State of Arizona comprehensive annual financial report 1992 |
Previous | 1 of 17 | Next |
|
This page
All
Subset |
Am13 .3: C5511992
STATE OF ARIZONA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 1992
Prepared by
Department of Administration
Division of Finance
General Accounting Office
STATE OF ARIZONA -- COMPREHENSIVE ANNUAL FINANCIAL REPORT
CONTENTS -- CONTINUED
FINANCIAL SECTION -- CONTINUED Page
Capital Projects Funds . . . . .
Combining Balance Sheet . . . .
Combining Statement of Revenues,
Fund Balances
Expenditures and Changes in
101
102
103
Enterprise Funds
Combining Balance Sheet
Combining Statement of Revenues, Expenses and Changes in
Retained Earnings ....
Combining Statement of Cash Flows
Internal Service Funds
Combining Balance Sheet . .
Combining Statement of Revenues, Expenses and Changes in
Retained Earnings ....
Combining Statement of Cash Flows
Trust and Agency Funds
Combining Balance Sheet
Expendable Trust Funds
Combining Balance Sheet
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances .....
Non- Expendable Trust Funds
Combining Balance Sheet .
Combining Statement of Revenues, Expenses and Changes in
Fund Balances . . . .
Combining Statement of Cash Flows
Pension Trust Funds ....
Combining Balance Sheet . .
Combining Statement of Revenues, Expenses and Changes in
Fund Balances
Agency Funds
Combining Balance Sheet
Combining Statement of Changes in Assets and Liabilities
105
106
108
110
115
116
118
120
123
125
127
128
1.30
133
134
135
136
137
138
139
141
143
144
General Fixed Assets
Schedule of General
Schedule of Changes
Schedule of General
Fixed Assets by Function .....
in General Fixed Assets by Function
Fixed Assets by Source
147
148
148
149
University Funds
Combining Balance Sheet
iv
151
152
STATE OF ARIZONA - - COMPREHENSIVE ANNUAL FINANCIAL REPORT
CONTENTS -- CONTINUED
STATISTICAL SECTION
( Not covered by the Independent Auditors' Report)
Page
Revenues by Source ( Budgetary Basis)-- General and Special Revenue
Funds Only for the Last Ten Fiscal Years . . . .. .... 156
Expenditures by Function ( Budgetary Basis)-- General and Special
Revenue Funds Only for the Last Ten Fiscal Years . . . . . . . 158
Property Tax Levies, Collections, Taxable Property Assessed and
Estimated Actual Value, and Property Tax Rates for the Last Ten
Fiscal Years . . . . . . . . . . . . . . . . . . . . . 160
Highway Construction Revenue Bond Coverage for the Last Ten
Fiscal Years 160
Arizona State University Revenue Bond Coverage for the Last Six
Fiscal Years . . . . . . . . . . . . . . . 161
University of Arizona Revenue Bond Coverage for the Last Ten
Fiscal Years . . . . . . . . . . . . . . . . . . . . . . 161
Veterans' Memorial Coliseum and Exposition Center Revenue Bond Coverage
for the Last Ten Fiscal Years . . . . . . . . . . . . 162
Northern Arizona University Revenue Bond Coverage for the Last Ten
Fiscal Years . . . . . . . . . . . . . . . . . . . . . . 162
University Medical Center Revenue Bond Coverage for the Last Eight
Fiscal Years . . . . . . . . . . . 163
Economic Indicators for the Last Ten Years 163
Major Employers . . .. 164
Population by Age Group 164
Schedule of Bank and Savings and Loan Deposits for the Last Ten
Fiscal Years . . . . . . . . . . . . . . . . . . . . . 165
Public School Enrollment - Grades K- 12 for the Last Ten Academic Years 165
Public Higher Education Institutes Full- Time Equivalent Fall
Enrollment for the Last Ten Years . . . . . . . . . . 166
Average State Prison Adult Inmate Population for the Last Ten
Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . 166
Assessed Value of New Commercial and Residential Construction
for the Last Ten Years . . . . . . . . . . . . . . . . . . . 167
v
THIS PAGE INTENTIONALLYLEFT BLANK
INTRODUCTORY SECTION
THIS PAGE INTENTIONALLYLEFTBLANK
FIFE SYMINGTON
GOVERNOR
J. ELLIOTT HIBBS
DIRECTOR
ARIZONA DEPARTMENT OF ADMINISTRATION
OFFICE OF THE DIRECTOR
1700 WEST WASHINGTON, ROOM 801
PHOENIX, ARIZONA 85007
( 602) 542- 1500
June 10, 1994
The Honorable Fife Symington
Governor of the State of Arizona,
Members of the Legislature, and
Citizens and Taxpayers of
the state of Arizona
Ladies and Gentlemen:
In accordance with Section 35- 131 of the Arizona Revised Statutes, it is our
pleasure to transmit to you the Comprehensive Annual Financial Report ( CAFR) of
the state of Arizona for the fiscal year ended June 30, 1992. Responsibility
for the accuracy of data, completeness and fairness of presentation, including
all disclosures, rests with the state's management. The data presented in this
report, to the best of our knowledge and belief, are accurate in all material
respects and are reported in a manner which fairly presents the financial
position and results of operations of the various funds and account groups of the
State. All disclosures needed for the reader to gain a reasonable understanding
of the State's financial activities have been included.
The report is presented in three sections: Introductory, Financial, and
Statistical. The Introductory Section includes this Letter of Transmittal, the
State's organization chart and a list of principal State officials. The
Financial Section begins with the State Auditor General's report and contains the
General Purpose Financial Statements, Combining Financial Statements by Fund Type
and Account Group, and other schedules. The Statistical Section includes
selected financial, economic and demographic data.
FINANCIAL REPORTING ENTITY
The accompanying CAFR includes all funds and account groups for which the State
exercises oversight responsibility. The determination of " oversight
responsibility" is based on criteria established in the Codification of
Governmental Accounting and Financial Reporting Standards, issued by the
Governmental Accounting Standards Board, ( Section 2100). Note 1. B of the Notes
to the Financial Statements explains which units are included and excluded from
the Financial Reporting Entity of the State.
SERVICES PROVIDED BY THE STATE
The services provided by the State are administered through various agencies,
departments, boards, commissions and institutions of higher learning. These
services include: ( 1) General Government, ( 2) Health and Welfare, ( 3) Inspection
and Regulation, ( 4) Education, ( 5) Protection and Safety, ( 6) Transportation, and
( 7) Natural Resources.
- 1-
GENERAL GOVERNMENTAL FUNCTIONS
General governmental activities are accounted for in four Governmental Fund
types: ( 1) the General Fund, ( 2) Special Revenue Funds, ( 3) Debt Service Funds,
and ( 4) Capital Projects Funds.
Revenues for governmental and expendable trust fund functions totaled $ 7.313
billion for the fiscal year ended June 30, 1992, an increase of 13.0% over 1991.
Taxes, the single largest source of general governmental revenue, produced 67.5%
of revenue. The amount of revenues from various sources and changes from last
year are shown as follows:
GENERAL GOVERNMENT REVENUES
( Expressed in Thousands)
Revenue Source
Sales Taxes ••..•.•••••.•.•••
Income Taxes .•.•.•••••••••••
Motor Vehicle and Fuel Taxes
Property Taxes ...•.........•
Unemployment Taxes •....•••.•
Intergovernmental Revenues .•
Licenses, Fees and Permits •.
Earnings on Investments ..•..
Other Taxes and Revenues .•..
Total
Amount
$ 2,092,390
1,447,437
803,133
170; 773
128,068
1,977,665
121,039
90,249
481,807
$ 7,312,561
Percent
of Total
28.6%
19.8
11.0
2.3
1.8
27.0
1.7
1.2
~
~%
Increase/( Decrease)
From 1991
Amount Percent
$ 143,275 7.4%
160,442 12.5
4, ,1II8'. 3, 0,.,. .5 0 .... " ..... , v. o
9,061 7.6
458,635 30.2
15,649 14.8
( 16,199) ( 15.2)
66,254 15.9
$ 842,717 13.0%
The total revenues increase of $ 842.7 million or 13.0% was the result of several
factors:
The 7.4% increase in sales taxes is a result of the increased economic growth
in the State.
The 12.5% increase in income taxes is primarily a result of the State
recognizing for the first time revenue relating to the Urban Revenue Sharing
distributions to Arizona cities and counties for fiscal year 1992 ( See Note
1.0.2 in the Notes to the Financial Statements for details on this change).
Without this change, income taxes would have actually decreased 1.2% for
fiscal year 1992.
The 30.2% increase in intergovernmental revenues resulted primarily from
increased Federal revenues for the Arizona Health Care Cost Containment System
( AHCCCS). Also, a change in accounting policy which enabled the State to
recognize the Federal portion of the AHCCCS liability as revenue contributed
to the increase in revenues ( See Note 1. D. 2 in the Notes to the Financial
Statements for details on this change in accounting policy).
The 15.2% decrease in earning on investments reflects the decrease in interest
rates paid on investments.
Expenditur'es for governmental and expendable trust fund functions totaled $ 7.367
billion for the fiscal year ended June 30, 1992, an increase of 14.9% over 1991.
State government expenditures and the changes from last year are as follows:
- 2-
GENERAL GOVERNMENT EXPENDITURES
( Expressed in Thousands)
Expenditure Function Amount
Percent
of Total
Increase/( Decrease)
From 1991
Amount Percent
General Government ••'••••••.••
Health and Welfare •••••••••••
Inspection and Regulation ••••
Education .
Protection and Safety••••••••
Transportation •••••••••••••••
Natural Resources ••••••••••••
Capital Outlay•.•••••••••••••
Debt Service •••••••••••••••••
Total
$ 1,140,284
2,762,896
74,665
1,647,948
398,539
857,691
50,389
246,506
187,737
$ 7,366,655
15.5%
37.5
1.0
22.4
5.4
11.6
0.7
3.3
-- b.. §
12. Q.:.. Q%
$ 361,831
634,692
263
89,314
10,425
( 105,999)
3,900
( 55,104)
14,514
$ 953,836
46.5%
29.8
0.4
5.7
2.7
( 11. 0)
8.4
( 18.3)
8.4
14.9%
The total expenditures increase of $ 953.8 million or 14.9% was the result of
several factors:
The 46.5% increase in general government expenditures resulted primarily from
the State recognizing for the first time expenditures related to the Urban
Revenue Sharing distributions to Arizona cities and counties for Fiscal Year
1992 ( See Note 1. D. 3 in the Notes to the Financial Statements for details on
this change). Without this change, General Government expenditures would have
only increased 23.9% Also, contributing to this increase in expenditures is
the additional distributions to cities and counties resulting from the
increase in sales tax revenue and the continuing increase in the cost by the
State to provide services to the public. .
The 29.8% increase in health and welfare expenditures reflects the continuing
increase in the cost by the State to provide Health and Welfare services to
the public, in particular the increase in expenditures by the Arizona Health
Care Cost Containment System and the Department of Economic Security.
The 11% decrease in transportation expenditures is the result of a reduction
in highway construction.
The 18.3% decrease in capital outlay expenditures is the result of a reduction
in construction in both the Maricopa Regional Area Road Fund and the
Certificates of Participation Fund.
The 8.4% increase in debt service expenditures reflects the increased cost to
service the debts of bonds and certificates of participation.
GENERAL FUND BALANCE
The General Fund ended the fiscal year with a $ 123.2 million deficit fund
balance, compared to the previous year deficit fund balance of $ 12.3 million,
as restated. This was caused primarily by the increased cost to provide health
care through the Arizona Health Care Cost Containment System. The System
reported a $ 178 million increase in the liability for current portion of
insurance losses over the previous fiscal year. This increase was partly due to
medical inflation and capitation increases and also a 14.9% increase in new
member years to be covered by AHCCCS.
BUDGETARY CONTROLS
Budgetary control is maintained through legislative appropriation and the
executive branch allotment process. The Governor is required to submit an annual
budget to the Legislature. The budget is legally re~ Jired to be adopted through
passage of appropriation bills by the Legislature and approval by the Governor.
The appropriated funds are controlled by the executive branch through an
allotment process. This process allocates the appropriation into quarterly
allotments by legal appropriation level. The State also maintains an encumbrance
- 3-
accounting system to further enhance budgetary control. With the exception of
capital outlay items, encumbered amounts lapse as of the end of the fiscal year.
Capital outlay appropriations and encumbrances continue from year to year.
The State's budgetary policies and procedures, fund accounting structure, and
basis of accouniing are explained in detail in Note 1 of the Notes to the
Financial Statements.
INTERNAL CONTROLS
The State is responsible for establishing and maintaining an internal control
structure designed to ensure that the assets of the State are protected from
loss, theft or misuse, and to ensure that adequate accounting data are compiled
to allow for the preparation of financial statements in conformity with generally
accepted accounting principles. Internal accounting controls are designed to
provide reasonable, but not absolute, assurance that these objectives are met.
The concept of reasonable assurance recognizes that: ( 1) the cost of a control
should not exceed the benefits likely to be derived, and ( 2) the valuation of
costs and benefits requires estimates and judgements by management. In the
opinion of management, the State's internal controls are adequate to provide
reasonable assurance that these objectives are met.
The responsibility for cash management of the State is shared by the Office of
the Treasurer ( Treasurer) and the General Accounting Office of the Department of
Administration, Finance Division ( GAO). The Treasurer is responsible for the
depository, custodial and investment functions of cash. The GAO is responsible
for drawing down monies available for State functions, and the expenditure or
disbursement of those monies. Currently, the GAO is exploring alternatives
regarding the consolidation of its cash management functions. The results will
comply with potential Federal requirements and promote efficient use of cash.
The State requires that Treasurer's deposits and investments with financial
institutions be entirely covered by Federal depository insurance or alternatively
collateralized with surety equal to 102% of the deposit or investment. Component
units may have collateralization policies that differ from those of the
Treasurer.
The Legislature has passed statutes authorizing State investments. Note 2. A in
the Notes to the Financial Statements describes the types of investment made by
the State.
The Treasurer deposits receipts in accordance with applicable statutes and
invests excess cash of the General Fund and other various funds. All interest,
not otherwise apportioned by law, is deposited in the General Fund. Investment
earnings for the General Fund totaled $ 16.7 million for the fiscal year ended
June 30, 1992.
ENTERPRISE FUNDS
Enterprise Funds are comprised of governmental and quasi- governmental agencies
that provide goods and services to the public on a charge for service basis. For
fiscal year 1992, the Enterprise funds ended the year with a combined equity of
$ 273.3 million as compared to the previous year- end equity of $ 280.5 million.
For additional information on the Enterprise Funds, see Note 11 in the Notes to
the Financial Statements.
TRUST AND AGENCY FUNDS
Trust and Agency Funds are used to account for assets held by the State in a
trustee capacity or as an agent for individuals, private organizations and other
governments, including the four State Retirement Systems. The Trust and Agency
Funds reported a year- end fund balance of $ 11.489 billion as compared to the
previous year- end of $ 10.675 billion. For additional information on the four
State Retirement Systems, see Note 8 in the Notes to the Financial Statements.
- 4-
DEBT ADMINISTRATION
The Arizona State constitution, under Article 9 Section 5, provides that the
State may contract debts not to exceed $ 350,000. This provision has been
interpreted to restrict the State from pledging its credit as a sole source of
payment for debts incurred for the operation of State government. As a result,
the State, including the Enterprise Funds and The University Funds, finances most
of its major capital needs by lease purchase transactions and by issuing revenue
bonds. Lease purchase transactions are funded by Certificates of Participation
( COPs). Revenue bonds are associated with specific State functions and are
funded by dedicated revenue sources.
The State first issued COPs in 1985 to acquire a telecommunications system for
Arizona State University. Since that time, ten more issues have been transacted
for the construction and purchase of buildings and other structures as well as
a telecommunications system for the University of Arizona. During fiscal year
1992, the State issued COPs which provide for the sale and leaseback of prison
facilities at Florence, Arizona. The proceeds were used to reimburse the General
Fund for the expenditures incurred in purchasing the ENSCO Hazardous Waste
Facility. In all cases, the Attorney General determined that the issuance of the
COPs was in accordance with the provisions of the Constitution.
COPs issued during the current fiscal year carry a rating of Aaa from Moody's
Investors Service, Inc. and AAA from Standard and Poor's Corporation. During the
fiscal year ended June 30, 1992, the State issued $ 232.8 million of COPs and
retired $ 177.0 million. The State had $ 361.4 million in COPs outstanding at yearend,
an increase of $ 55.8 million from fiscal year 1991. Principal and interest
are covered by lease payments out of current revenues or appropriations from the
fund responsible for utilization of the specific buildings.
The State has issued revenue bonds primarily to finance the construction of
highways. They have also been issued for the construction of buildings and other
facilities. The State's revenue bonds currently carry a Aa rating from Moody's
Investors Service, Inc. and AAA from Standard and Poor's Corporation. During the
fiscal year ended June 30, 1992, the State issued $ 588.5 million of revenue bonds
and retired $ 339.6 million. The State had $ 2.302 billion in bonds outstanding
at the year- end, an increase of 248.9 million from fiscal year 1991. $ 1.515
billion of the total bonds outstanding were for Arizona Department of
Transportation Highway Revenue Bonds.
RISK MANAGEMENT
The State purchases liability coverage whenever available on reasonable terms.
Currently, the State is insured by an approved liability insurer for liability
claims in excess of $ 5 million but less than $ 15 million. For claims less than
or in excess of this coverage, or whenever such coverage is unavailable on
reasonable terms, the State's self- insurance fund provides liability coverage.
The State pays its self- insurance losses out of a fund to which moneys are
appropriated each year by the Legislature. Monies remaining in the fund at the
end of the fiscal year carryover to the next fiscal year, but are part of the
appropriation for that fiscal year to pay expected losses and costs. Selfinsurance
losses and claims- related expenses ( excluding the cost of administering
the program) have risen from approximately $ 15.3 million in fiscal year 1988 to
approximately $ 43 million in fiscal year 1992. To meet such rising losses and
claims- related expenses, yearly appropriations have also increased from
approximately $ 27.7 million in fiscal year 1988 to approximately $ 48.3 million
in fiscal year 1992. For fiscal year 1993, the State has appropriated $ 48.3
million to continue the funding of all self- insurance losses and claims- related
expenses. The 1993 appropriation is subject to modification by subsequent
legislative enactments and similarly, there can be no assurances that amounts
sufficient to cover all self- insurance losses and costs of claims administration
will be appropriated by the Legislature in future years.
- 5-
SIGNIFICANT STATE ECONOMIC EVENTS
The following economic outlook is excerpted from the Arizona Department of
Economic Security's ( ADES) Arizona Economic Trends, February 1993.
Arizona's economy created jobs at a substantially faster pace in 1992 than the
previous year. Non- farm payroll employment growth was 1. 9 percent in 1992, more
than four times higher than the growth rate for 1991. Improved Arizona payroll
employment growth can be attributed to fewer job losses in manufacturing and much
improved growth in the State's construction industry. But while 1992' s growth
rate was a welcome change from the slow growth of 1991, it was well below rates
experienced in the mid-' 80s.
The ADES Research Administration's forecast for 1993 and 1994 calls for continued
improvement in wage and salary employment growth. The 1993 forecast calls for
positive growth in all eight of Arizona's industry groups: manufacturing;
construction; transportation, communications, and public utilities ( TCPU); and
finance, insurance and real estate ( FIRE), although growth rates in manufacturing
are expected to continue to lag those in other major industry groups in Arizona.
In 1992, minor employment losses were e. xperienced by the manufacturing and mining
industries.
Continued cutbacks in defense spending will make it difficult for durable- goods
manufacturers to increase production and employment. Durable- goods producers,
especially those in the high- tech industries, will continue to pare employment,
but at a slower pace than last year, as they restructure to become more
competitive.
Arizona's construction industry enjoyed a good year in 1992, with the addition
of 4,200 workers. Construction should continue to see substantial growth the
next two years. Residential construction should provide most of the growth, but
some large- scale projects and road and highway improvements should also
contribute to the growth.
Arizona's mining industry is expected to show modest job growth in 1993 and 1994,
increasing by 200 jobs in both years. Increased efficiency and lower production
costs should lead to stable, but modest employment growth in the State's copper
mining sector.
From 1983 through 1989, services added more than 20,000 new jobs a year. But
employment growth d: ropped below 20,000 the past three years, growing 13,400 in
1990, 8,500 in 1991 and 14,500 in 1992. For 1993 and 1994, services are expected
to make some improvement with job growth still below the 20,000 mark. A forecast
of modest improvement in services employment is due to three factors. First,
Arizona should see continued, but stable growth in business services and the
catchall category " other services". Second, a rebound in the tourism industry
should lead to improved employment growth in hotel services. Third, slower
growth in the medical- services professions is expected, as hospitals attempt to
hold the line on employment costs.
Like services, trade has had weaker- than- normal growth in the 1990s. Trade grew
by less than two percent in the past three years, compared to growth rates of
three- plus percent following the recessionary year of 1982. Trade's rate of
growth is expected to improve to 2.6 percent in 1993 and 2.7 percent in 1994, but
still well below the historical trend. This expected improvement can be
attributed to improved retail trade growth in Maricopa County, which has
accounted for most of the weakness in the state's retail trade sector for the
last few years.
The transportation, communications and public utilities ( TCPU) group, which was
hurt by losses in both the air transportation and public utilities industries in
1991 , added 400 jobs in 1992. All of the gains came in the communications and
public utilities sectors. TCPU should experience improved job growth with
forecasted gains of 1.8 percent in 1993 and 2.3 percent in 1994. Modest job
growth is expected in transportation, as improved prospects at America West
Airlines and continued grow~ h at southwest Airlines should help the
transportation sector rebound from several years of weak growth.
- 6-
The finance, insurance and real estate ( FIRE) group added 1,200 positions in
1992, with all the gain occurring in the insurance and real estate industries.
The forecast for 1993 calls for continued growth in insurance and real estate,
with employment losses in the finance industry coming to an end. The opening of
new credit card facilities in Maricopa County should help improve the finance
industry's performance, bringing to an end two years of employment declines.
Overall, FIRE employment should grow 3 percent in 1993 and 2.7 percent in 1994.
Government is projected to add 7,700 jobs in 1993 and 8,700 jobs in 1994.
Increases in school employment should account for 70 percent of this gain in
1993 and 61 percent of the growth in 1994. Improved growth in state and local
government accounts for the higher forecasted job growth in 1994.
Finally, Arizona's unemployment rate is expected to decline 1.2 percentage points
in 1993, averaging 6.2 percent. The 7.4 percent rate of 1992 was the highest
rate in nine years, but well below the rates of 9.9 percent and 9.1 percent in
the recession years of 1982 and 1983, respectively. An improved jobless rate in
1993 would be due to better growth in total employment, combined with a decline
in unemployment. The same scenario should occur for 1994, as the jobless rate
is expected to improve to 5.8 percent.
In summary, the two year employment outlook for Arizona's economy remains
positive. While the national recession certainly had a negative impact on
Arizona, the State's economy rebounded in 1992 from the weak job growth
experienced the year before. The national economy has begun to show signs of
life, and the Research Administration forecasts that Arizona's economic recovery
will continue over the next 24 months.
INDEPENDENT AUDIT
The Auditor General is appointed to a five- year term by the Joint Legislative
Audit Committee with approval of the Legislature. The State Auditor General is
responsible for the audit of all State agencies. The State statute ( ARS 411279.03)
requires at least a biennial single audit by the State Auditor General.
This audit is required in conformity with the Single Audit Act of 1984 ( PL98- 502)
and the U. S. Office of Management and Budget Circular A- 128, " Audits of State and
Local Governments".
AWARDS
The Government Finance Officers Association of the United States and Canada
established the Certificate of Achievement for Excellence in Financial Reporting
Program to recognize governments that produce outstanding financial reports. In
order to be awarded this certificate, a governmental unit must publish an easily
readable and efficiently organized CAFR, the contents of which must conform to
program standards. Such reports must satisfy both generally accepted accounting
principles and applicable legal requirements. The certificate is valid for a
period of one year.
It is a goal of the State to receive the certificate for the fiscal year 1995
CAFR.
ACKNOWLEDGEMENTS
We wish to express our sincere appreciation to the many individuals whose
dedicated efforts have made this report possible. The preparation of this report
could not have been accomplished without the professionalism and dedication
demonstrated by the financial and management personnel of each State agency,
board, commission, and institution of higher education.
/' 1/ d~~/
l J) ~/ V\ vc, qL-Robert
Rocha
State Comptroller
- 7-
STATE OF ARIZONA.
Graphic Presentation of Revenues by Source
and Expenditures by Function
General Fund
For the Fiscal Year Ended June 30, 1992
Other taxes
9.3%
Income taxes
25.2%
Expenditures by Function
Education
30.1%
Natural resources 0.4%
Protection and safety 6.7%
Inspection and regulation
0,6%
- 8 -
Revenues by Source
Intergovernmental
29.6%
/ 1
-~
34.2%
General government
16.9%
Capital outlay / Debt
=---; service 0.9%
Health and welfare
44.4%
STATE OF ARIZONA
Graphic Presentation of Revenues by Source
and Expenditures by Function
All Governmental Fund Types
For the Fiscal Year Ended June 30, 1992
Revenues by Source
Intergovernmental
27,0%
Other taxes
19.. 2%
Other revenues
5.4%
"" I"''''===----~'--- -~,
Income taxes
19.8%
Expenditures by Function
Sales taxes
28.6%
Education
22.4%
Protection and safety
5.4%
General government
15.5%
Inspection and regulation
1,, 0%
Capital outlay / Debt
service 5.9%
iNatural resources
i 0.7%
./
.~~--------~'
Health and welfare
37.. 5%
- 9 -
ARIZONA STATE GOVERNMENT ORGANIZATION
COMMISSIONS
AND AGENCIES
REGENTS
I, eo OF' ' BRA" V
COlLEGE BOARD
,,
ELECTORATE
-------------------------------~
~ ~,
LEGISLATIVE EXECUTIVE JUDICIAL
.:-:-
@
BRANCH BRANCH BRANCH ~ ~< 0.:-
~~~
I I ,
STATE HOUSE 01' GOVERNOR · STATE SENATE' SUPREME COURT
REPRESENTATIVES"
LEGISlATIVE AUDITOR COURT OF I
SUPERIOR COURT I COUNCIL GENERAL APPEALS I ; , ,
I JOft-..'. T ~. ~', I MUNICIPAL I JUSTICE OF THE
LEGISLATIVE ARCHIVES AND
COURTS PEACE COURTS"
BUDGETCOMM PUBLIC RECORDS
I I I I I
SECRETARY ATTORNEY STATE
SUPERINTENDENT
CORPORATION STATE MINE
GENERAL" TREASURER"
OF PUBLIC
OF STATE" COMMISSION" INSPECTOR"
EDUCATIO....
I I
DEPARTMENT OF DEPARTMENT OF
LAW EDUCATION
DEPARTMENTOF DEPARTMENT OF DEPARTMENT OF
AHCCCS
ADMINISTRATION CORRECTlONS TRANSPORTATION
DEPARTMENT OF DEPARTMENT OF
DEPARTMENT OF DEPARTMENT OF
HEALTH ECONOMIC
REVENUE PIJBUC SAFETY
SERVICES SECURITY
I I
I I I I I COMMUNITY BOARD OF OTHER BOARDS, I
COMMUNITY
COLLEGES
NORTHERN
ARIZONA STATE UNIVERSITY OF
ARIZONA
UNIVERSITY ARIZONA
UNIVERSITY
- 10- * ELECTED OFFICIALS
JANUARY 11194
STATE OF ARIZONA
PRINCIPAL STATE OFFICIALS
as of June 3D, 1992
Elected Officials
Fife Symington, Governor
Senator Peter Rios, President
of the Senate
Representative Jane Dee Hul~, Speaker
of the House
Stanley G. Feldman, Chief Justice
Richard Mahoney, Secretary · · of State
Grant Woods, Attorney General
Tony West, State Treasurer
C. Diane Bishop, Superintendent of
Public Education
Renz D. Jennings, Commissioner,
Corporation Commission
Douglas K. Martin, State Mine Inspector
Executive Officials
Appointed Officials
Legislative Officials
J. Elliott Hibbs, Director
Department of Administration
Samuel A. Lewis, Director
Department of Corrections
David A. Lowenberg, Acting Director
Department of Economic Security
Paul Waddell, Director
Department of Revenue
Col. F. J. Ayars, Director
Department of Public Safety
Alethea O. Caldwell, Director
Department of Health Services
Charles E. Cowan, Director
Department of Transportation
Leonard J. Kirschner, M. D., Director
Arizona Health Care Cost Containment
System ( AHCCCS)
- 11-
Don Jansen, Director
Legislative Council
Ted Ferris, Staff Director
Joint Legislative Budget Committee
Douglas R. Norton, Auditor General
Sharon G. Womack, Director
Board of Library, Archives
and Public Records
University Officials
Lattie F. Coor, Ph. D., President
Arizona State university
Eugene M. Hughes, Ph. D., President
Northern Arizona University
Manuel Pacheco, Ph. D., President
University of Arizona
THIS PAGE INTENTIONALLYLEFT BLANK
FINANCIAL SECTION
THIS PAGE INTENTIONALLY LEFT BLANK
INDEPENDENT AUDITORS' REPORT
I)
STATE OF ARIZONA
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
OFFICE OF THE
AUDITOR GENERAL
Independent Auditors' Report
DEB! OAVENPORT, CPA
pp" c · t'" AUDITOR GENERAL
The Honorable Fife Symington, Governor
State of Arizona
The Honorable John Greene, President
Arizona State Senate
The Honorable Mark W. Killian, Speaker
Arizona House of Representatives
The Honorable Stanley G. Feldman, Chief Justice
Arizona Supreme Court
We have audited the accompanying general purpose financial statements of the State of
Arizona, as of and for the year ended June 3D, 1992, or December 31, 1991, as listed
in the table of contents. These general purpose financial statements are the responsibility
of the State's management. Our responsibility is to express an opinion on these general
purpose financial statements based on our audit. We did not audit the financial
statements of the Pension Trust Funds and State Deferred Compensation Plan, which
statements comprise 72 percent of the total assets of the Fiduciary Funds. We also did
not audit the financial statements of the Arizona Health Care Cost Containment System,
the Arizona Department of Transportation, the State Compensation Fund, the University
Medical Center, the Arizona Power Authority, and the Lottery Commission, which
statements comprise 22 percent of the assets and 14 percent of the revenues and other
financing sources of the General Fund; 57 percent of the assets and 79 percent of the
revenues and other financing sources of the Special Revenue Funds; 84 percent of the
assets and 90 percent of the revenues and other financing sources of the Debt Service
Fund; 80 percent of the assets and 85 percent of the revenues and other financing
sources of the Capital Projects Funds; 85 percent of the assets and 90 percent of the
revenues and other financing sources of the Enterprise Fund; 37 percent of the assets
and 20 percent of the revenues and other financing sources of the Internal Service Funds;
and 73 percent of the liabilities of the General Long- Term Debt Account Group. Those
financial statements were audited by other auditors whose reports thereon have been
fllrnishl: lrl tn lie: ~ nrl nur npininn I: lvprl: lssl: lrl hl: lrl: l'ln insnfar as ', t relates + n the amnun+ s .""'. II I ..... '"" ........... W'J"""'.'""~ I ........ v ....." .... '-' ..... '..., ......... )"..., ". I """"' 1 11\, 1."
included for the above- mentioned component units, is based solely on the reports of the
other auditors.
- 16-
2910 NORTH 44TH STREET. SUITE 410. PHOENIX, ARIZONA 85018. ( 602) 553- 0333 • FAX ( 602) 553- 0051
Except as discussed in the following paragraph, we conducted our audit in accordance
with generally accepted auditing standards and Government Auditing Standards, issued
by the Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the general purpose
financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the general purpose
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall general
purpose financial statement presentation. We believe that our audit and the reports of
the other auditors provide a reasonable basis for our opinion.
The records of the General Fixed Assets Account Group were incomplete as to cost. As
a result of such incomplete records, we were unable to satisfy ourselves as to the stated
cost of the assets included in the General Fixed Assets Account Group by appropriate
audit tests or by other means..
In our opinion, based on our audit and the reports of the other auditors, except for the
effects of such adjustments, if any, as might have been determined to be necessary had
we been able to satisfy ourselves as to the stated cost of the assets included in the
General Fixed Assets Account Group as discussed in the above paragraph, the general
purpose financial statements referred to in the first paragraph present fairly, in all material
respects, the financial position of the State of Arizona as of June 3D, 1992, or December
31, 1991, and the results of its operations, the cash flows of its proprietary funds and
similar trust funds, the changes in fund balances of its university funds, and the current
operating funds revenues, expenditures, and other changes of its university funds for the
year then ended in conformity with generally accepted accounting principles..
As discussed in Note 1.0.. 2. to the general purpose financial statements, the State
changed its method of recognizing federal grant revenues of the Arizona Health Care
Cost Containment System in fiscal year 1991- 92.
Our audit was made for the purpose of forming an opinion on the general purpose
financial statements of the State of Arizona taken as a whole. The combining and
individual fund and account group financial statements and schedules as listed in the
table of contents are presented for purposes of additional analysis and are not a required
part of the general purpose financial statements. Such information has been subjected
to the aUditing procedures applied in the audit of the general purpose financial statements
and, in our opinion, based on our audit and the reports of the other aUditors, except for
the effects of the matter discussed in the third paragraph, is fairly presented in all material
respects in relation to the general purpose financial statements taken as a whole.
- 17-
The information included in the introductory and statistical sections listed in the table of
contents has not been subjected to the aUditing procedures applied in our audit of the
general purpose financial statements and, accordingly, we express no opinion on such
information.
& t:: o~
Auditor General
September 22, 1993
- 18-
GENERAL PURPOSE FINANCIAL STATEMENTS
STATE OF ARIZONA
COMBINED BALANCE SHEET
ALL FUND TYPES AND ACCOUNT GROUPS
JUNE 30, 1992
( Expressed in Thousands)
PROPRIETARY
GOVERNMENTAL FUND TYPES FUND TYPES
SPECIAL DEBT CAPITAL INTERNAL
ASSETS AND OTHER DEBITS GENERAL REVENUE SERVICE PROJECTS ENTERPRISE SERVICE
Current Assets:
Cash and investments $ 150,903 $ 399,171 $ 28,343 $ 203,043 $ 73,371 $ 42,980
Cash held by trustee 590
Receivables, net of allowances:
Taxes 360,006 64,605 1,656 4,613
Interest 1,548 7,959 587 1,167 17,888 260
Other 7,789 9,772 84,950 1,436
Due from U. S. Government 161,029 23,687
Due from local governments 630 6,364 2,149 54
Due from others 6 14
Due from other Funds 32,050 8,741 108 2,289 427 9,591
Inventories, at cost 5,462 10,393 3,253
Other 1,039 19,255 3,260
Total Current Assets 715,000 525,775 29,038 210,304 211,487 60,834 ------
Long- term Assets:
Investments 1,145,572
Investments held by trustee 79,166
Receivables, net of allowances
Other 49,205
Fixed assets
Property and equipment 220,791 116,546
Less: accumulated depreciation ( 69,494) ( 63,907)
Total Long- term Assets 1,425,240 52,639
Total Assets 715,000 525,775 29,038 210,304 1,636,727 113,473
Other Debits:
Amount available for retirement
of long- term debt
Amount to be provided for retirement
of long- term debt
Total Assets and Other Debits $ 715,000 $ 525,775 $ 29,038 $ 210,304 $ 1,636,727 $ 113,473
The Notes to the Financial Statements are an integral part of this statement.
- 20-
24,393
2,069,690
24,393
2,069,690
21,491
1,532,649
$ 15,397,344 $ 1,150,438 $ 2,094,083 $ 2,572,259 $ 24,444,441 $ 21,513,618
- 21-
STATE OF ARIZONA
COMBINED BALANCE SHEET
ALL FUND TYPES AND ACCOUNT GROUPS
JUNE 3D, 1992
( CONTINUED)
( Expressed in Thousands)
GOVERNMENTAL FUND TYPES
PROPRIETARY
FUND TYPES
LIABILITIES AND FUND EQUITY
Current Liabilities:
Accounts payable $
Accrued expenses
Obligations under securities
loan agreements
Tax refunds payable
Due to U" S" Government
Due to local governments
Due to others
Due to other Funds
Deferred revenue
Current portion of insurance losses
Currant portion of long- term debt
Other
Total Current Liabilities
Long- term Liabilities:
Accrued compensated absences
Accrued insurance losses
Liabilities to plan investors
Tax refunds payable
Long- term debt:
Revenue bonds
Certificates of participation
Leases and installment purchases
Other
Total Long- term Liabilities
Total Liabilities
Commitments and contingencies
Fund Equity and Other Credits:
Net investment in fixed assets
Contributed capital
Retained earnings
Fund balances:
Reserved
Unreserved
Total Fund Equity and
Other Credits
GENERAL
126,072
30,254
6,603
221,930
2,080
14,689
151,026
270,134
10,266
833,054
833,054
5,184
103,253
( 226,491)
( 123,238)
$
SPECIAL
REVENUE
33,036
7,545
58,702
1,946
12,304
540
20
114,093
114,093
276,225
135,457
411,682
$
DEBT
SERVICE
5
4,640
4,645
4,645
24,393
24,393
$
CAPITAL
PROJECTS
7,873
55
287
8,215
8,215
23,693
178,396
202,089
$
ENTERPRISE
16,693
84,584
10,524
52,760
293,682
1,271
40,641
500,155
4,154
666,469
169,981
15,400
3
420
856,427
1,356,582
6,830
273,315
280,145
$
INTERNAL
SERVICE
10,296
1,120
107
240
4,566
70
16,399
695
325,837
5,535
332,067
348,466
14,459
( 249,452)
( 234,993)
Total Liabilities and Fund Equity
and Other Credits $ 715,000 $ 525,775 $ 29,038 $ 210,304 $ 1,636,727 $ 113,473
The Notes to the Financial Statements are an integral part of this statement
- 22-
1,150,438 1,520,344 2,670,782 2,174,148
2,284 23,573 22,822
23,863 167,628
11,487,014 11,914,578 11,204,472
254,487 341,849 158,311
11,489,298 1,150,438 1,774,831 14,974,645 13,727,381
$ 15,397,344 $ 1,150,438 $ 2,094,083 $ 2,572,259 $ 24,444,441 $ 21,513,618
- 23-
STATE OF ARIZONA
COMBINED STATEMENT OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES
ALL GOVERNMENTAL FUND TYPES AND
EXPENDABLE TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1992
( Expressed in Thousands)
FIDUCIARY
GOVERNMENTAL FUND TYPES FUND TYPE
SPECIAL DEBT CAPITAL EXPENDABLE
GENERAL REVENUE SERVICE PROJECTS TRUST
REVENUES:
Taxes:
Sales $ 1,965,555 $ 126,835 $ $ $
Income 1,447,421 16
Motor vehicle and fuel 100,195 698,586 4,352
Property 169,584 1,091 98
Unemployment 128,068
Other 263,581 12,797 21,270
Intergovernmental 1,701,688 219,548 70 56,359
Licenses, fees and permits 35,788 77,344 1,221 6,686
Earnings on investments 16,693 17,760 9,867 7,073 38,856
Sales and charges for services 18,019 1,715 320
Fines, forfeitures and penalties 6,245 28,094 5,746
Other 24,974 20,750 2,739 75,557
Total Revenues 5,749,743 1,204,520 9,867 36,823 311,608
EXPENDITURES:
General government 926,918 25,022 188,344
Health and welfare 2,429,163 24,055 309,678
Inspection and I'egulation 32,527 40,115 2,023
Education 1,645,051 2,208 689
Protection and safety 367,441 17,853 13,245
Transportation 857,428 263
Natural resources 23,273 26,026 1,090
Capital outlay 40,669 13,821 187,675 4,341
Debt service:
Principal 7,375 559 68,760 415
Interest and otheI fiscal charges 1,343 38 109,247
Total Expenditures 5,473,760 1,007,125 178,270 187,675 519,825
Revenues Over ( UndeI') ExpendituIes 275,983 197,395 ( 168,403) ( 150,852) ( 208,217)
OTHER FINANCING SOURCES ( USES):
Operating transfers in 94,873 47,388 173,338 2,858 137,548
Operating transfers out ( 602,155) ( 229,181) ( 5,327) ( 8,175)
Other financing sources ( uses) 111,726 1,643 ( 2,033) 278,881 1,507
Total Other Financing Sources
( Uses) ( 395,556) ( 180,150) 171,305 276,412 130,880
Revenues and Other Financing Sources
Over ( UndeI) Expenditures and Other
Financing Uses ( 119,573) 17,245 2,902 125,560 ( 77,337)
Beginning Fund Balances, as restated ( 12,286) 397,443 21,491 77,179 607,455
Residual Equity Transfers 8,621 ( 3,006) ( 650) ( 10)
Ending Fund Balances $ ( 123,238) $ 411,682 $ 24,393 $ 202,089 $ 530,108
The Notes to the Financial Statements are an integral part of this statement,
- 24-
TOTALS
( MEMORANDUM ONLY)
1992 1991
$ 2,092,390 $ 1,949,115
1,447,437 1,286,995
803,133 798,950
170,773 169,356
128,068 119,007
297,648 271,034
1,977 ,665 1,519,030
121,039 105,390
90,249 106,448
20,054 11,192
40,085 32,805
124,020 100,522
7,312,561 6,469,844
1,140,284 778,453
2,762,896 2,128,204
74,665 74,402
1,647,948 1,558,634
398,539 388,114
857,691 963,690
50,389 46,489
246,506 301,610
77,109 69,008
110,628 104,215
7,366,655 6,412,819
( 54,094) 57,025
456,005 353,122
( 844,838) ( 758,801)
391,724 291,766
2,891 ( 113,913)
( 51,203 )
1,091,282
4,955
$ 1,045,034
( 56,888)
1,107,077
2,972
$ 1,053,161
- 25-
STATE OF ARIZONA
COMBINED STATEMENT OF REVENUES AND EXPENDITURES
APPROPRIATION ( BUDGET) TO ACTUAL - BUDGETARY BASIS
GENERAL, SPECIAL REVENUE AND CAPITAL PROJECTS FUNDS
FOR THE YEAR ENDED JUNE 30, 1992
( Expressed in Thousands)
GENERAL FUND SPECIAL REVENUE FUNDS
Appropriation
( Budget) Actual
Variance
Favorable
< unfavorable)
Appropriation
( Budget) Actual
Variance
Favor'able
( Unfavorable)
REVENUES
EXPENDITURES:
General Appropriations
General government
Health and welfare
Inspection and regulation
Education
Protection and safety
Transportation
Natur'al resources
Capital outlay
Total General Appropriations
Other Appropriations
General government
Health and welfare
Protection and safety
Total Other Appropriations
TOTAL EXPENDITURES
Revenues Over ( Under') Expenditures
OTHER FINANCING SOURCES ( USES):
General Appropriations
Opel'ating transfers- in
Other financing sources ( uses)
Total Genel'al Operations
Other Appropriations
Operating transfers- in
Other financing SOUl'ces ( uses)
Total Other Appropriations
Total Other Financing
Sources ( Uses)
$
245,519
1,046,048
37,176
1,950,442
345,515
65
25,761
31,624
3,682,150
3,881
961,961
4,313
970,155
4,652,305
$ 4,145,847 $
239,389
1,019,539
35,181
1,939,368
336,524
64
25,007
5,746
3,600,818
2,148
851,893
3,115
857,156
4,457,974
( 312,127)
15,022
87,661
102,683
84,582
1,195
85,777
188,460
6,130
26,509
1,995
11,074
8,991
1
754
25,878
81,332
1,733
110,068
1,198
112,999
194,331
$
1,576
4,754
31,116
4,106
1,549,659
17,670
1,608,881
1,608,881
$ 1,322,876 $
1,396
2,995
29,118
4,095
429,370
16,945
483,919
483,919
838,957
20,564
3,011
23,575
23,575
180
1,759
1,998
11
1,120,289
725
1,124,962
1,124,962
Revenues and Other Financing Sources
Over ( Under) Expenditures and Other
Financing Uses $ $ ( 123,667) $ $ $ 862,532 $
The Notes to the Financial Statements are an integral part of this statement.
- 26-
CAPITAL PROJECTS FUNDS
Appropriation
( Budget) Actual
Variance
Favorable
( Unfavorable)
$
$
33
897
49,874
50,804
50,804
$
$
296,079 $
33
897
26,069
26,999
26,999
269,080
2,054
7
2,061
2,061
271,141 $
23,805
23,805
23,805
- 27-
STATE OF ARIZONA
COMBINED STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN RETAINED EARNINGS/ FUND BALANCES
ALL PROPRIETARY FUND TYPES AND SIMILAR TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1992
( Expressed in Thousands)
PROPRIETARY FUND TYPES FIDUCIARY FUND TYPES
TOTALS
INTERNAL NON- EXPENDABLE PENSION ( MEMORANDUM ONLY)
ENTERPRISE SERVICE TRUST TRUST 1992 1991
OPERATING REVENUES:
Sales and charges for services:
Lottery $ 249,251 $ $ $ $ 249,251 $ 230,449
Other 453,799 122,932 14,179 590,910 550,575
Taxes 21,825 21,825 24,327
Intergovernmental 18 18 93
Licenses, fees and permits 914 9,723 10,637 17,135
Earnings on investments 108,674 45,711 976,372 1,130,757 948,807
Retirement contributions 357,498 357,498 350,953
Other 19,636 4,529 1,061 946 26,172 31,169
Total Operating Revenues 854,117 127,461 70,674 1,334,816 2,387,068 2,153,508
OPERATING EXPENSES:
Cost of sales and benefits 512,707 19,194 531,901 471,979
Retirement benefits and refunds 449,414 449,414 406,970
Personal services 112,247 24,373 212 136,832 121,541
Contractual services 26,697 20,601 1,082 48,380 42,403
Aid to local governments 30,654 663 57,460 88,777 95,566
Depreciation and amortization 12,929 13,833 422 58 27,242 26,233
Insurance 5,421 176,885 74 182,380 53,676
Other 55,658 4,381 2,500 31,675 94,214 119,946
Total Operating Expenses 756,313 259,930 61,750 481,147 1,559,140 1,338,314
Operating Income ( Loss) 97,804 ( 132,469) 8,924 853,669 827,928 815,194
NON- OPERATING REVENUES ( EXPENSES) :
Interest income 5,082 517 5,599 19,189
Interest expense ( 3,933) ( 3,933) ( 5,281)
Other ( 4,159) 359 30,609 26,809 26,370
Total Non- operating Income
( Loss) ( 3,010) 876 30,609 28,475 40,278
Income ( Loss) Before Operating
Transfers 94,794 ( 131,593) 39,533 853,669 856,403 855,472
OPERATING TRANSFERS:
Operating transfers in 952 25 977 4,757
Oper~ ting transfers out ( 76,415) ( 2,765) ( 489) ( 4,070) ( 83,739) ( 78,388)
Total Operating Transfers ( 75,463) ( 2,740) ( 489) ( 4,070) ( 82,762) ( 73,631)
Net Income ( Loss) 19,331 ( 134,333) 39,044 849,599 773,641 781,841
Beginning Retained Earnings/ Fund
Balances, as r'estated 280,093 ( 113,630) 556,565 9,511,782 10,234,810 9,474,282
Residual Equity Transfers ( 1,109) ( 1,489) ( 84) ( 2,682) ( 2,972)
Provision for Dividends ( 25,000) ( 25,000) ( 18,200)
Ending Retained Earnings/ Fund
Balances $ 273,315 $ ( 249,452) $ 595,525 $ 10,361,381 $ 10,980,769 $ 10,234,951
The Notes to the Financial Statements are an integral part of this statement
- 28-
THIS PAGE INTENTIONALLY LEFT BLANK
STATE OF ARIZONA
CCMBINED STATEMENT OF CASH FLOWS
ALL PROPRIETARY FUND TYPES AND SIMILAR TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1992
( Expressed in Thousands)
PROPRIETARY FUND TYPES
INTERNAL
ENTERPRISE SERVICE
FIDUCIARY
FUND TYPES
NON- EXPENDABLE
TRUST
TOTALS
( MEMORANDUM ONLY)
1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES:
Operating Income ( Loss)
Adjustments to reconcile to net cash provided
by operating activities:
Depreciation
Amortization of investment ( premium)
Net ( gain) on sale of investment
Net ( gain) on sale of fixed assets
Dividends to policyholders
Amortization of bond issuance costs
Provision for long- term liabilities
Write off of preliminary survey and
investigation costs
Total Adjustments
Changes in Assets and Liabilities:
( Increase) in receivables, net of allowances
( Increase) decrease in due from local governments
( Increase) decrease in due fr'om other Funds
( Increase) in inventories, at cost
( Increase) in other current assets
Increase ( decrease) in accounts payable
Increase ( decrease) in accrued expenses
( Decrease) in due to local governments
Increase ( decrease) in due to other Funds
Increase ( decr'ease) in defer'red revenue
Increase in other current liabilities
Increase ( decrease) in compensated absences
Increase ( decrease) in long- term insurance losses
Net Changes in Assets and Liabilities
Net Cash Provided ( Used) by
Operating Activities
CASH FLOWS FROM NON- CAPITAL FINANCING ACTIVITIES:
Interest expense
Other non- operating revenues ( expenses)
Operating transfers in
Oper'ating transfers out
Residual equity transfers
Increase in advances for Hoover Uprating Project
Contributions from U" S, Government
Net Cash Provided ( Used) by Non- capital
Financing Activities
$ 97,804 $
12,929
( 21,208)
( 134)
( 99)
( 25,000)
2,404
918
( 30,190)
( 4,959)
951
( 478)
( 7,908)
( 17,821)
79,416
2,790
13,285
93,583
( 67)
( 1,376)
157,416
225,030
( 3,335)
( 1,201)
952
( 76,415)
( 3)
( 11,688)
( 91,690)
( 132,469) $
13,833
13,833
( 577)
56
2,008
( 495)
( 374)
3,349
( 224)
( 1,591)
( 328)
70
2
134,850
136,746
18,110
254
25
( 2,765)
( 1,489)
( 3,975)
8,924
422
422
( 10,312)
2,506
( 893)
58
( 2,621)
752
00,510)
( 1,164)
30,609
( 489)
( 84)
2,284
32,320
$ ( 25,741) $
27,184
( 21,208)
( 134)
( 99)
( 25,000)
2,404
918
( 15,935)
( 15,848)
56
5,465
( 973)
( 8,282)
( 15,365)
79,250
( 1,422)
13,709
93,653
( 65)
133,474
283,652
241,976
( 3,335)
29,662
977
( 79,669)
( 1,576)
( 11,688)
2,284
( 63,345)
98,943
26,078
( 18,166)
( 103)
( 3,757)
( 27,261)
97
2,846
( 9,443)
( 89)
( 538)
( 1,112)
( 1,630)
13,246
1,732
( 8)
13,063
6,534
6,290
180
92,902
121,127
199,804
( 4,323)
20,751
921
( 74,552)
( 2,972)
( 6,123)
( 66,298)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:
Acquisition and construction of fixed assets
Proceeds from sale of fixed assets
Retirement of revenue bonds principal
Interest payments under certificate of
participation or bonds
Principal payments under leases and
installment purchases
Proceeds from other long- term debt
Proceeds in funds received by trustee
Payment for bond issuance and insurance costs
Contributions ( to) from other Funds
( 22,179)
1,552
( 25,003)
( 598)
( 668)
27,268
8,406
( 2,697)
50
( 10,696)
829
( 4,429)
( 661)
( 507)
1,024
( 33,382)
2,381
( 25,003)
( 598)
( 5,097)
27,268
8,406
( 2,697)
413
( 30,097)
8,001
( 495)
( 958)
( 5,983)
49,967
6,098
0,781)
1,187
Net Cash Provided ( Used) by Capital and
Related Financing Activities $ ( 13,869) $
- 30-
( 14,957) $ 517 $ ( 28,309) $ 25,939
STATE OF ARIZONA
COMBINED STATEMENT OF CASH FLOWS
ALL PROPRIETARY FUND TYPES AND SIMILAR TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 1992
( CONTINUED)
( Expressed in Thousands)
PROPRIETARY FUND TYPES
INTERNAL
ENTERPRISE SERVICE
FIDUCIARY
FUND TYPES
NON- EXPENDABLE
TRUST
TOTALS
( MEMORANDUM ONLY)
1992 1991
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of investments $ 25,800 $ $ 2,128,227 $ 2,154,027 $ 1,183,845
Purchase of investments ( 143,073) ( 2,160,485) ( 2,303,558) ( 1,392,147)
Interest and dividends on investments 4,828 399 5,227 15,114
Decrease in assets whose use is limited 5,961 5,961
Net Cash Provided ( Used) by Investing Activities ( 106,484) 399 ( 32,258) ( 138,343) ( 193,188)
Net Increase ( Decrease) in Cash and
Short- term Investments 12,987 ( 423) ( 585) 11,979 ( 33,743)
Cash and Short- term Investments - Beginning 60,974 43,403 29,775 134,152 167,895
Cash and Short- term Investments - Ending $ 73,961 $ 42,980 $ 29,190 $ 146,131 $ 134,152
NON- CASH TRANSACTIONS
Enterprise Funds:
During fiscal year 1991- 92, the University Medical Center advance refunded a portion of Hospital Revenue Bonds ( Series 1986 and
1987) and wrote off certain costs related to the Ser'ies 1986 and 1987 Bonds resulting in a loss of $ 3.3 million. The University
Medical Center also retired $ 2.9 million of its fixed assets resulting in a gain of $ 88 thousand which is reported as other
operating revenue.
During fiscal year 1991- 92, the Coliseum and Exposition Center was mandated by the Legislature to transfer $ 2.0 million to the
State General Fund. This transaction is reported in the financial statements as a transfer of $ 0,, 9 million of contributed capital
and a residual equity transfer of $ 1.1 million However, since the effective date of ARS 23- 987 mandating the transfer was
September 30, 1992, as of June 3D, 1992, the $ 2.0 million had not been transferred, but the liability had been accrued.
Effective July 1, 1991, the Arizona Correctional Industries transferred ownership of their warehouse, sheet metal shop building,
and the farm house at the Arizona State Prison Complex in Florence to the Arizona Department of Corrections. The total annual
depr'eciation of these three buildings being charged to operating expenses was $ 35 thousand and at June 30, 1991, they had a
combined net value of $ 1.0 million which was offset against contributed capital during fiscal year 1991.
Internal Service Funds:
During fiscal year 1991- 92, mobile equipment of $ 15 thousand was transferred fr'om the General Fixed Assets Account Group to the
Transportation Equipment Revolving Fund, The transfer of equipment was recorded as an increase in contributed capitaL
During fiscal year 1991- 92, the Telecommunications Fund entered into two installment purchase contracts to acquire various
telecommunications equipment totaling $ 0,, 3 million. At June 3D, 1992, the outstanding pr'incipal balance on these contracts totaled
$ 0.2 million.
The Data Center entered into two installment purchase contracts to acquire various computer equipment totaling $ 1.6 million. At
June 30, 1992, the outstanding principal balance on these contracts totaled $ 1,, 3 million.
The Notes to the Financial Statements are an integral part of this statement,
- 31-
STATE OF ARIZONA
COMBINED STATEMENT OF CHANGES IN FUND BALANCES
UNIVERSITY FUNDS
FOR THE YEAR ENDED JUNE 30, 1992
( Expressed in Thousands)
CURRENT OPERATING FUNDS
UNRESTRICTED
TOTAL
GENERAL AUXILIARY CURRENT
OPERATING DESIGNATED ENTERPRISES RESTRICTED OPERATING
FUNDS FUNDS FUNDS FUNDS FUNDS
REVENUES AND OTHER ADDITIONS:
Unrestricted current revenues $ 176,370 $ 172,643 $ 149,921 $ $ 498,934
Tuition and fees 302 302
Governmental grants and contracts 222,492 222,492
Private gifts, grants and contracts 78,610 78,610
Investment and endowment income 3,525 3,525
Additions to plant facilities including
$ 53,224 charged to current funds expenditures
Retirement of indebtedness including
$ 1,388 charged to current funds expenditures
Proceeds of bond refunding
Other additions 25 25
Total Revenues and Other Additions 176,370 172,643 149,921 304,954 803,888
EXPENDITURES AND OTHER DEDUCTIONS:
Educational and general expenditures 641,630 120,846 256,408 1,018,884
Auxiliary enterprises expenditures 123,243 123,243
Indirect costs recovered 46,075 46,075
Cancellation of loans and provision
for bad debts
Administrative and collection costs 21 21
Expended for plant facilities including
expenditures not capitalized of $ 1,775
Interest on indebtedness including $ 7,852
capitalized as construction in progress
Disposal of plant facilities
Retirement of indebtedness
Other deductions 515 515
Total Expenditures and Other Deductions 641,630 120,846 123,243 303,019 1,188,738
TRANSFERS AMONG FUNDS AND ADDITIONS ( DEDUCTIONS):
State general fund appr'opriations 516,687 1,332 518,019
Mandatory loan fund and matching grants ( 91) 86 ( 5)
Mandatory debt indentur'e requirements ( 55) ( 28,766) ( 16,924) ( 45,745)
Other mandatory ( 53,238) ( 1,606) ( 1,507) 465 ( 55,886)
Voluntary, net 375 ( 14,198) ( 2,668) ( 925) ( 17,416)
Net Transfers Among Funds 463,769 ( 44,661) ( 21,099) 958 398,967
Net Increase ( Decrease) for the Year ( 1,491) 7,136 5,579 2,893 14,117
Beginning Fund Balances 4,496 40,660 16,895 20,051 82,102
Ending Fund Balances $ 3,005 $ 47,796 $ 22,474 $ 22,944 $ 96,219
The Notes to the Financial Statements are an integral part of this statement,
- 32-
50 259 1,614 1,614 519,942 520,066
5
( 409) 46,154 45,745
154 7,385 7,539 ( 48,347) ( 40,756)
61 ( 1,876) 110,828 2,627 ( 94,224) 19,231
116 0,617) 112,187 56,166 ( 94,224) 74,129 471,595 479,310
424 3,171 634 ( 6,158) 66,792 61,268 78,980 80,528
34,438 72,316 24,041 29,402 1,453,552 1,506,995 1,695,851 1,615,323
$ 34,862 $ 75,487 $ 24,675 $ 23,244 $ 1,520,344 $ 1,568,263 $ 1,774,831 $ 1,695,851
- 33-
STATE OF ARIZONA
COMBINED STATEMENT OF CURRENT OPERATING FUNDS
REVENUES, EXPENDITURES AND OTHER CHANGES
UNIVERSITY FUNDS
FOR THE YEAR ENDED JUNE 30, 1992
( Expressed in Thousands)
UNRESTRICTED FUNDS
GENERAL AUXILIARY TOTAL TOTAL CURRENT
OPERATING DESIGNATED ENTERPRISES UNRESTRICTED RESTRICTED OPERATING FUNDS
FUNDS FUNDS FUNDS FUNDS FUNDS 1992 1991
REVENUES:
Tuition and fees $ 168,971 $ 84,911 $ 10,043 $ 263,925 $ 349 $ 264,274 $ 254,141
Governmental grants and contracts 3,334 40,357 19 43,710 195,852 239,562 222,243
Private gifts, grants and
contracts 12,312 1,674 13,986 55,324 69,310 66,408
Investment and endowment income 1,431 8,669 331 10,431 3,243 13,674 14,715
Sales and services of
auxiliary enterprises 136,040 136,040 136,040 132,580
Internal services 1,566 1,566 1,566 49
Other 2,634 26,394 248 29,276 287 29,563 27,631
Total Revenues 176,370 172,643 149,921 498,934 255,055 753,989 717,767
EXPENDITURES:
Educational and general:
Instruction 271,459 38,400 309,859 18,396 328,255 333,907
Research 53,401 10,090 63,491 145,682 209,173 196,514
Public service 13,894 .... " 1" 7" 19,071 30,813 49,884 46,312 .. J,. l. I'
Academic support 109,962 10,349 120,311 665 120,976 120,302
Student services 33,414 8,959 42,373 2,446 44,819 45,874
Institutional support 56,176 29,398 85,574 859 86,433 89,197
Operation and maintenance
of plant 70,432 8,746 79,178 7 79,185 73,669
Scholarships and fellowships 32,892 9,727 42,619 57,540 100,159 88,540
Total Educational
and General Expenditures 641,630 120,846 762,476 256,408 1,018,884 994,315
Auxiliary enterprises 123,243 123,243 123,243 128,507
Total Expenditures 641,630 120,846 123,243 885,719 256,408 1,142,127 1,122,822
MANDATORY TRANSFERS:
Debt indenture requirements ( 55) ( 28,766) ( 16,924) ( 45,745) ( 45,745) ( 52,626)
Loan fund and matching grants ( 91) ( 91) 86 ( 5)
Other mandatory ( 53,238) ( 1,606) ( 1,507) ( 56,351) 465 ( 55,886) ( 47,515)
Total Net Mandatory
Transfers ( 53,293) ( 30,463) ( 18,431) ( 102,187) 551 ( 101,636) ( 100,141)
OTHER TRANSFERS AND
ADDITIONS ( DEDUCTIONS):
State general fund
appropriations 516,687 516,687 1,353 518,040 516,735
Restricted receipts over
( under) transfers to revenues 3,358 3,358 ( 992)
Voluntary transfers, net 375 ( 14,198) ( 2,668) ( 16,491) ( 925) ( 17,416) ( 14,800)
Other ( 91) ( 91) ( 109)
Total Other Transfers
and Additions ( Deductions) 517,062 ( 14,198) ( 2,668) 500,196 3,695 503,891 500,834
Net Increase ( Decrease)
in Fund Balances $ ( 1,491) $ 7,136 $ 5,579 $ 11,224 $ 2,893 $ 14,117 $ ( 4,362)
The Notes to the Financial Statements are an integral part of this statement
- 34-
THIS PAGE INTENTIONALLY LEFT BLANK
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
The accompanying financial statements of the State of Arizona have been
prepared in conformity with generally accepted accounting principles ( GAAP)
applicable to governmental units.
The measurement focus of the financial statements for Governmental,
Expendable Trust and Agency Funds is the flow of current financial
resources, measured by the modified accrual basis of accounting. The
measurement focus of the financial statements for Proprietary, NonExpendable
Trust, Pension Trust and University Funds is the flow of economic
resources, measured by the accrual basis of accounting.
The State classifies assets and liabilities as current or long- term on the
balance sheet. Liabilities expected to be paid within the next 12 months,
except for the General Long- Term Debt Account Group, along with the assets
available to meet those liabilities, are classified as current. Other
assets and liabilities are long- term.
Amounts in the 1992 and 1991 " Total- Memorandum Only" columns in the
accompanying financial statements represent a summation of the combined
financial statement line items. These are presented for analytical purposes
only. Consequently, amounts shown in the " Total- Memorandum Only" columns
are not comparable to a consolidation, and they do not represent the total
resources available, total liabilities and fund balances or total revenues
and expenditures/ expenses of the State. Certain amounts have been
reclassified in the 1991 column to conform to the 1992 presentation.
All financial statement information of the reporting entity is for the
fiscal year- ended June 30, 1992, except for certain components of the
Enterprise Funds. The State Compensation Fund's and the Social Service
Contractors Indemnity Pool's, a component of the Other Enterprise Funds,
information is for the calendar year- ended December 31, 1991.
B. FINANCIAL REPORTING ENTITY
The accompanying financial statements include financial transactions of all
funds, account groups, elected offices, agencies, boards, commissions and
universities over which the State's judicial, executive or legislative
branches exercise primary oversight responsibility. Oversight responsibility
includes selection of an entity's governing authority and ultimate
accountability for fiscal matters.
The State reporting entity includes the three State universities ( University
of Arizona, Arizona State University, and Northern Arizona University), the
University Medical Center Corporation, the Arizona Power Authority, and the
four State retirement systems.
The State reporting entity does not include counties, municipalities, school
districts, community colleges, the Central Arizona Water Conservation
District or other political subdivisions of the State over which the State
exercises little, if any, oversight responsibility.
- 36-
NOTE 1. ( CONTINUED)
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
C. FUND STRUCTURE
The State uses approximately 600 accounting funds. Each accounting fund is
a separate accounting entity with its own self- balancing set of accounts
that represent its assets, liabilities, fund equity, revenues, and
expenditures or expenses, as appropriate. Governmental resources are
allocated to and accounted for in individual accounting funds depending upon
the purposes for which the State collects revenues or expends resources, and
the means the State uses to control spending activities. For the purpose of
preparing financial statements, the accounting funds have been combined by
fund type. Account groups are used to provide accountability for certain
assets and liabilities that are not recorded in the funds because they do
not directly affect net expendable available financial resources. The four
major fund types and the two account groups are described below.
1. Governmental Fund Types
The General Fund accounts for all financial resources except those required
to be accounted for in another fund. The General Fund consists of four
different sub- funds: 1) General Operations; 2) Federal Grants; 3) Other
Appropriations; and 4) Other Non- Appropriations.
Special Revenue Funds account for the proceeds of specific revenue sources
( other than expendable trusts or major capital projects) that are legally
restricted to expenditure for specified purposes.
Debt Service Funds account for the accumulation of resources for, and the
payment of, general long- term debt principal, interest and related costs.
Capital Projects Funds account for financial resources used to acquire or
construct major capital facilities ( other than those financed by
Proprietary, Non- Expendable Trust, Pension Trust or University Funds).
2. Proprietary Fund Types
Enterprise Funds account for operations ( a) financed and operated in a
manner similar to private business enterprises, where the State intends that
the cost of providing goods or services to the general public be financed
or recovered primarily through service charges, or ( b) where the State
decides that periodic determination of revenues earned, expenses incurred,
and/ or net income is appropriate for capital maintenance, public policy,
management control, accountability, or other purposes.
Internal Service Funds account for the financing of goods and services
provided by one State department or agency to other State departments or
agencies on a cost- reimbursement basis.
3. Fiduciary Fund Types
Expendable Trust Funds account for assets held by the State in a trustee
capacity, where principal may be expended in the course of the funds I
designated operations.
Non- Expendable Trust Funds account for assets held by the State in a trustee
capacity, where the State must preserve the principal intact, and may expend
only income derived from the principal for the funds' designated operations.
Pension Trust Funds account for transactions of the four public employee
retirement systems for which the State acts as trustee.
- 37-
NOTE 1.
STATE OF ARIZONA
, NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
( CONTINUED)
Agency Funds account for
deposits, deductions, and
acts as an agent for
organizations.
4. University Funds
the receipt and disbursement of various taxes,
property collected by the State, where the State
distribution to other governmental units or
The University Funds account for the transactions of the State's three
universities. For State reporting purposes, the University Funds combine
the balances of each university's separate financial statements.
The University Funds include:
* Current Operating Funds which account for unrestricted resources over
which the governing board retains full control in achieving the
institutions' purposes and restricted resources which may be utilized
only in accordance with externally restricted purposes.
* Loan funds account for loans made to assist students in financing their
education.
* Endowment funds account for private gifts which specify income purpose
and principal protection.
* Agency funds account for assets for which the university acts in a
custodial manner.
* Plant funds which account for institutional property investment,
acquisition, renewal, replacement and debt service.
5. General Fixed Assets Account Group
Fixed assets used in Governmental and Expendable Trust Fund operations
( general fixed assets) are accounted for in the General Fixed Assets Account
Group, rather than in the individual funds. Fixed assets related to
Proprietary, Non- Expendable Trust, Pension Trust and the University Funds
are accounted for in those funds.
6. General Long- Term Debt Account Group
The General Long- Term Debt Account Group reflects long- term liabilities
expected to be retired with Governmental and Expendable Trust Fund
resources. Acquisition liabilities related to Proprietary, Non- Expendable
Trust, Pension Trust and University Funds are accounted for in those funds.
D. BASIS OF ACCOUNTING
1. Overview
The financial statements present the Governmental, Expendable Trust and
Agency Funds on the modified accrual basis of accounting. Under the
modified accrual basis of accounting, revenues and other financial resources
are recognized in the accounting period in which they become both measurable
and available to finance operations of the fiscal year or liquidate
liabilities existing at fiscal year end. Expenditures and other uses of
financial resources are recognized when the related fund liability is
incurred.
The financial statements of the Proprietary, Non- Expendable and Pension
Trust Funds are presented on the accrual basis of accounting. Revenues are
recognized when they are earned and expenses are recognized when they are
incurred.
- 38-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 1. ( CONTINUED)
The financial statements of the University Funds use the accrual basis of
accounting in accordance with generally accepted accounting principles.
2. Revenue Recognition - Governmental Fund Types
The State recognizes tax revenues and related receivables when the taxpayer
incurs the corresponding liability, and the payment has been demanded,
provided the state can reasonably estimate the amount of revenue to which
it is entitled and can reasonably establish its collectibility, i. e., earned
and collected or expected to be collected within the next 31 days.
Otherwise, the State defers recognizing revenue until cash is received.
Major revenues determined to be susceptible to accrual include income,
sales, unemployment, and motor vehicle and fuel taxes. Any receivables not
expected to be collected within the next 31 days are recorded as deferred
revenue.
The State estimates the amount of taxes that will ultimately be
uncollectible and excludes these from revenues. Tax refunds are based upon
actual payments made within 31 days after fiscal year end and are recorded
as a liability and a reduction in related revenue.
Property taxes are levied on the third Monday in August. The first half of
collections are due October 1 and the second half are due the following
March 1. Any property tax collections received within 31 days after fiscal
year end are recognized as revenue. The lien date is the first day of
January each year.
Federal grants and reimbursements are recorded as intergovernmental
receivables and revenues when the State incurs the related expenditures or
expenses, provided the State has complied with the terms of the grant award.
Revenues from Federal entitlement awards are recorded as intergovernmental
receivables and revenues when entitlement occurs.
Revenue from non- refundable licenses, permits and similar fees is recorded
when cash is received. Other revenues are recorded when earned, or when the
State becomes entitled to the revenue and can establish its collectibilitYi
otherwise, the State defers recognition of revenue until cash is received.
Prior to fiscal year 1992, the State did not recognize the Federal grant
revenue that is related to the expenditure accrued as an incurred but not
reported liability of the Arizona Health Care Cost Containment System
( AHCCCS). For fiscal year 1992, the state will recognize these Federal
grant revenues to the extent that they are expected to be received by AHCCCS
and are attributable to the related expenditures accrued at the current
fiscal year end. This change in accounting policy resulted in a restatement
of beginning fund balance of $ 42.3 million in the General Fund. See Note
10 for details on the restatement of fund balance.
Beginning with fiscal year 1992, the state will recognize both the revenue
and the related expenditure for those amounts distributed throughout the
year to cities and counties as Urban Revenue Sharing. This change has no
effect on fund balance and is not reflected on the accompanying comparative
financial statements in the fiscal year 1991 total ( memorandum only) column.
3. Expenditure Recognition - Governmental Fund Types
The State recognizes expenditures and related liabilities in the accounting
period the liability is incurred to the extent it is expected to be paid
within the next 12 months, as a result of receiving property, goods or
services, or when the beneficiary of a State program becomes entitled to
receive benefits. Exceptions to this rule are:
- 39-
NOTE 1.
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
( CONTINUED)
* The State does not recognize a liability or the related expenditure for
expected future welfare, health and similar benefits if the beneficiary
is entitled to benefits solely because of a current condition.
*
*
* The State recognizes interest in the Debt Service Funds to the extent it
becomes payable during the current fiscal year.
The State recognizes compensated absences in the period they are paid.
The amounts earned and to be paid in the future are recorded in the
General Long- Term Debt Account Group.
The State recognizes a liability and the related expenditures for the
accrued insurance losses of AHCCCS as they are incurred, without regard
to when these expenditures are actually paid.
The portion of the liabilities which is expected to be paid beyond 12 months
is recorded in the General Long- Term Debt Account Group.
Beginning with fiscal year 1992, the state will recognize both the revenue
and the related expenditure for those a~ ounts distributed throughout the
year to cities and counties as Urban Revenue Sharing. This change has no
effect on fund balance and is not reflected on the accompanying comparative
financial statements in the fiscal year 1991 total ( memorandum only) column.
4. Expenditure Classification - Governmental Function Types
General Government agencies provide general government services to other
State agencies or to the general public.
Health and Welfare agencies provide health and welfare services to the
general public.
Inspection and Regulation agencies provide inspection and regulatory
services for the general public.
Education agencies provide education services to the general public.
Protection and Safety agencies provide law enforcement, military, custody
and related services to the general public.
Transportation services to the general public are provided by the Arizona
Department of Transportation.
Natural Resources agencies provide services with regard to the natural
resources of the State.
E. VALUATION POLICIES
1. Cash and Cash Equivalents
Cash and cash equivalents include undeposited receipts, petty cash, bank
accounts, and certificates of deposit.
2. Investments
Investments are stated at cost or amortized cost, except for investments in
the Deferred Compensation Agency Fund which are reported at market value.
- 40-
NOTE 1.
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
( CONTINUED)
3. Inventories
Inventories consist of expendable supplies held for consumption in all
funds, and merchandise intended for sale to customers in the Proprietary and
University Funds. Inventories are stated at cost, using the first- in,
first- out method. In Governmental Funds inventories are accounted for using
the consumption method. Under this method, inventories are recorded as an
expenditure as they are used.
4. General Fixed Assets
Fixed assets capitalized in the General Fixed Assets Account Group are
recorded at the time of purchase as capital outlay or other expenditures in
the funds from whicjl the expenditures are made. Such assets are capitalized
at historical cost or estimated historical cost if actual historical cost
is unknown. Donated fixed assets are recorded at estimated fair market
value on the date of contribution. Public domain ( infrastructure) general
fixed assets consisting of roads and bridges are not capitalized, as these
assets are immovable and of value only to the government.
Prior to fiscal year 1992, the State computed depreciation on its general
fixed assets. Beginning with fiscal year 1992, the State no longer computes
depreciation on general fixed assets.
5. Proprietary and Similar Trust Fund Fixed Assets
Fixed assets acquired in Proprietary and Similar Trust Funds are capitalized
at historical cost or estimated historical cost if actual cost is unknown.
Donated fixed assets are recorded at estimated fair market value on the date
of contribution. Depreciation is charged against operations in Proprietary
and Similar Trust Funds on a straight- line basis over the estimated useful
lives of the assets.
The State is trustee for approximately 9.6 million acres of land acquired
through U. S. Government land grants. The State acquired a substantial
portion of this land at no cost to the State, and its fair market value has
not been reliably estimated. Accordingly, this land is not reported on the
accompanying financial statements. A portion of the land that the State is
trustee for has been sold and the buyers of the land have defaulted on the
loans. The value of the land has been recorded at the sales price and
properly included in the Non- Expendable Trust Funds fixed assets.
The State holds land and other assets in trust for the benefit of its public
schools and other public institutions. The trust requires the principal to
be held intact with only interest and rentals of property distributed for
current operations. Accordingly, certain revenues, including gains on the
sale of property, are added to principal rather than distributed for current
operations. In addition, the State Constitution provides that certain State
revenues be added to the principal of the trust. In 1992, the trust
distributed all monies eligible for distribution to aid the State's
educational system and other public institutions.
6. University Fixed Assets
Fixed assets capitalized in the University Funds are recorded at historical
cost or estimated historical cost if actual historical cost is unknown.
Donated fixed assets are recorded at fair value on the date of contribution.
The University Funds do not record depreciation on fixed assets.
- 41-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 3D, 1992
NOTE 1. ( CONTINUED)
7. Leases
The State has capital leases for land, buildings, machinery and equipment.
Although the terms of these leases vary, most are subject to annual
appropriations by the Legislature. If a legislative appropriation is
reasonably assured and the intent of the State is to continue the lease, a
capital lease is considered non- cancellable for financial reporting purposes
and is reported in the General Long- Term Debt Account Group, or in the
appropriate Proprietary and Similar Trust or University Funds.
Assets acquired through capital leases are valued at cost. Capital leases
for the Governmental Funds are reported in the General Long- Term Debt
Account Group and the related assets are reported in the General Fixed
Assets Account Group. Capital leases for the Proprietary and Similar Trust
or University Funds are reported in those funds as a long- term obligation,
together with the related assets.
The State also leases land, buildings and equipment under operating leases.
The related assets are not capitalized. Operating lease obligations are
recorded when incurred as rental expenditures or expenses of the related
funds.
F. BUDGETS AND BUDGETARY ACCOUNTING
1. Budget Process
Annually, no later than five days after the regular session of the
Legislature convenes, the Governor must submit to the Legislature for
approval, a proposed operating and capital outlay budget for the succeeding
fiscal year. The Legislature must approve the budget by passing a general
and a capital outlay appropriation bill. The budget can be amended
throughout the year by special legislative appropriations and/ or budget
transfers. The State's budgeted expenditures may not exceed seven percent
of aggregate personal income as estimated by the Economic Estimates
Commission as stated in the State Constitution.
Funds which have legal budgets include the General Fund, Special Revenue
Funds ( except for minor funds), portions of Capital Projects Funds, State
appropriations to the Coliseum and Exposition Center of the Enterprise
Funds, certain Expendable, Non- Expendable and Pension Trust Funds, and State
appropriations to the University Funds. However, Federal resources included
in these Funds are not appropriated. The General Fund is the only fund for
which a revenue budget is prepared.
State agencies are responsible for exercising budgetary control and ensuring
that expenditures do not exceed appropriations. The State Department of
Administration - Division of Finance exercises oversight and does not
disburse funds in excess of appropriations.
The State prepares its annual budget on the cash basis of accounting.
E~ cumbrances as of June 30 can be liquidated during a four week
administrative period known as the 13th month. Anticipated revenue is
estimated on the cash basis. The statements comparing budgeted and actual
results are presented on the budgetary ( or legal) basis. The State prepares
an annual budgetary report which presents the individual funds comparisons
at the level of budgetary control.
- 42-
NOTE 1.
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
( CONTINUED)
2. Encumbrance Accounting
Encumbrance accounting, under which purchase orders, contracts and other
commitments for expenditures are recorded to reserve that portion of the
applicable appropriation, is an extension of formal budgetary control. The
Department of Administration - Division of Finance is authorized to draw
warrants against the available balances of appropriations for one month
after the end of the fiscal year in order to pay for goods or services
received but not paid for at the close of the fiscal year.
Encumbrances outstanding more than one month after year end for goods or
services that were not received before year end are cancelled. These can
only be paid upon a subsequent appropriation by the Legislature.
Encumbrances for goods and services received before year end can be paid in
the subsequent year with the previous year appropriations.
One month after year end, the remaining available appropriations lapse and
no further payments may be made except for continuing appropriations allowed
under Arizona Revised Statutes ( ARS) Section 35- 190. Continuing
appropriations primarily relate to multi- year commitments and automatically
renew without further legislative action until altered or revoked.
NOTE 2 . CASH AND INVESTMENTS
A. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are under the control of the State Treasurer, the
retirement systems or other administrative bodies. In accordance with
statutory requirements, the State invests temporary surpluses of cash in
obligations issued or guaranteed by the U. S. Government, and commercial
paper or bankers acceptances for a term not to exceed fifteen days. Most
cash deposited with the State Treasurer by State agencies is maintained by
the Treasurer in various pooled investment funds. The Treasurer deposits
in the General Fund interest earned from investments purchased with such
pooled monies. However, the Treasurer also invests a State agency's cash
in a separate pool if specifically requested to do so by the agency; the
Treasurer allocates interest earned from these investments monthly to the
participating funds based on average daily cash balances.
Arizona Revised Statutes 23- 703 requires that unemployment insurance
contributions from Arizona employers be deposited in an unemployment trust
fund account with the Secretary of the Treasury of the United States that
is established and maintained pursuant to section 1104 of the Social
Security Act. The cash on deposit in the trust fund account is pooled and
invested. Interest earned from investments purchased with such pooled
monies is deposited in the trust fund account.
The State Treasurer invests the deposited cash, including the cash float,
in short- term securities and other investments. Provisions of Arizona law
restrict these investments to obligations of the U. S. Government and its
agencies, obligations of the State and certain local government
subdivisions, interest- bearing savings accounts and certificates of deposits
( only if deposits in excess of the insured amount are secured by the
depository), collateralized repurchase agreements, certain obligations of
U. S. corporations, and certain other securities.
- 43-
NOTE 2.
STATE OF ARIZONA
NOT, ES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
( CONTINUED)
Statutes enacted by the Legislature authorize the retirement systems to make
investments in accordance with the " Prudent Man" rule. This rule imposes
the responsibility of making investments with the jUdgement and care that
men of ordinary prudence would exercise in the ma1'! agement of their own
affairs when considering both the probable safety of their capital and the
probable income from tbat capital. Within this broad framework, the
retirement systems have chosen to invest in short- term securities and
repurchase agreements, obligations of the U. S. Government and its agencies,
corporate bonds, common and preferred stocks and mortgages. The Statutes
also place certain restrictions on the investment fund portfolios of the
retirement systems.
The Statutes also allow the Arizona State Retirement System to lend
securities to brokers under a security loan program. The System enters into
agreements with brokers to loan securities and have the same securities
redelivered at a later date. It is the policy of the System to receive and
maintain as collateral at least 102% of the market value of the loaned
securities in the form of cash. The system records the cash received and
the same amount as an obligation for securities on loan. The cash received
is invested in temporary investments. Interest income from the investment
of the collateral is returned to the broker. The System receives a
negotiated fee for its loan activities. At June 30, 1992 and 1991, the
System had $ 369.0 and $ 413.3 million, respectively, outstanding as payable
for securities on loan.
Due to the flow of securities to and from transfer agents and the security
loan program, securities occasionally cannot be delivered for a sale or
received for a purchase, resulting in a " failed" transaction. Securities
with trade dates in June and settlement. dates in July result in
" outstanding" transactions. Since these securities have contractually
changed ownership, receivables and payables result from these transactions.
Such transactions resulted in a receivable for securities sold of $ 166.0 and
$ 13.9 million at June 30, 1992 and 1991, respectively, and a payable for
securities purchased of $ 279.8 and $ 28.1 million at June 30, 1992 and 1991,
respectively.
B. RESTRICTED ASSETS
University Funds report as restricted assets cash and investments for bond
and loan retirement funds ( including advance refunding of bonds), as well
as for maintenance and replacement reserves. The endowment and restricted
funds also include restricted assets.
C. COLLATERAL AND INSURANCE
The State requires that deposits and investments with financial institutions
be entirely covered by Federal depository insurance or, alternatively,
collateralized with surety equal to at least 100% ( 102% for the Treasurer)
of the deposits so collateralized. Cash deposited with banks is
collateralized based on bank balances. Surety collateralization includes
U. S. government obligations, state obligations, obligations of counties and
municipalities within the State, and certain other securities.
- 44-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 2. ( CONTINUED)
D. DEPOSITS
At June 30, 1992 the carrying amount of the State's deposits was $ 236.2
million and the bank balance was $ 344.2 million. Of the bank balance,
$ 223.9 million was collateralized by Federal depository insurance. Of the
remaining balance, $ 91.5 million was collateralized by securities held by
the bank's trust division in the State's name in book- entry form, and $ 28.8
million was collateralized by securities held in the bank's custodial
account with the Federal Reserve in the banks name and in the State's name
in book- entry form.
E. INVESTMENTS
The following table summarizes the credit risk of the State's investments
( expressed in millions). Category A includes investments that are insured
or registered, or for which securities are held by the State or the State's
agent in the state's name, category B includes uninsured and unregistered
investments for which securities are held by the counterparty's agent or
trust department in the State's name. Category C includes uninsured and
unregistered investments for which securities are held by the counterparty,
or by its agent or trust department but not in the State's name.
Type of Deposit Category Carrying Market
or Investment A B C Amount Value
U. S. Government
securities $ 4,965.6 $ 428.0 $ 443.1 $ 5,836.7 $ 6,249.2
Corporate stocks 4,444.0 14.1 4,458.1 5,037.3
Corporate debt 2,112.7 450.9 5.5 2,569.1 2,669.9
State and local
government securities 1,250.0 47.6 1,297.6 1,301. 9
Repurchase agreements 379.7 379.7 379.7
Mortgages 223.4 38.6 262.0 262.0
Temporary investments 793.9 793.9 794.0
Other investments 826.9 314.2 75.6 1,216.7 1,223.1
Subtotal S 14,996.2 S 1,279.3 S 538.3 16,813.8 17,917.1
United States Treasury
Pooled Investment 407.0 407.0
Total Investments 17,220.8 18,324.1
Deposits 236.2 236.2
Total Cash and Investments S 17,457.0 S 18,560.3
At June 30, 1992, the State had no commitments to resell securities under
yield maintenance agreements.
During the year ended June 30, 1992, the State did not make significant
investments in types of investments beyond those enumerated in the table
above,
- 45-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 3D, 1992
NOTE 3. RECEIVABLES/ PAYABLES/ OTHER REVENUES
A. TAXES RECEIVABLE
Taxes receivable represent amounts owed by taxpayers for the 1991 and prior
calendar years including assessments for underpayment, penalties and
interest totaling approximately $ 151. 5 million at June 30, 1992. Taxes
receivable are accrued when they are earned, measurable, and available.
The income tax receivable is composed of individual and corporate estimated
payments, withholding payments, payments with final returns and assessments
which relate to income earned through June 30, 1992. The property tax
receivable is composed of payments for real property owned and subject to
tax through June 3D, 1992. Sales and motor vehicle and fuel tax receivable
represent amounts which are earned by the State in the fiscal period ending
June 3D, 1992, but not collected until the following month. The following
table summarizes taxes receivable at June 3D, 1992 ( expressed in millions).
Type of Tax
General
Fund
Special
Revenue
Funds
Capital
Projects
Funds
Enterprise
Funds
Expendable
Trust
Funds
Sales
Income- Individual
and Corporate
Property
Insurance Premium
Motor Vehicle and Fuel
Luxury
Unemployment
$ 236.8 $ 11.0 $
268.2
11.8
14.3
7.9 53.6
5.5 1.7
$
4.6
$
39.1
Allowance for
uncollectible taxes
Net Taxes Receivable
B. OTHER RECEIVABLES
( 184.5)
$ 360.0 $ 64.6 $ 1. 7 $ 4. 6 .$. 3.. 9.=.== 1
The total amount of other current receivables at June 3D, 1992 is $ 394.4
million. The following schedule summarizes other current receivables over
$ 5 million ( expressed in millions).
Fund
Pension Trust
University
Enterprise
Expendable Trust
Non- expendable Trust
Pension Trust
General Fund
Enterprise
Type of Receivable
Securities sold
Student loans and fees
Patient accounts
Unemployment Insurance Benefits
Land sales
Contributions
Loans to City of Phoenix
Lottery ticket sales
Amount
$ 166.0
83.0
30.7
14.6
11.2
10.5
5.1
5.0
The State Compensation Fund had a receivable for premiums at December 31,
1991 of $ 42.0 million.
Long- term accounts receivables consist primarily of receivables for land
sales contracts of the Land Department, a Non- Expendable Trust Fund ($ 29.0
million) .
- 46-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 3. ( CONTINUED)
C. DEFERRED REVENUES
Deferred revenues consist of payments to the State for goods and services
not yet rendered. Delinquent taxes not collected within 31 days after June
30, 1992, have been deferred and, consequently, are not included in current
year revenues. Funds with deferred revenues of $ 10 million or more consist
of the following ( expressed in millions).
Trust and
General Enterprise Agency University
Revenue Source Fund Funds Funds Funds
Taxes $ 134.1 $ $ $
Land Leases 10.4 10.0
Federal Grants 4.8
Insurance Premiums 47.6 24.8
Student Services 30.9
Other 1.7 5.1
Total S 151.0 S 52.7 S 34.8 S 30.9
D. SALES AND CHARGES FOR SERVICES - OTHER
The total amount of sales and charges for services - other, of all
Proprietary and Similar Trust Funds, for fiscal year end June 30, 1992 is
$ 590.9 million. The following schedule summarizes sales and charges for
services - other, over $ 10 million ( expressed in millions).
Fund
State compensation
University Medical Center
Risk Management
Transportation Equipment
Arizona Power Authority
Workers' Compensation
Land Endowments
Data Processing
Telecommunications
Coliseum & Exposition
Center
Types of Sales and
Charges for Services
Insurance premiums
Medical services
Insurance premiums
Equipment and warehouse supplies
Power sales
Insurance premiums
Land Sales
Data processing
Telecommunications
Entertainment related sales and
rentals
$
Amount
248.6
153.6
35.8
22.8
16.7
14.9
14.2
13.0
12.2
12.0
NOTE 4. GOVERNMENTAL RECEIVABLES! PAYABLES
A. GOVERNMENTAL RECEIVABLES
Due from U. S. Government in the General Fund of $ 161.0 million represents
receivables from Federal Financial Assistance Programs. The amount of $ 23.7
million in the Special Revenue Funds consists principally of amounts due to
the Arizona Department of Transportation for reimbursement of highway
construction costs from the U. S. Department of Transportation.
B. GOVERNMENTAL PAYABLES
Due to Local Governments in the General Fund of $ 221.9 million, represents
primarily education aid and sales tax collections ($ 142.5 and $ 74.3 million,
respectively) that have not yet been remitted by the State to the respective
local governments as of June 30, 1992.
- 47-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 5. INTERFUND TRANSACTIONS
A. OPERATING TRANSFERS
Interfund transactions include temporary loans, billings for services,
appropriations and other obligations of one fund to another fund. Major
operating transfers of $ 10 million or more, other than those involving
Internal Service Funds operations, during the year ended June 30, 1992
included the following ( expressed in millions).
Paying Fund
General Fund
General Operations
Special Revenue
Maricopa RARF
State Highway
University Funds
General Fund
General Operations
Enterprise
Lottery
special Revenue
State Highway
Enterprise
Lottery
General Fund
Federal Grants
Special Revenue
Highway Users
Enterprise
Industrial Commission
Receiving Fund
University Funds
Debt Service
Dept. of Transportation
Dept. of Transportation
Expendable Trust
Employee Benefits
Expendable Trust
Employee Benefits
General- Fund
General operations
General Fund
General Operations
Special Revenue
Other
Expendable Trust
Employee Benefits
General Fund
General Operations
Special Revenue
Industrial Commission
Amount
$ 519.9
93.8
66.6
48.3
40.9
35.9
29.2
26.6
20.4
12.5
12.2
Other interfund transactions included smaller operating transfers and quasiexternal
transactions, i. e., transactions for goods and services rendered
for other funds primarily by Internal Service Funds.
B. DUE FROM/ DUE TO
The following balances represent due from/ to balances among funds and State
agencies as of June 30, 1992 ( expressed in millions).
Receivable Fund
General Fund
Payable Fund
Special Revenue Funds:
other
Capital Projects Funds:
Other
Debt Service Funds:
Certificates of Participation
Enterprise Funds:
Lottery
Coliseum and Exposition Center
Expendable Trust Funds:
Employee Benefits
Other
Non- Expendable Trust Funds:
Land Endowments
Agency Funds:
Other
University Funds
- 48-
Amount
$ 8.0
0.2
4.7
6.8
2.0
1.1
1.2
5.8
0.9
1.4
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 5. ( CONTINUED)
Receivable Fund
Special Revenue Funds:
State Highway
Game and Fish
Other
Capital Projects Funds:
Other
Debt Service Funds:
Certificates of
Participation
Enterprise Funds:
Industrial Commission
Other
Internal Service Funds:
Transportation Equipment
Workers' Compensation
Data Processing
Telecommunications
Motor Pool
Other
Expendable Trust Funds:
Energy Conservation
payable Fund
General Fund
Expendable Trust Funds:
Employee Benefits
General Fund
Enterprise Funds:
Lottery
Expendable Trust Funds:
Employee Benefits
Other
Agency Funds:
Other
General Fund
Special Revenue Funds:
Highway Users
Non- Expendable Trust Funds:
Other
Agency Funds:
Other
Non- Expendable Trust Funds:
Land Endowments
Special Revenue Funds:
Industrial Commission
General Fund
Special Revenue Funds:
State Highway
Enterprise Funds:
State Compensation
General Fund
Special Revenue Funds:
Industrial Commission
Other
General Fund
Special Revenue Funds:
Other
General Fund
Special Revenue Funds:
Other
General Fund
Special Revenue Funds:
Other
Agency Funds:
Other
- 49-
Amount
$ 0.1
0.1
6.9
1.0
0.1
0.3
0.2
1.4
0.4
0.5
0.1
0.1
0.3
0.1
2.6
0.7
2.0
0.1
0.1
1.0
0.1
1.3
0.4
.1 L. u"
0.2
0.1
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 5. ( CONTINUED)
Receivable Fund
Other
Non- Expendable Trust Funds:
Land Endowments
c. RESIDUAL EQUITY TR&~ SFERS
Payable Fund
General Fund
Special Revenue Funds:
other
Agency Funds:
other
General Fund
Agency Funds:
Other
Total
$
s
Amount
0.6
0.2
0.1
0.3
0.4
54.9
The table below reflects residual equJ. ty transfers in and out and related
activity which occurred during the fiscal year ended June 30, 1992 ( expressed in
thousands):
General Fund:
General Operations
Federal Grants
Other Non- Appropriations
Special Revenue Funds:
State Highway Fund
Criminal Joint Enforcement Funds
90/ 10 Boards
Air Quality Fund
Other Funds
Capital Projects Funds:
Special Revenue Funds Financed
Enterprise Funds:
Coliseum and Exposition Center
Other Funds
Internal Service Funds:
Risk Management
Transportation Equipment
Workers Compensation
Telecommunications
Other Funds
Expendable Trust Funds:
Other Funds
Non- Expendable Trust Funds:
Land Endowments
Other Funds
Transfers
In
$ 11,653
348
272
Transfers
Out
$
2
3,030
8
175
3,443
650
1,106
3
53
930
10
182
314
10
4
80
Total Residual Equity Transfers
- 50-
$ 12,273 $ 10,000
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 5. ( CONTINUED)
Transfers Transfers
In Out
Enterprise Funds:
Coliseum and Exposition Center
return of Contributed Capital
to the General Fund $ $ 894
Internal Service Funds:
Telecommunications return of Contributed
Capital to the General Fund 240
Motor Pool return of Contributed
Capital to the General Fund 1,040
Other Funds return of Contributed
Capital to the General Fund 99
Total Residual Equity Transfers
and Related Activity $ 12,273 $ 12,273
NOTE 6. FIXED ASSETS
A. CAPITALIZATION POLICY
Land and buildings are capitalized regardless of cost. Improvements ( other
than buildings) with a project cost of $ 5,000 or more, and furniture,
vehicles, and equipment with a cost of $ 1,000 or more are capitalized if
they have useful lives longer than one year. Infrastructure is not
capitalized.
B. GENERAL FIXED ASSETS ACCOUNT GROUP
A summary of changes in the general fixed assets account group follows
( expressed in millions) •
Restated
Balance Balance
Asset July 1, 1991 Additions Deletions June 30, 1992
Land $ 52.7 $ 9.4 $ 0.4 $ 61. 7
Buildings and
improvements 684.5 84.7 7.1 762.1
Other improvements 16.5 7.1 23.6
Furniture, vehicles
and equipment 261.9 47.6 9.2 300.3
Subtotal 1, 015.6 148.8 16.7 1, 147.7
Construction in
progress 47.9 16.7 61.8 2.8
Total General
Fixed Assets $ 1,063.5 $ 165.5 $ 78.5 $ 1, 150. 5
The July 1, 1991 beginning balance amounts for the General Fixed Asset
Account Group's land, buildings and improvements, furniture, vehicles and
equipment, and construction in progress asset classifications were restated
by $( 2.0), $ 1.8, $( 7.0) and $ 0.5 million, respectively. Restatements are
attributable to additional findings by agencies in fiscal year 1992 that
consisted of fixed assets of the agency, which did not get recorded on the
fixed asset listing or assets retired, but not yet deleted from the fixed
asset listing.
- 51-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 6. ( CONTINUED)
C. PROPRIETARY AND SIMILAR TRUST FUND FIXED ASSETS
Proprietary and Similar Trust Funds fixed assets consisted of the following
as of June 30, 1992 ( expressed in millions), except for State compensation
and the Social Service Contractors Indemnity Pool, a component of the other
Enterprise Funds, which contains balances as of December 31, 1991.
Internal Similar
Enterprise Service Trust Combined
Funds Funds Funds Total
Land $ 8.6 $ $ 14.6 $ 23.2
Buildings and improvements 143.2 1.4 2.6 147.2
Other improvements 1.4 1.4
Furniture, vehicles and
equipment 60.0 115.1 2.0 177 .1
Construction in progress 7.6 7.6
Subtotal 220.8 116.5 19.2 356.5
Less: Accumulated
depreciation ( 69.5) ( 63.9) ( 1. 9) ( 135.3)
Total S 151.3 S 52.6 S 17.3 S 221.2
Fixed assets of the Proprietary and Similar Trust Funds are capitalized in
the fund in which they are utilized and depreciated on a straight line basis
over their useful lives. The estimated lives of fixed assets are as
follows:
Years
Building and improvements
Other improvements
Furniture, vehicles and
equipment
D. UNIVERSITY FIXED ASSETS
40
20
3- 15
The University fixed assets
millions).
Asset
Land
Buildings and improvements
Other improvements
Furniture, vehicles and
equipment
Subtotal
Construction in progress
Total
consist of the following ( expressed in
Balance Balance
June 30, 1991 June 30, 1992
$ 148.0 $ 150.7
1,064.1 1,163.5
23.9 24.9
652.7 679.2
1,888.7 2,018.3
127.8 152.6
S 2,016.5 S 2,170.9
Universities construction pro; ects included in Construction in Progress have
a total estimated cost of-$ 203.6 million, a cost to date of $ 152.6 million
and a remaining cost to complete of $ 51.0 million.
- 52-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 7. EMPLOYEE BENEFITS
A. COMPENSATED ABSENCES
1. Annual Leave
In general, State employees accrue vested annual leave at a variable rate
based on years of service. An employee forfeits accumulated annual leave
in excess of 240 hours at the end of a calendar year, unless the Director
of the Department of Administration authorizes an exception. An employee
who separates from State service is paid for all unused and unforfeited
annual leave at the employee's rate of pay at the time of separation.
2. Compensatory Leave
Some employees accumulate compensatory leave for time worked over 40 hours
per week. Compensatory leave is treated like annual leave except that the
employee must use any compensatory leave before using annual leave.
B. SICK LEAVE
Sick leave includes any approved period of paid absence granted an employee
due to illness, injury or disability. Most State employees accrue sick
leave at the rate of eight hours per month without an accumulation limit.
With minor exceptions, sick leave credits are forfeited upon separation.
If more than 1,000 hours are accumulated upon retirement, the retiree will
receive $ 750 as a bonus. ( See Note 12. E)
C. DEFERRED COMPENSATION PLAN
The State of Arizona Deferred Compensation Plan for State Employees ( the
Plan), established in accordance with section 457 of the Internal Revenue
Code, allows employees to contribute to the Plan an amount not to exceed the
lesser of $ 7,500 or one- third of the employee's includable compensation.
Employee contributions are deferred for income tax purposes until benefits
are paid to the employees. Revenue Siources are voluntary payroll deductions
from employees and earnings on investments made therefrom. The State does
not make any contributions to the Plan.
The State has stewardship responsibility under the terms of the Plan. Plan
assets are the sole property of the State subject to claims of State
creditors. The rights of the employees or their beneficiaries are
equivalent to that of a general creditor. Employees may withdraw the value
of their Plan account upon termination of employment, retirement, death,
disability or financial hardship. Employees may select from various annuity
options.
The State appointed an independent administrator for the Plan. Participants
direct the administrator to invest their accounts among various investment
options. The administrator receives commissions from the investment of
participant contributions.
As of June 30, 1992, assets invested on behalf of the participants and
available for Plan benefits totaled $ 140.8 million. Of this amount and its
liability, $ 140.0 million is reported in investments and $ 0.8 million is
reported as contributions receivable. These amounts are reported at market
value in an Agency Fund.
- 53-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 7. ( CONTINUED)
D. SOCIAL SECURITY PARTICIPATION COSTS
As an employer, the State participates in the Social Security Program. In
accordance with the terms of the Social Security program, the State matched
the employee payment of 7.65% of up to $ 53,400 and $ 57,600 in employee
earnings in calendar years 1991 and 1992, respectively. The total Social
Security participation costs to the State for fiscal year 1991- 92 were
$ 103.0 million.
NOTE 8. RETIREMENT PLANS
A. PLAN DESCRIPTIONS
The State maintains two cost- sharing and two agent, multiple- employer
retirement systems: the Arizona State Retirement System ( ASRS), the Public
Safety Personnel Retirement System ( PSPRS), the Elected Officials'
Retirement Plan ( EORP), and the Corrections Officer Retirement Plan ( CORP).
The systems publish their own Component Unit Financial Reports containing
historical trend and other data to provide information on progress made in
accumulating sufficient assets to pay benefits when due.
The systems provide retirement, death, and disability benefits to State
employees, public school employees, and employees of counties,
municipalities, and certain other State political subdivisions.
The number of participating local government employers as of June 30, 1992
are shown below.
EMPLOYER ASRS PSPRS EORP CORP
Cities and towns 55 101 13
Counties 14 15 15 10
State 1 1 1 1
Special districts 11 15
School districts 214
Community college districts 10
The number of members and benefit recipients of the retirement systems as
of June 30, 1992 are shown below.
Retirees and beneficiaries currently
receiving benefits and inactive or
terminated employees entitled to
benefits but not yet receiving them
Cur'rent employees:
Vested
Nonvested
B. FUNDING AND BENEFIT POLICIES
ASRS
56,668
74,392
65,241
PSPRS
3,184
5,432
5,254
EORP
415
386
272
CORP
233
863
6,228
The Arizona State Legislature prescribes requirements relating to
membership, benefits, and employee/ employer contribution requirements for
each system. The following summarizes those requirements.
- 54-
NOTE 8.
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
( CONTINUED)
ASRS is a cost- sharing multiple- employer pension system that benefits
employees of public schools, the State and its political subdivisions.
Membership is required as a condition of employment. Both employers and
employees must contribute. Benefits vest after five years of service.
Members retiring at age 65, or at age 62 with ten years of total credited
service, or when age plus total credited service equals 80, receive full
retirement benefits. The benefit is based on two percent of the
participant's highest 36- month average monthly compensation ( in the last 120
months of employment) multiplied by years of total credited service.
In addition to the pension benefits described, the ASRS offers health care
benefits to retired and disabled members that are no longer eligible for
health care benefits through their former member employer's group health
plan. This program is administered in accordance with ARS 38- 781.25 and
38- 781.41. The ASRS reimbursed approximately $ 23.7 million towards the cost
of group health insurance coverage for the year. This figure represents an
increase of 28.11% over the previous year.
PSPRS is an agent multiple- employer pension system that benefits fire
fighters and police officers employed by the State and its political
subdivisions. Membership is required as a condition of employment. Both
employers and employees must contribute. Members retiring at age 62 with
15 years service, or at any age with 20 or more years service, receive
benefits. Retirees with at least 20 years of credited service, but less
than 25 years of credited service receive 50% of average compensation plus
two percent of average compensation for each year over 20. For retirees
with less than 20 years of credited service the 50% of average compensation
is reduced by four percent of average compensation for each year of credited
service under 20 years. Retirees with 25 years or more of credited service
receive 50% of average compensation plus two and one- half percent of average
compensation for each year of credited service over 20 years up to a maximum
of 80%. Average compensation is described as the average for the highest
paid three consecutive years out of the last twenty. Members with ten years
service may also vest certain benefits provided they do not withdraw their
contributions prior to attaining age 62.
EORP is a cost- sharing, multiple- employer pension plan that benefits all
elected State and county officials and judges ( except La Paz County elected
officials), and certain elected city officials. Membership is required as
a condition of employment. Both employers and employees must contribute.
Benefits vest after five years of credited service. Vested members retiring
at age 60 with 25 years or more of credited service, or at age 62 with ten
or more years of credited service, or at age 65 with five years or more of
credited service receive benefits. The benefit is four percent of the
member's final annual salary multiplied by the years of the member's
credited service. The maximum is 80% of a member's final annual salary.
CORP is an agent multiple- employer pension plan that benefits county
detention officers and certain employees of the State Department of
Corrections. Membership is required as a condition of employment. Both
employers and employees must contribute. Benefits vest after ten years of
credited service. Vested members retiring with 25 years of credited
service, or at age 62 with ten years of credited service receive annual
benefits. The benefit is two percent of the member's average monthly salary
multiplied by the member's years of credited service. The amount of a
member's pension shall not exceed 75% of the member's average monthly
salary. Average monthly salary is defined as one- thirty- sixth ( 1/ 36) of
total base salary paid a member during the highest three consecutive years
out of the last ten years of credited service.
Upon termination of employment, a member may withdraw contributions made to
the system plus accrued interest. The acceptance of a refund forfeits the
individual's rights and benefits in the system.
- 55-
STATE OF ARIZONA
; NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 8. ( CONTINUED)
C. FUNDING STATUS AND PROGRESS
The Pension Benefit Obligation ( PBO) is a standardized disclosure measure
of the present value of · · pension benefits, adjusted for the effects of
projected salary increases and step- rate benefits, estimated to be payable
in the future as a resu. lt of employee service to date. The PBO is the
actuarial present value of credited projected benefits and is intended to:
( 1) help users assess the plans' funding status on a going- concern basis,
( 2) assess progress being made in accumulating sufficient assets to pay
benefits when due, and ( 3) allow for comparisons among public employee
retirement plans. The PBO is independent of the actuarial funding method
used to determine contributions to the plan.
Significant actuarial assumptions used to compute the PBO at June 30, 1992
are summarized below.
Annual interest rate
( compounded annually)
Inflation and other factors
Merit or seniority increases
Post- retirement benefit
increases
ASRS
8.0%
5.5%
0.5%- 3.0%
none
PSPRS
9.0%
6.5%
0%- 3.0%
none
EORP
9.0%
7.0%
none
none
CORP
9.0%
6.5%
0.1%- 0.3%
none
The total PBO and net assets available to meet the obligation for each
system at June 30, 1992 are summarized below ( expressed in millions).
ASRS PSPRS EORP CORP TOTAL
Net assets available for
benefits, at cost or amortized
cost S 8,459 S 1, 596 S 116 -"" S_---= 1..,, 6= 8 S 10,339
1,932 245 12 50 2,239
2,217 599 43 32 2,891
619 84 3 30 736
34 2 6 42
8,080 1,503 108 135 9,826
S 379 S 93 S 8 S 33 S 513
S 9,437 S 1,903 S 141 S 189 S 11,670
Pension benefit obligation--
Retirees and beneficiaries
currently receiving benefits
and terminated employees not
yet receiving benefits
Current employees:
Accumulated employee
contributions including
allocated investment income
Employer financed- vested
Employer financed- non- vested
Health Insurance
Total pension benefit
obligation
Net assets in excess of
pension benefit obligation
Net assets available for
benefits, at market
3,312
- 56-
541 48 17 3,918
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 8. ( CONTINUED)
Estimated increases in the PBO of June 30, 1992 resulting from changes
( expressed in millions) are as follows.
ASRS PSPRS EORP CORP
Assumption changes $ 199 $ $ $
Benefit provision changes and ad hoc
increase for retirees and beneficiaries 81 16 1
Changes in retirees and beneficiaries 710 114 5 19
Net changes in PBO S 990 S 130 S 6 S 19
D. CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE
The systems' consulting actuaries determine employer contributions. The
systems use the projected benefit method with entry age normal cost for this
purpose. In determining funding requirements, the actuary uses the same
actuarial assumptions as those used to calculate the pension benefit
obligation. At June 30, 1992, the remaining unfunded accrued liability
liquidation period in years were as follows.
11 26 30
CORP
37
Actual contributions ( expressed in millions) for the fiscal year ended June
30, 1992 were as follows.
% of % of
Employer Covered Employee Covered
Contributions Payroll Contributions Payroll
ASRS $ 132.3 3.6 $ 132.3 3.6
PSPRS 35.8 8.1 30.5 7.3
EORP 4.8 17.4 2.1 7.6
CORP 9.5 6.1 10.2 6.5
E. TREND INFORMATION
Trend information gives an indication of the progress made in accumulating
sufficient assets to pay benefits when due. An analysis of funding progress
for the fiscal years ended June 30, 1990, 1991 and 1992 follows.
Net assets available for benefits
as a percentage of the pension
benefit obligation:
June 30, 1992
June 30, 1991
June 30, 1990
Excess ( unfunded) pension benefit
obligation as a percentage of
annual covered payroll:
June 30, 1992
June 30, 1991
June 30, 1990
Employer contributions as a
percentage of annual
covered payroll:
June 30, 1992
June 30, 1991
June 30, 1990
- 57-
ASRS
104.7%
110.3%
109.8%
10.5%
21.1%
20.2%
3.6%
3.8%
2.0%
PSPRS
106.2%
104.3%
105.8%
22.4%
14.6%
19.2%
8.1%
7.0%
6.7%
EORP
107.4%
100.9%
98.4%
28.8%
3.3%
( 5.8)%
17.4%
14.9%
11.8%
CORP
124.6%
120.2%
109.2%
21.3%
15.2%
6.7%
6.1%
6.4%
6.1%
STATE OF ARIZONA
NOTES TO TIm FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 8. ( CONTINUED)
The State's contribution to the ASRS met the actuarially determined
requirements for fiscal year ended June 30, 1992 and June 30, 1991. The
Arizona Legislature pre- empted the actuarially computed contribution amount
for the ASRS for the year ended June 30, 1990 by passing a law which set the
rate at two percent for employers and employees. The actual contribution
amounts made for the year ended June 30, 1990 were $ 128.9 million ($ 64.45
million each for employers' and employees' portions) • The actuarial
computed contribution amounts for the years ended June 30, 1991 and June 30,
1992 were $ 266.8 million ($ 133.4 million each for employers' and employees'
portions) and $ 264.6 million ($ 132.3 million each for employers' and
employees' portions) respectively.
The State's contributions to the PSPRS and CORP met the actuarially
determined requirements for the fiscal years ended June 30, 1990, 1991 and
1992. For the EORP, the following schedule details employer contributions
( in thousands):
Fiscal Valuation contribution Rates Dollar Contribution
Year Date as Percentage of Valuation for Fiscal Year
June 30 June 30 Valuation Payroll Payroll Computed Actual
1990 1989 15.94% $ 24,605 $ 3,922 $ 3,048
1991 1990 16.83 25,776 4,338 4,142
1992 1991 16.55 27,838 4,607 4,830
F. UNIVERSITIES DEFINED CONTRIBUTION PLANS
Eligible faculty, academic professionals and administrators at the three
universities ( Arizona State University, Northern Arizona University, and
University of Arizona) may select one of three retirement plans: Arizona
State Retirement System, as discussed above, Teachers Insurance Annuity
AssociationjCollegeRetirement Equities Fund ( TlAAjCREF) or Variable Annuity
Life Insurance Company ( VALIC). The former is a defined benefit plan and
the latter two are defined contribution plans. The two defined contribution
plans are administered by independent insurance and annuity companies
approved by the Arizona Board of Regents. Eligible classified staff belong
to the Arizona State Retirement System. In a defined contribution plan,
benefits depend solely on amounts contributed to the plan plus investment
earnings. State statute requires that both the employee and the university
contribute an amount equal to seven percent of the employee's base salary.
The three universities total payroll in fiscal year 1992 was $ 667.6 million.
The universities' contributions were calculated using the base salary amount
of $ 203.1 million for those employees who selected the TlAAjCREF Retirement
Plan and $ 32.6 million for those employees who selected the VALIC Retirement
Plan. Both the university and the covered employees made the required seven
percent contribution. For the TlAAjCREF Retirement Plan each source
contributed $ 14.2 million for a total of $ 28.4 million. For the VALlC
Retirement Plan each source contributed $ 2.3 million for a total of $ 4.6
million.
- 58-
STATE OF ARIZONA
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1992
NOTE 9. LONG- TERM DEBT
A. REVENUE BONDS
1. Department of Transportation
The Department of Transportation ( DOT) issued Highway Improvement Bonds in
1980, and Highway Revenue Bonds in 1986, 1987, 1990, 1991 and 1992. These
bonds are secured by a prior lien on, and a first pledge of, motor vehicle
and related fuel fe~ s and taxes of the State Highway Fund. Arizona Revised
Statutes prohibit the total principal amount of Arizona Highway Revenue
Bonds, excluding refunded bonds, to exceed $ 800 million unless the
additional amount is authorized by the legislature.
The 1980 State ~ f Arizona Highway Improvement Bonds are subject to
redemption prior to their maturity dates on any interest payment date in
inverse order of maturity. The bonds may be redeemed by payment of all
principal and accrued interest plus an amount equal to 0.25% of the
principal amount for each six- month period elapsing between the date of
redemption and the stated maturity date, not to exceed 2.5%.
The 1986, 1987 and 1990 State of Arizona Highway Revenue Bonds are subject
to redemption prior to their maturity dates on July 1, 1996, 1997, and 2000,
respectively, or on any interest payment date thereafter. The bonds may be
redeemed at redemption prices ranging from 100 percent to 103 percent of
principal, plus accrued interest to the date fixed for redemption. The 1990
State of Arizona Highway Revenue Bonds include $ 46.8, $ 49.2, and $ 18.4
million of term bonds maturing on July 1, 2006, 2009, 2010, respectively.
The 1990 Term Bonds maturing on July 1, 2006 and 2009 are subject to
mandatory sinking fund redemptions in 2004 to 2008.
On October 17, 1991, DOT issued the State of Arizona Transportation Board
Subordinated Highway Revenue Bonds, Series 1991A ( Series 1991A Subordinated
Bonds) ($ 171.1 million principal amount) as follows: The Series 1991A Serial
Bonds ($ 87.1 million principal amount) due July 1, 2003 through 2008; and
the Series 1991A Term Bonds ($ 84.0 million principal amount) due July 1,
2011. The Term Bonds maturing on July 1, 2011 are subject to mandatory
sinking fund redemption on July 1 of the years 2009 to 2011.
On March 26, 1992, DOT issued $ 75.5 million in Subordinated Highway Revenue
Bonds to advance refund $ 69.8 million of the 1986 Highway Revenue Bonds.
The net proceeds of $ 74.5 million ( after pa
Object Description
| Rating | |
| TITLE | State of Arizona comprehensive annual financial report |
| CREATOR | Arizona Dept. of Administration--Finance Division--General Accounting Office. |
| SUBJECT | Finance, Public--Arizona--Statistics; Arizona--Appropriations and expenditures; |
| Browse Topic |
Business and industry Government and politics |
| DESCRIPTION | This title contains one or more publications. |
| Language | English |
| Publisher | Arizona Dept. of Administration |
| TYPE |
Text |
| Material Collection |
Annual Reports State Documents |
| Acquisition Note | http://www.gao.state.az.us/financials/ |
| Source Identifier | ADM 3.3:C 55/ /E |
| Location | o845356303 |
| REPOSITORY | Arizona State Library, Archives and Public Records--Law and Research Library. |
Description
| TITLE | State of Arizona comprehensive annual financial report 1992 |
| DESCRIPTION | 173 pages (PDF version). File size: 5206 KB. |
| TYPE | Text |
| RIGHTS MANAGEMENT | Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution. |
| DATE ORIGINAL | 1992 |
| Time Period |
1990s (1990-1999) |
| ORIGINAL FORMAT | Paper |
| Source Identifier | ADM 3.3:C 55 |
| Location | o24256972 |
| DIGITAL IDENTIFIER | 20110720160316331.pdf |
| DIGITAL FORMAT | PDF (Portable Document Format) |
| DIGITIZATION SPECIFICATIONS | Scanned in house from copy. |
| REPOSITORY | Arizona State Library, Archives and Public Records--Law and Research Library |
| Full Text | Am13 .3: C5511992 STATE OF ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 1992 Prepared by Department of Administration Division of Finance General Accounting Office STATE OF ARIZONA -- COMPREHENSIVE ANNUAL FINANCIAL REPORT CONTENTS -- CONTINUED FINANCIAL SECTION -- CONTINUED Page Capital Projects Funds . . . . . Combining Balance Sheet . . . . Combining Statement of Revenues, Fund Balances Expenditures and Changes in 101 102 103 Enterprise Funds Combining Balance Sheet Combining Statement of Revenues, Expenses and Changes in Retained Earnings .... Combining Statement of Cash Flows Internal Service Funds Combining Balance Sheet . . Combining Statement of Revenues, Expenses and Changes in Retained Earnings .... Combining Statement of Cash Flows Trust and Agency Funds Combining Balance Sheet Expendable Trust Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances ..... Non- Expendable Trust Funds Combining Balance Sheet . Combining Statement of Revenues, Expenses and Changes in Fund Balances . . . . Combining Statement of Cash Flows Pension Trust Funds .... Combining Balance Sheet . . Combining Statement of Revenues, Expenses and Changes in Fund Balances Agency Funds Combining Balance Sheet Combining Statement of Changes in Assets and Liabilities 105 106 108 110 115 116 118 120 123 125 127 128 1.30 133 134 135 136 137 138 139 141 143 144 General Fixed Assets Schedule of General Schedule of Changes Schedule of General Fixed Assets by Function ..... in General Fixed Assets by Function Fixed Assets by Source 147 148 148 149 University Funds Combining Balance Sheet iv 151 152 STATE OF ARIZONA - - COMPREHENSIVE ANNUAL FINANCIAL REPORT CONTENTS -- CONTINUED STATISTICAL SECTION ( Not covered by the Independent Auditors' Report) Page Revenues by Source ( Budgetary Basis)-- General and Special Revenue Funds Only for the Last Ten Fiscal Years . . . .. .... 156 Expenditures by Function ( Budgetary Basis)-- General and Special Revenue Funds Only for the Last Ten Fiscal Years . . . . . . . 158 Property Tax Levies, Collections, Taxable Property Assessed and Estimated Actual Value, and Property Tax Rates for the Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . 160 Highway Construction Revenue Bond Coverage for the Last Ten Fiscal Years 160 Arizona State University Revenue Bond Coverage for the Last Six Fiscal Years . . . . . . . . . . . . . . . 161 University of Arizona Revenue Bond Coverage for the Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . 161 Veterans' Memorial Coliseum and Exposition Center Revenue Bond Coverage for the Last Ten Fiscal Years . . . . . . . . . . . . 162 Northern Arizona University Revenue Bond Coverage for the Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . 162 University Medical Center Revenue Bond Coverage for the Last Eight Fiscal Years . . . . . . . . . . . 163 Economic Indicators for the Last Ten Years 163 Major Employers . . .. 164 Population by Age Group 164 Schedule of Bank and Savings and Loan Deposits for the Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . 165 Public School Enrollment - Grades K- 12 for the Last Ten Academic Years 165 Public Higher Education Institutes Full- Time Equivalent Fall Enrollment for the Last Ten Years . . . . . . . . . . 166 Average State Prison Adult Inmate Population for the Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . 166 Assessed Value of New Commercial and Residential Construction for the Last Ten Years . . . . . . . . . . . . . . . . . . . 167 v THIS PAGE INTENTIONALLYLEFT BLANK INTRODUCTORY SECTION THIS PAGE INTENTIONALLYLEFTBLANK FIFE SYMINGTON GOVERNOR J. ELLIOTT HIBBS DIRECTOR ARIZONA DEPARTMENT OF ADMINISTRATION OFFICE OF THE DIRECTOR 1700 WEST WASHINGTON, ROOM 801 PHOENIX, ARIZONA 85007 ( 602) 542- 1500 June 10, 1994 The Honorable Fife Symington Governor of the State of Arizona, Members of the Legislature, and Citizens and Taxpayers of the state of Arizona Ladies and Gentlemen: In accordance with Section 35- 131 of the Arizona Revised Statutes, it is our pleasure to transmit to you the Comprehensive Annual Financial Report ( CAFR) of the state of Arizona for the fiscal year ended June 30, 1992. Responsibility for the accuracy of data, completeness and fairness of presentation, including all disclosures, rests with the state's management. The data presented in this report, to the best of our knowledge and belief, are accurate in all material respects and are reported in a manner which fairly presents the financial position and results of operations of the various funds and account groups of the State. All disclosures needed for the reader to gain a reasonable understanding of the State's financial activities have been included. The report is presented in three sections: Introductory, Financial, and Statistical. The Introductory Section includes this Letter of Transmittal, the State's organization chart and a list of principal State officials. The Financial Section begins with the State Auditor General's report and contains the General Purpose Financial Statements, Combining Financial Statements by Fund Type and Account Group, and other schedules. The Statistical Section includes selected financial, economic and demographic data. FINANCIAL REPORTING ENTITY The accompanying CAFR includes all funds and account groups for which the State exercises oversight responsibility. The determination of " oversight responsibility" is based on criteria established in the Codification of Governmental Accounting and Financial Reporting Standards, issued by the Governmental Accounting Standards Board, ( Section 2100). Note 1. B of the Notes to the Financial Statements explains which units are included and excluded from the Financial Reporting Entity of the State. SERVICES PROVIDED BY THE STATE The services provided by the State are administered through various agencies, departments, boards, commissions and institutions of higher learning. These services include: ( 1) General Government, ( 2) Health and Welfare, ( 3) Inspection and Regulation, ( 4) Education, ( 5) Protection and Safety, ( 6) Transportation, and ( 7) Natural Resources. - 1- GENERAL GOVERNMENTAL FUNCTIONS General governmental activities are accounted for in four Governmental Fund types: ( 1) the General Fund, ( 2) Special Revenue Funds, ( 3) Debt Service Funds, and ( 4) Capital Projects Funds. Revenues for governmental and expendable trust fund functions totaled $ 7.313 billion for the fiscal year ended June 30, 1992, an increase of 13.0% over 1991. Taxes, the single largest source of general governmental revenue, produced 67.5% of revenue. The amount of revenues from various sources and changes from last year are shown as follows: GENERAL GOVERNMENT REVENUES ( Expressed in Thousands) Revenue Source Sales Taxes ••..•.•••••.•.••• Income Taxes .•.•.••••••••••• Motor Vehicle and Fuel Taxes Property Taxes ...•.........• Unemployment Taxes •....•••.• Intergovernmental Revenues .• Licenses, Fees and Permits •. Earnings on Investments ..•.. Other Taxes and Revenues .•.. Total Amount $ 2,092,390 1,447,437 803,133 170; 773 128,068 1,977,665 121,039 90,249 481,807 $ 7,312,561 Percent of Total 28.6% 19.8 11.0 2.3 1.8 27.0 1.7 1.2 ~ ~% Increase/( Decrease) From 1991 Amount Percent $ 143,275 7.4% 160,442 12.5 4, ,1II8'. 3, 0,.,. .5 0 .... " ..... , v. o 9,061 7.6 458,635 30.2 15,649 14.8 ( 16,199) ( 15.2) 66,254 15.9 $ 842,717 13.0% The total revenues increase of $ 842.7 million or 13.0% was the result of several factors: The 7.4% increase in sales taxes is a result of the increased economic growth in the State. The 12.5% increase in income taxes is primarily a result of the State recognizing for the first time revenue relating to the Urban Revenue Sharing distributions to Arizona cities and counties for fiscal year 1992 ( See Note 1.0.2 in the Notes to the Financial Statements for details on this change). Without this change, income taxes would have actually decreased 1.2% for fiscal year 1992. The 30.2% increase in intergovernmental revenues resulted primarily from increased Federal revenues for the Arizona Health Care Cost Containment System ( AHCCCS). Also, a change in accounting policy which enabled the State to recognize the Federal portion of the AHCCCS liability as revenue contributed to the increase in revenues ( See Note 1. D. 2 in the Notes to the Financial Statements for details on this change in accounting policy). The 15.2% decrease in earning on investments reflects the decrease in interest rates paid on investments. Expenditur'es for governmental and expendable trust fund functions totaled $ 7.367 billion for the fiscal year ended June 30, 1992, an increase of 14.9% over 1991. State government expenditures and the changes from last year are as follows: - 2- GENERAL GOVERNMENT EXPENDITURES ( Expressed in Thousands) Expenditure Function Amount Percent of Total Increase/( Decrease) From 1991 Amount Percent General Government ••'••••••.•• Health and Welfare ••••••••••• Inspection and Regulation •••• Education . Protection and Safety•••••••• Transportation ••••••••••••••• Natural Resources •••••••••••• Capital Outlay•.••••••••••••• Debt Service ••••••••••••••••• Total $ 1,140,284 2,762,896 74,665 1,647,948 398,539 857,691 50,389 246,506 187,737 $ 7,366,655 15.5% 37.5 1.0 22.4 5.4 11.6 0.7 3.3 -- b.. § 12. Q.:.. Q% $ 361,831 634,692 263 89,314 10,425 ( 105,999) 3,900 ( 55,104) 14,514 $ 953,836 46.5% 29.8 0.4 5.7 2.7 ( 11. 0) 8.4 ( 18.3) 8.4 14.9% The total expenditures increase of $ 953.8 million or 14.9% was the result of several factors: The 46.5% increase in general government expenditures resulted primarily from the State recognizing for the first time expenditures related to the Urban Revenue Sharing distributions to Arizona cities and counties for Fiscal Year 1992 ( See Note 1. D. 3 in the Notes to the Financial Statements for details on this change). Without this change, General Government expenditures would have only increased 23.9% Also, contributing to this increase in expenditures is the additional distributions to cities and counties resulting from the increase in sales tax revenue and the continuing increase in the cost by the State to provide services to the public. . The 29.8% increase in health and welfare expenditures reflects the continuing increase in the cost by the State to provide Health and Welfare services to the public, in particular the increase in expenditures by the Arizona Health Care Cost Containment System and the Department of Economic Security. The 11% decrease in transportation expenditures is the result of a reduction in highway construction. The 18.3% decrease in capital outlay expenditures is the result of a reduction in construction in both the Maricopa Regional Area Road Fund and the Certificates of Participation Fund. The 8.4% increase in debt service expenditures reflects the increased cost to service the debts of bonds and certificates of participation. GENERAL FUND BALANCE The General Fund ended the fiscal year with a $ 123.2 million deficit fund balance, compared to the previous year deficit fund balance of $ 12.3 million, as restated. This was caused primarily by the increased cost to provide health care through the Arizona Health Care Cost Containment System. The System reported a $ 178 million increase in the liability for current portion of insurance losses over the previous fiscal year. This increase was partly due to medical inflation and capitation increases and also a 14.9% increase in new member years to be covered by AHCCCS. BUDGETARY CONTROLS Budgetary control is maintained through legislative appropriation and the executive branch allotment process. The Governor is required to submit an annual budget to the Legislature. The budget is legally re~ Jired to be adopted through passage of appropriation bills by the Legislature and approval by the Governor. The appropriated funds are controlled by the executive branch through an allotment process. This process allocates the appropriation into quarterly allotments by legal appropriation level. The State also maintains an encumbrance - 3- accounting system to further enhance budgetary control. With the exception of capital outlay items, encumbered amounts lapse as of the end of the fiscal year. Capital outlay appropriations and encumbrances continue from year to year. The State's budgetary policies and procedures, fund accounting structure, and basis of accouniing are explained in detail in Note 1 of the Notes to the Financial Statements. INTERNAL CONTROLS The State is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the State are protected from loss, theft or misuse, and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. Internal accounting controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: ( 1) the cost of a control should not exceed the benefits likely to be derived, and ( 2) the valuation of costs and benefits requires estimates and judgements by management. In the opinion of management, the State's internal controls are adequate to provide reasonable assurance that these objectives are met. The responsibility for cash management of the State is shared by the Office of the Treasurer ( Treasurer) and the General Accounting Office of the Department of Administration, Finance Division ( GAO). The Treasurer is responsible for the depository, custodial and investment functions of cash. The GAO is responsible for drawing down monies available for State functions, and the expenditure or disbursement of those monies. Currently, the GAO is exploring alternatives regarding the consolidation of its cash management functions. The results will comply with potential Federal requirements and promote efficient use of cash. The State requires that Treasurer's deposits and investments with financial institutions be entirely covered by Federal depository insurance or alternatively collateralized with surety equal to 102% of the deposit or investment. Component units may have collateralization policies that differ from those of the Treasurer. The Legislature has passed statutes authorizing State investments. Note 2. A in the Notes to the Financial Statements describes the types of investment made by the State. The Treasurer deposits receipts in accordance with applicable statutes and invests excess cash of the General Fund and other various funds. All interest, not otherwise apportioned by law, is deposited in the General Fund. Investment earnings for the General Fund totaled $ 16.7 million for the fiscal year ended June 30, 1992. ENTERPRISE FUNDS Enterprise Funds are comprised of governmental and quasi- governmental agencies that provide goods and services to the public on a charge for service basis. For fiscal year 1992, the Enterprise funds ended the year with a combined equity of $ 273.3 million as compared to the previous year- end equity of $ 280.5 million. For additional information on the Enterprise Funds, see Note 11 in the Notes to the Financial Statements. TRUST AND AGENCY FUNDS Trust and Agency Funds are used to account for assets held by the State in a trustee capacity or as an agent for individuals, private organizations and other governments, including the four State Retirement Systems. The Trust and Agency Funds reported a year- end fund balance of $ 11.489 billion as compared to the previous year- end of $ 10.675 billion. For additional information on the four State Retirement Systems, see Note 8 in the Notes to the Financial Statements. - 4- DEBT ADMINISTRATION The Arizona State constitution, under Article 9 Section 5, provides that the State may contract debts not to exceed $ 350,000. This provision has been interpreted to restrict the State from pledging its credit as a sole source of payment for debts incurred for the operation of State government. As a result, the State, including the Enterprise Funds and The University Funds, finances most of its major capital needs by lease purchase transactions and by issuing revenue bonds. Lease purchase transactions are funded by Certificates of Participation ( COPs). Revenue bonds are associated with specific State functions and are funded by dedicated revenue sources. The State first issued COPs in 1985 to acquire a telecommunications system for Arizona State University. Since that time, ten more issues have been transacted for the construction and purchase of buildings and other structures as well as a telecommunications system for the University of Arizona. During fiscal year 1992, the State issued COPs which provide for the sale and leaseback of prison facilities at Florence, Arizona. The proceeds were used to reimburse the General Fund for the expenditures incurred in purchasing the ENSCO Hazardous Waste Facility. In all cases, the Attorney General determined that the issuance of the COPs was in accordance with the provisions of the Constitution. COPs issued during the current fiscal year carry a rating of Aaa from Moody's Investors Service, Inc. and AAA from Standard and Poor's Corporation. During the fiscal year ended June 30, 1992, the State issued $ 232.8 million of COPs and retired $ 177.0 million. The State had $ 361.4 million in COPs outstanding at yearend, an increase of $ 55.8 million from fiscal year 1991. Principal and interest are covered by lease payments out of current revenues or appropriations from the fund responsible for utilization of the specific buildings. The State has issued revenue bonds primarily to finance the construction of highways. They have also been issued for the construction of buildings and other facilities. The State's revenue bonds currently carry a Aa rating from Moody's Investors Service, Inc. and AAA from Standard and Poor's Corporation. During the fiscal year ended June 30, 1992, the State issued $ 588.5 million of revenue bonds and retired $ 339.6 million. The State had $ 2.302 billion in bonds outstanding at the year- end, an increase of 248.9 million from fiscal year 1991. $ 1.515 billion of the total bonds outstanding were for Arizona Department of Transportation Highway Revenue Bonds. RISK MANAGEMENT The State purchases liability coverage whenever available on reasonable terms. Currently, the State is insured by an approved liability insurer for liability claims in excess of $ 5 million but less than $ 15 million. For claims less than or in excess of this coverage, or whenever such coverage is unavailable on reasonable terms, the State's self- insurance fund provides liability coverage. The State pays its self- insurance losses out of a fund to which moneys are appropriated each year by the Legislature. Monies remaining in the fund at the end of the fiscal year carryover to the next fiscal year, but are part of the appropriation for that fiscal year to pay expected losses and costs. Selfinsurance losses and claims- related expenses ( excluding the cost of administering the program) have risen from approximately $ 15.3 million in fiscal year 1988 to approximately $ 43 million in fiscal year 1992. To meet such rising losses and claims- related expenses, yearly appropriations have also increased from approximately $ 27.7 million in fiscal year 1988 to approximately $ 48.3 million in fiscal year 1992. For fiscal year 1993, the State has appropriated $ 48.3 million to continue the funding of all self- insurance losses and claims- related expenses. The 1993 appropriation is subject to modification by subsequent legislative enactments and similarly, there can be no assurances that amounts sufficient to cover all self- insurance losses and costs of claims administration will be appropriated by the Legislature in future years. - 5- SIGNIFICANT STATE ECONOMIC EVENTS The following economic outlook is excerpted from the Arizona Department of Economic Security's ( ADES) Arizona Economic Trends, February 1993. Arizona's economy created jobs at a substantially faster pace in 1992 than the previous year. Non- farm payroll employment growth was 1. 9 percent in 1992, more than four times higher than the growth rate for 1991. Improved Arizona payroll employment growth can be attributed to fewer job losses in manufacturing and much improved growth in the State's construction industry. But while 1992' s growth rate was a welcome change from the slow growth of 1991, it was well below rates experienced in the mid-' 80s. The ADES Research Administration's forecast for 1993 and 1994 calls for continued improvement in wage and salary employment growth. The 1993 forecast calls for positive growth in all eight of Arizona's industry groups: manufacturing; construction; transportation, communications, and public utilities ( TCPU); and finance, insurance and real estate ( FIRE), although growth rates in manufacturing are expected to continue to lag those in other major industry groups in Arizona. In 1992, minor employment losses were e. xperienced by the manufacturing and mining industries. Continued cutbacks in defense spending will make it difficult for durable- goods manufacturers to increase production and employment. Durable- goods producers, especially those in the high- tech industries, will continue to pare employment, but at a slower pace than last year, as they restructure to become more competitive. Arizona's construction industry enjoyed a good year in 1992, with the addition of 4,200 workers. Construction should continue to see substantial growth the next two years. Residential construction should provide most of the growth, but some large- scale projects and road and highway improvements should also contribute to the growth. Arizona's mining industry is expected to show modest job growth in 1993 and 1994, increasing by 200 jobs in both years. Increased efficiency and lower production costs should lead to stable, but modest employment growth in the State's copper mining sector. From 1983 through 1989, services added more than 20,000 new jobs a year. But employment growth d: ropped below 20,000 the past three years, growing 13,400 in 1990, 8,500 in 1991 and 14,500 in 1992. For 1993 and 1994, services are expected to make some improvement with job growth still below the 20,000 mark. A forecast of modest improvement in services employment is due to three factors. First, Arizona should see continued, but stable growth in business services and the catchall category " other services". Second, a rebound in the tourism industry should lead to improved employment growth in hotel services. Third, slower growth in the medical- services professions is expected, as hospitals attempt to hold the line on employment costs. Like services, trade has had weaker- than- normal growth in the 1990s. Trade grew by less than two percent in the past three years, compared to growth rates of three- plus percent following the recessionary year of 1982. Trade's rate of growth is expected to improve to 2.6 percent in 1993 and 2.7 percent in 1994, but still well below the historical trend. This expected improvement can be attributed to improved retail trade growth in Maricopa County, which has accounted for most of the weakness in the state's retail trade sector for the last few years. The transportation, communications and public utilities ( TCPU) group, which was hurt by losses in both the air transportation and public utilities industries in 1991 , added 400 jobs in 1992. All of the gains came in the communications and public utilities sectors. TCPU should experience improved job growth with forecasted gains of 1.8 percent in 1993 and 2.3 percent in 1994. Modest job growth is expected in transportation, as improved prospects at America West Airlines and continued grow~ h at southwest Airlines should help the transportation sector rebound from several years of weak growth. - 6- The finance, insurance and real estate ( FIRE) group added 1,200 positions in 1992, with all the gain occurring in the insurance and real estate industries. The forecast for 1993 calls for continued growth in insurance and real estate, with employment losses in the finance industry coming to an end. The opening of new credit card facilities in Maricopa County should help improve the finance industry's performance, bringing to an end two years of employment declines. Overall, FIRE employment should grow 3 percent in 1993 and 2.7 percent in 1994. Government is projected to add 7,700 jobs in 1993 and 8,700 jobs in 1994. Increases in school employment should account for 70 percent of this gain in 1993 and 61 percent of the growth in 1994. Improved growth in state and local government accounts for the higher forecasted job growth in 1994. Finally, Arizona's unemployment rate is expected to decline 1.2 percentage points in 1993, averaging 6.2 percent. The 7.4 percent rate of 1992 was the highest rate in nine years, but well below the rates of 9.9 percent and 9.1 percent in the recession years of 1982 and 1983, respectively. An improved jobless rate in 1993 would be due to better growth in total employment, combined with a decline in unemployment. The same scenario should occur for 1994, as the jobless rate is expected to improve to 5.8 percent. In summary, the two year employment outlook for Arizona's economy remains positive. While the national recession certainly had a negative impact on Arizona, the State's economy rebounded in 1992 from the weak job growth experienced the year before. The national economy has begun to show signs of life, and the Research Administration forecasts that Arizona's economic recovery will continue over the next 24 months. INDEPENDENT AUDIT The Auditor General is appointed to a five- year term by the Joint Legislative Audit Committee with approval of the Legislature. The State Auditor General is responsible for the audit of all State agencies. The State statute ( ARS 411279.03) requires at least a biennial single audit by the State Auditor General. This audit is required in conformity with the Single Audit Act of 1984 ( PL98- 502) and the U. S. Office of Management and Budget Circular A- 128, " Audits of State and Local Governments". AWARDS The Government Finance Officers Association of the United States and Canada established the Certificate of Achievement for Excellence in Financial Reporting Program to recognize governments that produce outstanding financial reports. In order to be awarded this certificate, a governmental unit must publish an easily readable and efficiently organized CAFR, the contents of which must conform to program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements. The certificate is valid for a period of one year. It is a goal of the State to receive the certificate for the fiscal year 1995 CAFR. ACKNOWLEDGEMENTS We wish to express our sincere appreciation to the many individuals whose dedicated efforts have made this report possible. The preparation of this report could not have been accomplished without the professionalism and dedication demonstrated by the financial and management personnel of each State agency, board, commission, and institution of higher education. /' 1/ d~~/ l J) ~/ V\ vc, qL-Robert Rocha State Comptroller - 7- STATE OF ARIZONA. Graphic Presentation of Revenues by Source and Expenditures by Function General Fund For the Fiscal Year Ended June 30, 1992 Other taxes 9.3% Income taxes 25.2% Expenditures by Function Education 30.1% Natural resources 0.4% Protection and safety 6.7% Inspection and regulation 0,6% - 8 - Revenues by Source Intergovernmental 29.6% / 1 -~ 34.2% General government 16.9% Capital outlay / Debt =---; service 0.9% Health and welfare 44.4% STATE OF ARIZONA Graphic Presentation of Revenues by Source and Expenditures by Function All Governmental Fund Types For the Fiscal Year Ended June 30, 1992 Revenues by Source Intergovernmental 27,0% Other taxes 19.. 2% Other revenues 5.4% "" I"''''===----~'--- -~, Income taxes 19.8% Expenditures by Function Sales taxes 28.6% Education 22.4% Protection and safety 5.4% General government 15.5% Inspection and regulation 1,, 0% Capital outlay / Debt service 5.9% iNatural resources i 0.7% ./ .~~--------~' Health and welfare 37.. 5% - 9 - ARIZONA STATE GOVERNMENT ORGANIZATION COMMISSIONS AND AGENCIES REGENTS I, eo OF' ' BRA" V COlLEGE BOARD ,, ELECTORATE -------------------------------~ ~ ~, LEGISLATIVE EXECUTIVE JUDICIAL .:-:- @ BRANCH BRANCH BRANCH ~ ~< 0.:- ~~~ I I , STATE HOUSE 01' GOVERNOR · STATE SENATE' SUPREME COURT REPRESENTATIVES" LEGISlATIVE AUDITOR COURT OF I SUPERIOR COURT I COUNCIL GENERAL APPEALS I ; , , I JOft-..'. T ~. ~', I MUNICIPAL I JUSTICE OF THE LEGISLATIVE ARCHIVES AND COURTS PEACE COURTS" BUDGETCOMM PUBLIC RECORDS I I I I I SECRETARY ATTORNEY STATE SUPERINTENDENT CORPORATION STATE MINE GENERAL" TREASURER" OF PUBLIC OF STATE" COMMISSION" INSPECTOR" EDUCATIO.... I I DEPARTMENT OF DEPARTMENT OF LAW EDUCATION DEPARTMENTOF DEPARTMENT OF DEPARTMENT OF AHCCCS ADMINISTRATION CORRECTlONS TRANSPORTATION DEPARTMENT OF DEPARTMENT OF DEPARTMENT OF DEPARTMENT OF HEALTH ECONOMIC REVENUE PIJBUC SAFETY SERVICES SECURITY I I I I I I I COMMUNITY BOARD OF OTHER BOARDS, I COMMUNITY COLLEGES NORTHERN ARIZONA STATE UNIVERSITY OF ARIZONA UNIVERSITY ARIZONA UNIVERSITY - 10- * ELECTED OFFICIALS JANUARY 11194 STATE OF ARIZONA PRINCIPAL STATE OFFICIALS as of June 3D, 1992 Elected Officials Fife Symington, Governor Senator Peter Rios, President of the Senate Representative Jane Dee Hul~, Speaker of the House Stanley G. Feldman, Chief Justice Richard Mahoney, Secretary · · of State Grant Woods, Attorney General Tony West, State Treasurer C. Diane Bishop, Superintendent of Public Education Renz D. Jennings, Commissioner, Corporation Commission Douglas K. Martin, State Mine Inspector Executive Officials Appointed Officials Legislative Officials J. Elliott Hibbs, Director Department of Administration Samuel A. Lewis, Director Department of Corrections David A. Lowenberg, Acting Director Department of Economic Security Paul Waddell, Director Department of Revenue Col. F. J. Ayars, Director Department of Public Safety Alethea O. Caldwell, Director Department of Health Services Charles E. Cowan, Director Department of Transportation Leonard J. Kirschner, M. D., Director Arizona Health Care Cost Containment System ( AHCCCS) - 11- Don Jansen, Director Legislative Council Ted Ferris, Staff Director Joint Legislative Budget Committee Douglas R. Norton, Auditor General Sharon G. Womack, Director Board of Library, Archives and Public Records University Officials Lattie F. Coor, Ph. D., President Arizona State university Eugene M. Hughes, Ph. D., President Northern Arizona University Manuel Pacheco, Ph. D., President University of Arizona THIS PAGE INTENTIONALLYLEFT BLANK FINANCIAL SECTION THIS PAGE INTENTIONALLY LEFT BLANK INDEPENDENT AUDITORS' REPORT I) STATE OF ARIZONA DOUGLAS R. NORTON, CPA AUDITOR GENERAL OFFICE OF THE AUDITOR GENERAL Independent Auditors' Report DEB! OAVENPORT, CPA pp" c · t'" AUDITOR GENERAL The Honorable Fife Symington, Governor State of Arizona The Honorable John Greene, President Arizona State Senate The Honorable Mark W. Killian, Speaker Arizona House of Representatives The Honorable Stanley G. Feldman, Chief Justice Arizona Supreme Court We have audited the accompanying general purpose financial statements of the State of Arizona, as of and for the year ended June 3D, 1992, or December 31, 1991, as listed in the table of contents. These general purpose financial statements are the responsibility of the State's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We did not audit the financial statements of the Pension Trust Funds and State Deferred Compensation Plan, which statements comprise 72 percent of the total assets of the Fiduciary Funds. We also did not audit the financial statements of the Arizona Health Care Cost Containment System, the Arizona Department of Transportation, the State Compensation Fund, the University Medical Center, the Arizona Power Authority, and the Lottery Commission, which statements comprise 22 percent of the assets and 14 percent of the revenues and other financing sources of the General Fund; 57 percent of the assets and 79 percent of the revenues and other financing sources of the Special Revenue Funds; 84 percent of the assets and 90 percent of the revenues and other financing sources of the Debt Service Fund; 80 percent of the assets and 85 percent of the revenues and other financing sources of the Capital Projects Funds; 85 percent of the assets and 90 percent of the revenues and other financing sources of the Enterprise Fund; 37 percent of the assets and 20 percent of the revenues and other financing sources of the Internal Service Funds; and 73 percent of the liabilities of the General Long- Term Debt Account Group. Those financial statements were audited by other auditors whose reports thereon have been fllrnishl: lrl tn lie: ~ nrl nur npininn I: lvprl: lssl: lrl hl: lrl: l'ln insnfar as ', t relates + n the amnun+ s .""'. II I ..... '"" ........... W'J"""'.'""~ I ........ v ....." .... '-' ..... '..., ......... )"..., ". I """"' 1 11\, 1." included for the above- mentioned component units, is based solely on the reports of the other auditors. - 16- 2910 NORTH 44TH STREET. SUITE 410. PHOENIX, ARIZONA 85018. ( 602) 553- 0333 • FAX ( 602) 553- 0051 Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general purpose financial statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinion. The records of the General Fixed Assets Account Group were incomplete as to cost. As a result of such incomplete records, we were unable to satisfy ourselves as to the stated cost of the assets included in the General Fixed Assets Account Group by appropriate audit tests or by other means.. In our opinion, based on our audit and the reports of the other auditors, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to satisfy ourselves as to the stated cost of the assets included in the General Fixed Assets Account Group as discussed in the above paragraph, the general purpose financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the State of Arizona as of June 3D, 1992, or December 31, 1991, and the results of its operations, the cash flows of its proprietary funds and similar trust funds, the changes in fund balances of its university funds, and the current operating funds revenues, expenditures, and other changes of its university funds for the year then ended in conformity with generally accepted accounting principles.. As discussed in Note 1.0.. 2. to the general purpose financial statements, the State changed its method of recognizing federal grant revenues of the Arizona Health Care Cost Containment System in fiscal year 1991- 92. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of the State of Arizona taken as a whole. The combining and individual fund and account group financial statements and schedules as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements. Such information has been subjected to the aUditing procedures applied in the audit of the general purpose financial statements and, in our opinion, based on our audit and the reports of the other aUditors, except for the effects of the matter discussed in the third paragraph, is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. - 17- The information included in the introductory and statistical sections listed in the table of contents has not been subjected to the aUditing procedures applied in our audit of the general purpose financial statements and, accordingly, we express no opinion on such information. & t:: o~ Auditor General September 22, 1993 - 18- GENERAL PURPOSE FINANCIAL STATEMENTS STATE OF ARIZONA COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS JUNE 30, 1992 ( Expressed in Thousands) PROPRIETARY GOVERNMENTAL FUND TYPES FUND TYPES SPECIAL DEBT CAPITAL INTERNAL ASSETS AND OTHER DEBITS GENERAL REVENUE SERVICE PROJECTS ENTERPRISE SERVICE Current Assets: Cash and investments $ 150,903 $ 399,171 $ 28,343 $ 203,043 $ 73,371 $ 42,980 Cash held by trustee 590 Receivables, net of allowances: Taxes 360,006 64,605 1,656 4,613 Interest 1,548 7,959 587 1,167 17,888 260 Other 7,789 9,772 84,950 1,436 Due from U. S. Government 161,029 23,687 Due from local governments 630 6,364 2,149 54 Due from others 6 14 Due from other Funds 32,050 8,741 108 2,289 427 9,591 Inventories, at cost 5,462 10,393 3,253 Other 1,039 19,255 3,260 Total Current Assets 715,000 525,775 29,038 210,304 211,487 60,834 ------ Long- term Assets: Investments 1,145,572 Investments held by trustee 79,166 Receivables, net of allowances Other 49,205 Fixed assets Property and equipment 220,791 116,546 Less: accumulated depreciation ( 69,494) ( 63,907) Total Long- term Assets 1,425,240 52,639 Total Assets 715,000 525,775 29,038 210,304 1,636,727 113,473 Other Debits: Amount available for retirement of long- term debt Amount to be provided for retirement of long- term debt Total Assets and Other Debits $ 715,000 $ 525,775 $ 29,038 $ 210,304 $ 1,636,727 $ 113,473 The Notes to the Financial Statements are an integral part of this statement. - 20- 24,393 2,069,690 24,393 2,069,690 21,491 1,532,649 $ 15,397,344 $ 1,150,438 $ 2,094,083 $ 2,572,259 $ 24,444,441 $ 21,513,618 - 21- STATE OF ARIZONA COMBINED BALANCE SHEET ALL FUND TYPES AND ACCOUNT GROUPS JUNE 3D, 1992 ( CONTINUED) ( Expressed in Thousands) GOVERNMENTAL FUND TYPES PROPRIETARY FUND TYPES LIABILITIES AND FUND EQUITY Current Liabilities: Accounts payable $ Accrued expenses Obligations under securities loan agreements Tax refunds payable Due to U" S" Government Due to local governments Due to others Due to other Funds Deferred revenue Current portion of insurance losses Currant portion of long- term debt Other Total Current Liabilities Long- term Liabilities: Accrued compensated absences Accrued insurance losses Liabilities to plan investors Tax refunds payable Long- term debt: Revenue bonds Certificates of participation Leases and installment purchases Other Total Long- term Liabilities Total Liabilities Commitments and contingencies Fund Equity and Other Credits: Net investment in fixed assets Contributed capital Retained earnings Fund balances: Reserved Unreserved Total Fund Equity and Other Credits GENERAL 126,072 30,254 6,603 221,930 2,080 14,689 151,026 270,134 10,266 833,054 833,054 5,184 103,253 ( 226,491) ( 123,238) $ SPECIAL REVENUE 33,036 7,545 58,702 1,946 12,304 540 20 114,093 114,093 276,225 135,457 411,682 $ DEBT SERVICE 5 4,640 4,645 4,645 24,393 24,393 $ CAPITAL PROJECTS 7,873 55 287 8,215 8,215 23,693 178,396 202,089 $ ENTERPRISE 16,693 84,584 10,524 52,760 293,682 1,271 40,641 500,155 4,154 666,469 169,981 15,400 3 420 856,427 1,356,582 6,830 273,315 280,145 $ INTERNAL SERVICE 10,296 1,120 107 240 4,566 70 16,399 695 325,837 5,535 332,067 348,466 14,459 ( 249,452) ( 234,993) Total Liabilities and Fund Equity and Other Credits $ 715,000 $ 525,775 $ 29,038 $ 210,304 $ 1,636,727 $ 113,473 The Notes to the Financial Statements are an integral part of this statement - 22- 1,150,438 1,520,344 2,670,782 2,174,148 2,284 23,573 22,822 23,863 167,628 11,487,014 11,914,578 11,204,472 254,487 341,849 158,311 11,489,298 1,150,438 1,774,831 14,974,645 13,727,381 $ 15,397,344 $ 1,150,438 $ 2,094,083 $ 2,572,259 $ 24,444,441 $ 21,513,618 - 23- STATE OF ARIZONA COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 1992 ( Expressed in Thousands) FIDUCIARY GOVERNMENTAL FUND TYPES FUND TYPE SPECIAL DEBT CAPITAL EXPENDABLE GENERAL REVENUE SERVICE PROJECTS TRUST REVENUES: Taxes: Sales $ 1,965,555 $ 126,835 $ $ $ Income 1,447,421 16 Motor vehicle and fuel 100,195 698,586 4,352 Property 169,584 1,091 98 Unemployment 128,068 Other 263,581 12,797 21,270 Intergovernmental 1,701,688 219,548 70 56,359 Licenses, fees and permits 35,788 77,344 1,221 6,686 Earnings on investments 16,693 17,760 9,867 7,073 38,856 Sales and charges for services 18,019 1,715 320 Fines, forfeitures and penalties 6,245 28,094 5,746 Other 24,974 20,750 2,739 75,557 Total Revenues 5,749,743 1,204,520 9,867 36,823 311,608 EXPENDITURES: General government 926,918 25,022 188,344 Health and welfare 2,429,163 24,055 309,678 Inspection and I'egulation 32,527 40,115 2,023 Education 1,645,051 2,208 689 Protection and safety 367,441 17,853 13,245 Transportation 857,428 263 Natural resources 23,273 26,026 1,090 Capital outlay 40,669 13,821 187,675 4,341 Debt service: Principal 7,375 559 68,760 415 Interest and otheI fiscal charges 1,343 38 109,247 Total Expenditures 5,473,760 1,007,125 178,270 187,675 519,825 Revenues Over ( UndeI') ExpendituIes 275,983 197,395 ( 168,403) ( 150,852) ( 208,217) OTHER FINANCING SOURCES ( USES): Operating transfers in 94,873 47,388 173,338 2,858 137,548 Operating transfers out ( 602,155) ( 229,181) ( 5,327) ( 8,175) Other financing sources ( uses) 111,726 1,643 ( 2,033) 278,881 1,507 Total Other Financing Sources ( Uses) ( 395,556) ( 180,150) 171,305 276,412 130,880 Revenues and Other Financing Sources Over ( UndeI) Expenditures and Other Financing Uses ( 119,573) 17,245 2,902 125,560 ( 77,337) Beginning Fund Balances, as restated ( 12,286) 397,443 21,491 77,179 607,455 Residual Equity Transfers 8,621 ( 3,006) ( 650) ( 10) Ending Fund Balances $ ( 123,238) $ 411,682 $ 24,393 $ 202,089 $ 530,108 The Notes to the Financial Statements are an integral part of this statement, - 24- TOTALS ( MEMORANDUM ONLY) 1992 1991 $ 2,092,390 $ 1,949,115 1,447,437 1,286,995 803,133 798,950 170,773 169,356 128,068 119,007 297,648 271,034 1,977 ,665 1,519,030 121,039 105,390 90,249 106,448 20,054 11,192 40,085 32,805 124,020 100,522 7,312,561 6,469,844 1,140,284 778,453 2,762,896 2,128,204 74,665 74,402 1,647,948 1,558,634 398,539 388,114 857,691 963,690 50,389 46,489 246,506 301,610 77,109 69,008 110,628 104,215 7,366,655 6,412,819 ( 54,094) 57,025 456,005 353,122 ( 844,838) ( 758,801) 391,724 291,766 2,891 ( 113,913) ( 51,203 ) 1,091,282 4,955 $ 1,045,034 ( 56,888) 1,107,077 2,972 $ 1,053,161 - 25- STATE OF ARIZONA COMBINED STATEMENT OF REVENUES AND EXPENDITURES APPROPRIATION ( BUDGET) TO ACTUAL - BUDGETARY BASIS GENERAL, SPECIAL REVENUE AND CAPITAL PROJECTS FUNDS FOR THE YEAR ENDED JUNE 30, 1992 ( Expressed in Thousands) GENERAL FUND SPECIAL REVENUE FUNDS Appropriation ( Budget) Actual Variance Favorable < unfavorable) Appropriation ( Budget) Actual Variance Favor'able ( Unfavorable) REVENUES EXPENDITURES: General Appropriations General government Health and welfare Inspection and regulation Education Protection and safety Transportation Natur'al resources Capital outlay Total General Appropriations Other Appropriations General government Health and welfare Protection and safety Total Other Appropriations TOTAL EXPENDITURES Revenues Over ( Under') Expenditures OTHER FINANCING SOURCES ( USES): General Appropriations Opel'ating transfers- in Other financing sources ( uses) Total Genel'al Operations Other Appropriations Operating transfers- in Other financing SOUl'ces ( uses) Total Other Appropriations Total Other Financing Sources ( Uses) $ 245,519 1,046,048 37,176 1,950,442 345,515 65 25,761 31,624 3,682,150 3,881 961,961 4,313 970,155 4,652,305 $ 4,145,847 $ 239,389 1,019,539 35,181 1,939,368 336,524 64 25,007 5,746 3,600,818 2,148 851,893 3,115 857,156 4,457,974 ( 312,127) 15,022 87,661 102,683 84,582 1,195 85,777 188,460 6,130 26,509 1,995 11,074 8,991 1 754 25,878 81,332 1,733 110,068 1,198 112,999 194,331 $ 1,576 4,754 31,116 4,106 1,549,659 17,670 1,608,881 1,608,881 $ 1,322,876 $ 1,396 2,995 29,118 4,095 429,370 16,945 483,919 483,919 838,957 20,564 3,011 23,575 23,575 180 1,759 1,998 11 1,120,289 725 1,124,962 1,124,962 Revenues and Other Financing Sources Over ( Under) Expenditures and Other Financing Uses $ $ ( 123,667) $ $ $ 862,532 $ The Notes to the Financial Statements are an integral part of this statement. - 26- CAPITAL PROJECTS FUNDS Appropriation ( Budget) Actual Variance Favorable ( Unfavorable) $ $ 33 897 49,874 50,804 50,804 $ $ 296,079 $ 33 897 26,069 26,999 26,999 269,080 2,054 7 2,061 2,061 271,141 $ 23,805 23,805 23,805 - 27- STATE OF ARIZONA COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS/ FUND BALANCES ALL PROPRIETARY FUND TYPES AND SIMILAR TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 1992 ( Expressed in Thousands) PROPRIETARY FUND TYPES FIDUCIARY FUND TYPES TOTALS INTERNAL NON- EXPENDABLE PENSION ( MEMORANDUM ONLY) ENTERPRISE SERVICE TRUST TRUST 1992 1991 OPERATING REVENUES: Sales and charges for services: Lottery $ 249,251 $ $ $ $ 249,251 $ 230,449 Other 453,799 122,932 14,179 590,910 550,575 Taxes 21,825 21,825 24,327 Intergovernmental 18 18 93 Licenses, fees and permits 914 9,723 10,637 17,135 Earnings on investments 108,674 45,711 976,372 1,130,757 948,807 Retirement contributions 357,498 357,498 350,953 Other 19,636 4,529 1,061 946 26,172 31,169 Total Operating Revenues 854,117 127,461 70,674 1,334,816 2,387,068 2,153,508 OPERATING EXPENSES: Cost of sales and benefits 512,707 19,194 531,901 471,979 Retirement benefits and refunds 449,414 449,414 406,970 Personal services 112,247 24,373 212 136,832 121,541 Contractual services 26,697 20,601 1,082 48,380 42,403 Aid to local governments 30,654 663 57,460 88,777 95,566 Depreciation and amortization 12,929 13,833 422 58 27,242 26,233 Insurance 5,421 176,885 74 182,380 53,676 Other 55,658 4,381 2,500 31,675 94,214 119,946 Total Operating Expenses 756,313 259,930 61,750 481,147 1,559,140 1,338,314 Operating Income ( Loss) 97,804 ( 132,469) 8,924 853,669 827,928 815,194 NON- OPERATING REVENUES ( EXPENSES) : Interest income 5,082 517 5,599 19,189 Interest expense ( 3,933) ( 3,933) ( 5,281) Other ( 4,159) 359 30,609 26,809 26,370 Total Non- operating Income ( Loss) ( 3,010) 876 30,609 28,475 40,278 Income ( Loss) Before Operating Transfers 94,794 ( 131,593) 39,533 853,669 856,403 855,472 OPERATING TRANSFERS: Operating transfers in 952 25 977 4,757 Oper~ ting transfers out ( 76,415) ( 2,765) ( 489) ( 4,070) ( 83,739) ( 78,388) Total Operating Transfers ( 75,463) ( 2,740) ( 489) ( 4,070) ( 82,762) ( 73,631) Net Income ( Loss) 19,331 ( 134,333) 39,044 849,599 773,641 781,841 Beginning Retained Earnings/ Fund Balances, as r'estated 280,093 ( 113,630) 556,565 9,511,782 10,234,810 9,474,282 Residual Equity Transfers ( 1,109) ( 1,489) ( 84) ( 2,682) ( 2,972) Provision for Dividends ( 25,000) ( 25,000) ( 18,200) Ending Retained Earnings/ Fund Balances $ 273,315 $ ( 249,452) $ 595,525 $ 10,361,381 $ 10,980,769 $ 10,234,951 The Notes to the Financial Statements are an integral part of this statement - 28- THIS PAGE INTENTIONALLY LEFT BLANK STATE OF ARIZONA CCMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES AND SIMILAR TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 1992 ( Expressed in Thousands) PROPRIETARY FUND TYPES INTERNAL ENTERPRISE SERVICE FIDUCIARY FUND TYPES NON- EXPENDABLE TRUST TOTALS ( MEMORANDUM ONLY) 1992 1991 CASH FLOWS FROM OPERATING ACTIVITIES: Operating Income ( Loss) Adjustments to reconcile to net cash provided by operating activities: Depreciation Amortization of investment ( premium) Net ( gain) on sale of investment Net ( gain) on sale of fixed assets Dividends to policyholders Amortization of bond issuance costs Provision for long- term liabilities Write off of preliminary survey and investigation costs Total Adjustments Changes in Assets and Liabilities: ( Increase) in receivables, net of allowances ( Increase) decrease in due from local governments ( Increase) decrease in due fr'om other Funds ( Increase) in inventories, at cost ( Increase) in other current assets Increase ( decrease) in accounts payable Increase ( decrease) in accrued expenses ( Decrease) in due to local governments Increase ( decrease) in due to other Funds Increase ( decr'ease) in defer'red revenue Increase in other current liabilities Increase ( decrease) in compensated absences Increase ( decrease) in long- term insurance losses Net Changes in Assets and Liabilities Net Cash Provided ( Used) by Operating Activities CASH FLOWS FROM NON- CAPITAL FINANCING ACTIVITIES: Interest expense Other non- operating revenues ( expenses) Operating transfers in Oper'ating transfers out Residual equity transfers Increase in advances for Hoover Uprating Project Contributions from U" S, Government Net Cash Provided ( Used) by Non- capital Financing Activities $ 97,804 $ 12,929 ( 21,208) ( 134) ( 99) ( 25,000) 2,404 918 ( 30,190) ( 4,959) 951 ( 478) ( 7,908) ( 17,821) 79,416 2,790 13,285 93,583 ( 67) ( 1,376) 157,416 225,030 ( 3,335) ( 1,201) 952 ( 76,415) ( 3) ( 11,688) ( 91,690) ( 132,469) $ 13,833 13,833 ( 577) 56 2,008 ( 495) ( 374) 3,349 ( 224) ( 1,591) ( 328) 70 2 134,850 136,746 18,110 254 25 ( 2,765) ( 1,489) ( 3,975) 8,924 422 422 ( 10,312) 2,506 ( 893) 58 ( 2,621) 752 00,510) ( 1,164) 30,609 ( 489) ( 84) 2,284 32,320 $ ( 25,741) $ 27,184 ( 21,208) ( 134) ( 99) ( 25,000) 2,404 918 ( 15,935) ( 15,848) 56 5,465 ( 973) ( 8,282) ( 15,365) 79,250 ( 1,422) 13,709 93,653 ( 65) 133,474 283,652 241,976 ( 3,335) 29,662 977 ( 79,669) ( 1,576) ( 11,688) 2,284 ( 63,345) 98,943 26,078 ( 18,166) ( 103) ( 3,757) ( 27,261) 97 2,846 ( 9,443) ( 89) ( 538) ( 1,112) ( 1,630) 13,246 1,732 ( 8) 13,063 6,534 6,290 180 92,902 121,127 199,804 ( 4,323) 20,751 921 ( 74,552) ( 2,972) ( 6,123) ( 66,298) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition and construction of fixed assets Proceeds from sale of fixed assets Retirement of revenue bonds principal Interest payments under certificate of participation or bonds Principal payments under leases and installment purchases Proceeds from other long- term debt Proceeds in funds received by trustee Payment for bond issuance and insurance costs Contributions ( to) from other Funds ( 22,179) 1,552 ( 25,003) ( 598) ( 668) 27,268 8,406 ( 2,697) 50 ( 10,696) 829 ( 4,429) ( 661) ( 507) 1,024 ( 33,382) 2,381 ( 25,003) ( 598) ( 5,097) 27,268 8,406 ( 2,697) 413 ( 30,097) 8,001 ( 495) ( 958) ( 5,983) 49,967 6,098 0,781) 1,187 Net Cash Provided ( Used) by Capital and Related Financing Activities $ ( 13,869) $ - 30- ( 14,957) $ 517 $ ( 28,309) $ 25,939 STATE OF ARIZONA COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES AND SIMILAR TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 1992 ( CONTINUED) ( Expressed in Thousands) PROPRIETARY FUND TYPES INTERNAL ENTERPRISE SERVICE FIDUCIARY FUND TYPES NON- EXPENDABLE TRUST TOTALS ( MEMORANDUM ONLY) 1992 1991 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales and maturities of investments $ 25,800 $ $ 2,128,227 $ 2,154,027 $ 1,183,845 Purchase of investments ( 143,073) ( 2,160,485) ( 2,303,558) ( 1,392,147) Interest and dividends on investments 4,828 399 5,227 15,114 Decrease in assets whose use is limited 5,961 5,961 Net Cash Provided ( Used) by Investing Activities ( 106,484) 399 ( 32,258) ( 138,343) ( 193,188) Net Increase ( Decrease) in Cash and Short- term Investments 12,987 ( 423) ( 585) 11,979 ( 33,743) Cash and Short- term Investments - Beginning 60,974 43,403 29,775 134,152 167,895 Cash and Short- term Investments - Ending $ 73,961 $ 42,980 $ 29,190 $ 146,131 $ 134,152 NON- CASH TRANSACTIONS Enterprise Funds: During fiscal year 1991- 92, the University Medical Center advance refunded a portion of Hospital Revenue Bonds ( Series 1986 and 1987) and wrote off certain costs related to the Ser'ies 1986 and 1987 Bonds resulting in a loss of $ 3.3 million. The University Medical Center also retired $ 2.9 million of its fixed assets resulting in a gain of $ 88 thousand which is reported as other operating revenue. During fiscal year 1991- 92, the Coliseum and Exposition Center was mandated by the Legislature to transfer $ 2.0 million to the State General Fund. This transaction is reported in the financial statements as a transfer of $ 0,, 9 million of contributed capital and a residual equity transfer of $ 1.1 million However, since the effective date of ARS 23- 987 mandating the transfer was September 30, 1992, as of June 3D, 1992, the $ 2.0 million had not been transferred, but the liability had been accrued. Effective July 1, 1991, the Arizona Correctional Industries transferred ownership of their warehouse, sheet metal shop building, and the farm house at the Arizona State Prison Complex in Florence to the Arizona Department of Corrections. The total annual depr'eciation of these three buildings being charged to operating expenses was $ 35 thousand and at June 30, 1991, they had a combined net value of $ 1.0 million which was offset against contributed capital during fiscal year 1991. Internal Service Funds: During fiscal year 1991- 92, mobile equipment of $ 15 thousand was transferred fr'om the General Fixed Assets Account Group to the Transportation Equipment Revolving Fund, The transfer of equipment was recorded as an increase in contributed capitaL During fiscal year 1991- 92, the Telecommunications Fund entered into two installment purchase contracts to acquire various telecommunications equipment totaling $ 0,, 3 million. At June 3D, 1992, the outstanding pr'incipal balance on these contracts totaled $ 0.2 million. The Data Center entered into two installment purchase contracts to acquire various computer equipment totaling $ 1.6 million. At June 30, 1992, the outstanding principal balance on these contracts totaled $ 1,, 3 million. The Notes to the Financial Statements are an integral part of this statement, - 31- STATE OF ARIZONA COMBINED STATEMENT OF CHANGES IN FUND BALANCES UNIVERSITY FUNDS FOR THE YEAR ENDED JUNE 30, 1992 ( Expressed in Thousands) CURRENT OPERATING FUNDS UNRESTRICTED TOTAL GENERAL AUXILIARY CURRENT OPERATING DESIGNATED ENTERPRISES RESTRICTED OPERATING FUNDS FUNDS FUNDS FUNDS FUNDS REVENUES AND OTHER ADDITIONS: Unrestricted current revenues $ 176,370 $ 172,643 $ 149,921 $ $ 498,934 Tuition and fees 302 302 Governmental grants and contracts 222,492 222,492 Private gifts, grants and contracts 78,610 78,610 Investment and endowment income 3,525 3,525 Additions to plant facilities including $ 53,224 charged to current funds expenditures Retirement of indebtedness including $ 1,388 charged to current funds expenditures Proceeds of bond refunding Other additions 25 25 Total Revenues and Other Additions 176,370 172,643 149,921 304,954 803,888 EXPENDITURES AND OTHER DEDUCTIONS: Educational and general expenditures 641,630 120,846 256,408 1,018,884 Auxiliary enterprises expenditures 123,243 123,243 Indirect costs recovered 46,075 46,075 Cancellation of loans and provision for bad debts Administrative and collection costs 21 21 Expended for plant facilities including expenditures not capitalized of $ 1,775 Interest on indebtedness including $ 7,852 capitalized as construction in progress Disposal of plant facilities Retirement of indebtedness Other deductions 515 515 Total Expenditures and Other Deductions 641,630 120,846 123,243 303,019 1,188,738 TRANSFERS AMONG FUNDS AND ADDITIONS ( DEDUCTIONS): State general fund appr'opriations 516,687 1,332 518,019 Mandatory loan fund and matching grants ( 91) 86 ( 5) Mandatory debt indentur'e requirements ( 55) ( 28,766) ( 16,924) ( 45,745) Other mandatory ( 53,238) ( 1,606) ( 1,507) 465 ( 55,886) Voluntary, net 375 ( 14,198) ( 2,668) ( 925) ( 17,416) Net Transfers Among Funds 463,769 ( 44,661) ( 21,099) 958 398,967 Net Increase ( Decrease) for the Year ( 1,491) 7,136 5,579 2,893 14,117 Beginning Fund Balances 4,496 40,660 16,895 20,051 82,102 Ending Fund Balances $ 3,005 $ 47,796 $ 22,474 $ 22,944 $ 96,219 The Notes to the Financial Statements are an integral part of this statement, - 32- 50 259 1,614 1,614 519,942 520,066 5 ( 409) 46,154 45,745 154 7,385 7,539 ( 48,347) ( 40,756) 61 ( 1,876) 110,828 2,627 ( 94,224) 19,231 116 0,617) 112,187 56,166 ( 94,224) 74,129 471,595 479,310 424 3,171 634 ( 6,158) 66,792 61,268 78,980 80,528 34,438 72,316 24,041 29,402 1,453,552 1,506,995 1,695,851 1,615,323 $ 34,862 $ 75,487 $ 24,675 $ 23,244 $ 1,520,344 $ 1,568,263 $ 1,774,831 $ 1,695,851 - 33- STATE OF ARIZONA COMBINED STATEMENT OF CURRENT OPERATING FUNDS REVENUES, EXPENDITURES AND OTHER CHANGES UNIVERSITY FUNDS FOR THE YEAR ENDED JUNE 30, 1992 ( Expressed in Thousands) UNRESTRICTED FUNDS GENERAL AUXILIARY TOTAL TOTAL CURRENT OPERATING DESIGNATED ENTERPRISES UNRESTRICTED RESTRICTED OPERATING FUNDS FUNDS FUNDS FUNDS FUNDS FUNDS 1992 1991 REVENUES: Tuition and fees $ 168,971 $ 84,911 $ 10,043 $ 263,925 $ 349 $ 264,274 $ 254,141 Governmental grants and contracts 3,334 40,357 19 43,710 195,852 239,562 222,243 Private gifts, grants and contracts 12,312 1,674 13,986 55,324 69,310 66,408 Investment and endowment income 1,431 8,669 331 10,431 3,243 13,674 14,715 Sales and services of auxiliary enterprises 136,040 136,040 136,040 132,580 Internal services 1,566 1,566 1,566 49 Other 2,634 26,394 248 29,276 287 29,563 27,631 Total Revenues 176,370 172,643 149,921 498,934 255,055 753,989 717,767 EXPENDITURES: Educational and general: Instruction 271,459 38,400 309,859 18,396 328,255 333,907 Research 53,401 10,090 63,491 145,682 209,173 196,514 Public service 13,894 .... " 1" 7" 19,071 30,813 49,884 46,312 .. J,. l. I' Academic support 109,962 10,349 120,311 665 120,976 120,302 Student services 33,414 8,959 42,373 2,446 44,819 45,874 Institutional support 56,176 29,398 85,574 859 86,433 89,197 Operation and maintenance of plant 70,432 8,746 79,178 7 79,185 73,669 Scholarships and fellowships 32,892 9,727 42,619 57,540 100,159 88,540 Total Educational and General Expenditures 641,630 120,846 762,476 256,408 1,018,884 994,315 Auxiliary enterprises 123,243 123,243 123,243 128,507 Total Expenditures 641,630 120,846 123,243 885,719 256,408 1,142,127 1,122,822 MANDATORY TRANSFERS: Debt indenture requirements ( 55) ( 28,766) ( 16,924) ( 45,745) ( 45,745) ( 52,626) Loan fund and matching grants ( 91) ( 91) 86 ( 5) Other mandatory ( 53,238) ( 1,606) ( 1,507) ( 56,351) 465 ( 55,886) ( 47,515) Total Net Mandatory Transfers ( 53,293) ( 30,463) ( 18,431) ( 102,187) 551 ( 101,636) ( 100,141) OTHER TRANSFERS AND ADDITIONS ( DEDUCTIONS): State general fund appropriations 516,687 516,687 1,353 518,040 516,735 Restricted receipts over ( under) transfers to revenues 3,358 3,358 ( 992) Voluntary transfers, net 375 ( 14,198) ( 2,668) ( 16,491) ( 925) ( 17,416) ( 14,800) Other ( 91) ( 91) ( 109) Total Other Transfers and Additions ( Deductions) 517,062 ( 14,198) ( 2,668) 500,196 3,695 503,891 500,834 Net Increase ( Decrease) in Fund Balances $ ( 1,491) $ 7,136 $ 5,579 $ 11,224 $ 2,893 $ 14,117 $ ( 4,362) The Notes to the Financial Statements are an integral part of this statement - 34- THIS PAGE INTENTIONALLY LEFT BLANK STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF PRESENTATION The accompanying financial statements of the State of Arizona have been prepared in conformity with generally accepted accounting principles ( GAAP) applicable to governmental units. The measurement focus of the financial statements for Governmental, Expendable Trust and Agency Funds is the flow of current financial resources, measured by the modified accrual basis of accounting. The measurement focus of the financial statements for Proprietary, NonExpendable Trust, Pension Trust and University Funds is the flow of economic resources, measured by the accrual basis of accounting. The State classifies assets and liabilities as current or long- term on the balance sheet. Liabilities expected to be paid within the next 12 months, except for the General Long- Term Debt Account Group, along with the assets available to meet those liabilities, are classified as current. Other assets and liabilities are long- term. Amounts in the 1992 and 1991 " Total- Memorandum Only" columns in the accompanying financial statements represent a summation of the combined financial statement line items. These are presented for analytical purposes only. Consequently, amounts shown in the " Total- Memorandum Only" columns are not comparable to a consolidation, and they do not represent the total resources available, total liabilities and fund balances or total revenues and expenditures/ expenses of the State. Certain amounts have been reclassified in the 1991 column to conform to the 1992 presentation. All financial statement information of the reporting entity is for the fiscal year- ended June 30, 1992, except for certain components of the Enterprise Funds. The State Compensation Fund's and the Social Service Contractors Indemnity Pool's, a component of the Other Enterprise Funds, information is for the calendar year- ended December 31, 1991. B. FINANCIAL REPORTING ENTITY The accompanying financial statements include financial transactions of all funds, account groups, elected offices, agencies, boards, commissions and universities over which the State's judicial, executive or legislative branches exercise primary oversight responsibility. Oversight responsibility includes selection of an entity's governing authority and ultimate accountability for fiscal matters. The State reporting entity includes the three State universities ( University of Arizona, Arizona State University, and Northern Arizona University), the University Medical Center Corporation, the Arizona Power Authority, and the four State retirement systems. The State reporting entity does not include counties, municipalities, school districts, community colleges, the Central Arizona Water Conservation District or other political subdivisions of the State over which the State exercises little, if any, oversight responsibility. - 36- NOTE 1. ( CONTINUED) STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 C. FUND STRUCTURE The State uses approximately 600 accounting funds. Each accounting fund is a separate accounting entity with its own self- balancing set of accounts that represent its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual accounting funds depending upon the purposes for which the State collects revenues or expends resources, and the means the State uses to control spending activities. For the purpose of preparing financial statements, the accounting funds have been combined by fund type. Account groups are used to provide accountability for certain assets and liabilities that are not recorded in the funds because they do not directly affect net expendable available financial resources. The four major fund types and the two account groups are described below. 1. Governmental Fund Types The General Fund accounts for all financial resources except those required to be accounted for in another fund. The General Fund consists of four different sub- funds: 1) General Operations; 2) Federal Grants; 3) Other Appropriations; and 4) Other Non- Appropriations. Special Revenue Funds account for the proceeds of specific revenue sources ( other than expendable trusts or major capital projects) that are legally restricted to expenditure for specified purposes. Debt Service Funds account for the accumulation of resources for, and the payment of, general long- term debt principal, interest and related costs. Capital Projects Funds account for financial resources used to acquire or construct major capital facilities ( other than those financed by Proprietary, Non- Expendable Trust, Pension Trust or University Funds). 2. Proprietary Fund Types Enterprise Funds account for operations ( a) financed and operated in a manner similar to private business enterprises, where the State intends that the cost of providing goods or services to the general public be financed or recovered primarily through service charges, or ( b) where the State decides that periodic determination of revenues earned, expenses incurred, and/ or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Internal Service Funds account for the financing of goods and services provided by one State department or agency to other State departments or agencies on a cost- reimbursement basis. 3. Fiduciary Fund Types Expendable Trust Funds account for assets held by the State in a trustee capacity, where principal may be expended in the course of the funds I designated operations. Non- Expendable Trust Funds account for assets held by the State in a trustee capacity, where the State must preserve the principal intact, and may expend only income derived from the principal for the funds' designated operations. Pension Trust Funds account for transactions of the four public employee retirement systems for which the State acts as trustee. - 37- NOTE 1. STATE OF ARIZONA , NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 ( CONTINUED) Agency Funds account for deposits, deductions, and acts as an agent for organizations. 4. University Funds the receipt and disbursement of various taxes, property collected by the State, where the State distribution to other governmental units or The University Funds account for the transactions of the State's three universities. For State reporting purposes, the University Funds combine the balances of each university's separate financial statements. The University Funds include: * Current Operating Funds which account for unrestricted resources over which the governing board retains full control in achieving the institutions' purposes and restricted resources which may be utilized only in accordance with externally restricted purposes. * Loan funds account for loans made to assist students in financing their education. * Endowment funds account for private gifts which specify income purpose and principal protection. * Agency funds account for assets for which the university acts in a custodial manner. * Plant funds which account for institutional property investment, acquisition, renewal, replacement and debt service. 5. General Fixed Assets Account Group Fixed assets used in Governmental and Expendable Trust Fund operations ( general fixed assets) are accounted for in the General Fixed Assets Account Group, rather than in the individual funds. Fixed assets related to Proprietary, Non- Expendable Trust, Pension Trust and the University Funds are accounted for in those funds. 6. General Long- Term Debt Account Group The General Long- Term Debt Account Group reflects long- term liabilities expected to be retired with Governmental and Expendable Trust Fund resources. Acquisition liabilities related to Proprietary, Non- Expendable Trust, Pension Trust and University Funds are accounted for in those funds. D. BASIS OF ACCOUNTING 1. Overview The financial statements present the Governmental, Expendable Trust and Agency Funds on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues and other financial resources are recognized in the accounting period in which they become both measurable and available to finance operations of the fiscal year or liquidate liabilities existing at fiscal year end. Expenditures and other uses of financial resources are recognized when the related fund liability is incurred. The financial statements of the Proprietary, Non- Expendable and Pension Trust Funds are presented on the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when they are incurred. - 38- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 1. ( CONTINUED) The financial statements of the University Funds use the accrual basis of accounting in accordance with generally accepted accounting principles. 2. Revenue Recognition - Governmental Fund Types The State recognizes tax revenues and related receivables when the taxpayer incurs the corresponding liability, and the payment has been demanded, provided the state can reasonably estimate the amount of revenue to which it is entitled and can reasonably establish its collectibility, i. e., earned and collected or expected to be collected within the next 31 days. Otherwise, the State defers recognizing revenue until cash is received. Major revenues determined to be susceptible to accrual include income, sales, unemployment, and motor vehicle and fuel taxes. Any receivables not expected to be collected within the next 31 days are recorded as deferred revenue. The State estimates the amount of taxes that will ultimately be uncollectible and excludes these from revenues. Tax refunds are based upon actual payments made within 31 days after fiscal year end and are recorded as a liability and a reduction in related revenue. Property taxes are levied on the third Monday in August. The first half of collections are due October 1 and the second half are due the following March 1. Any property tax collections received within 31 days after fiscal year end are recognized as revenue. The lien date is the first day of January each year. Federal grants and reimbursements are recorded as intergovernmental receivables and revenues when the State incurs the related expenditures or expenses, provided the State has complied with the terms of the grant award. Revenues from Federal entitlement awards are recorded as intergovernmental receivables and revenues when entitlement occurs. Revenue from non- refundable licenses, permits and similar fees is recorded when cash is received. Other revenues are recorded when earned, or when the State becomes entitled to the revenue and can establish its collectibilitYi otherwise, the State defers recognition of revenue until cash is received. Prior to fiscal year 1992, the State did not recognize the Federal grant revenue that is related to the expenditure accrued as an incurred but not reported liability of the Arizona Health Care Cost Containment System ( AHCCCS). For fiscal year 1992, the state will recognize these Federal grant revenues to the extent that they are expected to be received by AHCCCS and are attributable to the related expenditures accrued at the current fiscal year end. This change in accounting policy resulted in a restatement of beginning fund balance of $ 42.3 million in the General Fund. See Note 10 for details on the restatement of fund balance. Beginning with fiscal year 1992, the state will recognize both the revenue and the related expenditure for those amounts distributed throughout the year to cities and counties as Urban Revenue Sharing. This change has no effect on fund balance and is not reflected on the accompanying comparative financial statements in the fiscal year 1991 total ( memorandum only) column. 3. Expenditure Recognition - Governmental Fund Types The State recognizes expenditures and related liabilities in the accounting period the liability is incurred to the extent it is expected to be paid within the next 12 months, as a result of receiving property, goods or services, or when the beneficiary of a State program becomes entitled to receive benefits. Exceptions to this rule are: - 39- NOTE 1. STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 ( CONTINUED) * The State does not recognize a liability or the related expenditure for expected future welfare, health and similar benefits if the beneficiary is entitled to benefits solely because of a current condition. * * * The State recognizes interest in the Debt Service Funds to the extent it becomes payable during the current fiscal year. The State recognizes compensated absences in the period they are paid. The amounts earned and to be paid in the future are recorded in the General Long- Term Debt Account Group. The State recognizes a liability and the related expenditures for the accrued insurance losses of AHCCCS as they are incurred, without regard to when these expenditures are actually paid. The portion of the liabilities which is expected to be paid beyond 12 months is recorded in the General Long- Term Debt Account Group. Beginning with fiscal year 1992, the state will recognize both the revenue and the related expenditure for those a~ ounts distributed throughout the year to cities and counties as Urban Revenue Sharing. This change has no effect on fund balance and is not reflected on the accompanying comparative financial statements in the fiscal year 1991 total ( memorandum only) column. 4. Expenditure Classification - Governmental Function Types General Government agencies provide general government services to other State agencies or to the general public. Health and Welfare agencies provide health and welfare services to the general public. Inspection and Regulation agencies provide inspection and regulatory services for the general public. Education agencies provide education services to the general public. Protection and Safety agencies provide law enforcement, military, custody and related services to the general public. Transportation services to the general public are provided by the Arizona Department of Transportation. Natural Resources agencies provide services with regard to the natural resources of the State. E. VALUATION POLICIES 1. Cash and Cash Equivalents Cash and cash equivalents include undeposited receipts, petty cash, bank accounts, and certificates of deposit. 2. Investments Investments are stated at cost or amortized cost, except for investments in the Deferred Compensation Agency Fund which are reported at market value. - 40- NOTE 1. STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 ( CONTINUED) 3. Inventories Inventories consist of expendable supplies held for consumption in all funds, and merchandise intended for sale to customers in the Proprietary and University Funds. Inventories are stated at cost, using the first- in, first- out method. In Governmental Funds inventories are accounted for using the consumption method. Under this method, inventories are recorded as an expenditure as they are used. 4. General Fixed Assets Fixed assets capitalized in the General Fixed Assets Account Group are recorded at the time of purchase as capital outlay or other expenditures in the funds from whicjl the expenditures are made. Such assets are capitalized at historical cost or estimated historical cost if actual historical cost is unknown. Donated fixed assets are recorded at estimated fair market value on the date of contribution. Public domain ( infrastructure) general fixed assets consisting of roads and bridges are not capitalized, as these assets are immovable and of value only to the government. Prior to fiscal year 1992, the State computed depreciation on its general fixed assets. Beginning with fiscal year 1992, the State no longer computes depreciation on general fixed assets. 5. Proprietary and Similar Trust Fund Fixed Assets Fixed assets acquired in Proprietary and Similar Trust Funds are capitalized at historical cost or estimated historical cost if actual cost is unknown. Donated fixed assets are recorded at estimated fair market value on the date of contribution. Depreciation is charged against operations in Proprietary and Similar Trust Funds on a straight- line basis over the estimated useful lives of the assets. The State is trustee for approximately 9.6 million acres of land acquired through U. S. Government land grants. The State acquired a substantial portion of this land at no cost to the State, and its fair market value has not been reliably estimated. Accordingly, this land is not reported on the accompanying financial statements. A portion of the land that the State is trustee for has been sold and the buyers of the land have defaulted on the loans. The value of the land has been recorded at the sales price and properly included in the Non- Expendable Trust Funds fixed assets. The State holds land and other assets in trust for the benefit of its public schools and other public institutions. The trust requires the principal to be held intact with only interest and rentals of property distributed for current operations. Accordingly, certain revenues, including gains on the sale of property, are added to principal rather than distributed for current operations. In addition, the State Constitution provides that certain State revenues be added to the principal of the trust. In 1992, the trust distributed all monies eligible for distribution to aid the State's educational system and other public institutions. 6. University Fixed Assets Fixed assets capitalized in the University Funds are recorded at historical cost or estimated historical cost if actual historical cost is unknown. Donated fixed assets are recorded at fair value on the date of contribution. The University Funds do not record depreciation on fixed assets. - 41- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 3D, 1992 NOTE 1. ( CONTINUED) 7. Leases The State has capital leases for land, buildings, machinery and equipment. Although the terms of these leases vary, most are subject to annual appropriations by the Legislature. If a legislative appropriation is reasonably assured and the intent of the State is to continue the lease, a capital lease is considered non- cancellable for financial reporting purposes and is reported in the General Long- Term Debt Account Group, or in the appropriate Proprietary and Similar Trust or University Funds. Assets acquired through capital leases are valued at cost. Capital leases for the Governmental Funds are reported in the General Long- Term Debt Account Group and the related assets are reported in the General Fixed Assets Account Group. Capital leases for the Proprietary and Similar Trust or University Funds are reported in those funds as a long- term obligation, together with the related assets. The State also leases land, buildings and equipment under operating leases. The related assets are not capitalized. Operating lease obligations are recorded when incurred as rental expenditures or expenses of the related funds. F. BUDGETS AND BUDGETARY ACCOUNTING 1. Budget Process Annually, no later than five days after the regular session of the Legislature convenes, the Governor must submit to the Legislature for approval, a proposed operating and capital outlay budget for the succeeding fiscal year. The Legislature must approve the budget by passing a general and a capital outlay appropriation bill. The budget can be amended throughout the year by special legislative appropriations and/ or budget transfers. The State's budgeted expenditures may not exceed seven percent of aggregate personal income as estimated by the Economic Estimates Commission as stated in the State Constitution. Funds which have legal budgets include the General Fund, Special Revenue Funds ( except for minor funds), portions of Capital Projects Funds, State appropriations to the Coliseum and Exposition Center of the Enterprise Funds, certain Expendable, Non- Expendable and Pension Trust Funds, and State appropriations to the University Funds. However, Federal resources included in these Funds are not appropriated. The General Fund is the only fund for which a revenue budget is prepared. State agencies are responsible for exercising budgetary control and ensuring that expenditures do not exceed appropriations. The State Department of Administration - Division of Finance exercises oversight and does not disburse funds in excess of appropriations. The State prepares its annual budget on the cash basis of accounting. E~ cumbrances as of June 30 can be liquidated during a four week administrative period known as the 13th month. Anticipated revenue is estimated on the cash basis. The statements comparing budgeted and actual results are presented on the budgetary ( or legal) basis. The State prepares an annual budgetary report which presents the individual funds comparisons at the level of budgetary control. - 42- NOTE 1. STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 ( CONTINUED) 2. Encumbrance Accounting Encumbrance accounting, under which purchase orders, contracts and other commitments for expenditures are recorded to reserve that portion of the applicable appropriation, is an extension of formal budgetary control. The Department of Administration - Division of Finance is authorized to draw warrants against the available balances of appropriations for one month after the end of the fiscal year in order to pay for goods or services received but not paid for at the close of the fiscal year. Encumbrances outstanding more than one month after year end for goods or services that were not received before year end are cancelled. These can only be paid upon a subsequent appropriation by the Legislature. Encumbrances for goods and services received before year end can be paid in the subsequent year with the previous year appropriations. One month after year end, the remaining available appropriations lapse and no further payments may be made except for continuing appropriations allowed under Arizona Revised Statutes ( ARS) Section 35- 190. Continuing appropriations primarily relate to multi- year commitments and automatically renew without further legislative action until altered or revoked. NOTE 2 . CASH AND INVESTMENTS A. CASH AND CASH EQUIVALENTS Cash and cash equivalents are under the control of the State Treasurer, the retirement systems or other administrative bodies. In accordance with statutory requirements, the State invests temporary surpluses of cash in obligations issued or guaranteed by the U. S. Government, and commercial paper or bankers acceptances for a term not to exceed fifteen days. Most cash deposited with the State Treasurer by State agencies is maintained by the Treasurer in various pooled investment funds. The Treasurer deposits in the General Fund interest earned from investments purchased with such pooled monies. However, the Treasurer also invests a State agency's cash in a separate pool if specifically requested to do so by the agency; the Treasurer allocates interest earned from these investments monthly to the participating funds based on average daily cash balances. Arizona Revised Statutes 23- 703 requires that unemployment insurance contributions from Arizona employers be deposited in an unemployment trust fund account with the Secretary of the Treasury of the United States that is established and maintained pursuant to section 1104 of the Social Security Act. The cash on deposit in the trust fund account is pooled and invested. Interest earned from investments purchased with such pooled monies is deposited in the trust fund account. The State Treasurer invests the deposited cash, including the cash float, in short- term securities and other investments. Provisions of Arizona law restrict these investments to obligations of the U. S. Government and its agencies, obligations of the State and certain local government subdivisions, interest- bearing savings accounts and certificates of deposits ( only if deposits in excess of the insured amount are secured by the depository), collateralized repurchase agreements, certain obligations of U. S. corporations, and certain other securities. - 43- NOTE 2. STATE OF ARIZONA NOT, ES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 ( CONTINUED) Statutes enacted by the Legislature authorize the retirement systems to make investments in accordance with the " Prudent Man" rule. This rule imposes the responsibility of making investments with the jUdgement and care that men of ordinary prudence would exercise in the ma1'! agement of their own affairs when considering both the probable safety of their capital and the probable income from tbat capital. Within this broad framework, the retirement systems have chosen to invest in short- term securities and repurchase agreements, obligations of the U. S. Government and its agencies, corporate bonds, common and preferred stocks and mortgages. The Statutes also place certain restrictions on the investment fund portfolios of the retirement systems. The Statutes also allow the Arizona State Retirement System to lend securities to brokers under a security loan program. The System enters into agreements with brokers to loan securities and have the same securities redelivered at a later date. It is the policy of the System to receive and maintain as collateral at least 102% of the market value of the loaned securities in the form of cash. The system records the cash received and the same amount as an obligation for securities on loan. The cash received is invested in temporary investments. Interest income from the investment of the collateral is returned to the broker. The System receives a negotiated fee for its loan activities. At June 30, 1992 and 1991, the System had $ 369.0 and $ 413.3 million, respectively, outstanding as payable for securities on loan. Due to the flow of securities to and from transfer agents and the security loan program, securities occasionally cannot be delivered for a sale or received for a purchase, resulting in a " failed" transaction. Securities with trade dates in June and settlement. dates in July result in " outstanding" transactions. Since these securities have contractually changed ownership, receivables and payables result from these transactions. Such transactions resulted in a receivable for securities sold of $ 166.0 and $ 13.9 million at June 30, 1992 and 1991, respectively, and a payable for securities purchased of $ 279.8 and $ 28.1 million at June 30, 1992 and 1991, respectively. B. RESTRICTED ASSETS University Funds report as restricted assets cash and investments for bond and loan retirement funds ( including advance refunding of bonds), as well as for maintenance and replacement reserves. The endowment and restricted funds also include restricted assets. C. COLLATERAL AND INSURANCE The State requires that deposits and investments with financial institutions be entirely covered by Federal depository insurance or, alternatively, collateralized with surety equal to at least 100% ( 102% for the Treasurer) of the deposits so collateralized. Cash deposited with banks is collateralized based on bank balances. Surety collateralization includes U. S. government obligations, state obligations, obligations of counties and municipalities within the State, and certain other securities. - 44- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 2. ( CONTINUED) D. DEPOSITS At June 30, 1992 the carrying amount of the State's deposits was $ 236.2 million and the bank balance was $ 344.2 million. Of the bank balance, $ 223.9 million was collateralized by Federal depository insurance. Of the remaining balance, $ 91.5 million was collateralized by securities held by the bank's trust division in the State's name in book- entry form, and $ 28.8 million was collateralized by securities held in the bank's custodial account with the Federal Reserve in the banks name and in the State's name in book- entry form. E. INVESTMENTS The following table summarizes the credit risk of the State's investments ( expressed in millions). Category A includes investments that are insured or registered, or for which securities are held by the State or the State's agent in the state's name, category B includes uninsured and unregistered investments for which securities are held by the counterparty's agent or trust department in the State's name. Category C includes uninsured and unregistered investments for which securities are held by the counterparty, or by its agent or trust department but not in the State's name. Type of Deposit Category Carrying Market or Investment A B C Amount Value U. S. Government securities $ 4,965.6 $ 428.0 $ 443.1 $ 5,836.7 $ 6,249.2 Corporate stocks 4,444.0 14.1 4,458.1 5,037.3 Corporate debt 2,112.7 450.9 5.5 2,569.1 2,669.9 State and local government securities 1,250.0 47.6 1,297.6 1,301. 9 Repurchase agreements 379.7 379.7 379.7 Mortgages 223.4 38.6 262.0 262.0 Temporary investments 793.9 793.9 794.0 Other investments 826.9 314.2 75.6 1,216.7 1,223.1 Subtotal S 14,996.2 S 1,279.3 S 538.3 16,813.8 17,917.1 United States Treasury Pooled Investment 407.0 407.0 Total Investments 17,220.8 18,324.1 Deposits 236.2 236.2 Total Cash and Investments S 17,457.0 S 18,560.3 At June 30, 1992, the State had no commitments to resell securities under yield maintenance agreements. During the year ended June 30, 1992, the State did not make significant investments in types of investments beyond those enumerated in the table above, - 45- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 3D, 1992 NOTE 3. RECEIVABLES/ PAYABLES/ OTHER REVENUES A. TAXES RECEIVABLE Taxes receivable represent amounts owed by taxpayers for the 1991 and prior calendar years including assessments for underpayment, penalties and interest totaling approximately $ 151. 5 million at June 30, 1992. Taxes receivable are accrued when they are earned, measurable, and available. The income tax receivable is composed of individual and corporate estimated payments, withholding payments, payments with final returns and assessments which relate to income earned through June 30, 1992. The property tax receivable is composed of payments for real property owned and subject to tax through June 3D, 1992. Sales and motor vehicle and fuel tax receivable represent amounts which are earned by the State in the fiscal period ending June 3D, 1992, but not collected until the following month. The following table summarizes taxes receivable at June 3D, 1992 ( expressed in millions). Type of Tax General Fund Special Revenue Funds Capital Projects Funds Enterprise Funds Expendable Trust Funds Sales Income- Individual and Corporate Property Insurance Premium Motor Vehicle and Fuel Luxury Unemployment $ 236.8 $ 11.0 $ 268.2 11.8 14.3 7.9 53.6 5.5 1.7 $ 4.6 $ 39.1 Allowance for uncollectible taxes Net Taxes Receivable B. OTHER RECEIVABLES ( 184.5) $ 360.0 $ 64.6 $ 1. 7 $ 4. 6 .$. 3.. 9.=.== 1 The total amount of other current receivables at June 3D, 1992 is $ 394.4 million. The following schedule summarizes other current receivables over $ 5 million ( expressed in millions). Fund Pension Trust University Enterprise Expendable Trust Non- expendable Trust Pension Trust General Fund Enterprise Type of Receivable Securities sold Student loans and fees Patient accounts Unemployment Insurance Benefits Land sales Contributions Loans to City of Phoenix Lottery ticket sales Amount $ 166.0 83.0 30.7 14.6 11.2 10.5 5.1 5.0 The State Compensation Fund had a receivable for premiums at December 31, 1991 of $ 42.0 million. Long- term accounts receivables consist primarily of receivables for land sales contracts of the Land Department, a Non- Expendable Trust Fund ($ 29.0 million) . - 46- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 3. ( CONTINUED) C. DEFERRED REVENUES Deferred revenues consist of payments to the State for goods and services not yet rendered. Delinquent taxes not collected within 31 days after June 30, 1992, have been deferred and, consequently, are not included in current year revenues. Funds with deferred revenues of $ 10 million or more consist of the following ( expressed in millions). Trust and General Enterprise Agency University Revenue Source Fund Funds Funds Funds Taxes $ 134.1 $ $ $ Land Leases 10.4 10.0 Federal Grants 4.8 Insurance Premiums 47.6 24.8 Student Services 30.9 Other 1.7 5.1 Total S 151.0 S 52.7 S 34.8 S 30.9 D. SALES AND CHARGES FOR SERVICES - OTHER The total amount of sales and charges for services - other, of all Proprietary and Similar Trust Funds, for fiscal year end June 30, 1992 is $ 590.9 million. The following schedule summarizes sales and charges for services - other, over $ 10 million ( expressed in millions). Fund State compensation University Medical Center Risk Management Transportation Equipment Arizona Power Authority Workers' Compensation Land Endowments Data Processing Telecommunications Coliseum & Exposition Center Types of Sales and Charges for Services Insurance premiums Medical services Insurance premiums Equipment and warehouse supplies Power sales Insurance premiums Land Sales Data processing Telecommunications Entertainment related sales and rentals $ Amount 248.6 153.6 35.8 22.8 16.7 14.9 14.2 13.0 12.2 12.0 NOTE 4. GOVERNMENTAL RECEIVABLES! PAYABLES A. GOVERNMENTAL RECEIVABLES Due from U. S. Government in the General Fund of $ 161.0 million represents receivables from Federal Financial Assistance Programs. The amount of $ 23.7 million in the Special Revenue Funds consists principally of amounts due to the Arizona Department of Transportation for reimbursement of highway construction costs from the U. S. Department of Transportation. B. GOVERNMENTAL PAYABLES Due to Local Governments in the General Fund of $ 221.9 million, represents primarily education aid and sales tax collections ($ 142.5 and $ 74.3 million, respectively) that have not yet been remitted by the State to the respective local governments as of June 30, 1992. - 47- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 5. INTERFUND TRANSACTIONS A. OPERATING TRANSFERS Interfund transactions include temporary loans, billings for services, appropriations and other obligations of one fund to another fund. Major operating transfers of $ 10 million or more, other than those involving Internal Service Funds operations, during the year ended June 30, 1992 included the following ( expressed in millions). Paying Fund General Fund General Operations Special Revenue Maricopa RARF State Highway University Funds General Fund General Operations Enterprise Lottery special Revenue State Highway Enterprise Lottery General Fund Federal Grants Special Revenue Highway Users Enterprise Industrial Commission Receiving Fund University Funds Debt Service Dept. of Transportation Dept. of Transportation Expendable Trust Employee Benefits Expendable Trust Employee Benefits General- Fund General operations General Fund General Operations Special Revenue Other Expendable Trust Employee Benefits General Fund General Operations Special Revenue Industrial Commission Amount $ 519.9 93.8 66.6 48.3 40.9 35.9 29.2 26.6 20.4 12.5 12.2 Other interfund transactions included smaller operating transfers and quasiexternal transactions, i. e., transactions for goods and services rendered for other funds primarily by Internal Service Funds. B. DUE FROM/ DUE TO The following balances represent due from/ to balances among funds and State agencies as of June 30, 1992 ( expressed in millions). Receivable Fund General Fund Payable Fund Special Revenue Funds: other Capital Projects Funds: Other Debt Service Funds: Certificates of Participation Enterprise Funds: Lottery Coliseum and Exposition Center Expendable Trust Funds: Employee Benefits Other Non- Expendable Trust Funds: Land Endowments Agency Funds: Other University Funds - 48- Amount $ 8.0 0.2 4.7 6.8 2.0 1.1 1.2 5.8 0.9 1.4 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 5. ( CONTINUED) Receivable Fund Special Revenue Funds: State Highway Game and Fish Other Capital Projects Funds: Other Debt Service Funds: Certificates of Participation Enterprise Funds: Industrial Commission Other Internal Service Funds: Transportation Equipment Workers' Compensation Data Processing Telecommunications Motor Pool Other Expendable Trust Funds: Energy Conservation payable Fund General Fund Expendable Trust Funds: Employee Benefits General Fund Enterprise Funds: Lottery Expendable Trust Funds: Employee Benefits Other Agency Funds: Other General Fund Special Revenue Funds: Highway Users Non- Expendable Trust Funds: Other Agency Funds: Other Non- Expendable Trust Funds: Land Endowments Special Revenue Funds: Industrial Commission General Fund Special Revenue Funds: State Highway Enterprise Funds: State Compensation General Fund Special Revenue Funds: Industrial Commission Other General Fund Special Revenue Funds: Other General Fund Special Revenue Funds: Other General Fund Special Revenue Funds: Other Agency Funds: Other - 49- Amount $ 0.1 0.1 6.9 1.0 0.1 0.3 0.2 1.4 0.4 0.5 0.1 0.1 0.3 0.1 2.6 0.7 2.0 0.1 0.1 1.0 0.1 1.3 0.4 .1 L. u" 0.2 0.1 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 5. ( CONTINUED) Receivable Fund Other Non- Expendable Trust Funds: Land Endowments c. RESIDUAL EQUITY TR&~ SFERS Payable Fund General Fund Special Revenue Funds: other Agency Funds: other General Fund Agency Funds: Other Total $ s Amount 0.6 0.2 0.1 0.3 0.4 54.9 The table below reflects residual equJ. ty transfers in and out and related activity which occurred during the fiscal year ended June 30, 1992 ( expressed in thousands): General Fund: General Operations Federal Grants Other Non- Appropriations Special Revenue Funds: State Highway Fund Criminal Joint Enforcement Funds 90/ 10 Boards Air Quality Fund Other Funds Capital Projects Funds: Special Revenue Funds Financed Enterprise Funds: Coliseum and Exposition Center Other Funds Internal Service Funds: Risk Management Transportation Equipment Workers Compensation Telecommunications Other Funds Expendable Trust Funds: Other Funds Non- Expendable Trust Funds: Land Endowments Other Funds Transfers In $ 11,653 348 272 Transfers Out $ 2 3,030 8 175 3,443 650 1,106 3 53 930 10 182 314 10 4 80 Total Residual Equity Transfers - 50- $ 12,273 $ 10,000 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 5. ( CONTINUED) Transfers Transfers In Out Enterprise Funds: Coliseum and Exposition Center return of Contributed Capital to the General Fund $ $ 894 Internal Service Funds: Telecommunications return of Contributed Capital to the General Fund 240 Motor Pool return of Contributed Capital to the General Fund 1,040 Other Funds return of Contributed Capital to the General Fund 99 Total Residual Equity Transfers and Related Activity $ 12,273 $ 12,273 NOTE 6. FIXED ASSETS A. CAPITALIZATION POLICY Land and buildings are capitalized regardless of cost. Improvements ( other than buildings) with a project cost of $ 5,000 or more, and furniture, vehicles, and equipment with a cost of $ 1,000 or more are capitalized if they have useful lives longer than one year. Infrastructure is not capitalized. B. GENERAL FIXED ASSETS ACCOUNT GROUP A summary of changes in the general fixed assets account group follows ( expressed in millions) • Restated Balance Balance Asset July 1, 1991 Additions Deletions June 30, 1992 Land $ 52.7 $ 9.4 $ 0.4 $ 61. 7 Buildings and improvements 684.5 84.7 7.1 762.1 Other improvements 16.5 7.1 23.6 Furniture, vehicles and equipment 261.9 47.6 9.2 300.3 Subtotal 1, 015.6 148.8 16.7 1, 147.7 Construction in progress 47.9 16.7 61.8 2.8 Total General Fixed Assets $ 1,063.5 $ 165.5 $ 78.5 $ 1, 150. 5 The July 1, 1991 beginning balance amounts for the General Fixed Asset Account Group's land, buildings and improvements, furniture, vehicles and equipment, and construction in progress asset classifications were restated by $( 2.0), $ 1.8, $( 7.0) and $ 0.5 million, respectively. Restatements are attributable to additional findings by agencies in fiscal year 1992 that consisted of fixed assets of the agency, which did not get recorded on the fixed asset listing or assets retired, but not yet deleted from the fixed asset listing. - 51- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 6. ( CONTINUED) C. PROPRIETARY AND SIMILAR TRUST FUND FIXED ASSETS Proprietary and Similar Trust Funds fixed assets consisted of the following as of June 30, 1992 ( expressed in millions), except for State compensation and the Social Service Contractors Indemnity Pool, a component of the other Enterprise Funds, which contains balances as of December 31, 1991. Internal Similar Enterprise Service Trust Combined Funds Funds Funds Total Land $ 8.6 $ $ 14.6 $ 23.2 Buildings and improvements 143.2 1.4 2.6 147.2 Other improvements 1.4 1.4 Furniture, vehicles and equipment 60.0 115.1 2.0 177 .1 Construction in progress 7.6 7.6 Subtotal 220.8 116.5 19.2 356.5 Less: Accumulated depreciation ( 69.5) ( 63.9) ( 1. 9) ( 135.3) Total S 151.3 S 52.6 S 17.3 S 221.2 Fixed assets of the Proprietary and Similar Trust Funds are capitalized in the fund in which they are utilized and depreciated on a straight line basis over their useful lives. The estimated lives of fixed assets are as follows: Years Building and improvements Other improvements Furniture, vehicles and equipment D. UNIVERSITY FIXED ASSETS 40 20 3- 15 The University fixed assets millions). Asset Land Buildings and improvements Other improvements Furniture, vehicles and equipment Subtotal Construction in progress Total consist of the following ( expressed in Balance Balance June 30, 1991 June 30, 1992 $ 148.0 $ 150.7 1,064.1 1,163.5 23.9 24.9 652.7 679.2 1,888.7 2,018.3 127.8 152.6 S 2,016.5 S 2,170.9 Universities construction pro; ects included in Construction in Progress have a total estimated cost of-$ 203.6 million, a cost to date of $ 152.6 million and a remaining cost to complete of $ 51.0 million. - 52- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 7. EMPLOYEE BENEFITS A. COMPENSATED ABSENCES 1. Annual Leave In general, State employees accrue vested annual leave at a variable rate based on years of service. An employee forfeits accumulated annual leave in excess of 240 hours at the end of a calendar year, unless the Director of the Department of Administration authorizes an exception. An employee who separates from State service is paid for all unused and unforfeited annual leave at the employee's rate of pay at the time of separation. 2. Compensatory Leave Some employees accumulate compensatory leave for time worked over 40 hours per week. Compensatory leave is treated like annual leave except that the employee must use any compensatory leave before using annual leave. B. SICK LEAVE Sick leave includes any approved period of paid absence granted an employee due to illness, injury or disability. Most State employees accrue sick leave at the rate of eight hours per month without an accumulation limit. With minor exceptions, sick leave credits are forfeited upon separation. If more than 1,000 hours are accumulated upon retirement, the retiree will receive $ 750 as a bonus. ( See Note 12. E) C. DEFERRED COMPENSATION PLAN The State of Arizona Deferred Compensation Plan for State Employees ( the Plan), established in accordance with section 457 of the Internal Revenue Code, allows employees to contribute to the Plan an amount not to exceed the lesser of $ 7,500 or one- third of the employee's includable compensation. Employee contributions are deferred for income tax purposes until benefits are paid to the employees. Revenue Siources are voluntary payroll deductions from employees and earnings on investments made therefrom. The State does not make any contributions to the Plan. The State has stewardship responsibility under the terms of the Plan. Plan assets are the sole property of the State subject to claims of State creditors. The rights of the employees or their beneficiaries are equivalent to that of a general creditor. Employees may withdraw the value of their Plan account upon termination of employment, retirement, death, disability or financial hardship. Employees may select from various annuity options. The State appointed an independent administrator for the Plan. Participants direct the administrator to invest their accounts among various investment options. The administrator receives commissions from the investment of participant contributions. As of June 30, 1992, assets invested on behalf of the participants and available for Plan benefits totaled $ 140.8 million. Of this amount and its liability, $ 140.0 million is reported in investments and $ 0.8 million is reported as contributions receivable. These amounts are reported at market value in an Agency Fund. - 53- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 7. ( CONTINUED) D. SOCIAL SECURITY PARTICIPATION COSTS As an employer, the State participates in the Social Security Program. In accordance with the terms of the Social Security program, the State matched the employee payment of 7.65% of up to $ 53,400 and $ 57,600 in employee earnings in calendar years 1991 and 1992, respectively. The total Social Security participation costs to the State for fiscal year 1991- 92 were $ 103.0 million. NOTE 8. RETIREMENT PLANS A. PLAN DESCRIPTIONS The State maintains two cost- sharing and two agent, multiple- employer retirement systems: the Arizona State Retirement System ( ASRS), the Public Safety Personnel Retirement System ( PSPRS), the Elected Officials' Retirement Plan ( EORP), and the Corrections Officer Retirement Plan ( CORP). The systems publish their own Component Unit Financial Reports containing historical trend and other data to provide information on progress made in accumulating sufficient assets to pay benefits when due. The systems provide retirement, death, and disability benefits to State employees, public school employees, and employees of counties, municipalities, and certain other State political subdivisions. The number of participating local government employers as of June 30, 1992 are shown below. EMPLOYER ASRS PSPRS EORP CORP Cities and towns 55 101 13 Counties 14 15 15 10 State 1 1 1 1 Special districts 11 15 School districts 214 Community college districts 10 The number of members and benefit recipients of the retirement systems as of June 30, 1992 are shown below. Retirees and beneficiaries currently receiving benefits and inactive or terminated employees entitled to benefits but not yet receiving them Cur'rent employees: Vested Nonvested B. FUNDING AND BENEFIT POLICIES ASRS 56,668 74,392 65,241 PSPRS 3,184 5,432 5,254 EORP 415 386 272 CORP 233 863 6,228 The Arizona State Legislature prescribes requirements relating to membership, benefits, and employee/ employer contribution requirements for each system. The following summarizes those requirements. - 54- NOTE 8. STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 ( CONTINUED) ASRS is a cost- sharing multiple- employer pension system that benefits employees of public schools, the State and its political subdivisions. Membership is required as a condition of employment. Both employers and employees must contribute. Benefits vest after five years of service. Members retiring at age 65, or at age 62 with ten years of total credited service, or when age plus total credited service equals 80, receive full retirement benefits. The benefit is based on two percent of the participant's highest 36- month average monthly compensation ( in the last 120 months of employment) multiplied by years of total credited service. In addition to the pension benefits described, the ASRS offers health care benefits to retired and disabled members that are no longer eligible for health care benefits through their former member employer's group health plan. This program is administered in accordance with ARS 38- 781.25 and 38- 781.41. The ASRS reimbursed approximately $ 23.7 million towards the cost of group health insurance coverage for the year. This figure represents an increase of 28.11% over the previous year. PSPRS is an agent multiple- employer pension system that benefits fire fighters and police officers employed by the State and its political subdivisions. Membership is required as a condition of employment. Both employers and employees must contribute. Members retiring at age 62 with 15 years service, or at any age with 20 or more years service, receive benefits. Retirees with at least 20 years of credited service, but less than 25 years of credited service receive 50% of average compensation plus two percent of average compensation for each year over 20. For retirees with less than 20 years of credited service the 50% of average compensation is reduced by four percent of average compensation for each year of credited service under 20 years. Retirees with 25 years or more of credited service receive 50% of average compensation plus two and one- half percent of average compensation for each year of credited service over 20 years up to a maximum of 80%. Average compensation is described as the average for the highest paid three consecutive years out of the last twenty. Members with ten years service may also vest certain benefits provided they do not withdraw their contributions prior to attaining age 62. EORP is a cost- sharing, multiple- employer pension plan that benefits all elected State and county officials and judges ( except La Paz County elected officials), and certain elected city officials. Membership is required as a condition of employment. Both employers and employees must contribute. Benefits vest after five years of credited service. Vested members retiring at age 60 with 25 years or more of credited service, or at age 62 with ten or more years of credited service, or at age 65 with five years or more of credited service receive benefits. The benefit is four percent of the member's final annual salary multiplied by the years of the member's credited service. The maximum is 80% of a member's final annual salary. CORP is an agent multiple- employer pension plan that benefits county detention officers and certain employees of the State Department of Corrections. Membership is required as a condition of employment. Both employers and employees must contribute. Benefits vest after ten years of credited service. Vested members retiring with 25 years of credited service, or at age 62 with ten years of credited service receive annual benefits. The benefit is two percent of the member's average monthly salary multiplied by the member's years of credited service. The amount of a member's pension shall not exceed 75% of the member's average monthly salary. Average monthly salary is defined as one- thirty- sixth ( 1/ 36) of total base salary paid a member during the highest three consecutive years out of the last ten years of credited service. Upon termination of employment, a member may withdraw contributions made to the system plus accrued interest. The acceptance of a refund forfeits the individual's rights and benefits in the system. - 55- STATE OF ARIZONA ; NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 8. ( CONTINUED) C. FUNDING STATUS AND PROGRESS The Pension Benefit Obligation ( PBO) is a standardized disclosure measure of the present value of · · pension benefits, adjusted for the effects of projected salary increases and step- rate benefits, estimated to be payable in the future as a resu. lt of employee service to date. The PBO is the actuarial present value of credited projected benefits and is intended to: ( 1) help users assess the plans' funding status on a going- concern basis, ( 2) assess progress being made in accumulating sufficient assets to pay benefits when due, and ( 3) allow for comparisons among public employee retirement plans. The PBO is independent of the actuarial funding method used to determine contributions to the plan. Significant actuarial assumptions used to compute the PBO at June 30, 1992 are summarized below. Annual interest rate ( compounded annually) Inflation and other factors Merit or seniority increases Post- retirement benefit increases ASRS 8.0% 5.5% 0.5%- 3.0% none PSPRS 9.0% 6.5% 0%- 3.0% none EORP 9.0% 7.0% none none CORP 9.0% 6.5% 0.1%- 0.3% none The total PBO and net assets available to meet the obligation for each system at June 30, 1992 are summarized below ( expressed in millions). ASRS PSPRS EORP CORP TOTAL Net assets available for benefits, at cost or amortized cost S 8,459 S 1, 596 S 116 -"" S_---= 1..,, 6= 8 S 10,339 1,932 245 12 50 2,239 2,217 599 43 32 2,891 619 84 3 30 736 34 2 6 42 8,080 1,503 108 135 9,826 S 379 S 93 S 8 S 33 S 513 S 9,437 S 1,903 S 141 S 189 S 11,670 Pension benefit obligation-- Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits Current employees: Accumulated employee contributions including allocated investment income Employer financed- vested Employer financed- non- vested Health Insurance Total pension benefit obligation Net assets in excess of pension benefit obligation Net assets available for benefits, at market 3,312 - 56- 541 48 17 3,918 STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 8. ( CONTINUED) Estimated increases in the PBO of June 30, 1992 resulting from changes ( expressed in millions) are as follows. ASRS PSPRS EORP CORP Assumption changes $ 199 $ $ $ Benefit provision changes and ad hoc increase for retirees and beneficiaries 81 16 1 Changes in retirees and beneficiaries 710 114 5 19 Net changes in PBO S 990 S 130 S 6 S 19 D. CONTRIBUTIONS REQUIRED AND CONTRIBUTIONS MADE The systems' consulting actuaries determine employer contributions. The systems use the projected benefit method with entry age normal cost for this purpose. In determining funding requirements, the actuary uses the same actuarial assumptions as those used to calculate the pension benefit obligation. At June 30, 1992, the remaining unfunded accrued liability liquidation period in years were as follows. 11 26 30 CORP 37 Actual contributions ( expressed in millions) for the fiscal year ended June 30, 1992 were as follows. % of % of Employer Covered Employee Covered Contributions Payroll Contributions Payroll ASRS $ 132.3 3.6 $ 132.3 3.6 PSPRS 35.8 8.1 30.5 7.3 EORP 4.8 17.4 2.1 7.6 CORP 9.5 6.1 10.2 6.5 E. TREND INFORMATION Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. An analysis of funding progress for the fiscal years ended June 30, 1990, 1991 and 1992 follows. Net assets available for benefits as a percentage of the pension benefit obligation: June 30, 1992 June 30, 1991 June 30, 1990 Excess ( unfunded) pension benefit obligation as a percentage of annual covered payroll: June 30, 1992 June 30, 1991 June 30, 1990 Employer contributions as a percentage of annual covered payroll: June 30, 1992 June 30, 1991 June 30, 1990 - 57- ASRS 104.7% 110.3% 109.8% 10.5% 21.1% 20.2% 3.6% 3.8% 2.0% PSPRS 106.2% 104.3% 105.8% 22.4% 14.6% 19.2% 8.1% 7.0% 6.7% EORP 107.4% 100.9% 98.4% 28.8% 3.3% ( 5.8)% 17.4% 14.9% 11.8% CORP 124.6% 120.2% 109.2% 21.3% 15.2% 6.7% 6.1% 6.4% 6.1% STATE OF ARIZONA NOTES TO TIm FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 8. ( CONTINUED) The State's contribution to the ASRS met the actuarially determined requirements for fiscal year ended June 30, 1992 and June 30, 1991. The Arizona Legislature pre- empted the actuarially computed contribution amount for the ASRS for the year ended June 30, 1990 by passing a law which set the rate at two percent for employers and employees. The actual contribution amounts made for the year ended June 30, 1990 were $ 128.9 million ($ 64.45 million each for employers' and employees' portions) • The actuarial computed contribution amounts for the years ended June 30, 1991 and June 30, 1992 were $ 266.8 million ($ 133.4 million each for employers' and employees' portions) and $ 264.6 million ($ 132.3 million each for employers' and employees' portions) respectively. The State's contributions to the PSPRS and CORP met the actuarially determined requirements for the fiscal years ended June 30, 1990, 1991 and 1992. For the EORP, the following schedule details employer contributions ( in thousands): Fiscal Valuation contribution Rates Dollar Contribution Year Date as Percentage of Valuation for Fiscal Year June 30 June 30 Valuation Payroll Payroll Computed Actual 1990 1989 15.94% $ 24,605 $ 3,922 $ 3,048 1991 1990 16.83 25,776 4,338 4,142 1992 1991 16.55 27,838 4,607 4,830 F. UNIVERSITIES DEFINED CONTRIBUTION PLANS Eligible faculty, academic professionals and administrators at the three universities ( Arizona State University, Northern Arizona University, and University of Arizona) may select one of three retirement plans: Arizona State Retirement System, as discussed above, Teachers Insurance Annuity AssociationjCollegeRetirement Equities Fund ( TlAAjCREF) or Variable Annuity Life Insurance Company ( VALIC). The former is a defined benefit plan and the latter two are defined contribution plans. The two defined contribution plans are administered by independent insurance and annuity companies approved by the Arizona Board of Regents. Eligible classified staff belong to the Arizona State Retirement System. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. State statute requires that both the employee and the university contribute an amount equal to seven percent of the employee's base salary. The three universities total payroll in fiscal year 1992 was $ 667.6 million. The universities' contributions were calculated using the base salary amount of $ 203.1 million for those employees who selected the TlAAjCREF Retirement Plan and $ 32.6 million for those employees who selected the VALIC Retirement Plan. Both the university and the covered employees made the required seven percent contribution. For the TlAAjCREF Retirement Plan each source contributed $ 14.2 million for a total of $ 28.4 million. For the VALlC Retirement Plan each source contributed $ 2.3 million for a total of $ 4.6 million. - 58- STATE OF ARIZONA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1992 NOTE 9. LONG- TERM DEBT A. REVENUE BONDS 1. Department of Transportation The Department of Transportation ( DOT) issued Highway Improvement Bonds in 1980, and Highway Revenue Bonds in 1986, 1987, 1990, 1991 and 1992. These bonds are secured by a prior lien on, and a first pledge of, motor vehicle and related fuel fe~ s and taxes of the State Highway Fund. Arizona Revised Statutes prohibit the total principal amount of Arizona Highway Revenue Bonds, excluding refunded bonds, to exceed $ 800 million unless the additional amount is authorized by the legislature. The 1980 State ~ f Arizona Highway Improvement Bonds are subject to redemption prior to their maturity dates on any interest payment date in inverse order of maturity. The bonds may be redeemed by payment of all principal and accrued interest plus an amount equal to 0.25% of the principal amount for each six- month period elapsing between the date of redemption and the stated maturity date, not to exceed 2.5%. The 1986, 1987 and 1990 State of Arizona Highway Revenue Bonds are subject to redemption prior to their maturity dates on July 1, 1996, 1997, and 2000, respectively, or on any interest payment date thereafter. The bonds may be redeemed at redemption prices ranging from 100 percent to 103 percent of principal, plus accrued interest to the date fixed for redemption. The 1990 State of Arizona Highway Revenue Bonds include $ 46.8, $ 49.2, and $ 18.4 million of term bonds maturing on July 1, 2006, 2009, 2010, respectively. The 1990 Term Bonds maturing on July 1, 2006 and 2009 are subject to mandatory sinking fund redemptions in 2004 to 2008. On October 17, 1991, DOT issued the State of Arizona Transportation Board Subordinated Highway Revenue Bonds, Series 1991A ( Series 1991A Subordinated Bonds) ($ 171.1 million principal amount) as follows: The Series 1991A Serial Bonds ($ 87.1 million principal amount) due July 1, 2003 through 2008; and the Series 1991A Term Bonds ($ 84.0 million principal amount) due July 1, 2011. The Term Bonds maturing on July 1, 2011 are subject to mandatory sinking fund redemption on July 1 of the years 2009 to 2011. On March 26, 1992, DOT issued $ 75.5 million in Subordinated Highway Revenue Bonds to advance refund $ 69.8 million of the 1986 Highway Revenue Bonds. The net proceeds of $ 74.5 million ( after pa |
