year.

74

FINANCIAL TRENDS

Exhibit B-1NORTH SLOPE BOROUGH, ALASKA

Net Position by Component

Last Eight Fiscal Years(accrual basis of accounting)

2006 2007 2008 2009 2010 2011 2012 2013Governmental activities:

Net investment in capital assets $ 659,580,307 951,967,630 1,042,943,709 1,066,332,197 1,096,242,857 1,183,978,755 1,232,329,156 1,277,311,066Restricted 483,087,216 543,913,229 462,158,849 364,583,487 394,041,935 463,186,129 441,675,669 489,268,426Unrestricted 267,828,924 20,184,207 (14,582,068) (3,364,797) 26,557,935 32,421,090 101,662,489 128,628,500

Total governmental activities netposition $ 1,410,496,447 1,516,065,066 1,490,520,490 1,427,550,887 1,516,842,727 1,679,585,974 1,775,667,314 1,895,207,992

Business-type activities:Net investment in capital assets $ 61,654,370 58,379,524 58,614,045 72,904,018 68,936,131 65,233,553 308,034,242 309,389,581Unrestricted 2,099,435 4,541,761 2,321,914 85,578 375,128 (339,880) 1,488,631 2,025,539

Total business-type activities netposition $ 63,753,805 62,921,285 60,935,959 72,989,596 69,311,259 64,893,673 309,522,873 311,415,120

Borough-wide:Net investment in capital assets $ 721,234,677 1,010,347,154 1,101,557,754 1,139,236,215 1,165,178,988 1,249,212,308 1,540,363,398 1,586,700,647Restricted 483,087,216 543,913,229 462,158,849 364,583,487 394,041,935 463,186,129 441,675,669 489,268,426Unrestricted 269,928,359 24,725,968 (12,260,154) (3,279,219) 26,933,063 32,081,210 103,151,120 130,654,039

Total Borough-wide net position $ 1,474,250,252 1,578,986,351 1,551,456,449 1,500,540,483 1,586,153,986 1,744,479,647 2,085,190,187 2,206,623,112

75


Changes in Net Position

Last Eight Fiscal Years(accrual basis of accounting)

2006 2007 2008 2009 2010 2011 2012 2013Expenses:

Primary government:Governmental activities:

General government $ 37,021,906 41,740,931 38,243,959 50,489,409 51,228,661 68,612,945 73,647,851 67,472,759 Public works 68,566,382 86,591,126 22,292,972 25,365,984 106,336,977 103,456,114 106,341,341 127,446,812 Public safety 17,494,957 20,049,567 85,487,557 96,435,093 24,251,433 27,593,158 29,781,325 31,177,215 Health and social services 3,926,456 13,673,657 3,679,550 4,878,490 21,779,406 25,972,316 26,747,391 27,165,148 Wildlife management 12,778,518 3,902,951 16,669,761 18,947,397 4,844,964 5,997,605 6,172,284 7,999,441 Primary and secondary education 30,541,574 32,143,232 31,695,358 35,892,319 35,673,749 46,470,371 42,250,162 42,947,630 Higher education 6,498,668 6,047,517 6,485,427 7,402,035 8,499,972 9,078,253 8,929,228 10,844,513 Interest on long-term debt 32,668,222 29,189,484 26,850,112 25,135,677 25,536,682 22,803,331 21,138,351 17,854,348

Total governmental activities expenses 209,496,683 233,338,465 231,404,696 264,546,404 278,151,844 309,984,093 315,007,933 332,907,866 Business-type activities:

Power and Light 15,260,393 16,396,398 20,170,704 22,571,679 20,228,358 21,537,042 25,914,894 27,220,964 Service Area 10 6,039,261 9,046,057 12,372,320 15,895,602 20,021,898 21,748,609 25,266,587 21,638,889 Home Assistance Loan 87,766 606 - - - - (3,869) (2,146)Real Property Management - 38,968 183,652 335,450 270,766 266,663 370,344 358,983

Total business-type activities expenses 21,387,420 25,482,029 32,726,676 38,802,731 40,521,022 43,552,314 51,547,956 49,216,690 Total primary government expenses $ 230,884,103 258,820,494 264,131,372 303,349,135 318,672,866 353,536,407 366,555,889 382,124,556

Program revenues:Governmental activities:

Charges for services:General government $ 1,900,232 2,544,119 3,029,207 4,855,701 2,999,599 2,967,296 3,164,892 4,371,029 Public works* 3,005,661 2,939,016 3,807,977 1,330,532 2,984,384 3,510,601 2,870,640 3,069,042 Health and social services 24,239 23,566 20,664 235,466 125,773 159,345 162,542 234,113

Operating grants and contributions 16,080,428 23,362,228 18,388,587 23,050,579 18,090,745 21,429,605 20,417,040 41,809,725 Capital grants and contributions 3,896,975 12,159,655 12,365,544 7,272,903 9,581,837 4,531,222 5,805,944 23,713,020

Total governmental activities program revenues 24,907,535 41,028,584 37,611,979 36,745,181 33,782,338 32,598,069 32,421,058 73,196,929 Business-type activities:

Charges for services:Power and Light 6,891,584 6,976,345 6,309,564 8,707,133 6,660,172 6,303,426 7,946,206 8,702,015 Service Area 10 5,748,681 11,385,462 12,370,634 15,239,840 18,366,406 21,019,673 27,192,858 24,030,572 Home Assistance Loan 173 7 6,961 14,344 12,538 5,754 1,381 656 Real Property Management 85,063 204,059 267,721 1,045,064 1,491,844 1,045,295 1,276,598 1,311,548

Operating grants and contributions - - - - - - 421,362 603,499 Total business-type activities program revenues 12,725,501 18,565,873 18,954,880 25,006,381 26,530,960 28,374,148 36,838,405 34,648,290 Total primary government program revenues $ 37,633,036 59,594,457 56,566,859 61,751,562 60,313,298 60,972,217 69,259,463 107,845,219

Net expense:Governmental activities $ (184,589,148) (192,309,881) (193,792,717) (227,801,223) (244,369,506) (277,386,024) (282,586,875) (259,710,937)Business-type activities (8,661,919) (6,916,156) (13,771,796) (13,796,350) (13,990,062) (15,178,166) (14,709,551) (14,568,400)

Total primary government net expense $ (193,251,067) (199,226,037) (207,564,513) (241,597,573) (258,359,568) (292,564,190) (297,296,426) (274,279,337)General revenues and other changes in net position:

Property taxes $ 198,391,387 203,217,204 212,964,677 243,563,335 275,655,056 304,184,865 317,906,077 328,846,618 Property tax judgment - - - - - 34,767,484 51,184,896 -Grants and entitlements not restricted to specificprograms 1,810,438 2,195,814 634,466 1,341,431 1,022,230 1,025,675 1,162,044 1,135,374 Loss (gain) on sale of capital asset (1,611,927) - - - - - - -Payment in lieu of taxes 4,400,000 5,000,000 - 5,000,000 4,950,000 5,000,000 5,000,000 5,000,000 Proceeds from settlement 62,301 3,083 - - - - - -Investment earnings 51,741,463 103,357,349 (44,462,973) (65,322,433) 60,661,645 92,517,446 4,934,970 55,825,691 State gas production tax credit - - - - - - 4,884,379 -Other 1,953,303 2,137,184 10,605,023 1,550,685 1,682,329 13,363,886 6,982,889 4,903,795 Special item – donation of capital assets to TNHA - (12,267,152) - - - - - -

Extraordinary item:NPO and OPEB elimination - - - 4,474,072 - - - -Transfers (3,170,393) (5,764,982) (11,493,052) (25,775,470) (10,309,914) (10,730,085) (13,387,040) (16,459,863)

Total governmental activities 253,576,572 297,878,500 168,248,141 164,831,620 333,661,346 440,129,271 378,668,215 379,251,615 Business-type activities:

Investment earnings 250,982 318,654 293,418 74,517 1,811 30,495 642 784 Capital contributions 12,189,139 184,673 4,458,170 - - - 245,951,069 -Transfers 14,571,454 5,764,982 11,493,052 25,775,470 10,309,914 10,730,085 13,387,040 16,459,863

Total business-type activities 27,011,575 6,268,309 16,244,640 25,849,987 10,311,725 10,760,580 259,338,751 16,460,647 Total primary government $ 280,588,147 304,146,809 184,492,781 190,681,607 343,973,071 450,889,851 638,006,966 395,712,262

Change in net position:Governmental activities $ 68,987,424 105,568,619 (27,529,902) (62,969,603) 89,291,840 162,743,247 96,081,340 119,540,678 Business-type activities 6,160,517 (832,520) (1,985,326) 12,053,637 (3,678,337) (4,417,586) 244,629,200 1,892,247

Total primary government $ 75,147,941 104,736,099 (29,515,228) (50,915,966) 85,613,503 158,325,661 340,710,540 121,432,925

76


Fund Balances, Governmental Funds

Last Eight Fiscal Years(modified accrual basis of accounting)

2006 2007 2008 2009 2010 2011 2012 2013General fund (after GASB 54):

Nonspendable $ - - - - - 15,040,466 6,648,312 16,691,942 Committed - - - - - 9,200,000 9,200,000 9,200,000 Assigned - - - - - 13,252,744 11,777,445 18,426,205 Unassigned - - - - - 95,368,129 133,939,140 111,582,443

General fund (prior to GASB 54):Reserved 5,095,320 3,474,308 11,139,194 16,967,243 11,888,461 - - -Unreserved 53,440,286 79,660,287 67,612,616 72,709,665 85,614,848 - - -

Total general fund $ 58,535,606 83,134,595 78,751,810 89,676,908 97,503,309 132,861,339 161,564,897 155,900,590 All other governmental funds (after GASB 54):

Nonspendable $ - - - - - 15,795 15,795 339,078,320 Restricted - - - - - 694,594,576 632,938,417 365,147,050 Committed - - - - - 12,155,907 11,687,070 10,122,010 Unassigned - - - - - (177,271) (88,749) -

All other governmental funds (prior to GASB 54):Reserved 518,725,658 570,087,823 501,651,981 403,210,985 438,108,093 - - -Unreserved, reported in:

Special revenue funds 6,554,303 7,937,689 11,429,733 11,735,636 12,025,520 - - -Capital projects funds 85,837,503 87,521,014 104,663,878 95,116,486 128,845,426 - - -

Total all other governmental funds $ 611,117,464 665,546,526 617,745,592 510,063,107 578,979,039 706,589,007 644,552,533 714,347,380

Prior to June 30, 2011, the Fund Balance categories were presented as "Invested in capital net of related debt", "Unrestricted" and "Restricted".The fund balance descriptions have been revised for those years in order to comply with GASB 54.

77


Changes in Fund Balances, Governmental Funds

Last Ten Fiscal Years(modified accrual basis of accounting)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Revenues:

Property taxes $ 199,804,529 197,493,466 198,473,498 202,990,894 212,827,417 243,119,271 275,654,810 305,416,388 314,358,424 331,616,907 Intergovernmental 20,694,127 23,235,320 21,787,842 37,717,697 31,388,596 31,664,913 28,694,812 26,986,503 27,385,028 52,130,996 Charges for services 8,158,069 4,862,150 4,930,131 5,506,701 6,857,848 6,421,699 6,109,756 6,637,242 6,198,074 7,674,184 Investment earnings (loss) 19,347,688 33,966,253 40,915,700 51,536,782 43,426,868 (65,322,433) 60,661,645 92,517,446 4,934,970 55,825,691 Net increase (decrease) in the fair value of investments 56,501,541 13,581,457 14,988,908 51,820,567 (87,889,841) - - - - -State gas production tax credit - - - - - - - - 4,884,379 12,785,605 Economic impact assistance 4,400,000 4,400,000 4,400,000 5,000,000 5,000,000 5,000,000 4,950,000 5,000,000 5,000,000 5,000,000 Property tax judgment - - - - - - - 34,767,484 51,184,896 -Other 856,531 719,037 2,283,840 2,330,831 5,666,874 1,300,811 2,175,573 4,584,952 3,692,317 4,903,795

Total revenues 309,762,485 278,257,683 287,779,919 356,903,472 217,277,762 222,184,261 378,246,596 475,910,015 417,638,088 469,937,178 Expenditures:

Current:General government 43,105,518 36,366,809 34,425,841 37,380,504 39,345,956 47,374,049 49,766,313 54,974,456 66,557,116 59,583,559 Public works 31,591,728 35,410,424 36,394,099 41,457,450 45,267,537 54,636,082 59,206,566 61,089,388 66,144,353 69,369,354 Public safety 13,370,162 13,908,343 14,788,859 17,073,751 19,020,938 22,285,235 21,018,482 24,015,694 26,316,340 26,487,760 Health and social services 13,839,115 13,659,766 11,326,276 12,207,050 15,108,588 17,385,623 20,235,043 24,202,856 25,152,471 25,525,767 Wildlife management 3,703,440 3,588,362 3,874,554 3,845,456 3,623,478 4,829,192 4,795,757 5,945,335 6,093,153 7,824,154 Primary and secondary education 22,958,123 23,555,878 22,991,968 24,051,680 23,914,436 28,084,027 27,865,457 37,591,411 34,585,697 35,155,086 Higher education 7,116,608 6,816,608 6,516,608 6,516,608 6,844,801 8,004,518 9,102,454 9,680,737 10,031,001 11,946,284

Debt service:Principal retirement 88,389,230 60,852,889 63,682,384 68,843,158 65,843,946 83,938,980 83,005,986 95,012,800 105,869,836 115,993,897 Interest 54,984,326 54,359,431 48,842,425 43,695,809 42,069,250 24,258,849 44,199,406 43,360,783 40,347,523 35,395,733 Issuance costs - - - - - 519,134 793,837 955,142 653,472 761,159

Capital projects 43,161,635 55,661,408 54,033,520 58,319,789 56,565,862 61,656,270 57,715,292 68,916,346 147,775,951 101,349,065 Special revenue costs - - - - - 18,080 251,824 231,732 723,973 1,840,361

Total expenditures 322,219,885 304,179,918 296,876,534 313,391,255 317,604,792 352,990,039 377,956,417 425,976,680 530,250,886 491,232,179 Excess (deficiency) of revenues

over (under) expenditures (12,457,400) (25,922,235) (9,096,615) 43,512,217 (100,327,030) (130,805,778) 290,179 49,933,335 (112,612,798) (21,295,001)Other financing sources (uses):

Transfers in from other governmental funds 29,094,355 32,961,984 33,712,841 42,751,739 53,158,348 57,227,026 27,065,986 30,147,419 43,618,020 82,447,214 Transfers in from component units - - - - - - 768,911 - - -Transfers out to other governmental funds (29,094,355) (32,961,984) (33,712,841) (42,751,739) (53,158,348) (57,227,026) (27,065,986) (30,147,419) (43,618,020) (82,447,214)Transfers in from enterprise funds - - - - - - - 261,324 319,150 327,887 Transfer out to enterprise funds (411,925) (1,105,769) (2,382,315) (5,580,309) (7,034,882) (10,961,728) (10,440,302) (10,116,412) (12,671,945) (12,895,022)Proceeds from loans - - - - - - - - - -Issuance of debt, net 73,725,000 75,811,000 30,609,566 41,063,000 55,171,773 86,500,000 83,825,000 116,130,000 74,790,000 92,155,000 Payment to refunded bond escrow agent - - (3,078,410) - - (42,407,067) - - -Premium on issuance of debt - - - - - 914,201 2,288,837 5,701,142 5,359,488 4,096,158

Proceeds from insurance (24,170,470) 2,732,877 2,465,400 - - - - - 11,483,189 1,741,518 Proceeds from settlement - 15,935,763 62,301 3,083 5,224 1,161 9,708 1,058,609 - -Proceeds from sale of assets 105,650 6,696,175 6,669 30,060 1,195 1,824 - - - -

Total other financing sources 49,248,255 100,070,046 27,683,211 35,515,834 48,143,310 34,048,391 76,452,154 113,034,663 79,279,882 85,425,541 Net change in fund balances $ 36,790,855 74,147,811 18,586,596 79,028,051 (52,183,720) (96,757,387) 76,742,333 162,967,998 (33,332,916) 64,130,540

Debt service as a percentage of noncapital expenditures 50.36% 44.78% 45.00% 42.51% 39.52% 35.07% 35.78% 36.31% 36.58% 36.01%

Source: North Slope Borough recordsNote: Noncapital expenditures are total expenditures less capital outlay.Public works account classification was added beginning with year-end June 30, 2005.Prior to June 30, 2005, public works was reported as municipal services and housing.Prior to June 30, 2003, expenditures for primary and secondary education and higher education were reflected as operating transfers out.Prior to June 30, 2008, the net increase (decrease) in the fair value of investments was reported separately from investment earnings (loss).

78

REVENUE CAPACITY

Exhibit C-1NORTH SLOPE BOROUGH, ALASKA

Assessed Value and Actual Value of Taxable Property

Last Ten Fiscal Years(modified accrual basis of accounting)

Appraised Total taxablevalue of assessed value Plus

Fiscal year land and Less of land and personal Plus oil and Total assessed Total directended June 30 Land Improvements improvements exemptions improvements property gas property property value tax rate

2004 136,487,168 690,198,210 826,685,378 685,127,327 141,558,051 105,024,580 10,341,992,820 10,588,575,451 1.865 2005 137,051,168 671,373,210 808,424,378 680,172,427 128,251,951 64,774,030 10,132,394,975 10,325,420,956 1.903 2006 137,051,168 660,833,310 797,884,478 673,182,227 124,702,251 72,700,840 10,452,842,364 10,650,245,455 1.905 2007 136,452,968 651,318,610 787,771,578 667,354,527 120,417,051 84,900,820 11,415,662,280 11,620,980,151 1.850 2008 136,607,268 645,752,510 782,359,778 657,763,927 124,595,851 94,297,590 12,712,957,462 12,931,850,903 1.850 2009 139,201,068 656,081,910 795,282,978 651,811,566 143,471,412 135,599,550 14,637,973,715 14,917,044,677 1.850 2010 164,396,068 713,567,010 877,963,078 680,281,993 197,681,085 136,576,820 16,113,479,700 16,447,737,605 1.850 2011 234,677,968 733,728,310 968,406,278 740,271,946 228,134,332 144,487,334 16,591,768,338 16,964,390,004 1.850 2012 221,113,327 757,978,300 979,091,627 755,233,946 223,857,681 122,525,611 17,426,327,320 17,772,710,612 1.850 2013 240,996,227 769,554,300 1,010,550,527 771,831,827 238,718,700 209,100,862 18,790,305,190 19,238,124,752 1.850

Source: Municipal Tax Assessor

Note: Property in the Borough is reassessed each year. Property is assessed at actual value; therefore, the assessed values are equal to actual value.Tax rates are per $1,000 of assessed value.

79


Property Tax Rates

Last Ten Fiscal Years(rate per $100 of assessed value)

(1) North Slope Borough General FundFiscal year Operating Debt service Total

2004 $ 0.732 1.124 1.856 2005 0.751 1.099 1.850 2006 0.809 1.094 1.903 2007 0.865 1.040 1.905 2008 0.936 0.914 1.850 2009 1.021 0.829 1.850 2010 1.001 0.849 1.850 2011 1.009 0.841 1.850 2012 1.031 0.819 1.850 2013 0.975 0.875 1.850

(1) Represents fiscal year in which taxes were assessed (January 1, due June 30).

Note: There are no overlapping governmental units.

80


Principal Taxpayers

Current Year and Nine Years Ago(modified accrual basis of accounting)

2013 2004Assessed Percentage of Assessed Percentage of

value Tax levy total tax levy value Tax levy total tax levyState assessed/received in fiscal year 2013:BP Exploration Alaska, Inc. $ 8,146,375,640 150,707,949 42.35 % $ 6,444,160,240 119,603,614 60.15 %ConocoPhillips Alaska, Inc. 4,807,872,060 88,945,633 25.00 2,803,153,710 52,026,533 26.17 Alyeska Pipeline Service Co. 3,180,102,790 58,831,902 16.53 727,885,100 13,509,547 6.80ENI US Operating 1,078,182,270 19,946,372 5.61 - - -Pioneer Natural Resources Alaska 415,192,510 7,681,061 2.16 - - -Nabors Alaska Drilling - - - 64,606,490 1,199,096 0.61Dowell Schlumberger - - - 30,185,450 560,242 0.28

Total of state assessed 17,627,725,270 326,112,917 91.65 10,069,990,990 186,899,032 94.01 Locally assessed/received in fiscal year 2013:CH2M Hill Equipment, Inc 41,273,600 763,562 0.21 - - — Ukpeagvik Inupiat Corporation 36,776,800 680,371 0.19 - - — Baker Hughes 29,563,800 546,930 0.15 - - — Halliburton Energy Services, Inc. 26,024,200 481,448 0.14 - - — I.C.E. Services 22,766,000 421,171 0.12 - - — VECO Equipment - - - 10,911,250 202,513 0.10Alaska Interstate Construction, LLC - - - 9,867,420 183,139 0.09Alascom, Inc - - - 9,391,350 174,303 0.09Peak Oilfield Services - - - 8,742,090 162,253 0.08GCI Communication Corporation - - - 5,917,000 109,820 0.06

Total of locally assessed 156,404,400 2,893,482 0.81 44,829,110 832,028 0.42$ 17,784,129,670 329,006,399 92.46 % $ 10,114,820,100 187,731,060 94.43 %

81

Exhibit C-4NORTH SLOPE BOROUGH

Property Tax Levies and Collections

Last Ten Fiscal Years

Collected within, or prior to,Taxes levied the fiscal year of the levy Collections in Total collections to date

Fiscal for the Percentage subsequent Total tax Percentageyear fiscal year Amount of levy years collections of levy 2004 $ 197,476,932 195,809,409 99.16 $ 1,667,523 197,476,932 100.00 2005 196,489,017 195,006,286 99.25 1,482,731 196,489,017 100.00 2006 202,887,176 201,418,790 99.28 1,468,386 202,887,176 100.00 2007 214,988,133 214,070,660 99.57 917,473 214,988,133 100.00 2008 239,239,242 237,751,972 99.38 1,487,270 239,239,242 100.00 2009 275,965,327 274,013,894 99.29 1,951,433 275,965,327 100.00 2010 304,283,146 303,244,097 99.66 1,039,049 304,283,146 100.00 2011 313,841,215 312,666,119 99.63 1,062,804 313,728,923 99.96 2012 328,795,146 324,722,667 98.76 4,072,479 328,795,146 100.00 2013 355,825,560 354,514,153 99.63 - 354,514,153 99.63

Note: Penalties, interest, legal fees, and receipts arising from property tax audits of prior years’ returns are not included in the tax amounts presented above.

82


Water Sold by Type of Customer

Last Ten Fiscal Years(in gallons)

Fiscal year ended June 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Type of customer:Residential 14,803,257 16,362,186 16,789,978 16,035,559 17,086,919 17,538,247 17,111,300 16,965,793 15,701,619 16,690,430Commercial 6,446,763 7,786,456 7,057,778 6,524,019 7,458,757 6,721,902 6,587,512 10,520,563 7,958,382 8,248,950

Total 21,250,020 24,148,642 23,847,756 22,559,578 24,545,676 24,260,149 23,698,812 27,486,356 23,660,001 24,939,380

Total direct rate per 1,000 gallons

Note that the gallons sold increase steadily as additional villages were added to the water utilidor.

Source: North Slope Borough, Power and Light calendar year data.

83


Water and Electric Rates


Electricity – residential Electricity –Water Villages except Nuiqsut Electricity – commercial residential Electricity – commercial

and Barrow Villages except Nuiqsut and Barrow Nuiqsut NuiqsutUtilidor

Delivered flat rate Rate per Rate per Rate per Rate per Rate per Rate per Rate per Rate per Rate perrate up to 3,000 KW hours KW hours KW hours KW hours KW hours KW hours KW hours KW hours KW hours

per gallon gallons1 0-6002 over 6013 0-1,0004 1,001-10,000 over 10,0005 All* 0-1,0004 1,001-10,000 over 10,00052004 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.15 0.20 0.30 0.35 2005 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.15 0.20 0.30 0.35 2006 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.15 0.20 0.30 0.35 2007 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.15 0.20 0.30 0.35 2008 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.15 0.20 0.30 0.35 2009 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.15 0.20 0.30 0.35 2010 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.08 0.20 0.30 0.08 2011 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.08 0.20 0.30 0.08 2012 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.08 0.20 0.30 0.08 2013 0.08 69.00 0.15 0.35 0.20 0.30 0.35 0.08 0.20 0.30 0.08

Notes: Rates are based on 5/8" meter, which is the standard household meter size. The authority charges an excess-use rate above normal demand.

1 Utilidor flat rate for seniors is $14.00 per month.2 There is a minimum charge of $15.00 for residential usage less than 100 KW hours.3 The differential for residential usage greater than 601 KW hours per month applies to all villages except Barrow.4 There is a minimum charge of $15.00 for commercial usage less than 75 KW hours.5 The differential for commercial usage greater than 1,001 KW hours per month applies to all villages except Barrow. Beginning in 2010, Nuiqsut power is produced by natural gas so the rate per kw hour was reduced.

84

DEBT CAPACITY

Exhibit D-1NORTH SLOPE BOROUGH

Ratios of Outstanding Debt by Type


Governmental activitiesGeneral Percentage of

Fiscal year obligation Capital personalended June 30 bonds leases Total income a Per capita a

2004 492,623,263 11,007,110 503,630,373 97.0 37,970 2005 507,578,692 10,134,781 517,713,473 94.0 39,517 2006 470,096,285 9,269,325 479,365,610 * 36,269 2007 440,108,127 8,350,490 448,458,617 * 31,559 2008 425,624,181 7,374,983 432,999,164 * 27,844 2009 385,785,201 6,339,309 392,124,510 * 23,731 2010 387,787,455 5,239,756 393,027,211 * 22,433 2011 408,904,655 4,072,385 412,977,040 * 23,553 2012 377,824,818 2,833,015 380,657,833 * 20,904 2013 353,985,921 1,517,202 355,503,123 * 19,283

Notes: Details regarding the borough’s outstanding debt can be found in the notes to the financial statements.

a See Exhibit E-1 for personal income and population data.* Information not available.

85

Exhibit D-2NORTH SLOPE BOROUGH

Ratios of Net General Bonded Debt Outstanding


Percentage ofGeneral actual taxable

obligation value a ofFiscal year ended June 30 bonds property Per capita b

2004 492,623,263 4.65% 37,140 2005 507,578,692 4.92% 38,744 2006 470,096,285 4.41% 35,568 2007 440,108,127 3.79% 30,972 2008 425,624,181 3.29% 27,370 2009 385,785,201 2.59% 23,347 2010 387,787,455 2.36% 22,134 2011 408,904,655 2.44% 23,321 2012 377,824,818 2.15% 20,748 2013 353,985,921 1.84% 19,201

Note: Details regarding the Borough’s outstanding debt can be found in the notes to the financial statements.a See Exhibit C-1 for property tax data.b Population data can be found in Exhibit E-1.

Deductions are allowable for resources that are restricted to repaying the principal of debt outstanding.

86

Exhibit D-3NORTH SLOPE BOROUGH, ALASKA

Governmental Activities Debt

June 30, 2013

Percentage Amountapplicable to applicable to

Debt North Slope North SlopeJurisdiction outstanding Borough Borough

Direct:North Slope Borough $ 355,503,123 100 % $ 355,503,123

Note: There are no overlapping governmental units.

87


Legal Debt Margin Information


There is no legal debt margin for municipalities in the State of Alaska.

88


Pledged Revenue Coverage


There is no nongeneral obligation debt that is secured by a pledge of a specific revenue stream.

89

DEMOGRAPHIC AND ECONOMIC INFORMATION

Exhibit E-1NORTH SLOPE BOROUGH

Demographic and Economic Statistics


Population Per capita income (3) (1) (2)

North Slope State of North Slope State of School UnemploymentYear Borough Alaska Borough Alaska enrollment (4) rate (5) 2004 13,264 655,435 $ 39,350 $ 33,761 2,065 10.2 % 2005 13,101 663,661 42,209 36,636 1,938 9.0 2006 13,217 670,053 51,957 38,138 1,941 6.7 2007 14,210 676,987 58,912 40,042 1,859 5.2 2008 15,551 679,720 64,757 44,801 1,864 4.1 2009 16,524 692,314 65,564 43,233 1,820 4.7 2010 17,520 710,231 50,475 44,174 1,816 5.9 2011 17,534 722,190 48,447 45,529 1,879 5.4 2012 18,210 732,298 * 46,778 1,893 5.3 2013 18,436 * * * 1,941 4.9

*Information not available.

Sources:(1) State of Alaska, Department of Community and Economic Development(2) State of Alaska, Department of Community and Economic Development(3) U.S. Department of commerce, Bureau of Economic Analysis(4) Alaska Department of Education and Early Development, Office of Data Management(5) Alaska Department of Labor, Employment Security Division

90

Exhibit E-2 North Slope Borough

Borough Employment By Industry (1)Last 5 Fiscal Years

Industrial 2008 2009 2010 2011 2012 2012

ClassificationAvg. Empl.

% ofTotal

Avg. Empl.

% ofTotal

Avg. Empl.

% ofTotal

Avg. Empl.

% ofTotal

Avg. Empl.

% ofTotal Rank

Natural Resource and Mining 8,314 62.9 % 8,429 62.8 % 8,445 61.1 % 8,384 60.6 % 8,449 59.8 % 1 Construction 237 1.8 % 197 1.5 % 201 1.5 % 270 2.0 % 259 1.8 % 8 Manufacturing - - % - - % - - % - - % - - % NATrade, Trans & Utilities 472 3.6 % 478 3.6 % 563 4.1 % 546 3.9 % 573 4.1 % 4 Information 35 0.3 % - - % 40 0.3 % 41 0.3 % 40 0.3 % 11Financial Activities 238 1.8 % 259 1.9 % 325 2.4 % 316 2.3 % 303 2.1 % 7 Professional & Business Services 1,186 9.0 % 1,225 9.1 % 1,206 8.7 % 1,270 9.2 % 1,446 10.2 % 3 Educational & Health Services 31 0.2 % 31 0.2 % 149 1.1 % 304 2.2 % 329 2.3 % 6 Leisure & Hospitality 575 4.4 % 550 4.1 % 540 3.9 % 541 3.9 % 560 4.0 % 5 Other Services 228 1.7 % 250 1.9 % 290 2.1 % 131 0.9 % 155 1.1 % 9 Federal Government 24 0.2 % 22 0.2 % 23 0.2 % 24 0.2 % 21 0.1 % 12State Government 65 0.5 % 66 0.5 % 66 0.5 % 65 0.5 % 67 0.5 % 10Local Government 1,810 13.7 % 1,913 14.3 % 1,968 14.2 % 1,950 14.1 % 1,928 13.6 % 2 Total Average Employment 13,215 100.0 % 13,420 100.0 % 13,816 100.0 % 13,842 100.0 % 14,130 100.0 % 13

(1) Annual average based upon quarterly Area Employment and Payroll Industry Series Reports, State of Alaska, Department of Labor and Workforce Development.

Source: State of Alaska, Department of Labor and Workforce Development, Research and Analysis Section.

91

OPERATING INFORMATION

Exhibit F-1NORTH SLOPE BOROUGH, ALASKA

Full-Time Equivalent Borough Employees by Function/Program


Function/Program 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Primary government:

General government * * 175 176 221 215 229 232 237 237Public works * * 247 275 229 283 287 292 292 291Public safety:

Fire * * 27 27 48 36 40 40 44 44Police * * 58 58 65 68 68 68 67 67Search and rescue * * 18 18 18 20 22 22 23 23Health and social services * * 132 141 115 155 160 170 175 175Wildlife management * * 16 16 20 22 23 23 23 23

Total - - 673 711 716 799 829 847 861 860

Source: Borough departmental records.* Either information is not available for this year or the records are not readily attainable.

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Operating Indicators by Function/Program


Function/Program 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Police:

Arrests 334 300 325 313 499 271 535 546 761 507 Fire:

Fire responses 77 146 171 171 250 165 140 181 134 142 Emergency responses 1,447 2,169 2,268 2,359 2,459 2,502 2,634 2,715 2,714 2,803 Aeromedical responses 254 265 318 358 254 191 243 255 213 153

Search and rescue:Medevac (# of flights) * * 284 325 245 179 230 241 138 137 Search and rescue (# of flights) * * 34 40 52 32 44 40 50 36 Training (# of flights) * * 67 25 42 13 39 105 73 153 Other – incl depart support and maintenance (# of flights) * * 85 99 141 73 50 121 88 112

Landfill:Barrow Landfill – Tons per year 311 325 341 5,896 3,339 4,000 5,800 5,831 6,917 4,894

Public works:Roads maintained-all villages (miles) * * 103 103 103 103 103 101 101 101 Water:

Water/Sewer hookups * * 2,196 2,221 2,256 2,282 911 2,202 2,219 2,418 Health and social services:

Arctic Women in Crisis (AWIC) Program:Safe Shelter placements (nights) * * 2,836 2,043 1,833 2,079 1,743 1,693 1,665 2,692 Emergency client air transportation * * 28 25 17 11 25 33 33 54 Crisis calls * * 257 265 247 261 288 319 345 521

Integrated behavioral services:Adult/Adolescent outpatient substance abuse

treatment * * 1,058 1,723 1,906 1,365 1,217 1,571 1,396 1,315 Psychiatric emergency services * * 1,809 1,738 2,565 1,820 1,577 1,098 1,404 1,495

Women, Infants & Children (WIC) Program:Contacts * * 5,362 4,980 5,551 4,870 5,428 5,288 5,556 4,351

Children’s Youth Services (CYS) Program:Placements (nights) * * 2,795 2,105 1,973 1,475 1,110 2,307 3,798 2,316

Senior citizens programs:Number of congregate meals served * * 8,138 10,041 8,694 11,166 12,577 6,560 6,873 7,544 Number of Meals on Wheels delivered * * 10,508 26,660 15,509 22,581 16,606 11,014 11,552 3,060 Total number of rides in Senior Vans * * 31,842 44,228 36,183 44,634 36,514 23,993 22,743 25,320 Assisted living: number of bed nights * * 1,979 - - 2,683 3,411 3,517 3,794 4,266

Veterinary clinic :Rabies vaccinations * * 699 807 773 816 584 500 856 747 Spays/Neuters * * 176 137 57 85 68 70 116 137 Appointments * * 1,126 750 717 606 614 300 714 855 Stray impounds * * 314 266 258 245 257 150 160 171 Animal control calls * * 1,330 1,025 773 694 637 400 403 453 Rabies testing (Arctic Fox) * * 6 19 14 3 3 4 10 1 Euthanasia * * 69 107 81 67 22 40 92 61

Community Health Aides (CHAP) Program:Clinic visits * * 12,851 11,306 12,004 12,862 14,230 14,123 13,949 13,019 Medevacs * * 480 474 483 487 620 628 534 442

Public Health Nursing (PHN) Program:Immunizations (flu, pneumovax, Td, childhood) * * 4,348 4,677 4,115 5,328 6,874 5,465 3,960 3,747 TB screenings * * 1,896 1,627 2,811 1,642 1,611 1,772 1,668 1,552 STI screenings * * 338 303 523 475 307 404 263 221 Child health screenings including EPSDT * * 660 518 364 289 70 130 252 245 Community education/classes/trainings * * 52 41 28 42 57 25 27 18

Source: North Slope Borough Department records.* Either information is not available for this year or the records are not readily attainable.

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Capital Asset Statistics by Function/Program


Function/Program 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Police:

Stations * * 8 8 8 8 8 8 8 8Patrol Units 1 * * 40 41 43 45 47 50 53 60

Fire:Stations * * 9 9 9 9 9 9 9 9Fire Trucks * * 18 18 19 19 20 21 22 23

Search and Rescue:Helicopters * * 2 2 2 2 2 2 2 2King Air plane * * 1 1 1 1 1 1 - 1Lear Jet * * 1 1 1 1 1 1 1 1

Public Works:Streets-miles * * 103 103 103 103 103 101 101 101Water line-linear feet * * 122,984 122,984 122,984 122,984 122,984 122,984 122,984 122,984

Water tank storage-gallons * *35,753,161

36,723,330 36,788,066 36,787,079 35,306,994 35,306,994 35,306,994 37,054,994Power:

Grids * * 7 7 7 7 7 7 7 7Generators * * 37 37 37 38 36 36 36 36Power Lines (miles) * * 35 35 35 35 118 118 118 118

Health and Social Services:Clinics & Shelters * * 17 17 17 17 17 17 17 17

Primary and Secondary Education:Schools * * 12 12 12 12 11 11 11 11

Source: Borough departmental records

* Either information is not available for this year or the records are not readily attainable.1 Including four-wheelers and snow machines.

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Documents

COMPREHENSIVE ANNUAL FINANCIAL REPORT · COMPREHENSIVE ANNUAL FINANCIAL REPORT Photographed by John Tidwell JULY 1, 2012 Of the NORTH SLOPE BOROUGH, ALASKA - JUNE 30, 2013. NORTH