Audit FY05-06
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VLLYUear Ended June 30, 2006PYRUust ReporMMAVAPPATCVHZEFiscal CTOHCNHJIMSNEAC OZCPAO NBenefits TIudit of NOONGYIOLAAEGARAAOHIAAMIGARSENEANCLUEYAEAMIAARPAIRisk Management and Employee CrOt on APFinancial StatementsAC MARICOPA COUNTY, ARIZONA RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUNDS Report on Audit of Financial Statements June 30, 2006 MARICOPA COUNTY RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUNDS Report on Audit of Financial Statements June 30, 2006 Table of Contents Page Independent Auditors’ Report 1 Statements of Net Assets—Internal Service Funds 2 Statements of Revenues, Expenses, and Changes in Fund Net Assets—Internal Service Funds 3 Statements of Cash Flows—Internal Service Funds 5 Notes to Financial Statements 6 STATE OF ARIZONADEBRA K. DAVENPORT, CPA WILLIAM THOMSONOFFICE OF THE AUDITOR GENERAL DEPUTY AUDITOR GENERAL AUDITOR GENERAL Independent Auditors’ Report Members of the Arizona State Legislature The Board of Supervisors of Maricopa County, Arizona We have audited the accompanying financial statements of the Maricopa County Risk Management and Employee Benefits Trust Funds as of and for the year ended June 30, 2006, as listed in the table of contents. These financial statements are the responsibility of the County’s management. Our ...
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Risk Management and Employee Benefits Trust Report on Audit of Financial Statements
MOHAVE
LA PAZ
YUMA
Fiscal Year Ended June 30, 2006
COCONINO
YAVAPAI
NAVAJO
APACHE
MARICOPA ILA COUNTY GREENLEE PINALGRAHAM
PIMA
SANTA CRUZ
COCHISE
MARICOPA COUNTY, ARIZONA RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUNDS Report on Audit of Financial Statements June 30, 2006
MARICOPA COUNTY RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUNDS Report on Audit of Financial Statements June 30, 2006
Table of Contents Independent Auditors’ Report Statements of Net AssetsInternal Service Funds Statements of Revenues, Expenses, and Changes in Fund Net AssetsInternal Service Funds Statements of Cash FlowsInternal Service Funds Notes to Financial Statements
Page 1 2 3 5 6
WILLIAM THOMSON DEPUTY AUDITOR GENERAL
STATE OF ARIZONA DEBRA K. DAVENPORT, CP OFFICE OF THE AUDITOR GENERAL AUDITOR GENERAL Independent Auditors Report Members of the Arizona State Legislature The Board of Supervisors of Maricopa County, Arizona We have audited the accompanying financial statements of the Maricopa County Risk Management and Employee Benefits Trust Funds as of and for the year ended June 30, 2006, as listed in the table of contents. These financial statements are the responsibility of the Countys management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Note 1, the Trust Funds financial statements are intended to present the financial position, and the changes in financial position and cash flows of only that portion of the governmental activities and aggregate remaining fund information of Maricopa County that is attributable to the Trust Funds. They do not purport to, and do not, present fairly the financial position of Maricopa County as of June 30, 2006, and the changes in its financial position and its cash flows, for the year then ended in conformity with U.S. generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Maricopa County Risk Management and Employee Benefits Trust Funds as of June 30, 2006, and the changes in its financial position and its cash flows, for the year then ended in conformity with U.S. generally accepted accounting principles. September 14, 2007
Debbie Davenport Auditor General
2910 NORTH 44 th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
MARICOPA COUNT RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUND Statements of Net AssetsInternal Service Funds June 30, 2006 Risk Em lo ee Mana ement Benefits
Assets Current assets: Cash and cash equivalents- Risk management Environmental insurance claims recovery Employee benefits Interest receivable Accounts receivable Prepaid insurance Total current assets Noncurrent assets: Machinery and equipment Less: accumulated depreciation Total noncurrent assets Total assets Liabilities Current liabilities: Accounts payable Employee compensation payable RBUC and IBNR claims Total current liabilities Noncurrent liabilities: RBUC and IBNR claims Total noncurrent liabilities Total liabilities Net Assets Invested in capital assets Unrestricted (deficit) Total net assets (deficit)
$ 33,830,392 825,891 194,967 1,750,717 36,601,967 86,951 64,244 22,707 36,624,674
1,413,609 128,076 23,068,119 24,609,804 32,848,274 32,848,274 57,458,078 22,707 (20,856,111) $ (20,833,404)
See accompanying notes to financial statements.
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$ 28,960,489 144,586 2,110,638 254,304 31,470,017 31,470,017
538,047 3,371,985 3,910,032 3,910,032 27,559,985 $ 27,559,985
MARICOPA COUNT RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUND Statements of Revenues, Ex enses, and Chan es in Fund Net AssetsInternal Service Funds Year Ended June 30, 2006 Risk Em lo ee Mana ement Benefits $ 22,460,153 $ 33,387,921 2,196,494 29,372 24,656,647 33,417,293 1,416,533 254,180 10,998 40,241 179,516 93,488 470,081 1,521,461 8,039,308 593,553 565,241 (66,792) 498,449 3,808,717 4,706,025 8,514,742 3,857,860 (342,501) 3,515,359 3,439,084 795,052 4,234,136 316,355 59,407 375,762 192,602 274,651 467,253
O eratin revenues: Charges for services County and employee premiums Other income Total o eratin revenues O eratin ex enses: Personal services Supplies and services Accounting and auditing fees Actuary fees Consulting and management fees Brokers' fees Claims administration service fees Legal expenses Workers' compensation taxes Claims and insurance: Auto liability claims paid Auto liability RBUC and IBNR claims decrease in estimate Total auto liabilit General liability claims paid General liability RBUC and IBNR claims increase in estimate Total general liabilit Workers' compensation claims paid Workers' compensation RBUC and IBNR claims decrease in estimate Total workers' compensatio Medical malpractice claims paid Medical malpractice RBUC and IBNR claims increase in estimate Total medical malpractice Auto physical damage claims paid Auto physical damage RBUC increase in estimate Total auto physical damage Property claims pai Property claims RBUC increase in estimate Total property Pharmacy claims paid Pharmacy IBNR claims increase in estimate Total pharmac Medical claims paid Medical RBUC and IBNR claims decrease in estimate Total medical
ee accompany ng notes to nanc a statements. 3
12,737,188 990,265 13,727,453 8,506,138 (1,522,000) 6,984,138
ont nue
RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUND Statements of Revenues, Ex enses, and Chan es in Fund Net AssetsInternal Service Funds Year Ended June 30, 2006 (Continued) Risk Em lo ee Mana ement Benefits $ 3,924,648 (188,000) 3,736,648 1,926,039 10,785 1,936,824 56,326 56,326 5,484 5,484 $ 776,128 1,566,255 547,869 31,656 745,847 1,479,157 60,767 10,360 33,860,871 28,029,101 (9,204,224) 5,388,192 1,073,671 685,209 1,073,671 685,209 (8,130,553) 6,073,401 (12,702,851) 21,486,584 $ (20,833,404) $ 27,559,985
Dental claims paid Dental IBNR claims decrease in estimate Total dental Short-term disability claims paid Short-term disability IBNR claims increase in estimate Total short-term disabilit Wellness incentives paid Total wellness External prosthetics appliances claims paid Total general medical Unemployment claims General liability insurance premiums Workers' compensation insurance premiums Crime insurance premiums Property insurance premiums Malpractice insurance premiums Stop loss insurance premiums Depreciation Total o eratin ex enses O eratin income (loss) Nono eratin revenues: Investment income Total nono eratin revenues Increase (decrease ) in net assets Total net assets (deficit), Jul 1, 2005 Total net assets (deficit), June 30, 2006
See accompanying notes to financial statements. 4
MARICOPA COUNT RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUND Statements of Cash FlowsInternal Service Funds Year Ended June 30, 2006 Risk Mana ement 22,460,153 2,196,494 (9,385,617) (12,955,987) (4,316,744) (1,396,684) (3,398,385) (15,521) 1,050,798 (2,363,108) 37,019,391 $34,656,283
Cash flows from o eratin activities: Receipts from other funds Other receipts Payments for fees, supplies, and services Payments for insurance claims Payments for insurance premiums Payments to employee Net cash provided by (used for) operating activities Cash flows from ca ital and related financin activities: Purchase of capital assets Cash flows from investin activities: Interest received on investments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, July 1, 2005 Cash and cash equivalents, June 30, 2006 Reconciliation of o eratin income (loss) to net cash rovided b (used for) o eratin activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities: Depreciation Net change in RBUC and IBNR claims, noncurrent portion Changes in assets and liabilities: Increase in: Accounts payable Employee compensation payabl RBUC and IBNR claims, current portio Decrease in: Accounts receivable Prepaid insurance Accounts payable Unearned revenue RBUC and IBNR claims, current portio Net cash provided by (used for) operating activities
$ (9,204,224) 10,360 2,507,670 295,748 19,849 2,918,172 54,040 $ (3,398,385)
See accompanying notes to financial statements.
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Em lo ee Benefits 33,998,087 948,935 (1,521,461) (27,528,850) (60,767) 5,835,944 602,696 6,438,640 22,521,849 $ 28,960,489
$ 5,388,192
610,166 919,563 (63,080) (309,947) (708,950) $ 5,835,944
MARICOPA COUNTY RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUNDS Notes to Financial Statements June 30, 2006 NOTE 1 - Summary of Significant Accounting Policies The County, in the exercise of the authority granted by Arizona Revised Statutes (A.R.S.) § 11-981, has established a trust fund and declares itself self-insured. For financial statement presentation purposes, the Self-insured Trust Fund is reported as Risk Management and Employee Benefits Trust Funds (Funds) and all monies held in these Funds are considered unrestricted. The Funds’ financial statements are prepared in conformity with U.S. generally accepted accounting principles applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). The Maricopa County Comprehensive Annual Financial Report for the year ended June 30, 2006, will report the Funds as governmental activities on the government-wide financial statements since they predominantly service the County’s governmental funds. A summary of the Funds’ more significant accounting policies follows. A. Reporting Entity The Funds are accounted for as internal service funds of Maricopa County, Arizona, under the direction of an administrator appointed by the County Board of Supervisors. In addition, the Funds are administered by no less than six joint trustees, all of whom shall be citizens of the United States of America and residents of Maricopa County. The County Board of Supervisors also appoints the trustees. However, the ultimate financial accountability for the Funds remains with the County. The County is responsible for the management and operations of the financing of the uninsured risk of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; natural disasters; and for certain health benefits (pharmacy, medical, dental, short-term disability, medical incentives, and wellness incentives) to eligible employees and their dependents. B. Fund Accounting The Funds’ accounts are maintained in accordance with the principles of fund accounting to ensure that limitations and restrictions on the Funds’ available resources are observed. The principles of fund accounting require that resources be classified for accounting and reporting purposes into funds in accordance with the activities or objectives specified for those resources. Each fund is considered a separate accounting entity, and its operations are accounted for in a separate set of self-balancing accounts that comprises its assets, liabilities, net assets, revenues, and expenses.
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MARICOPA COUNTY RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUNDS Notes to Financial Statements June 30, 2006 The Funds’ financial transactions are recorded and reported as internal service funds since their operations are financed and operated in a manner similar to private business enterprises. The intent of the County Board of Supervisors is that the costs (expenses, including depreciation) of providing goods or services to other departments within the County on a continuing basis be financed or recovered primarily through user charges. C. Basis of Presentation and Accounting The financial statements include statements of net assets; statements of revenues, expenses, and changes in fund net assets; and statements of cash flows. The statements of net assets provide information about the assets, liabilities, and net assets of the Funds at the end of the year. Assets and liabilities are classified as either current or noncurrent. Net assets are classified according to the availability of assets to satisfy the Funds’ obligations. Invested in capital assets represents the value of capital assets, net of accumulated depreciation. Unrestricted net assets represent the balance of monies held in the Funds. The statements of revenues, expenses, and changes in fund net assets provide information about the Funds’ financial activities during the year. Revenues and expenses are classified as either operating or nonoperating, and all changes in net assets are reported. Generally, charges for services and insurance premiums are considered to be operating revenues. Other revenues such as investment income are not generated from operations and are considered to be nonoperating revenues. The cost of services, administrative expenses, and depreciation on capital assets are considered to be operating expenses. The statements of cash flows provide information about the Funds’ sources and uses of cash and cash equivalents during the year. Increases and decreases in cash and cash equivalents are classified as either operating, noncapital financing, capital financing, or investing. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied, and determines when revenues and expenses are recognized in the accounts and reported in the financial statements. The financial statements of the Funds are presented on the accrual basis of accounting using the economic resources measurement focus. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.
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MARICOPA COUNTY RISK MANAGEMENT AND EMPLOYEE BENEFITS TRUST FUNDS Notes to Financial Statements June 30, 2006 The Funds apply only those applicable Financial Accounting Standards Board Statements and Interpretations issued on or before November 30, 1989, Accounting Principles Board Opinions, and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. The Funds have chosen the option not to follow FASB Statements and Interpretations issued after November 30, 1989. D. Cash and Cash Equivalents For purposes of the statements of cash flows, the Funds consider cash on hand, demand deposits, cash on deposit with the County Treasurer, and only those highly liquid investments with a maturity of 3 months or less when purchased to be cash equivalents. E. Machinery and Equipment Machinery and equipment are capitalized at cost. Depreciation of machinery and equipment is charged as an expense against operations. These assets are depreciated over their estimated useful lives using the straight-line method. The estimated useful lives of machinery and equipment range from 3 to 10 years. F. Employee Compensation Payable Employee compensation payable consists of payroll and payroll-related costs incurred but not paid at June 30, and personal time off (PTO) earned by employees based on services already rendered. Employees may accumulate up to 240 hours of PTO, but any PTO hours in excess of the maximum amount that are unused at calendar year-end will be transferred to family medical leave (FML). FML benefits are used by employees for FML-qualifying events and are cumulative but do not vest with employees and, therefore, are not accrued. However, upon retirement, employees of the Funds with accumulated FML in excess of 1,000 hours are entitled to a $3,000 bonus. The amount of such bonuses is accrued in the liability for employee compensation payable.
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