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Comprehensive Annual Financial Report
Maricopa County
Phoenix, Arizona
For the Fiscal Year
July 1, 2005 to June 30, 2006
Prepared By
Department of Finance
Tom Manos, Chief Financial Officer
Comprehensive Annual Financial Report
Table of Contents
For the Fiscal Year Ended June 30, 2006
i
Introductory Section
Page
Table of Contents i
Listing of Maricopa County Officials v
Organizational Chart vi
Letter of Transmittal vii
Maricopa County Citizens Audit Advisory Committee Letter x
Financial Section
Independent Auditors’ Report 1
Management’s Discussion and Analysis 3
Basic Financial Statements
Definitions of Government-wide Financial Statements and Listing of Major Funds 21
Government-wide Financial Statements
Statement of Net Assets 23
Statement of Activities 24
Fund Financial Statements
Governmental Funds Financial Statements
Balance Sheet 26
Statement of Revenues, Expenditures, and Changes in Fund Balances 28
Reconciliation of the Statement of Revenues, Expenditures, and Changes in
Fund Balances of Governmental Funds to the Statement of Activities 30
Proprietary Funds Financial Statements
Statement of Net Assets 32
Statement of Revenues, Expenses, and Changes in Fund Net Assets 34
Statement of Cash Flows 36
Fiduciary Funds Financial Statements
Statement of Fiduciary Net Assets 38
Statement of Changes in Fiduciary Net Assets 39
Basic Financial Statements – Notes 43
Required Supplementary Information
Budgetary Comparison Schedules – General Fund and Major Special Revenue Fund
General Fund 83
General Fund by Department 84
Detention Operations Fund 85
Notes to Budgetary Comparison Schedules 86
Table of Contents (Continued)
For the Fiscal Year Ended June 30, 2006
ii
Page
Schedule of Agent Retirement Plans’ Funding Progress 88
Modified Approach for Infrastructure Assets 89
Combining and Individual Fund Statements and Schedules
Listing of Nonmajor Governmental Funds 93
Governmental Funds
Combining Balance Sheet – Nonmajor Governmental Funds 100
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances –
Nonmajor Governmental Funds 116
Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget
and Actual
Special Revenue Funds
Adult Probation Fees Fund 133
Adult Probation Grants Fund 134
Air Quality Fees Fund 135
Air Quality Grants Fund 136
Animal Control Field Operations Fund 137
Animal Control Grants Fund 138
Animal Control License/Shelter Fund 139
Ballpark Operations Fund 140
Cactus League Operations Fund 141
CDBG Housing Trust Fund 142
Check Enforcement Program Fund 143
Child Support Enhancement Fund 144
Children’s Issues Education Fund 145
Clerk of Court Fill the Gap Fund 146
Clerk of the Court EDMS Fund 147
Clerk of the Court Grants Fund 148
Conciliation Court Fees Fund 149
Correctional Health Grants Fund 150
County Attorney Fill the Gap Fund 151
County Attorney Grants Fund 152
County Attorney RICO Fund 153
Court Document Retrieval Fund 154
Criminal Justice Enhancement Fund 155
Del Webb Special Revenue Fund 156
Diversion Fund 157
Domestic Relations Mediation Education Fund 158
Elections Grants Fund 159
Emergency Management Fund 160
Environmental Services Environmental Health Fund 161
Environmental Services Grants Fund 162
Table of Contents (Continued)
For the Fiscal Year Ended June 30, 2006
iii
Page
Special Revenue Funds (Continued)
Events Center Fund 163
Expedited Child Support Fund 164
Flood Control Fund 165
General Government Grants Fund 166
Human Services Grants Fund 167
Inmate Health Services Fund 168
Inmate Services Fund 169
Judicial Enhancement Fund 170
Justice Court Judicial Enhancement Fund 171
Justice Court Special Revenue Fund 172
Juvenile Probation Diversion Fund 173
Juvenile Probation Grants Fund 174
Juvenile Probation Special Fees Fund 175
Juvenile Restitution Fund 176
Lake Pleasant Recreation Services Fund 177
Law Library Fees Fund 178
Legal Defender Fill the Gap Fund 179
Library District Fund 180
Library District Grants Fund 181
Medical Examiner Grants Fund 182
Palo Verde Fund 183
Parks and Recreation Grants Fund 184
Parks Donations Fund 185
Parks Enhancement Fund 186
Parks Souvenir Fund 187
Parks Spur Cross Ranch Conservation Fund 188
Planning and Development Fees Fund 189
Probate Fees Fund 190
Public Defender Fill the Gap Fund 191
Public Defender Grants Fund 192
Public Defender Training Fund 193
Public Health Fund 194
Public Health Fees Fund 195
Recorder’s Surcharge Fund 196
Research and Reporting Fund 197
Sheriff Donations Fund 198
Sheriff Grants Fund 199
Sheriff Jail Enhancement Fund 200
Sheriff RICO Fund 201
Spousal Maintenance Enforcement Enhancement Fund 202
Superior Court Fill the Gap Fund 203
Transportation Grants Fund 204
Transportation Operations Fund 205
Trial Court Grants Fund 206
Trial Court Special Revenue Fund 207
Victim Compensation Interest Fund 208
Victim Compensation Restitution Fund 209
Victim Location Fund 210
Waste Management Fund 211
Waste Tire Fund 212
Table of Contents (Continued)
For the Fiscal Year Ended June 30, 2006
iv
Page
Debt Service Funds
County Improvement Debt Fund 213
Stadium District Debt Service Fund 214
Capital Projects Funds
County Improvement Fund 215
Detention Capital Projects Fund 216
Flood Control Capital Projects Fund 217
General Fund County Improvements Fund 218
Intergovernmental Capital Projects Fund 219
Long Term Project Reserve Fund 220
Transportation Capital Projects Fund 221
Schedule of Capital Projects – Budget and Actual
All Capital Improvement Projects 222
Internal Service Funds
Listing of Internal Service Funds 229
Combining Statement of Net Assets 230
Combining Statement of Revenues, Expenses, and Changes in Net Assets 232
Combining Statement of Cash Flows 234
Agency Fund
Listing of Agency Fund 239
Statement of Changes in Assets and Liabilities 240
Statistical Section
Listing of Statistical Information 243
Net Assets by Component 244
Changes in Net Assets 245
Fund Balances, Governmental Funds 247
Changes in Fund Balances, Governmental Funds 248
Tax Revenues by Source, Governmental Funds 250
Assessed Value and Estimated Market Value of Taxable Property 251
Direct and Overlapping Property Tax Rates 252
Principal Property Tax Payers 253
Property Tax Levies and Collections 254
Ratios of Outstanding Debt by Type 255
Legal Debt Margin Information 256
Pledged Revenue Coverage 257
Demographic and Economic Statistics 258
Principal Employers 259
Budgeted Full-time Equivalent County Employees by Function/Program 260
Operating Indicators by Function/Program 261
Capital Asset Statistics by Function/Program 262
v
Maricopa County Officials
BOARD OF SUPERVISORS
Fulton Brock, District 1
Don Stapley, District 2
Andrew Kunasek, District 3
Max Wilson, District 4
Mary Rose Garrido Wilcox, District 5
♦♦♦
COUNTY MANAGER
David R. Smith
♦♦♦
CHIEF FINANCIAL OFFICER
Tom Manos
Organizational Chart
vi
Board of Supervisors/Board of
Directors for Flood Control,
Library and Stadium Districts
Board of Supervisors/Board of
Directors for Flood Control,
Library and Stadium Districts
Superintendent of
Schools
Superintendent of
Schools CCoonnssttaabblleess ( (2233)) CCoouunnttyy A Attttoorrnneeyy AAsssseessssoorr TTrereaasusurererr RReeccoorrddeerr
Clerk of the Board
Deputy County Manager
S.T.A.R. Call Center Elections
Maricopa County Citizens
Legal Defender
Indigent Representation
Contract Counsel
Public Defender Maricopa Integrated Health System
Deputy County
Administrator
Management & Budget
Human Resources
Research & Reporting
General Government
Health Care Mandates
Chief Health Services
Officer
Regional Development
Services Officer
Finance
Risk Management
Materials Management
Recreation Services
Library District
Public Fiduciary
Planning & Development
Community
Development
Public Health
Human Services
Medical Examiner
Correctional Health
Animal Care and Control
Transportation
Flood Control District
Emergency
Management
Facilities Management
Equipment Services
Office of the C.I.O
Telecommunications
Office of Communications
Elected/Court
Officials
Elected/Court
Officials Appointed
Stadium District
County Manager
Internal Audit
Information Technology
Officer
Chief Community
Services Officer
Chief Financial
Officer
Legal Advocacy Integrated Criminal Justice
Information Systems
SShheerirfifff CClleerkrk o off C Coouurrtt
E-Government
Technology
Infrastructure Technology
Center
Customer Support Center
Capital Facilities Dev.
Planning &
Development
Environmental Services
Solid Waste
Real Estate
Maricopa County
County Administrative Office
vii
301 West Jefferson Street
10th Floor
Phoenix, AZ 85003-2143
Phone: 602-506-3571
Fax: 602-506-3328
www.maricopa.gov
October 12, 2007
The Honorable Board of Supervisors
Maricopa County
County Administration Building
301 W. Jefferson Street
Phoenix, AZ 85003
Arizona Revised Statute (ARS) §41-1279.21 requires the Office of the Auditor General to conduct
financial audits of the accounts and records of County governments. Pursuant to the statute, the
Office of the Auditor General audited the Comprehensive Annual Financial Report (CAFR) of
Maricopa County in accordance with generally accepted auditing standards for the year ended
June 30, 2006.
This report consists of management’s representations concerning the finances of Maricopa
County. Consequently, management assumes full responsibility of the completeness and
reliability of all the information presented in this report. To provide a reasonable basis for making
these representations, management of Maricopa County has established a comprehensive
internal control framework that is designed both to protect the government’s asset from loss, theft,
or misuse and to compile sufficient reliable information for preparation of Maricopa County’s
financial statements in conformity to generally accepted accounting principles (GAAP). Because
the cost of internal control should not outweigh their benefits, Maricopa County’s comprehensive
framework of internal controls has been designed to provide reasonable rather than absolute
assurance that the financial statements will be free from material misstatement. As management,
we assert that, to the best of our knowledge and belief, this financial report is complete and
reliable in all material respects.
The goal of the independent audit was to provide reasonable assurance that the financial
statements of Maricopa County for the fiscal year ended June 30, 2006, are free of material
misstatement. The independent audit involved examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements; assessing the accounting
principles used and significant estimates made by management; and evaluating the overall
financial statement presentation. The independent auditors expressed a modified opinion on
the Maricopa County financial statements for the fiscal year ended June 30, 2006. The
auditors concluded that the County did not maintain adequate controls for claims payment
processing resulting in a disclaimer of opinion on two major enterprise funds, administered by
the Maricopa Managed Care Systems, and business-type activities. The financial statements
for the remaining opinion units were considered fairly presented in conformity with GAAP.
The independent auditor’s report is presented as the first component of the financial section
of this report.
The independent audit of the financial statements of Maricopa County was part of a broader,
federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies.
The standards governing Single Audit engagements require the independent auditor to report not
only on the fair presentation of the financial statements, but also on the audited government’s
internal controls and compliance with legal requirements, with special emphasis on internal
controls and legal requirements involving the administration of federal awards. This report will be
available in Maricopa County’s separately issued Single Audit Report to be issued at a future date.
viii
On June 30, 1980, Arizona voters approved general propositions amending the Arizona Constitution to
establish expenditure and revenue limitations for local governments. The purpose of the expenditure limitation
is to control expenditures and to limit future increases in spending to adjustments for inflation, deflation and
population growth of the County. The Constitution also limits the amount of revenues that may be generated
from property taxes. A two-percent plus new construction annual increase is the maximum allowed by law
unless special voter approval is obtained. This report will be available in Maricopa County’s separately issued
Expenditure Limitation Report to be issued at a future date.
GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the
basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of
transmittal is designed to complement the MD&A, which can be found immediately following the report of the
independent auditors.
County Profile
Maricopa County is located in the south-central portion of the State of Arizona. Maricopa County is considered
to be the top growth area in the state, and one of the top growth areas in the country. Maricopa County
occupies 9,222 square miles of which 2,228 square miles are incorporated.
Maricopa County operates under a five member elected Board of Supervisors who appoints a County Manager.
The County Manager is responsible for the general administration and overall operations of the various County
departments. Maricopa County has several-elected officials including the Assessor, Clerk of the Superior
Court, Constables, County Attorney, Recorder, Sheriff, Superintendent of Schools, and the Treasurer.
Maricopa County includes in its financial statements all activities of the County and its component units.
Component units are legally separate entities for which the County is considered to be financially accountable.
See Note 1 to the Notes to the Financial Statements - Summary of Significant Accounting Policies for additional
information.
Maricopa County offers a wide variety of governmental services, including:
• Justice and Law Enforcement: Clerk of the Superior Court, County Attorney, Superior Court, Juvenile
Court, Justice Court, Sheriff’s Department, Indigent Representation and Public Fiduciary
• Medical Services: Health Plans, Public Health, Human Services and Forensic Science Center
• Community Resources: Superintendent of Schools, Library District and Stadium District
• Public Works: Flood Control District, Transportation Department and Solid Waste Management
• County Administration: Board of Supervisors, County Administrator, Assessor’s Office, Clerk of the
Board, Elections, Finance, Human Resources, Information Technology, Treasurer and Facilities
Management
The annual budget serves as the foundation for Maricopa County’s financial planning and control. Maricopa
County is required by ARS §§42-17101 et. seq. to annually prepare and adopt a balanced budget. Arizona law
further requires that no expenditure shall be made or liability incurred in excess of the amounts budgeted
except as provided by law. Maricopa County’s annual budget is available on the Internet at the following
address: http://www.maricopa.gov/budget/.
Factors Affecting Financial Condition
Maricopa County currently enjoys a favorable economic environment with an unemployment rate of 3.3 percent
at July 2007, compared to a statewide unemployment rate of 3.7 percent. According to Arizona Workforce
Informer, at July 1, 2006, Maricopa County contained 60.15 percent of the states total population
(www.workforce.az.gov). Maricopa County has a variety of industries within its boundaries with the major
industries being service retail trade and manufacturing. Some of the major employers located in the county
include Wal-Mart, Banner Health Systems, Honeywell International, and various local governments. Phoenix is
the capital of Arizona as well as the county seat for Maricopa County.
ix
Because of a favorable climate and mild weather conditions, tourism is also a large factor in the strength of the
local economy. Major sporting events can be held year around and many people come to the area during the
winter months. Maricopa County is the home to teams from major league professional sports, which include
the Arizona Cardinals of the National Football League (NFL), Phoenix Suns of the National Basketball
Association (NBA), Arizona Diamondbacks of the Major League Baseball (MLB) and the Phoenix Coyotes of
the National Hockey League (NHL). Maricopa County also hosts nine major league baseball teams for the
annual spring training Cactus League. Maricopa County is also a host to other major sporting events such as
the FBR Open, formerly known as the Phoenix Open, golf tournament, and Phoenix International Raceway,
which at this time hosts two major NASCAR events each year. Cities within Maricopa County also host college
bowl games such as the Fiesta Bowl, Insight Bowl, and the BCS National Championship Game. In January of
2008, the city of Glendale will also host the NFL Super Bowl.
Awards and Acknowledgements
The Government Finance Officers Association of the United States and Canada (GFOA) awards a Certificate of
Achievement for Excellence in Financial Reporting to governments to recognize and encourage excellence in
financial reporting. In order to be awarded a Certificate of Achievement, a government must publish an easily
readable and efficiently organized comprehensive annual financial report on a timely basis. Maricopa County
received this award for fifteen consecutive years for fiscal years ending 1989 through 2003.
As a result of a disclaimer of opinion on two of the County’s major enterprise funds (Maricopa Health Plan Fund
and the ALTCS Fund) and on the government-wide business type activities, the County was not eligible for the
GFOA Certificate of Achievement for Excellence for fiscal years 2004, 2005, or 2006 due to delays in obtaining
the financial reports from related entities. The County will reapply to the GFOA for consideration of the
Certificate for fiscal year ending 2007 as the major enterprise funds have either been closed or transferred and
there will no longer be delays in receiving their financial statements.
The preparation of this report could not be accomplished without the efficient and dedicated services of the
Department of Finance staff, the assistance of administrative personnel in the various departments, and the
competent service of the Office of the Auditor General. We appreciate all of those who assisted in and
contributed to the preparation of this report. We also wish to express our sincere appreciation to the Board of
Supervisors for their support in planning and overseeing the financial operations of the County in a responsible
and progressive manner.
Respectfully submitted,
David R. Smith Tom Manos
County Manager Chief Financial Officer
x
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
Independent Auditors’ Report
Members of the Arizona State Legislature
The Board of Supervisors of
Maricopa County, Arizona
We have audited the accompanying financial statements of the governmental activities, business-type activities, the
discretely presented component units, each major fund, and aggregate remaining fund information of Maricopa
County as of and for the year ended June 30, 2006, which collectively comprise the County’s basic financial
statements as listed in the table of contents. These financial statements are the responsibility of the County’s
management. Our responsibility is to express opinions on these financial statements based on our audit. We did not
audit the financial statements of two departments and the discretely presented component units, which account for
the following percentages of the assets, liabilities, revenues and other sources, and expenses or expenditures and
other uses of the opinion units affected:
Opinion Unit/Department
Assets
Liabilities
Revenues/
Sources
Expenses/
Expenditures/Uses
Government-wide Statements
Governmental activities:
Stadium District 9.33% 12.99% 0.69% 0.81%
Accommodation Schools 0.40% 0.77% 0.78% 0.87%
Discretely presented component units:
Housing Authority 99.50% 99.80% 97.20% 97.50%
Sports Commission 0.50% 0.20% 2.80% 2.50%
Fund Statements
Aggregate remaining fund information:
Stadium District 0.99% 0.09% 0.13% 0.14%
Accommodation Schools 0.17% 2.25% 0.11% 0.10%
Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our
opinions, insofar as they relate to the amounts included for those entities, are based solely on the reports of the other
auditors.
Except as discussed in the following paragraph, we conducted our audit in accordance with U.S. generally accepted
auditing standards and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other
auditors provide a reasonable basis for our opinions.
The Maricopa Managed Care Systems had inadequate internal controls for processing medical claims and
accounting for prepayments made to medical providers. As a result, we could not rely on the Systems’ financial
reporting system to generate reliable information for medical expenses, prepaid expenses, and medical claims
payable. Further, the Systems’ records did not permit us to apply auditing procedures sufficient to determine whether
the amounts reported for medical expenses, prepaid expenses, and medical claims payable in the financial
statements of the Maricopa Health Plan Fund, the Arizona Long-Term Care System (ALTCS) Fund, and business-type
activities were accurate. In addition, these control deficiencies affected the amounts reported in those funds and
business-type activities for charges for services revenues, accounts receivable, and due to other funds.
Since the Maricopa Managed Care Systems did not maintain adequate internal controls for processing medical
claims and accounting for prepayments made to medical providers, and we were not able to apply auditing
procedures to satisfy ourselves as to the amounts reported for medical expenses, prepaids, and medical claims
payable, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the
financial statements of the Maricopa Health Plan Fund, the ALTCS Fund, and business-type activities as of and for
the year ended June 30, 2006.
In addition, in our opinion, based on our audit and the reports of the other auditors, the financial statements referred
to above present fairly, in all material respects, the respective financial position of the governmental activities, the
discretely presented component units, General Fund, Detention Operations Fund, County Improvement Debt Fund,
Solid Waste Management Fund, and aggregate remaining fund information of Maricopa County as of June 30, 2006,
and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in
conformity with U.S. generally accepted accounting principles.
As described in Notes 2 and 3, beginning in fiscal year 2006, the Maricopa County Sports Commission is reported as
a discretely presented component unit. In prior years, the Commission was part of the primary government and was
reported as the Sports Authority Fund, a special revenue nonmajor governmental fund. This change constitutes a
change in the County’s reporting entity.
The Management’s Discussion and Analysis on pages 3 through 17, the Budgetary Comparison Schedules on
pages 83 through 87, the Schedule of Agent Retirement Plans’ Funding Progress on page 88, and the Infrastructure
Assets information on page 89 are not a required part of the basic financial statements, but are supplementary
information required by the Governmental Accounting Standards Board. We have applied certain limited procedures,
which consisted principally of inquiries of management regarding the methods of measurement and presentation of
the required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise
the County’s basic financial statements. The introductory section, combining and individual fund statements and
schedules, and statistical section listed in the table of contents are presented for purposes of additional analysis and
are not required parts of the basic financial statements. The combining and individual fund statements and
schedules have been subjected to the auditing procedures applied by us and the other auditors in the audit of the
basic financial statements and, in our opinion, based on our audit and the reports of the other auditors, are fairly
stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and
statistical sections have not been subjected to the auditing procedures applied in our audit of the basic financial
statements and, accordingly, we express no opinion on them.
In accordance with Government Auditing Standards, we will also issue our report on our consideration of the County’s
internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements and other matters at a future date. The purpose of that report is to describe the
scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not
to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an
audit performed in accordance with Government Auditing Standards and should be considered in assessing the
results of our audit.
Debbie Davenport
Auditor General
October 12, 2007
Maricopa County
Management’s Discussion and Analysis
3
This discussion and analysis is intended to be an easily readable analysis of Maricopa County’s (County)
financial activities based on currently known facts, decisions or conditions. This analysis focuses on current
year activities and should be read in conjunction with the Transmittal Letter that begins on page vii and with the
County’s basic financial statements following this section.
Financial Highlights
• The total assets of the County exceeded its liabilities at the close of the fiscal year by $3,347.1 million
(net assets), an increase of 10.2 percent from the prior year. Of this amount, $556.7 million
(unrestricted net assets) may be used to meet the County’s ongoing obligations to citizens and
creditors.
Composition of Net Assets
(in millions)
Unrestricted -
$556.7
(16.6%)
Restricted - $345.2
(10.3%)
Invested in capital
assets, net of
related debt -
$2,445.2
(73.1%)
• The County’s total net assets as reported in the Statement of Activities increased by $344.8 million, a
257.3 percent increase over the prior period’s increase in net assets. Of this amount, $316.0 million is
attributed to governmental activities and $28.8 million is attributable to business-type activities. The
significant increase from fiscal year 2005 is partly attributable to the transition of the Medical Center
to the Maricopa County Special Health Care District, a separate legal entity, in fiscal year 2005. The
transition resulted in a $108.7 million loss on the closure of the Medical Center (business-type
activities) during fiscal year 2005, of which there was no related activity in fiscal year 2006.
Net Assets by Activity
(in millions)
2006
2005
2006 2005
$(500)
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Governmental Activities Business-type Activities
• The County’s governmental funds reported combined fund balances of $981.6 million, an increase in
fund balance of $167.2 million over the prior fiscal year. Approximately 95.1 percent of the combined
fund balances or $933.6 million is unreserved and available to meet the County’s current and future
needs.
Management’s Discussion and Analysis (Continued)
4
• Unreserved fund balance for the General Fund increased by 26.1 percent to $539.6 million;
approximately 66.1 percent of total General Fund expenditures. In accordance with Arizona Revised
Statutes (A.R.S.), this entire amount is budgeted to be spent in the next fiscal year. A.R.S. §42-17151
requires that total estimated sources of revenue must equal the total estimated expenditures in the
budget for the current fiscal year. In addition, A.R.S. §42-17102 stipulates that the estimated
expenditures may include an amount for unanticipated contingencies or emergencies.
• The County’s proprietary funds reported combined total net assets of ($3.3) million, of which total
unrestricted net assets were ($4.6) million.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the County’s basic financial
statements. The County’s basic financial statements consist of three components: 1) Government-wide
financial statements, 2) Fund financial statements, and 3) Notes to the basic financial statements.
Required Supplementary Information is included in addition to the basic financial statements. The
Combining and Individual Fund Statements and Schedules – Nonmajor Funds begin on page 100.
Government-wide Financial Statements are designed to provide readers with a broad overview of the
County’s finances, in a manner similar to private-sector businesses.
• The Statement of Net Assets presents information on all County assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets
may serve as a useful indicator of whether the financial position of the County is improving or
deteriorating.
• The Statement of Activities presents information showing how net assets changed during the most
recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise
to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses
are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g.,
uncollected taxes and earned but unused vacation leave).
Both of these government-wide financial statements distinguish functions of the County that are
principally supported by taxes and intergovernmental revenues (governmental activities) from other
functions that are intended to recover all or a portion of their costs through user fees and charges
(business-type activities). The governmental activities of the County include general government; public
safety; highways and streets; health, welfare and sanitation; culture and recreation; education; and
interest on long-term debt. The business-type activities of the County include the Arizona Health Care
Cost Containment System (AHCCCS)—Arizona Long-Term Care System (ALTCS) program, AHCCCS—
Acute Health Care program, Non-AHCCCS Health Care program (Senior Select), and Solid Waste
Management.
Component units are legally separate entities for which the County is considered to be financially
accountable. Blended component units, although legally separate entities, are in substance part of the
County’s operations. Therefore, data from these units is combined with data of the primary government.
Discretely presented component units, on the other hand, are reported in a separate column in the
government-wide financial statements to emphasize they are legally separate from the County. The
reporting entity is comprised of the primary government, which includes Maricopa County Flood Control
District, Maricopa County Library District, Maricopa County Public Finance Corporation, Maricopa County
Special Assessment Districts, Maricopa County Stadium District, and the Maricopa County Street Lighting
Districts. The Housing Authority of Maricopa County and Maricopa County Sports Commission are
reported as a discretely presented component units.
The Government-wide financial statements can be found on pages 23-25 of this report.
Management’s Discussion and Analysis (Continued)
5
Fund Financial Statements are groupings of related accounts that are used to maintain control over
resources that have been segregated for specific activities or objectives. The County, like other state and
local governments, uses fund accounting to ensure and demonstrate finance-related legal compliance. All
of the funds of the County can be divided into three categories: governmental funds, proprietary funds
and fiduciary funds.
• Governmental funds are used to account for essentially the same functions reported as
governmental activities in the government-wide financial statements. However, unlike the
government-wide financial statements, governmental funds financial statements focus on near-term
inflows and outflows of spendable resources, as well as on balances of spendable resources
available at the end of the fiscal year. Such information may be useful in evaluating a county’s near-term
financing requirements. Governmental funds include the general, special revenue, debt service,
and capital projects funds.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By
doing so, readers may better understand the long-term impact of the government’s near-term
financing decisions. Both the governmental funds Balance Sheet and the governmental funds
Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to
facilitate this comparison between governmental funds and governmental activities.
The County reports three major governmental funds. Information is presented separately in the
governmental funds Balance Sheet and in the governmental funds Statement of Revenues,
Expenditures, and Changes in Fund Balances for the General, Detention Operations, and County
Improvement Debt funds.
Data from the other governmental funds (nonmajor) are combined into a single, aggregated
presentation. Individual fund data for each of these nonmajor governmental funds is provided in the
form of combining statements, which begin on page 100 of this report.
The governmental funds financial statements can be found on pages 26-30 of this report.
• Proprietary funds are maintained two ways. Enterprise funds are used to report the same functions
presented as business-type activities in the government-wide financial statements. The County uses
enterprise funds to account for the Arizona Health Care Cost Containment System (AHCCCS)—
Acute Health Care program, AHCCCS—Arizona Long-Term Care System (ALTCS) program, and the
Non-AHCCCS Health Care program (Senior Select). The County also reports the operations of Solid
Waste Management as an enterprise fund. Internal service funds are an accounting device used to
accumulate and allocate costs internally among the County’s various functions. The County uses
internal service funds to account for its equipment services, telecommunications, reprographics, risk
management, employee benefits trust, and sheriff warehouse functions. Because these services
predominantly benefit governmental rather than business-type functions, they have been included
within governmental activities in the government-wide financial statements.
Fund financial statements for the proprietary funds provide the same type of information as the
government-wide financial statements, only in more detail. The AHCCCS—ALTCS program (ALTCS
Fund), the AHCCCS—Acute Health Care program (Maricopa Health Plan Fund), and Solid Waste
Management Fund operations are considered to be major funds of the County. The County’s internal
service funds are combined into a single, aggregated presentation in the proprietary funds financial
statements. Individual fund data for the internal service funds is provided in the form of combining
statements, which begin on page 229 of this report.
The proprietary fund financial statements can be found on pages 32-37 of this report.
Management’s Discussion and Analysis (Continued)
6
• Fiduciary funds are used to account for resources held for the benefit of parties outside the
government. Fiduciary funds are not reflected in the government-wide financial statements because
the resources of those funds are not available to support the County’s own programs. The accounting
used for fiduciary funds is much like that used for proprietary funds.
The fiduciary funds financial statements can be found on pages 38-39 of this report.
Notes to the Financial Statements provide additional information that is essential to a full understanding
of the data provided in the government-wide and fund financial statements. The notes can be found on
pages 44-79 of this report.
Required Supplementary Information is presented concerning the County’s General Fund and
Detention Operations Fund. A budgetary comparison schedule has been provided for both of these funds
to demonstrate compliance with budget and additional information is provided by the Notes to Budgetary
Comparison Schedules. Also presented is the schedule of funding progress for the County’s two agent
retirement plans and infrastructure assets reported using the modified approach. Required supplementary
information can be found on pages 83-89 of this report.
Government-wide Financial Analysis
This year is the fifth fiscal year that the County applied Governmental Accounting Standards Board
(GASB) Statement No. 34.
Net Assets
As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position.
The following table reflects the condensed Statement of Net Assets of the County for June 30, 2006, as
compared to the prior year.
Statement of Net Assets
As of June 30
(in millions)
Governmental Business-type
Activities Activities Total
2006 2005* 2006 2005* 2006 2005*
% Chg
P/Y
Current and other assets $ 1,226.9 $ 1,082.7 $ 26.8 $ 55.5 $ 1,253.7 $ 1,138.2 10.2%
Capital assets 2,546.2 2,412.4 1.4 1.5 2,547.6 2,413.9 5.5
Total assets 3,773.1 3,495.1 28.2 57.0 3,801.3 3,552.1 7.0
Current liabilities 180.9 199.0 13.1 71.9 194.0 270.9 (28.4)
Long-term liabilities 241.8 261.7 18.4 17.2 260.2 278.9 (6.7)
Total liabilities 422.7 460.7 31.5 89.1 454.2 549.8 (17.4)
Net assets
Invested in capital assets,
Net of related debt 2,443.9 2,316.3 1.3 1.4 2,445.2 2,317.7 5.5
Restricted 345.2 260.5 0.0 0.0 345.2 260.5 32.5
Unrestricted 561.3 457.6 (4.6) (33.5) 556.7 424.1 31.3
Total net assets $ 3,350.4 $ 3,034.4 (3.3) $ (32.1) $ 3,347.1 $ 3,002.3 11.5
* The business-type activities and total columns’ total net assets and long-term liabilities amount for fiscal year 2005 were restated for a
change in the liability for closure and postclosure cost in the amount of $7.3 million. This restatement was a result of the County
reassessing the cost for closure and postclosure costs with the assistance of a consultant. In addition, the governmental activities and
total columns’ total net assets amount for fiscal year 2005 were restated by ($28.7) million for various adjustments related to the prior
period. See Note 3 – Beginning Balances Restated for additional information.
The largest increase in the County’s Statement of Net Assets was in current and other assets, which
increased $115.5 million or 10.2 percent from the prior fiscal year. This is due to an increase in cash of
$113.8 million, which is comprised of $127.1 and ($13.3) million in governmental and business-type
Management’s Discussion and Analysis (Continued)
7
activities, respectively. The increase in governmental activities cash is due to an increase in revenues of
$200.9 million, which exceeded the increase in expenditures of $104.3 million. See page 9 for additional
information. The decrease in business-type activities cash is due to the closure or transfer of the health
plans. See pages 9 and 12 for additional information. The other large fluctuation on the Statement of Net
Assets was in current liabilities, with a decrease of $76.9 million or 28.4 percent from the prior fiscal year,
of which $58.8 million is attributed to business-type activities. The decrease in business-type activities
current liabilities is due to a decrease in medical claims payable of $51.8 million from the prior fiscal year
and is a result of the closure or transfer of the health plans. See pages 9 and 12 for additional
information.
At June 30, 2006, the County’s combined governmental activities and business-type activities assets
exceeded liabilities by approximately $3.3 billion. The governmental activities comprise 91.6 percent of
the increase from the prior year, with an increase in net assets as reported in the statement of activities of
$316.0 million. The increase for governmental activities is attributed to the increase in the County’s capital
assets and tax revenue, as discussed below. The increase in business-type activities net assets of $28.8
million from the prior year is mainly attributed to transfers in from the General Fund to cover deficits in the
Maricopa Health Plan, ALTCS and Non-AHCCCS Health Plans Funds.
By far, the largest portion - $2.4 billion or 73.1 percent - of the County’s net assets reflects the investment
in capital assets (e.g., land, buildings and improvements, machinery and equipment, infrastructure and
construction in progress), less accumulated depreciation and any related debt used to acquire those
assets that is still outstanding. The County uses these capital assets to provide services to its citizens;
consequently, these assets are not available for future spending. Although the County’s investment in its
capital assets is reported net of related debt, it should be noted that the resources needed to repay this
debt must be provided from other sources, since the capital assets themselves cannot be used to
liquidate these liabilities. The governmental activities comprise 99.9 percent of this component of net
assets.
This component of net assets for governmental activities increased by $127.6 million due to the County’s
investment in its capital assets, particularly the construction related to the justice courts and
administrative facilities, for which a total of $46.0 million was expended and included $32.6 million in the
County Improvement Fund, $7.3 million in the General Fund County Improvement Fund, $5.6 million in
the Detention Capital Projects Fund, and $.5 million in the Intergovernmental Capital Projects Fund. A
large portion of the remaining increase can be attributed to the infrastructure capital projects of the Flood
Control District and the Transportation Department. These projects are accounted for in the Flood Control
Capital Projects Fund and the Transportation Capital Projects Fund, which had capital outlay
expenditures of $58.0 and $83.4 million, respectively. Further, the County received $29.0 million in
Transportation infrastructure capital asset donations that were received from other jurisdictions. The
business-type activities invested in capital assets did not significantly change from the prior fiscal year
and any changes mainly represent increases in accumulated depreciation.
The second component of the County’s total net assets, $345.2 million or approximately 10.3 percent,
represents resources that are subject to external restrictions on how they may be used. The
governmental activities comprise 100 percent of this component of net assets. This component increased
for governmental activities by $84.7 million. The increase in governmental activities restricted net assets
is mainly attributable to the public safety function, with a fund balance increase of $82.5 million from the
prior fiscal year. The net asset increase in this function is attributable to an increase in sales taxes for
detention operations of $18.7 million and a decrease in the expenditures and transfers out related to the
detention facilities construction of $9.9 and $32.6 million, respectively.
The final component consists of unrestricted net assets, $556.7 million or 16.6 percent, and may be used
to meet the County’s ongoing obligations. The governmental activities comprise 100.8 percent of this
component. Unrestricted net assets for governmental activities increased from fiscal year 2005 by $103.7
million, or 22.7 percent. The increase in unrestricted net assets can be attributed to an increase in tax
revenue recorded in the General Fund. Unrestricted property tax, sales tax and vehicle license tax
revenues increased $37.7, $60.1, and $15.4 million, respectively, from the prior fiscal year.
Management’s Discussion and Analysis (Continued)
8
Changes in Net Assets
As discussed previously, the County’s total net assets of $3.3 billion increased by $344.8 million as
reported in the Statement of Activities. Of this amount, $316.0 million, or 91.6 percent, is attributable to
governmental activities, and $28.8 million is related to business-type activities. A discussion of each is
presented below.
The following table reflects the condensed Statement of Activities of the County for the fiscal year 2006
compared to the prior year and indicates the changes in net assets for Governmental and Business-type
Activities:
Statement of Activities
For the Fiscal Years Ended June 30, 2006 and June 30, 2005
(in millions)
Governmental Business-type
Activities Activities Total % Chg
2006 2005* 2006 2005* 2006 2005* P/Y
Revenues:
Program revenues:
Charges for services $ 203.7 $ 167.4 $ 84.0 $ 518.3 $ 287.7 $ 685.7 (58.0)%
Operating grants and contributions 393.4 382.4 2.5 393.4 384.9 2.2
Capital grants and contributions 42.5 39.0 .1 42.5 39.1 8.7
General revenues:
Taxes 1,207.5 1,075.1 1,207.5 1,075.1 12.3
Other 44.9 27.2 0.5 1.0 45.4 28.2 61.0
Total Revenues 1,892.0 1,691.1 84.5 521.9 1,976.5 2,213.0 (10.7)
Expenses:
General government 163.0 157.8 163.0 157.8 3.3
Public safety 782.1 685.8 782.1 685.8 14.0
Health, welfare and sanitation 433.8 439.8 433.8 439.8 (1.4)
Other** 131.1 122.3 131.1 122.3 7.2
AHCCCS–ALTCS program 56.7 252.2 56.7 252.2 (77.5)
AHCCCS–Acute Health Care program 40.0 132.3 40.0 132.3 (69.7)
Non-AHCCCS Health Care program 29.6 29.6 (100.0)
Solid Waste Management 2.4 0.3 2.4 0.3 700.0
Medical Center 169.0 169.0 (100.0)
Total Expenses 1,510.0 1,405.7 99.1 583.4 1,609.1 1,989.1 (19.1)
Excess (deficiency) before gain (loss) on
disposal of capital assets and transfers 382.0 285.4 (14.6) (61.5) 367.4 223.9 64.1
Gain (loss) on disposal of capital assets (22.6) (18.7) (22.6) (18.7) 20.9
Special item – loss on closure of
business activity (108.7) (108.7) (100.0)
Transfers (43.4) (37.0) 43.4 37.0
Change in net assets 316.0 229.7 28.8 (133.2) 344.8 96.5 257.3
Net assets – beginning 3,034.4 2,804.7 (32.1) 101.1 3,002.3 2,905.8 3.3
Net assets – ending $ 3,350.4 $ 3,034.4 $ (3.3) $ (32.1) $ 3,347.1 $ 3,002.3 11.5
* The business-type activities and total columns’ total net asset amount for fiscal year 2005 were restated for a change in the liability for
closure and postclosure cost in the amount of $7.3 million. This restatement was a result of the County reassessing the cost for closure
and postclosure costs with the assistance of a consultant. In addition, the governmental activities and total columns’ total net assets
amount for fiscal year 2005 were restated by ($28.7) million for various adjustments related to the prior period. See Note 3 – Beginning
Balances Restated for additional information.
** The functions of highways and streets, culture and recreation, and education along with interest on long-term debt are shown in the
condensed statement of activities above as other expenses.
Governmental Activities
As previously mentioned, governmental activities contributed $316.0 million, or 91.6 percent, of the
$344.8 million increase in net assets of the County. This increase can be attributed to the treatment of
capital outlay and depreciation expense in the government-wide statements and to the increase in tax
revenues.
Management’s Discussion and Analysis (Continued)
9
One of the main differences a reader will see between the governmental funds reported in the fund
financial statements and the Statement of Activities is that governmental funds in the fund financial
statements report capital outlays as expenditures. However, in the Statement of Activities the cost of
those assets is reported as a capital asset and the expense of those assets is allocated over their
estimated useful lives and reported as depreciation expense. Capital outlay expenditures exceeded
depreciation expense in the current period by $127.0 million. As a result, net capital assets increased by
this amount, resulting in a net positive change to net assets.
In the government-wide statement of activities, the significant revenues reported for governmental
activities included County-levied taxes, general sales taxes, vehicle license taxes and operating grants.
Taxes and operating grants represent 63.8 and 20.8 percent, respectively, of total governmental activities
revenues for fiscal year 2006. Tax revenues increased by $132.4 million from sales taxes of $60.1 million,
property taxes levied of $37.7 million, other County-levied taxes of $19.2 million, and vehicle license
taxes of $15.4 million. The increase in tax revenues can be attributed to a strong economy, increasing
County population, and higher property values. Operating grants remained stable, increasing only $11.0
million. Tax and other operating revenues provide the principal support for the functions of the County,
which include general government; public safety; highways and streets; health, welfare and sanitation;
culture and recreation; and education.
Although governmental activities revenues increased by $200.9 million, or 11.9 percent, over the prior
period, this increase was offset by an increase in expenses. Governmental activities expenses increased
by $104.3 million, or 7.4 percent, over the prior period. The largest increase is from the public safety
function of $96.3 million and includes increases in the General Fund of $64.8 million and Detention
Operations Fund of $41.1 million. The increases in both the General and Detention Operations funds
were mainly due to an increase in personnel and payroll expenses. These increases can be attributed to
an increase in staffing for the justice departments and the various detention and justice facilities, which
completed construction in fiscal year 2005 and were fully operational in fiscal year 2006. In addition,
County-wide market rate salary adjustments were implemented during fiscal year 2006.
Business-Type Activities
As discussed earlier, the business-type activities of the County include Solid Waste Management and the
Maricopa Managed Care Systems, which is comprised of Arizona Health Care Cost Containment System
(AHCCCS) — Acute Health Care program, AHCCCS — Arizona Long-Term Care System (ALTCS)
program, and the Non-AHCCCS Health Care program (Senior Select). Business-type activities total net
assets increased by $28.8 million from the prior fiscal year, for total net assets at June 30, 2006, of ($3.3)
million. Solid Waste Management comprised ($1.6) million or (5.6) percent of the change in net assets for
fiscal year 2006. Solid Waste Management realized an increase in the Hassyampa Superfund Site
Liability of $1.8 million during fiscal year 2006, which contributed to the decrease in net assets of ($1.6)
million. Besides the increase in Superfund Liability, Solid Waste Management activities during fiscal year
2006 remained consistent with the prior year. The Maricopa Managed Care Systems (MMCS) comprised
$30.4 million or 105.6 percent of the total increase in business-type activities. The increase in MMCS net
assets is primarily from General Fund subsidies to the three health care programs, which totaled $43.4
million. Overall, MMCS revenues and expenditures decreased 78.2 and 84.1 percent, respectively, from
fiscal year 2005 due to the closure or transfer of the various health care programs. On September 30,
2005, the AHCCCS – Acute Health Care program was transferred to the Maricopa County Special Health
Care District, a separate legal entity, and the AHCCCS — ALTCS program was discontinued. Further, the
Senior Select program was closed during the prior fiscal year. These programs also experienced
decreasing membership prior to their actual discontinuations.
The primary revenue source for business-type activities is charges for services, which comprise $84.0
million or 99.4 percent of total business-type operating revenues. This component consists mainly of
patient service revenues and charges for services revenues from the Maricopa Managed Care Systems,
which include inpatient and outpatient medical and nursing services; attendant care services; and
managed institutional, home, and community-based long-term care services. The primary expense for
Management’s Discussion and Analysis (Continued)
10
business-type activities consists of medical and personal services costs that account for $87.8 million of
the $97.0 million in operating expenses. As noted above, Maricopa Managed Care Systems revenues
and expenditures decreased 78.2 percent and 84.1 percent, respectively, from fiscal year 2005 due to the
closure or transfer of the various health care programs.
Financial Analysis of the County’s Funds
As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements.
Governmental Funds. Governmental activities are contained in the general, special revenue, debt
service, and capital projects funds. The focus of the County’s governmental funds is to provide
information on near-term inflows, outflows, and balances of spendable resources. Such information is
useful in assessing the County’s financing requirements. In particular, unreserved fund balance may
serve as a useful measure of a government’s net resources available for spending at the end of the fiscal
year.
As of June 30, 2006, the governmental funds reported combined fund balances of $981.6 million and an
increase in fund balance of $167.2 million over the prior fiscal year. Approximately 95.1 percent of the
combined fund balances or $933.6 million is available to meet the County’s current and future needs
(unreserved fund balance). The remaining fund balance is reserved for inventories, intergovernmental
loans, advances and debt service.
The following funds are the County’s major governmental funds:
The General Fund is the County’s primary operating fund. At the end of the current fiscal year,
unreserved fund balance of the General Fund was $539.6 million, while total fund balance reached
$565.2 million. This represents an increase in fund balance from the prior year of $134.0 million, or 31.1
percent. This increase can be attributed to increases in tax revenue of $27.4 million and
intergovernmental revenue of $71.0 million. These increases were offset by increases in public safety
expenditures of $45.6 million and operating transfers out of $20.6 million. See pages 11 and 12 for
additional information. As a measure of the General Fund’s liquidity, it may be useful to compare both
unreserved fund balance and total fund balance to the total fund expenditures. Unreserved fund balance
represents 66.1 percent of the total fiscal year 2006 General Fund expenditures, while total fund balance
represents 69.3 percent of that same amount. These ratios indicate a strong fund balance position in
comparison to expenditures.
The Detention Operations Fund is a special revenue fund that was established under the authority of
propositions 400 and 401, which were passed in the General Election of November 3, 1998. These
propositions authorized a temporary 1/5 of one-cent sales tax to be used for the construction and
operation of adult and juvenile detention facilities. On November 5, 2002, the voters approved the
extension of the 1/5 of one-cent sales tax in the General Election to be used for jail facility operations.
The extension begins in the month following the expiration of the original tax and may continue for not
more than twenty years after the date the tax collection begins. The Detention Operations Fund accounts
for the jail tax revenue along with transfers from the General Fund for maintenance of effort (MOE). The
MOE transfer from the General Fund is used to support the jail detention operations. Arizona Revised
Statutes require the County to calculate the maintenance of effort transfer on an annual basis. The
Detention Operations Fund transfers monies to the Detention Capital Projects Fund for the construction of
the jail facilities. At the end of the current fiscal year, total fund balance of the Detention Operations Fund
was $123.8 million, of which more than 99 percent is unreserved. This was an increase in total fund
balance of $47.0 million, or 61.3 percent, from the prior fiscal year. Although the fund had more
expenditures than revenues by $83.8 million, the increase in fund balance can be partially attributed to
net transfers of $130.7 million, which was a net increase of $45.2 million over the prior year. Transfers
from the General Fund for maintenance of effort were $145.7 million while transfers to the Detention
Capital Projects Fund were $15.0 million. The amount to be transferred to the Detention Capital Projects
Fund for any given year is determined through the budget planning process.
Management’s Discussion and Analysis (Continued)
11
The County Improvement Debt Fund is a debt service fund that accounts for the debt service on the
Lease Revenue Bonds, Series 2001; Lease Revenue Refunding Bonds, Series 2003; Lease Trust
Certificates, Series 2004; and other long-term obligations. The fund balance is set aside for future debt
service on the Lease Revenue Bonds, Series 2001, and each year the fund balance will be reduced by
the annual debt service payment until the debt is satisfied. Funding for the Lease Revenue Refunding
Bonds, Series 2003, is provided by transfers from the departments who benefited by the refunding bond
issue and intergovernmental revenue from the Maricopa County Special Health Care District. Funding for
the Lease Trust Certificates, Series 2004, is provided by pledged contributions from various donors that
are used to repay Maricopa County for long-term financing pertaining to the Human Services Campus
improvements. At the end of the current fiscal year, unreserved fund balance of the County Improvement
Debt Fund was $18.8 million, while total fund balance was $27.2 million.
The following table presents the amount of all governmental funds revenues from various sources as well
as increases or decreases from the prior year.
Revenues Classified by Source
Governmental Funds
(in millions)
2006 2005 Increase/(Decrease)
Percent Percent % Chg
Revenues by Source Amount of Total Amount of Total Amount P/Y
Taxes $ 601.2 33% $ 556.8 34% $ 44.4 8.0%
Intergovernmental 1,025.7 55 904.2 55 121.5 13.4
Other 226.0 12 191.6 11 34.4 18.0
Totals $ 1,852.9 100% $ 1,652.6 100% $ 200.3 12.1
During fiscal year 2006, the County experienced an increase in governmental revenues from the previous
year of $200.3 million, a 12.1 percent increase. This increase is attributable to increases in taxes revenue
and intergovernmental revenue of $44.4 and $121.5 million, respectively. Intergovernmental and taxes
revenues comprises 88 percent of total governmental funds revenue. Tax revenues increased primarily
from property tax revenue of $34.4 million. Although the County decreased their property tax levy rate, an
increase in the assessed value and new housing resulted in the additional revenue. The
intergovernmental revenues increase was mainly attributable to an increase in the sales tax
apportionment of $60.1 million and vehicle license tax apportionment of $15.4 million, as reported in the
General Fund. The increases of sales and vehicle license tax apportionment can be attributed to the
County’s increasing economic vitality.
The following table presents the amount of all governmental funds expenditures by function compared to
prior year amounts.
Expenditures by Function
Governmental Funds
(in millions)
2006 2005 Increase/(Decrease)
Expenditures by Function Amount
Percent of
Total Amount
Percent of
Total Amount
% Chg
P/Y
General government $ 131.0 8% $ 130.1 9% $ .9 .7%
Public safety 733.2 45 636.9 41 96.3 15.1
Health, welfare and sanitation 430.6 26 437.8 29 (7.2) (1.6)
Capital outlay 232.9 14 205.9 14 27.0 13.1
Other 118.7 7 113.3 7 5.4 4.8
Totals $ 1,646.4 100% $ 1,524.0 100% $ 122.4 8.0
Expenditures from governmental fund types for fiscal year 2006 increased by $122.4 million, an 8.0
percent increase from the prior year. The most significant changes were in public safety and capital outlay
expenditures with increases of $96.3 and $27.0 million, respectively. The increase in public safety was
attributed to $86.6 million in additional payroll and personnel expenditures. The increase in personnel
and payroll expenditures is partially attributed to the County-wide market rate salary adjustments
implemented during fiscal year 2006. In addition, the increase in personnel and payroll can be attributed
Management’s Discussion and Analysis (Continued)
12
to an increase in staffing for the justice departments and the various detention and justice facilities, which
completed construction in fiscal year 2005 and were fully operational in fiscal year 2006. The increase in
capital outlay expenditures is attributed to increases in transportation and flood control capital projects of
$32.7 and $15.3 million, respectively, during fiscal year 2006. These increases were offset by decreases
in capital outlay expenditures in detention and general county improvement capital outlay expenditures of
$9.9 and $ 12.5 million, respectively.
Proprietary funds. The County’s proprietary funds (enterprise funds) provide the same information found
in the government-wide financial statements (business-type activities), but in more detail. Internal Service
Funds, although proprietary funds, are not included in the following section.
As of June 30, 2006, the proprietary funds reported combined net assets of ($3.3) million and an increase
in fund balance of $28.8 million over the prior fiscal year. Of the total fund balance, $1.3 million is
invested in capital assets, net of related debt, $7.6 thousand is restricted for debt service, and the
remainder is unrestricted.
The following funds are the County’s major enterprise funds:
The Arizona Long-Term Care System (ALTCS) Fund accounts for the AHCCCS—Arizona Long-Term
Care System (ALTCS) program, which is a managed care, long-term care program operated by Maricopa
Managed Care Systems (MMCS). Chronically ill and physically disabled patients receive medical services
as a result of an annual contract with the Arizona Health Care Cost Containment System (AHCCCS). On
September 30, 2005, the AHCCCS—ALTCS program was discontinued. As a result, the ALTCS Fund
had a $166.9 million or 75.6 percent decrease in operating revenues and a $192.4 million or 77.7 percent
decrease in operating expenses from the prior year. Operating revenues consist of charges for patient
services of $53.8 million and operating expenses consisted primarily of medical and personal services of
$50.9 and $2.7 million, respectively. The ALTCS Fund had a $1.4 million operating loss for fiscal year
2006. During the fiscal year, the County General Fund transferred $4.8 million as a subsidy. The Fund’s
fiscal year-end net assets balance increased $2.0 million to ($4.8) million, this increase can be attributed
to the General Fund subsidy of $4.8 million.
The Maricopa Health Plan Fund is an acute health care program operated by Maricopa Managed Care
Systems (MMCS). MMCS contracts with the Arizona Health Care Cost Containment System (AHCCCS),
which provides monthly capitation revenues based on AHCCCS—Acute Health Care program enrollment.
On September 30, 2005, the AHCCCS—Acute Health Care program was transferred to the Maricopa
County Special Health Care District, a separate legal entity. As a result, operating revenues decreased
by $87.8 million or 74.7 percent and operating expenses decreased $90.1 million or 69.6 percent.
Operating revenues consist entirely of charges for services revenue of $29.8 million and operating
expenses consist mainly of personal services of $4.2 million and medical services of $29.5 million. The
Maricopa Health Plan Fund had a net operating loss of $9.6 million. During fiscal year 2006, the County
General Fund transferred $35.2 million as a subsidy. The Fund’s fiscal year-end net assets balance
increased $24.9 million to $4.2 million from the prior fiscal year-end. This increase in net assets is
attributable to the General Fund subsidy of $35.2 million.
The Solid Waste Management Fund accounts for the activities that assist the cities and towns,
businesses, and citizens in continuously improving regional waste management systems. This includes
managing the County’s landfills and transfer stations, which provide solid waste transfer, disposal and
recycling services to County residents. The Solid Waste Management Fund also accounts for the
County’s environmental liabilities for closure and postclosure care costs associated with its landfills. The
beginning net assets balance for Solid Waste Management was restated to ($1.2) million for a change in
the liability for closure and postclosure cost in the amount of ($7.3) million. This restatement was a result
of the County reassessing the cost for closure and postclosure costs with the assistance of a consultant.
Operating revenues consist primarily of charges for services to citizens and municipalities for solid waste
management services of $360.9 thousand. Operating expenses for the fiscal year consisted primarily of
the increase in the Hassyampa Superfund Site Liability of $1.8 million. Besides the increase in
Management’s Discussion and Analysis (Continued)
13
Superfund Liability, Solid Waste Management activities during the fiscal year remained consistent with
the prior fiscal year. The fund’s fiscal year-end net assets balance decreased $1.6 million to ($2.8) million
at June 30, 2006. This decrease can be attributed to an increase in the Hassyampa Superfund Site
Liability during fiscal year 2006.
The following table shows actual revenues, expenses and results of operations for the current fiscal year
for all proprietary funds (enterprise funds):
Statement of Revenues, Expenses and Changes in Fund Net Assets
Proprietary Funds
(in millions)
Increase/(Decrease)
2006 2005 Amount % Chg P/Y
Operating revenues $ 84.0 $ 518.3 $ (434.3) (83.8)%
Operating expenses 97.0 574.9 (477.9) (83.1)
Operating loss (13.0) (56.6) 43.6 (77.0)
Nonoperating revenues (expenses), net (1.6) (4.9) 3.3 (67.3)
Loss before transfers and special item (14.6) (61.5) 46.9 (76.3)
Special item – loss on closure of business activity (108.7) 108.7 (100.0)
Transfers, net 43.4 37.0 6.4 17.3
Change in net assets $ 28.8 $ (133.2) $ 162.0 (121.6)
At June 30, 2006, revenues and expenses for business-type activities accounted for 4.3 and 5.7 percent
of the County’s total fund-based revenues and expenses, respectively. The Maricopa Managed Care
Systems (MMCS) comprised 99.1 and 97.5 percent of the proprietary funds operating revenues and
expenses, respectively.
The increase in net assets of $28.8 million is primarily from General Fund subsidies of the three health
care programs operated by MMCS, which totaled $43.4 million. Overall, revenues and expenses
decreased significantly from fiscal year 2005 due to the closure of the health care programs. On
September 30, 2005, the Arizona Health Care Cost Containment System (AHCCCS) – Acute Health Care
program was transferred to the Maricopa County Special Health Care District, a separate legal entity, and
the AHCCCS—Arizona Long-Term Care System (ALTCS) program was discontinued. These programs
also experienced decreasing membership prior to their actual discontinuations.
General Fund Budgetary Highlights
The difference between the original budget and the final amended budget for the General Fund resulted
in an increase in revenue of $18.3 million and a decrease in expenditures of $ .9 million. The revenue
increase was a result of a $16.2 million increase in budgeted intergovernmental revenue for
disproportionate share revenue. Significant favorable expenditure variances, as compared to the budget,
were incurred in the General Government Department (general government function) of $141.7 million.
The savings were a result of spending from contingency and reserve funds that was less than anticipated.
No variances between the budget to actual amounts were significant enough to affect the County’s ability
to provide future services.
Capital Assets and Long-Term Liabilities
Capital Assets
The County’s capital assets balance for its governmental and business-type activities as of June 30,
2006, were $2.5 billion (net of accumulated depreciation). Capital assets include land, buildings and
improvements, infrastructure, machinery and equipment, and construction in progress. Capital assets, net
of accumulated depreciation, increased by $133.7 million, or 5.5 percent, from the prior year. Of this
amount, $133.8 million, or 100.1 percent, is attributable to governmental activities, and ($.1) million is
related to business-type activities.
Management’s Discussion and Analysis (Continued)
14
Capital assets for the governmental and business-type activities are presented below (in millions) to
illustrate changes from the prior year:
Governmental Activities Business-type Activities Total
%
Chg
2006 2005* 2006 2005 2006 2005* P/Y
Land $ 496.7 $ 483.8 $ 1.2 $ 1.2 $ 497.9 $ 485.0 2.7%
Infrastructure 553.0 507.3 0.0 0.0 553.0 507.3 9.0
Buildings and improvements (net of
accumulated depreciation) 1,046.1 1,021.7 0.0 0.0 1,046.1 1,021.7 2.4
Machinery and equipment
(net of accumulated depreciation) 71.9 67.0 0.2 0.3 72.1 67.3 7.1
Construction in progress 207.3 156.8 0.0 0.0 207.3 156.8 32.2
Infrastructure (net of accumulated
depreciation) 171.2 175.8 0.0 0.0 171.2 175.8 (2.6)
Totals $ 2,546.2 $ 2,412.4 $ 1.4 $ 1.5 $ 2,547.6 $ 2,413.9 5.5
* The governmental activities and total columns’ capital asset amounts for fiscal year 2005 were restated for various prior period corrections.
See Note 3 – Beginning Balances Restated for additional information.
The most significant impact on the increase in governmental activities capital assets for the fiscal year
ended June 30, 2006, was in the increase in infrastructure-related construction in progress of $54.4
million and Transportation Department completed infrastructure assets of $17.8 million. The County
reports infrastructure assets, which consist of the Flood Control District and Transportation Department
infrastructure, in the government-wide financial statements in accordance with GASB Statement No. 34.
Additional information regarding infrastructure assets can be found in the Notes to the Financial
Statements (Note 1 – Summary of Significant Accounting Policies and Note 11 – Capital Assets).
The Flood Control District infrastructure assets consist of drainage systems, dams, flood channels and
canals. Flood Control infrastructure is reported using the depreciation approach and the County uses the
straight-line method of depreciation on these assets. At June 30, 2006, Flood Control District
infrastructure-related assets consisted of land, infrastructure and construction in progress of $260.9,
$171.2, and $115.8 million, respectively, net of any related accumulated depreciation.
The Transportation Department infrastructure assets consist of a roadway system and a bridge system.
Both systems are reported under the modified approach, which means the County will maintain the
assets using an asset management system and will document that the infrastructure assets are being
preserved at the established condition level. During fiscal year 2006, the condition level of both systems
was within the established condition level. Further, for the roadway system, there were no significant
differences of the actual maintenance/preservation costs from the estimated costs. Actual
maintenance/preservation costs of the bridge system were $154,902 below estimated costs. See
Required Supplementary Information on page 89 for additional information. At June 30, 2006,
Transportation Department infrastructure-related assets consisted of land, infrastructure and construction
in progress of $133.0, $552.6, and $47.9 million, respectively.
Capital assets for business-type activities decreased $.1 million during the fiscal year, which is attributed
to the annual depreciation of the Solid Waste Management assets. Due to the closure of the three health
care programs during fiscal year 2006, assets associated with these programs were deleted; however, as
these assets were fully depreciated, these disposals did not affect the net capital asset balance at June
30, 2006.
Management’s Discussion and Analysis (Continued)
15
Long-Term Liabilities
At June 30, 2006, the County had total long-term liabilities (noncurrent liabilities due within one year and
more than one year) of $260.2 million, which represents an $18.5 million decrease from the restated prior
year balance of $278.7 million. The County restated the beginning balance for a ` in the liability for
closure and postclosure cost in the amount of $7.3 million. This restatement was a result of the County
reassessing the cost for closure and postclosure costs with the assistance of a consultant. See Note 3 –
Beginning Balances Restated for additional information. The majority of the $18.5 million decrease is
attributable to the defeasance of Lease Revenue Bonds, Series 2001, of $10.6 million and debt service
payments made during fiscal year 2006 for Lease Revenue Bonds ($9.3 million), Lease Trust Certificates
($4.6 million), Stadium District revenue bonds ($2.7 million), and Stadium District contractual obligations
($2 million). The largest components of long-term liabilities at June 30, 2006, consisted of Lease Revenue
Bonds - $81.2 million, Stadium District revenue bonds - $50.1 million, and reported claims and incurred
but not reported claims - $59.3 million.
Maricopa County recently received an upgrade on all of its bond ratings from Moody’s Investor Services,
Fitch Ratings, and Standard & Poor’s. On April 26, 2007, Moody’s Investor Services upgraded Maricopa
County’s lease revenue bonds and certificate of participation ratings to Aa2 and Aa3, respectively. On
April 25, 2007, Fitch Ratings rated Maricopa County’s lease revenue bonds and certificates of
participation at AA+. In addition, Moody’s Investor Services and Fitch Ratings assigned an implied (issuer
credit rating) general obligation rating of Aa1 and AAA, respectively. On August 21, 2007, Standard &
Poor’s rated Maricopa County’s lease revenue bonds at AA+. Standard & Poor’s also gave Maricopa
County an implied (issuer credit rating) general obligation rating of AAA. At June 30, 2006, the County
had no general obligation bonds outstanding. All rating agencies referred to the County’s stable economic
environment, strong financial profile, low debt burdens, and complete insulation from the health care
system as reasons for the upgraded ratings.
Lease revenue bonds applicable to governmental activities are paid from the County Improvement Debt
Fund (debt service fund) that was funded in prior years by transfers from the General Fund and is
predominately unrestricted. At June 30, 2006, the fund balance in the County Improvement Debt Fund to
pay future liabilities was $27.2 million. Proceeds from the bonds are currently being used for capital
projects.
Stadium District revenue bonds are special obligations of the District. The bonds are payable solely from
pledged revenues, consisting of car rental surcharges levied and collected by the Stadium District
pursuant to A.R.S. §48-4234. On June 5, 2002, the Stadium District issued Revenue Refunding Bonds in
the amount of $58.2 million (par value) of which, $50.1 million remains outstanding.
Reported and incurred but not reported claims applicable to governmental activities of $59.3 million are
reported in the Risk Management and Employee Benefits Trust funds (internal service funds). This is an
increase of $4.7 million from the prior year primarily related to actuarial estimates for the County’s self-insured
portion of future claims for general litigation related to torts; thefts of, damage to, and destruction
of assets; errors and omissions; injuries to employees; natural disasters; and certain health benefits that
are paid through the operations of the funds. Additional information regarding long-term liabilities can be
found in the Notes to Financial Statements (Note 13 – Long-Term Liabilities and Note 17 – Risk
Management).
Management’s Discussion and Analysis (Continued)
16
Economic Factors and Next Year’s Budget and Rates
• Arizona’s economy is projected to grow at a faster rate than the nation in 2007 and 2008,
according to the Arizona Department of Economic Security. The State of Arizona expects payroll
jobs to grow at 4.3 percent during the forecast period (www.workforce.az.gov).
• The population in Maricopa County continues to grow at a rapid pace. The U.S. Census Bureau
reports that Maricopa County’s population increased by 3.5 percent from fiscal year 2005 to 2006
(www.census.gov). The unemployment rate in Maricopa County, according to Arizona’s
Workforce, in July 2007 was 3.3 percent, which remains below both the state average of 3.7
percent and national average of 4.6 percent (www.workforce.az.gov). The job outlook is
promising and Arizona is on track to add an additional 113,700 new jobs this year
(www.workforce.az.gov).
• As reported by the U.S. Census Bureau, Maricopa County’s population increased 22.6 percent
from April 1, 2000 to July 1, 2006, which is higher than the United States overall population
increase of 6.4 percent for the same time period. This suggests that more people are migrating to
Arizona than to most other states (quickfacts.census.gov).
As part of the annual budget planning process, the County’s Office of Management and Budget
developed a financial forecast to assist in both short and long range financial planning. This forecast
provides a conservative estimate of the County’s fiscal condition through the next five years given a
realistic economic forecast, current Board policies and existing laws. The forecast was instrumental in the
determination of the fiscal year 2007 budget and tax rate. It was based on the following assumptions:
• Continued steady growth in assessed values, but at lower levels than current. As Maricopa
County’s primary (general operating) property tax levy hit its constitutional limit in FY 2005-06,
increases in assessed values due to market appreciation have and will continue to drive
reductions in the primary property tax rate.
• Normalized revenue growth in other State Shared Sales Tax, Vehicle License Tax, and Sales Tax
(Detention Fund) revenues. These revenue sources have seen unprecedented growth over the
last year, but this growth is not sustainable. Revenues will continue to grow, but at a more
moderate pace.
• Discontinuation of Maricopa County’s role as a managed care plan provider for the Arizona
Health Care Cost Containment System (AHCCCS) and Arizona Long Term Care System
(ALTCS) health plans, and no further patient care liabilities for these plans beyond FY 2006-07.
The County will, nonetheless, continue to make mandated contributions to the State to fund the
non-Federal match for these programs overall. The County’s discontinuation of its ALTCS plan
will cause an increase in capitation rates, which will drive up County contributions in the near
term.
• The County’s continued policy of “pay-as-you-go” financing of capital improvements. In the most
likely scenario, a substantial portion of General Fund operating surpluses are applied to debt
service payments associated with funding the Capital Improvement Program in lieu of a bond
issue supported by dedicated taxes.
• Escalating costs associated with jail and juvenile detention operations due to opening of new
facilities, as well as the general impact of criminal justice system caseloads that are increasing
faster than the growth in the overall population.
• Steady increases in employee compensation and health care, including continuing efforts to
restore salary levels to market-competitive levels.
Management’s Discussion and Analysis (Continued)
17
At the end of the fiscal year, unreserved fund balance for the General Fund was $539.6, or 66.1 percent
of total General Fund expenditures. Unreserved fund balance increased by almost 31.1 percent from the
prior year. This is due to actual revenues in excess of actual expenditures. In accordance with Arizona
Revised Statutes (A.R.S.), the entire amount will be budgeted in the next fiscal year. A.R.S. §42-17151
requires that total estimated sources of revenue must equal the total estimated expenditures in the
budget for the current fiscal year. The estimated expenditures may include an amount for unanticipated
contingencies or emergencies, per A.R.S. §42-17102.
Request for Information
This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with
a general overview of the County’s finances and to demonstrate the County’s accountability for the
money it receives. If you have any questions about this report or need additional financial information,
please contact Maricopa County Department of Finance, 301 W. Jefferson, Suite 960, Phoenix, AZ
85003, or at www.maricopa.gov.
18
Maricopa County
Definitions of Government-wide Financial Statements and
Listing of Major Funds
21
Government-wide Financial Statements
The Statement of Net Assets presents information on all of Maricopa County’s assets and liabilities, with
the difference between the two reported as net assets.
The Statement of Activities presents information showing how the government’s net assets changed
during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event
giving rise to the change occurs, regardless of the timing of related cash flows.
The above two statements are presented utilizing the following types of activities:
Governmental Activities – generally are financed through taxes and intergovernmental revenues.
Business-type Activities – are financed in whole or in part by fees charged to external parties.
Major Funds
General Fund – is the County’s primary operating fund. It accounts for all financial resources of the
general government, except those required to be accounted for in another fund.
Special Revenue Funds
Detention Operations Fund – was established under the authority of propositions 400 and 401, which
were passed in the General Election of November 3, 1998. These propositions authorized a temporary
1/5 of one-cent sales tax to be used for the construction and operation of adult and juvenile detention
facilities. On November 5, 2002, the voters approved the extension of the 1/5 of one-cent sales tax in the
General Election to be used for jail facility operations. The extension begins in the month following the
expiration of the original tax and may continue for not more than twenty years after the date the tax
collection begins. The Detention Operations Fund accounts for the receipt of tax revenue, jail operations
expenditures, and transfers to the Detention Capital Projects Fund for construction of the adult and
juvenile detention facilities.
Debt Service Funds
County Improvement Debt Fund – accounts for the debt service on the Lease Revenue Bonds, Series
2001, the Lease Revenue Refunding Bonds, Series 2003, Lease Trust Certificates, Series 2004, and
other long-term debt. Funding is provided by transfers from the General Fund, intergovernmental
revenue from the Maricopa County Special Health Care District, a legally separate entity, and pledged
contributions from various donors for the Human Services Campus.
Maricopa County
Definitions of Government-wide Financial Statements and
Listing of Major Funds
22
Enterprise Funds
The Arizona Long-Term Care System (ALTCS) Fund – is a managed care, long-term care program
operated by Maricopa Managed Care Systems (MMCS). Chronically ill and physically disabled patients
receive medical services as a result of an annual contract with the Arizona Health Care Cost Containment
System (AHCCCS).
Maricopa Health Plan Fund – Accounts for the operation of the Acute Health Care program, an
ambulatory health care program operated by Maricopa Managed Care Systems (MMCS). MMCS
contracts with the Arizona Health Care Cost Containment System (AHCCCS), which provides monthly
capitation revenues based on Acute Health Care program enrollment.
Solid Waste Management Fund – assists the cities and towns, businesses, and citizens in continuously
improving regional waste management systems. This includes an ever-increasing focus on reducing the
amount of waste generated, maximizing resource recovery, proper management of special wastes, and
environmentally sound disposal.
Maricopa County
Statement of Net Assets
June 30, 2006
23
PRIMARY GOVERNMENT COMPONENT UNITS
Governmental Business-type Housing Sports
Activities Activities Total Authority Commission Total
ASSETS
Cash in bank and on hand $ 13,124,581 $ 1,475 $ 13,126,056 $ 3,154,135 $ 144,284 $ 3,298,419
Cash and investments held by
County Treasurer 906,681,852 14,306,705 920,988,557
Receivables (net of allowances
for uncollectibles) 23,298,775 12,300,072 35,598,847 5,601,647 5,601,647
Internal balances 7,079,352 (7,079,352)
Due from other governmental units 196,667,773 196,667,773
Inventories 9,354,090 9,354,090 131,989 131,989
Prepaids 2,005,021 7,280,749 9,285,770 4,193 4,193
Deferred costs 3,239,997 3,239,997
Miscellaneous 5,162,363 3,944 5,166,307
Intergovernmental loans 21,052,400 21,052,400
Advances to other funds 60,834 60,834
Cash and investments held by
trustee – restricted 39,145,301 7,556 39,152,857
Capital assets:
Land 496,721,222 1,187,486 497,908,708 4,830,082 4,830,082
Buildings and improvements 1,293,406,697 979,795 1,294,386,492 38,332,221 38,332,221
Machinery and equipment 207,224,634 1,597,801 208,822,435 645,570 25,272 670,842
Infrastructure – nondepreciable 552,968,897 552,968,897
Infrastructure – depreciable 224,835,151 224,835,151
Construction in progress 207,289,501 207,289,501 3,546,393 3,546,393
(Accumulated depreciation) (436,207,360) (2,413,368) (438,620,728) (24,991,904) (23,764) (25,015,668)
Total assets 3,773,111,081 28,172,863 3,801,283,944 31,254,326 145,792 31,400,118
LIABILITIES
Accounts payable 62,469,303 4,245,582 66,714,885 105,533 1,182 106,715
Accrued liabilities 7,469,781 319,235 7,789,016
Employee compensation payable 70,015,835 56,280 70,072,115 95,323 95,323
Interest payable 2,415,661 580 2,416,241
Medical claims payable 8,448,256 8,448,256
Deferred revenue 37,123,179 37,123,179
Due to other governmental units 173,643 173,643
Deposits held for other parties 1,252,920 1,252,920 149,908 149,908
Noncurrent liabilities:
Due within one year 49,411,423 1,323,164 50,734,587
Due in more than one year 192,392,564 17,087,233 209,479,797 294,122 294,122
Total liabilities 422,724,309 31,480,330 454,204,639 644,886 1,182 646,068
NET ASSETS
Invested in capital assets, net of
related debt 2,443,905,934 1,253,947 2,445,159,881 22,362,362 22,362,362
Restricted for:
General government 11,970,062 11,970,062
Public safety 224,907,701 224,907,701
Highways and streets 44,055,886 44,055,886
Health, welfare and sanitation 17,430,024 17,430,024 1,239,117 1,239,117
Culture and recreation 27,497,794 27,497,794
Education 26,729 26,729
Debt service 19,259,069 7,556 19,266,625
Unrestricted 561,333,573 (4,568,970) 556,764,603 7,007,961 144,610 7,152,571
Total net assets $3,350,386,772 $ (3,307,467) $3,347,079,305 $30,609,440 $ 144,610 $ 30,754,050
The notes to the financial statements are an integral part of this statement.
Maricopa County
Statement of Activities
For the Fiscal Year Ended June 30, 2006
24
Program Revenues
Operating Capital
Charges for Grants and Grants and
Expenses Services Contributions Contributions
Functions/Programs
Primary government:
Governmental activities:
General government $ 163,009,587 $ 45,332,986 $ 4,138,950 $ 3,468,017
Public safety 782,136,857 102,807,289 96,077,144 384,540
Highways and streets 70,418,156 12,380,453 98,134,763 37,827,055
Health, welfare and sanitation 433,776,254 33,726,958 178,349,242 26,840
Culture and recreation 32,596,971 9,378,993 1,693,043 831,443
Education 20,220,846 82,561 14,982,370
Interest on long-term debt 7,763,995
Total governmental activities 1,509,922,666 203,709,240 393,375,512 42,537,895
Business-type activities:
Arizona Health Care Cost Containment System (AHCCCS) –
Arizona Long-Term Care System (ALTCS) program 56,657,239 53,842,048
AHCCCS – Acute Health Care program 40,048,082 29,801,116
Solid Waste Management 2,400,374 360,864
Other business-type activity
Total business-type activities 99,105,695 84,004,028
Total primary government $ 1,609,028,361 $ 287,713,268 $ 393,375,512 $ 42,537,895
Component units:
Housing Authority $ 16,729,967 $ 1,532,264 $ 15,211,092 $ 1,220,162
Sports Commission 430,181 323,641 192,396
Total component units $ 17,160,148 $ 1,855,905 $ 15,403,488 $ 1,220,162
General revenues:
Taxes:
Property taxes, levied for general purposes
Property taxes, levied for Flood Control District
Property taxes, levied for Library District
Share of state sales taxes
Sales tax – Jail construction and operation
Surcharge tax – Stadium District
Vehicle license tax
Grants and contributions not restricted to specific programs
Unrestricted investment earnings
Gain (loss) on disposal of capital assets
Miscellaneous
Transfers
Total general revenues and transfers
Change in net assets
Net assets (deficit), beginning, as restated
Net assets (deficit), ending
The notes to the financial statements are an integral part of this statement.
25
Net (Expense) Revenue and
Changes in Net Assets
Primary Government Component Units
Governmental Business-type Housing Sports
Activities Activities Total Authority Commission Total
$ (110,069,634) $ $ (110,069,634)
(582,867,884) (582,867,884)
77,924,115 77,924,115
(221,673,214) (221,673,214)
(20,693,492) (20,693,492)
(5,155,915) (5,155,915)
(7,763,995) (7,763,995)
(870,300,019) (870,300,019)
(2,815,191) (2,815,191)
(10,246,966) (10,246,966)
(2,039,510) (2,039,510)
(15,101,667) (15,101,667)
(870,300,019) (15,101,667) (885,401,686)
$ 1,233,551 $ $ 1,233,551
85,856 85,856
$ 1,233,551 $ 85,856 $ 1,319,407
388,190,146 388,190,146
61,763,471 61,763,471
17,366,792 17,366,792
457,785,985 457,785,985
137,876,660 137,876,660
6,498,814 6,498,814
138,003,052 138,003,052
1,858,155 1,858,155
29,479,569 447,790 29,927,359
(22,618,680) 6,883 (22,611,797)
13,558,451 12,914 13,571,365
(43,435,540) 43,435,540
1,186,326,875 43,903,127 1,230,230,002
316,026,856 28,801,460 344,828,316 1,233,551 85,856 1,319,407
3,034,359,916 (32,108,927) 3,002,250,989 29,375,889 58,754 29,434,643
$ 3,350,386,772 $ (3,307,467) $ 3,347,079,305 $ 30,609,440 $ 144,610 $ 30,754,050
Maricopa County
Balance Sheet
Governmental Funds
June 30, 2006
26
Detention County
General Operations Improvement Debt
ASSETS
Cash in bank and on hand $ 99,100 $ 200 $
Cash and investments held by County Treasurer 456,912,995 105,892,388 18,697,446
Receivables 14,265,561 719,279 4,071,159
Due from other funds 12,640,833
Due from other governmental units 97,174,779 27,908,451 22,115,360
Inventories 4,524,734 191,572
Miscellaneous 549,233
Intergovernmental loans 21,052,400
Advances to other funds 60,834
Cash and investments held by trustee - restricted 19,651,785
Total assets $ 607,280,469 $ 134,711,890 $ 64,535,750
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 17,801,743 $ 5,264,012 $
Employee compensation payable 13,754,605 5,621,630
Accrued liabilities 1,206,896 451
Due to other funds
Due to other governmental units 3,391
Interest payable 2,179,912
Bonds payable 9,068,024
Special assessment debt with governmental commitment
Deferred revenue 9,338,101 26,075,156
Deposits held for other parties
Total liabilities 42,101,345 10,889,484 37,323,092
Fund balances:
Reserved for:
Inventories 4,524,734 191,572
Intergovernmental loans 20,984,387
Advances 48,668
Debt service 8,403,849
Unreserved, reported in:
General fund 539,621,335
Special revenue funds 123,630,834
Capital projects funds
Debt service funds 18,808,809
Total fund balances 565,179,124 123,822,406 27,212,658
Total liabilities and fund balances $ 607,280,469 $ 134,711,890 $ 64,535,750
Amounts reported for governmental activities in the Statement of Net Assets are different because:
Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.
Other assets are not available to pay for current period expenditures and, therefore, are deferred in the funds.
Internal service funds are used by management to charge the costs of equipment services, telecommunications, reprographics, risk management,
employee benefits, and the sheriff warehouse to individual funds. The assets and liabilities of the internal service funds are included in
governmental activities in the Statement of Net Assets.
Some long-term liabilities and compensated absences are not due and payable shortly after June 30, 2006, and, therefore, are not reported in the funds.
Net assets of governmental activities
The notes to the financial statements are an integral part of this statement.
27
Other Total
Governmental Governmental
Funds Funds
$ 627,108 $ 726,408
267,002,210 848,505,039
3,882,005 22,938,004
7,482,865 20,123,698
49,469,183 196,667,773
3,010,204 7,726,510
2,502,492 3,051,725
21,052,400
60,834
19,493,516 39,145,301
$ 353,469,583 $ 1,159,997,692
$ 36,757,438 $ 59,823,193
6,311,652 25,687,887
5,730,071 6,937,418
11,417,592 11,417,592
170,252 173,643
6,040 2,185,952
9,068,024
7,960 7,960
26,432,216 61,845,473
1,252,920 1,252,920
88,086,141 178,400,062
3,010,204 7,726,510
20,984,387
48,668
10,855,220 19,259,069
539,621,335
135,732,215 259,363,049
115,785,803 115,785,803
18,808,809
265,383,442 981,597,630
$ 353,469,583
2,541,661,349
24,722,294
16,290,336
(213,884,837)
$ 3,350,386,772
Maricopa County
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
For the Fiscal Year Ended June 30, 2006
28
Detention County
General Operations Improvement Debt
REVENUES
Taxes $ 378,705,924 $ 137,876,660 $
Licenses and permits 2,349,225
Intergovernmental 694,985,737 25,751,229 1,395,932
Charges for services 33,156,417 6,544
Fines and forfeits 15,646,209
Special assessments
Miscellaneous 22,714,172 2,654,061 4,547,357
Total revenues 1,147,557,684 166,288,494 5,943,289
EXPENDITURES
Current:
General government 123,583,211
Public safety 363,057,473 241,641,260
Highways and streets
Health, welfare and sanitation 303,832,165
Culture and recreation 1,466,743
Education 1,981,911
Debt service:
Principal 14,014,076
Interest 5,507,349
Other expenditures 16,258
Capital outlay 21,990,921 8,401,759
Total expenditures 815,912,424 250,043,019 19,537,683
Excess (deficiency) of revenues over expenditures 331,645,260 (83,754,525) (13,594,394)
OTHER FINANCING SOURCES (USES)
Transfers in 211,615 145,724,861 4,116,017
Transfers out (208,960,968) (14,977,841)
Capital lease agreements 9,395,689
Proceeds from bond issuance
Payment to escrow agent (10,605,000)
Total other financing sources (uses) (199,353,664) 130,747,020 (6,488,983)
Net change in fund balances 132,291,596 46,992,495 (20,083,377)
Fund balances at beginning of year, as restated 431,277,454 76,746,745 47,296,035
Increase in reserve for inventories 1,610,074 83,166
Fund balances at end of year $ 565,179,124 $ 123,822,406 $ 27,212,658
The notes to the financial statements are an integral part of this statement.
29
Other Total
Governmental Governmental
Funds Funds
$ 84,648,860 $ 601,231,444
39,917,437 42,266,662
303,604,350 1,025,737,248
53,762,927 86,925,888
7,719,799 23,366,008
3,770,790 3,770,790
39,673,924 69,589,514
533,098,087 1,852,887,554
7,447,858 131,031,069
128,545,719 733,244,452
47,763,048 47,763,048
126,782,127 430,614,292
23,158,550 24,625,293
16,903,307 18,885,218
4,766,191 18,780,267
2,989,859 8,497,208
1,250 17,508
202,529,835 232,922,515
560,887,744 1,646,380,870
(27,789,657) 206,506,684
163,952,106 314,004,599
(133,501,330) (357,440,139)
9,395,689
3,000,000 3,000,000
(10,605,000)
33,450,776 (41,644,851)
5,661,119 164,861,833
259,079,810 814,400,044
642,513 2,335,753
$ 265,383,442 $ 981,597,630
Maricopa County
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds to the
Statement of Activities
For the Fiscal Year Ended June 30, 2006
30
Net change in fund balances – total governmental funds (page 29) $ 164,861,833
Amounts reported for governmental activities in the Statement of Activities
pages 24 – 25 are different because:
Governmental funds report capital outlays as expenditures. However, in the
Statement of Activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by which
capital outlays exceeded depreciation in the current period. 127,028,521
The net effect of various miscellaneous transactions involving capital assets
(i.e., sales, trade-ins, and donations) is to increase net assets. 6,339,996
Collection of revenues in the governmental funds exceeded revenues reported
in the Statement of Activities. (4,188,335)
The issuance of long-term debt (e.g., bonds, leases) provides current financial
resources to governmental funds, while the repayment of the principal of long-term
debt consumes the current financial resources of governmental funds.
Neither transaction, however, has any effect on net assets. Also, governmental
funds report the effect of issuance costs, premiums, discounts, and similar items
when debt is first issued, whereas these amounts are deferred and amortized in
the Statement of Activities. This amount is the net effect of these differences in
the treatment of long-term debt and related items. 23,844,485
Some expenses reported in the Statement of Activities do not require the use of
current financial resources and, therefore, are not reported as expenditures in
governmental funds. (2,749,979)
Internal service funds are used by management to charge the costs of
equipment services, telecommunications, reprographics, risk management,
employee benefits, and the sheriff warehouse to individual funds. The net
revenue of internal service funds is reported with governmental activities 890,335
Change in net assets of governmental activities (page 25) $ 316,026,856
The notes to the financial statements are an integral part of this statement.
31
Maricopa County
Statement of Net Assets
Proprietary Funds
June 30, 2006
32
BUSINESS-TYPE ACTIVITIES -
ENTERPRISE FUNDS
Maricopa
Health Solid Waste
ALTCS Plan Management
ASSETS
Current assets:
Cash in bank and on hand $ $ $ 1,475
Cash and investments held by County Treasurer 14,306,705
Receivables 3,192,538 9,027,695 79,839
Inventories
Prepaids 3,785,959 3,494,790
Miscellaneous 3,944
Total current assets 6,978,497 12,522,485 14,391,963
Noncurrent assets:
Restricted:
Cash and investments held by trustee 7,556
Capital assets:
Land 1,187,486
Buildings and improvements 979,795
Machinery and equipment 1,597,801
Less accumulated depreciation (2,413,368)
Total noncurrent assets 1,359,270
Total assets 6,978,497 12,522,485 15,751,233
LIABILITIES
Current liabilities:
Accounts payable 2,973,607 1,240,410 31,565
Employee compensation payable 56,280
Accrued liabilities 78,408 233,732 7,095
Interest payable 580
Due to other funds 1,428,750 5,650,602
Medical claims payable 7,264,771 1,183,485
Lease revenue bonds payable (current portion) 6,976
Advances from other funds (current portion) 12,166
Leases payable (current portion)
Liability for reported and incurred but not reported claims (current portion)
Liability for closure and postclosure costs (current portion) 1,304,022
Total current liabilities 11,745,536 8,308,229 1,418,684
Noncurrent liabilities:
Leases payable
Lease revenue bonds payable 29,957
Advances from other funds 48,668
Liability for reported and incurred but not reported claims
Liability for closure and postclosure costs 17,008,608
Total noncurrent liabilities 17,087,233
Total liabilities 11,745,536 8,308,229 18,505,917
NET ASSETS
Invested in capital assets, net of related debt 1,253,947
Restricted for debt service 7,556
Unrestricted (deficit) (4,767,039) 4,214,256 (4,016,187)
Total net assets (deficit) $ (4,767,039) $ 4,214,256 $ (2,754,684)
The notes to the financial statements are an integral part of this statement.
33
Governmental
Activities -
Internal Service
Total Funds
$ 1,475 $ 12,398,173
14,306,705 58,176,813
12,300,072 360,771
1,627,580
7,280,749 2,005,021
3,944 2,110,638
33,892,945 76,678,996
7,556
1,187,486
979,795 323,649
1,597,801 9,507,815
(2,413,368) (5,254,071)
1,359,270 4,577,393
35,252,215 81,256,389
4,245,582 2,646,110
56,280 719,018
319,235 532,363
580
7,079,352 1,626,754
8,448,256
6,976
12,166
91,214
26,440,104
1,304,022
21,472,449 32,055,563
62,216
29,957
48,668
32,848,274
17,008,608
17,087,233 32,910,490
38,559,682 64,966,053
1,253,947 4,423,963
7,556
(4,568,970) 11,866,373
$ (3,307,467) $ 16,290,336
Maricopa County
Statement of Revenues, Expenses, and Changes in Fund Net Assets
Proprietary Funds
For the Fiscal Year Ended June 30, 2006
34
BUSINESS-TYPE ACTIVITIES -
ENTERPRISE FUNDS
Maricopa Solid
Health Waste
ALTCS Plan Management
OPERATING REVENUES
Net patient service revenue $ 53,842,048 $ $
Charges for services 29,801,116 360,864
Miscellaneous 12,914
Total operating revenues 53,842,048 29,801,116 373,778
OPERATING EXPENSES
Personal services 2,722,770 4,157,473 477,009
Supplies 15,519 26,177 36,904
Medical services 50,924,046 29,497,996
Other services 1,134,280 4,344,730 1,832,403
Legal
Insurance
Leases and rentals 193,894 512,977
Repairs and maintenance 17,252
Travel and transportation 921
Utilities 2,851
Depreciation 149,162 31,154
Miscellaneous 77,370 885,763 720
Total operating expenses 55,217,041 39,425,116 2,399,214
Operating loss (1,374,993) (9,624,000) (2,025,436)
NONOPERATING REVENUES (EXPENSES)
Investment income 447,790
Interest expense (1,160)
Premium tax (1,440,198) (622,966)
Gain (loss) on disposal of capital assets 6,883
Total nonoperating revenues (expenses) (1,440,198) (622,966) 453,513
Income (loss) before contributions and
transfers (2,815,191) (10,246,966) (1,571,923)
Capital contributions
Transfers in 4,808,761 35,129,812
Change in net assets 1,993,570 24,882,846 (1,571,923)
Total net assets (deficit) – beginning, as restated (6,760,609) (20,668,590) (1,182,761)
Total net assets (deficit) – ending $ (4,767,039) $ 4,214,256 $ (2,754,684)
The notes to the financial statements are an integral part of this statement.
35
Governmental
Nonmajor Fund- Activities -
Non-AHCCCS Internal Service
Health Plans Total Funds
$ $ 53,842,048 $
30,161,980 91,120,428
12,914 2,244,898
84,016,942 93,365,326
7,357,252 7,310,186
78,600 7,350,676
80,422,042
7,311,413 11,321,229
8,632,861
49,260,253
706,871 2,207,003
17,252 2,191,852
921 29,615
2,851 5,498,356
180,316 814,517
963,853
97,041,371 94,616,548
(13,024,429) (1,251,222)
447,790 1,857,002
(1,160) (86,232)
(2,063,164)
6,883 (3,540)
(1,609,651) 1,767,230
(14,634,080) 516,008
374,327
3,496,967 43,435,540
3,496,967 28,801,460 890,335
(3,496,967) (32,108,927) 15,400,001
$ $ (3,307,467) $ 16,290,336
Maricopa County
Statement of Cash Flows
Proprietary Funds
For the Fiscal Year Ended June 30, 2006
36
BUSINESS-TYPE ACTIVITIES -
ENTERPRISE FUNDS
Solid
Maricopa Waste
ALTCS Health Plan Management
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from contractors, patients and other payors $ 62,527,690 $ 35,684,278 $
Charges for services 360,864
Other receipts 12,914
Payments for goods and services (75,391,433) (65,154,183) (974,587)
Payments for personal services (3,391,465) (4,954,922) (440,480)
Net cash provided by (used for) operating activities (16,255,208) (34,424,827) (1,041,289)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Advances from General Fund
Cash transfers from other funds 4,808,761 35,129,812
Interest payments
Loan payments to General Fund (12,166)
Premium tax (1,248,261) (704,985)
Net cash provided by (used for) noncapital financing activities 3,560,500 34,424,827 (12,166)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Purchase of capital assets (27,173)
Proceeds from sale of capital assets 6,883
Capital lease payments
Principal payments on long-term debt (6,566)
Interest payments on long-term debt (1,291)
Net cash used for capital and related financing activities (28,147)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends 2,092 437,228
Net cash provided by investing activities 2,092 437,228
Net increase (decrease) in cash and cash equivalents (12,692,616) (644,374)
Cash and cash equivalents, July 1, 2005 12,692,616 14,960,110
Cash and cash equivalents, June 30, 2006 $ $ $ 14,315,736
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES
Operating loss $ (1,374,993) $ (9,624,000) $ (2,025,436)
Adjustments to reconcile operating loss to net cash
provided by (used for) operating activities
Depreciation expense 149,162 31,154
Liability for reported and incurred but not reported claims – noncurrent
Net change in liability for postclosure costs – noncurrent 211,582
Changes in assets [(increase) / decrease] and liabilities [increase / (decrease)]:
Accounts receivable 8,885,332 6,003,585
Inventories
Prepaids 1,734,046 6,343,430
Miscellaneous
Accounts payable (5,164,177) 39,866 (266,333)
Employee compensation payable 36,529
Accrued liabilities (668,695) (797,449)
Due to other funds 1,428,750 (8,673,744)
Medical claims payable (21,244,633) (27,716,515)
Liability for reported and incurred but not reported claims – current
Liability for closure and postclosure costs – current 971,215
Net cash provided by (used for) operating activities $ (16,255,208) $ (34,424,827) $ (1,041,289)
SCHEDULE OF NONCASH INVESTING, CAPITAL AND NONCAPITAL
FINANCING ACTIVITIES – Debit (Credit)
Accumulated depreciation from disposed capital assets $ $ $ 18,792
Machinery and equipment disposed (18,792)
Loss on disposal of capital assets
Capital contributions
Capital assets transferred from governmental activities
Accumulated depreciation transferred from governmental activities
Capital assets transferred to governmental activities
Accumulated depreciation transferred to governmental activities
The notes to the financial statements are an integral part of this statement.
37
Governmental
Nonmajor Fund- Activities -
Non-AHCCCS Internal Service
Health Plans Total Funds
$ $ 98,211,968 $
360,864 91,730,594
12,914 3,164,461
(3,494,307) (145,014,510) (81,784,137)
(2,660) (8,789,527) (7,226,824)
(3,496,967) (55,218,291) 5,884,094
1,626,754
3,496,967 43,435,540
(81,240)
(12,166) (2,594,207)
(1,953,246)
3,496,967 41,470,128 (1,048,693)
(27,173) (956,749)
6,883
(81,440)
(6,566)
(1,291) (4,992)
(28,147) (1,043,181)
439,320 1,739,081
439,320 1,739,081
(13,336,990) 5,531,301
27,652,726 65,043,685
$ $ 14,315,736 $ 70,574,986
$ $ (13,024,429) $ (1,251,222)
180,316 814,517
2,507,670
211,582
14,888,917
177,750
657,460 8,734,936 973,603
7,750 7,750 610,166
(322,258) (5,712,902) (772,073)
(2,660) 33,869 83,362
(1,466,144) 531,099
(1,017,002) (8,261,996)
(2,820,257) (51,781,405)
2,209,222
971,215
$ (3,496,967) $ (55,218,291) $ 5,884,094
$ 18,792 $ 18,792 $ 363,051
(18,792) (18,792) (366,591)
3,540
(374,327)
726,723
(352,396)
(25,805)
25,805
Maricopa County
Statement of Fiduciary Net Assets
Fiduciary Funds
June 30, 2006
38
Investment
Trust Fund
Treasurer’s
Investment Agency
Pool Fund
Assets
Cash in bank and on hand $ $ 43,919,767
Cash and investments held by County Treasurer 2,143,086,842 15,320,889
Receivables:
Accrued interest 11,636,501
Accounts 3,537,539
Total assets 2,158,260,882 $ 59,240,656
Liabilities
Deposits held for other parties 59,240,656
Total liabilities $ 59,240,656
Net Assets
Held in trust for investment participants $ 2,158,260,882
The notes to the financial statements are an integral part of this statement.
Maricopa County
Statement of Changes in Fiduciary Net Assets
Fiduciary Funds
For the Fiscal Year Ended June 30, 2006
39
Investment
Trust Fund
Treasurer’s
Investment
Pool
Additions:
Contributions from participants $ 12,597,359,388
Investment income:
Interest income 58,722,438
Net decrease in fair value of investments (6,463,701)
Net investment earnings 52,258,737
Total additions 12,649,618,125
Deductions:
Distributions to participants 12,341,743,604
Total deductions 12,341,743,604
Change in net assets 307,874,521
Net assets – beginning 1,850,386,361
Net assets – ending $ 2,158,260,882
The notes to the financial statements are an integral part of this statement.
40
Maricopa County
Basic Financial Statements – Notes
43
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 2 REPORTING CHANGES
NOTE 3 BEGINNING BALANCES RESTATED
NOTE 4 RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL
STATEMENTS
NOTE 5 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
NOTE 6 DEPOSITS AND INVESTMENTS
NOTE 7 CONDENSED FINANCIAL STATEMENTS OF COUNTY TREASURER’S
INVESTMENT POOL
NOTE 8 RECEIVABLES
NOTE 9 DUE FROM OTHER GOVERNMENTAL UNITS
NOTE 10 INTERGOVERNMENTAL LOANS
NOTE 11 CAPITAL ASSETS
NOTE 12 CONSTRUCTION AND OTHER SIGNIFICANT COMMITMENTS
NOTE 13 LONG-TERM LIABILITIES
NOTE 14 MUNICIPAL LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS
NOTE 15 MUNICIPAL REVOLVING LINE OF CREDIT AND IRREVOCABLE STANDBY
LETTER OF CREDIT
NOTE 16 OPERATING LEASES
NOTE 17 RISK MANAGEMENT
NOTE 18 EMPLOYEE RETIREMENT PLANS
NOTE 19 INTERFUND BALANCES AND ACTIVITY
NOTE 20 DISPROPORTIONATE SHARE SETTLEMENT
NOTE 21 SUBSEQUENT EVENTS
Notes to the Financial Statements
(Continued)
44
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Maricopa County conform to generally accepted accounting principles
applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB).
A. Reporting Entity
Maricopa County is a general purpose local government governed by a separately elected board of
five county supervisors. The accompanying financial statements present the activities of the County
(the primary government) and its component units.
Component units are legally separate entities for which the County is considered to be financially
accountable. Blended component units, although legally separate entities, are in substance part of
the County’s operations. Therefore, data from these units is combined with data of the primary
government. Discretely presented component units, on the other hand, are reported in a separate
column in the combined financial statements to emphasize they are legally separate from the County.
Each blended and discretely presented component unit discussed below has a June 30 year-end.
The reporting entity is comprised of the primary government, Maricopa County Flood Control District,
Maricopa County Library District, Maricopa County Public Finance Corporation, Maricopa County
Special Assessment Districts, Maricopa County Stadium District, Maricopa County Street Lighting
Districts, Housing Authority of Maricopa County, and Maricopa County Sports Commission.
The blended component units are as follows:
Maricopa County Flood Control District
The Maricopa County Flood Control District is a legally separate, tax-levying entity that provides flood
control facilities and regulates floodplains and drainage to prevent flooding of property in Maricopa
County. As the Maricopa County Board of Supervisors serves as the Board of Directors of the Flood
Control District, it is able to significantly influence the programs, projects, activities, or level of
services provided by the District; therefore, the District is considered a blended component unit of the
County.
Maricopa County Library District
The Maricopa County Library District is a legally separate, tax-levying entity that provides and
maintains library services for the residents of Maricopa County. As the Maricopa County Board of
Supervisors serves as the Board of Directors of the Library District, it is able to significantly influence
the programs, projects, activities, or level of services provided by the District; therefore, the District is
considered a blended component unit of the County.
Maricopa County Public Finance Corporation
Maricopa County Public Finance Corporation is a nonprofit corporation created by the Maricopa
County Board of Supervisors that exists primarily to assist the County in the acquisition, construction,
and improvement of County facilities, including real property and personal property. The Board of
Directors of the Public Finance Corporation is subject to the approval of the County Board of
Supervisors and the corporation exists primarily for the benefit of the County; therefore, the
corporation is considered a blended component unit of the County. The corporation has issued
certificates of participation, lease revenue bonds, and lease trust certificates that evidence undivided
proportionate interests in rent payments to be made under the lease agreements, with an option to
purchase, between Maricopa County and the Corporation. Since this debt is in substance the
County’s obligation, these liabilities and resulting assets are reported on the County’s financial
statements.
Notes to the Financial Statements
(Continued)
45
Maricopa County Special Assessment Districts
The Special Assessment Districts are legally separate entities that provide improvements to various
properties within the County. As the Maricopa County Board of Supervisors serves as the Board of
Directors of the Maricopa County Special Assessment Districts, it is able to significantly influence the
activities or level of services provided by the Districts; therefore, the Districts are considered a
blended component unit of the County.
Maricopa County Stadium District
The Maricopa County Stadium District is a legally separate entity that provides regional leadership
and fiscal resources to assure the presence of Major League Baseball in Maricopa County. As the
Maricopa County Board of Supervisors serves as the Board of Directors of the Stadium District, it is
able to significantly influence the programs, projects, activities, or level of services provided by the
District; therefore, the District is considered a blended component unit of the County.
Complete financial statements for the Maricopa County Stadium District may be obtained at the
entity’s administrative office listed below:
Maricopa County Stadium District
401 East Jefferson
Phoenix, Arizona 85004
www.maricopa.gov/stadiumdistrict
Maricopa County Street Lighting Districts
The Street Lighting Districts are legally separate entities that provide street lighting in areas of the
County that are not under local city jurisdictions. As the Maricopa County Board of Supervisors
serves as the Board of Directors of the Maricopa County Street Lighting Districts, the Districts are
considered a blended component unit of the County.
The discretely presented component units are as follows:
Housing Authority of Maricopa County
On July 1, 2003, the Housing Authority of Maricopa County became a legally separate entity pursuant
to A.R.S. §36-1404. The Housing Authority provides efficient and affordable rental housing to low-income
households of Maricopa County. Each member of the Maricopa County Board of Supervisors
appoints one member to the Board of Commissioners while the sixth member shall be based on the
recommendation of the County Administrative Officer and the seventh member shall be appointed by
a majority vote of the Maricopa County Board of Supervisors. The County does not have the ability to
impose its will on the Housing Authority. The Housing Authority is a discretely presented component
unit, as the Maricopa County Board of Supervisors may dissolve the Authority at any time at the sole
discretion of the County and, therefore, a financial benefit or burden exists.
Complete financial statements for the Housing Authority of Maricopa County may be obtained at the
entity’s administrative office listed below:
Housing Authority of Maricopa County
2024 North Seventh Street, Suite 101
Phoenix, Arizona 85006
www.maricopahousing.org
Notes to the Financial Statements
(Continued)
46
Maricopa County Sports Commission
The Maricopa County Sports Commission (Sports Authority) is a legally separate entity pursuant to
A.R.S. §11-701(F). The Sports Authority provides the citizens of Maricopa County with a variety of
sporting experiences by assisting in the promotion and acquisition of events, teams, and youth
programs. The Sports Authority’s governing board consists of fifteen members, of whom the
Maricopa County Board of Supervisors appoints five members, a state university president appoints
one member, and the remaining nine members are appointed by the seven most populous city’s
mayors within the County. The County does not have the ability to impose its will on the Sports
Authority. The Sports Authority is a discretely presented component unit, as the Maricopa County
Board of Supervisors may dissolve the Authority at any time at the sole discretion of the County and,
therefore, a financial benefit or burden exists.
Complete financial statements for the Maricopa County Sports Commission may be obtained at the
entity’s administrative office listed below:
Maricopa County Sports Commission
400 East Van Buren, Suite 600
Phoenix, Arizona 85004
www.phxsports.org
Related Organization
The Industrial Development Authority of Maricopa County (Authority) is a legally separate entity that
was created to assist in the financing of commercial and industrial enterprises; safe, sanitary, and
affordable housing; and healthcare facilities. The Authority fulfills its function through the issuance of
tax exempt or taxable revenue bonds. The County Board of Supervisors appoints the Authority’s
Board of Directors. The Authority’s operations are completely separate from the County and the
County is not financially accountable for the Authority. Therefore, the financial activities of the
Authority have not been i
Object Description
| Rating | |
| TITLE | Comprehensive annual financial report / Maricopa County, Arizona |
| CREATOR | Maricopa County Board of Supervisors |
| SUBJECT | Maricopa County (Ariz.).--Board of Supervisors--Periodicals; Maricopa County (Ariz.)--Politics and government--Periodicals; Maricopa County (Ariz.)--Appropriations and expenditures--Periodicals |
| Browse Topic |
Government and politics |
| DESCRIPTION | This title contains one or more publications |
| Language | English |
| Publisher | Maricopa County Board of Supervisors |
| Material Collection | State Documents |
| Source Identifier | LG 6.3:M 16 F 45 |
| Location | o20288782 |
| REPOSITORY | Arizona State Library, Archives and Public Records--Law and Research Library |
Description
| TITLE | Comprehensive annual financial report / Maricopa County, Arizona 2006 |
| DESCRIPTION | 281 pages (PDF version). File size: 2436 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 | 2006 |
| Time Period |
2000s (2000-2009) |
| ORIGINAL FORMAT | Born Digital |
| Source Identifier | LG 6.3:M 16 F 45 |
| Location | o20288782 |
| DIGITAL IDENTIFIER | cafr06.pdf |
| DIGITAL FORMAT | PDF (Portable Document Format) |
| REPOSITORY | Arizona State Library, Archives and Public Records--Law and Research Library. |
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| Full Text | Comprehensive Annual Financial Report Maricopa County Phoenix, Arizona For the Fiscal Year July 1, 2005 to June 30, 2006 Prepared By Department of Finance Tom Manos, Chief Financial Officer Comprehensive Annual Financial Report Table of Contents For the Fiscal Year Ended June 30, 2006 i Introductory Section Page Table of Contents i Listing of Maricopa County Officials v Organizational Chart vi Letter of Transmittal vii Maricopa County Citizens Audit Advisory Committee Letter x Financial Section Independent Auditors’ Report 1 Management’s Discussion and Analysis 3 Basic Financial Statements Definitions of Government-wide Financial Statements and Listing of Major Funds 21 Government-wide Financial Statements Statement of Net Assets 23 Statement of Activities 24 Fund Financial Statements Governmental Funds Financial Statements Balance Sheet 26 Statement of Revenues, Expenditures, and Changes in Fund Balances 28 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 30 Proprietary Funds Financial Statements Statement of Net Assets 32 Statement of Revenues, Expenses, and Changes in Fund Net Assets 34 Statement of Cash Flows 36 Fiduciary Funds Financial Statements Statement of Fiduciary Net Assets 38 Statement of Changes in Fiduciary Net Assets 39 Basic Financial Statements – Notes 43 Required Supplementary Information Budgetary Comparison Schedules – General Fund and Major Special Revenue Fund General Fund 83 General Fund by Department 84 Detention Operations Fund 85 Notes to Budgetary Comparison Schedules 86 Table of Contents (Continued) For the Fiscal Year Ended June 30, 2006 ii Page Schedule of Agent Retirement Plans’ Funding Progress 88 Modified Approach for Infrastructure Assets 89 Combining and Individual Fund Statements and Schedules Listing of Nonmajor Governmental Funds 93 Governmental Funds Combining Balance Sheet – Nonmajor Governmental Funds 100 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds 116 Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual Special Revenue Funds Adult Probation Fees Fund 133 Adult Probation Grants Fund 134 Air Quality Fees Fund 135 Air Quality Grants Fund 136 Animal Control Field Operations Fund 137 Animal Control Grants Fund 138 Animal Control License/Shelter Fund 139 Ballpark Operations Fund 140 Cactus League Operations Fund 141 CDBG Housing Trust Fund 142 Check Enforcement Program Fund 143 Child Support Enhancement Fund 144 Children’s Issues Education Fund 145 Clerk of Court Fill the Gap Fund 146 Clerk of the Court EDMS Fund 147 Clerk of the Court Grants Fund 148 Conciliation Court Fees Fund 149 Correctional Health Grants Fund 150 County Attorney Fill the Gap Fund 151 County Attorney Grants Fund 152 County Attorney RICO Fund 153 Court Document Retrieval Fund 154 Criminal Justice Enhancement Fund 155 Del Webb Special Revenue Fund 156 Diversion Fund 157 Domestic Relations Mediation Education Fund 158 Elections Grants Fund 159 Emergency Management Fund 160 Environmental Services Environmental Health Fund 161 Environmental Services Grants Fund 162 Table of Contents (Continued) For the Fiscal Year Ended June 30, 2006 iii Page Special Revenue Funds (Continued) Events Center Fund 163 Expedited Child Support Fund 164 Flood Control Fund 165 General Government Grants Fund 166 Human Services Grants Fund 167 Inmate Health Services Fund 168 Inmate Services Fund 169 Judicial Enhancement Fund 170 Justice Court Judicial Enhancement Fund 171 Justice Court Special Revenue Fund 172 Juvenile Probation Diversion Fund 173 Juvenile Probation Grants Fund 174 Juvenile Probation Special Fees Fund 175 Juvenile Restitution Fund 176 Lake Pleasant Recreation Services Fund 177 Law Library Fees Fund 178 Legal Defender Fill the Gap Fund 179 Library District Fund 180 Library District Grants Fund 181 Medical Examiner Grants Fund 182 Palo Verde Fund 183 Parks and Recreation Grants Fund 184 Parks Donations Fund 185 Parks Enhancement Fund 186 Parks Souvenir Fund 187 Parks Spur Cross Ranch Conservation Fund 188 Planning and Development Fees Fund 189 Probate Fees Fund 190 Public Defender Fill the Gap Fund 191 Public Defender Grants Fund 192 Public Defender Training Fund 193 Public Health Fund 194 Public Health Fees Fund 195 Recorder’s Surcharge Fund 196 Research and Reporting Fund 197 Sheriff Donations Fund 198 Sheriff Grants Fund 199 Sheriff Jail Enhancement Fund 200 Sheriff RICO Fund 201 Spousal Maintenance Enforcement Enhancement Fund 202 Superior Court Fill the Gap Fund 203 Transportation Grants Fund 204 Transportation Operations Fund 205 Trial Court Grants Fund 206 Trial Court Special Revenue Fund 207 Victim Compensation Interest Fund 208 Victim Compensation Restitution Fund 209 Victim Location Fund 210 Waste Management Fund 211 Waste Tire Fund 212 Table of Contents (Continued) For the Fiscal Year Ended June 30, 2006 iv Page Debt Service Funds County Improvement Debt Fund 213 Stadium District Debt Service Fund 214 Capital Projects Funds County Improvement Fund 215 Detention Capital Projects Fund 216 Flood Control Capital Projects Fund 217 General Fund County Improvements Fund 218 Intergovernmental Capital Projects Fund 219 Long Term Project Reserve Fund 220 Transportation Capital Projects Fund 221 Schedule of Capital Projects – Budget and Actual All Capital Improvement Projects 222 Internal Service Funds Listing of Internal Service Funds 229 Combining Statement of Net Assets 230 Combining Statement of Revenues, Expenses, and Changes in Net Assets 232 Combining Statement of Cash Flows 234 Agency Fund Listing of Agency Fund 239 Statement of Changes in Assets and Liabilities 240 Statistical Section Listing of Statistical Information 243 Net Assets by Component 244 Changes in Net Assets 245 Fund Balances, Governmental Funds 247 Changes in Fund Balances, Governmental Funds 248 Tax Revenues by Source, Governmental Funds 250 Assessed Value and Estimated Market Value of Taxable Property 251 Direct and Overlapping Property Tax Rates 252 Principal Property Tax Payers 253 Property Tax Levies and Collections 254 Ratios of Outstanding Debt by Type 255 Legal Debt Margin Information 256 Pledged Revenue Coverage 257 Demographic and Economic Statistics 258 Principal Employers 259 Budgeted Full-time Equivalent County Employees by Function/Program 260 Operating Indicators by Function/Program 261 Capital Asset Statistics by Function/Program 262 v Maricopa County Officials BOARD OF SUPERVISORS Fulton Brock, District 1 Don Stapley, District 2 Andrew Kunasek, District 3 Max Wilson, District 4 Mary Rose Garrido Wilcox, District 5 ♦♦♦ COUNTY MANAGER David R. Smith ♦♦♦ CHIEF FINANCIAL OFFICER Tom Manos Organizational Chart vi Board of Supervisors/Board of Directors for Flood Control, Library and Stadium Districts Board of Supervisors/Board of Directors for Flood Control, Library and Stadium Districts Superintendent of Schools Superintendent of Schools CCoonnssttaabblleess ( (2233)) CCoouunnttyy A Attttoorrnneeyy AAsssseessssoorr TTrereaasusurererr RReeccoorrddeerr Clerk of the Board Deputy County Manager S.T.A.R. Call Center Elections Maricopa County Citizens Legal Defender Indigent Representation Contract Counsel Public Defender Maricopa Integrated Health System Deputy County Administrator Management & Budget Human Resources Research & Reporting General Government Health Care Mandates Chief Health Services Officer Regional Development Services Officer Finance Risk Management Materials Management Recreation Services Library District Public Fiduciary Planning & Development Community Development Public Health Human Services Medical Examiner Correctional Health Animal Care and Control Transportation Flood Control District Emergency Management Facilities Management Equipment Services Office of the C.I.O Telecommunications Office of Communications Elected/Court Officials Elected/Court Officials Appointed Stadium District County Manager Internal Audit Information Technology Officer Chief Community Services Officer Chief Financial Officer Legal Advocacy Integrated Criminal Justice Information Systems SShheerirfifff CClleerkrk o off C Coouurrtt E-Government Technology Infrastructure Technology Center Customer Support Center Capital Facilities Dev. Planning & Development Environmental Services Solid Waste Real Estate Maricopa County County Administrative Office vii 301 West Jefferson Street 10th Floor Phoenix, AZ 85003-2143 Phone: 602-506-3571 Fax: 602-506-3328 www.maricopa.gov October 12, 2007 The Honorable Board of Supervisors Maricopa County County Administration Building 301 W. Jefferson Street Phoenix, AZ 85003 Arizona Revised Statute (ARS) §41-1279.21 requires the Office of the Auditor General to conduct financial audits of the accounts and records of County governments. Pursuant to the statute, the Office of the Auditor General audited the Comprehensive Annual Financial Report (CAFR) of Maricopa County in accordance with generally accepted auditing standards for the year ended June 30, 2006. This report consists of management’s representations concerning the finances of Maricopa County. Consequently, management assumes full responsibility of the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of Maricopa County has established a comprehensive internal control framework that is designed both to protect the government’s asset from loss, theft, or misuse and to compile sufficient reliable information for preparation of Maricopa County’s financial statements in conformity to generally accepted accounting principles (GAAP). Because the cost of internal control should not outweigh their benefits, Maricopa County’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The goal of the independent audit was to provide reasonable assurance that the financial statements of Maricopa County for the fiscal year ended June 30, 2006, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors expressed a modified opinion on the Maricopa County financial statements for the fiscal year ended June 30, 2006. The auditors concluded that the County did not maintain adequate controls for claims payment processing resulting in a disclaimer of opinion on two major enterprise funds, administered by the Maricopa Managed Care Systems, and business-type activities. The financial statements for the remaining opinion units were considered fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. The independent audit of the financial statements of Maricopa County was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. This report will be available in Maricopa County’s separately issued Single Audit Report to be issued at a future date. viii On June 30, 1980, Arizona voters approved general propositions amending the Arizona Constitution to establish expenditure and revenue limitations for local governments. The purpose of the expenditure limitation is to control expenditures and to limit future increases in spending to adjustments for inflation, deflation and population growth of the County. The Constitution also limits the amount of revenues that may be generated from property taxes. A two-percent plus new construction annual increase is the maximum allowed by law unless special voter approval is obtained. This report will be available in Maricopa County’s separately issued Expenditure Limitation Report to be issued at a future date. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A, which can be found immediately following the report of the independent auditors. County Profile Maricopa County is located in the south-central portion of the State of Arizona. Maricopa County is considered to be the top growth area in the state, and one of the top growth areas in the country. Maricopa County occupies 9,222 square miles of which 2,228 square miles are incorporated. Maricopa County operates under a five member elected Board of Supervisors who appoints a County Manager. The County Manager is responsible for the general administration and overall operations of the various County departments. Maricopa County has several-elected officials including the Assessor, Clerk of the Superior Court, Constables, County Attorney, Recorder, Sheriff, Superintendent of Schools, and the Treasurer. Maricopa County includes in its financial statements all activities of the County and its component units. Component units are legally separate entities for which the County is considered to be financially accountable. See Note 1 to the Notes to the Financial Statements - Summary of Significant Accounting Policies for additional information. Maricopa County offers a wide variety of governmental services, including: • Justice and Law Enforcement: Clerk of the Superior Court, County Attorney, Superior Court, Juvenile Court, Justice Court, Sheriff’s Department, Indigent Representation and Public Fiduciary • Medical Services: Health Plans, Public Health, Human Services and Forensic Science Center • Community Resources: Superintendent of Schools, Library District and Stadium District • Public Works: Flood Control District, Transportation Department and Solid Waste Management • County Administration: Board of Supervisors, County Administrator, Assessor’s Office, Clerk of the Board, Elections, Finance, Human Resources, Information Technology, Treasurer and Facilities Management The annual budget serves as the foundation for Maricopa County’s financial planning and control. Maricopa County is required by ARS §§42-17101 et. seq. to annually prepare and adopt a balanced budget. Arizona law further requires that no expenditure shall be made or liability incurred in excess of the amounts budgeted except as provided by law. Maricopa County’s annual budget is available on the Internet at the following address: http://www.maricopa.gov/budget/. Factors Affecting Financial Condition Maricopa County currently enjoys a favorable economic environment with an unemployment rate of 3.3 percent at July 2007, compared to a statewide unemployment rate of 3.7 percent. According to Arizona Workforce Informer, at July 1, 2006, Maricopa County contained 60.15 percent of the states total population (www.workforce.az.gov). Maricopa County has a variety of industries within its boundaries with the major industries being service retail trade and manufacturing. Some of the major employers located in the county include Wal-Mart, Banner Health Systems, Honeywell International, and various local governments. Phoenix is the capital of Arizona as well as the county seat for Maricopa County. ix Because of a favorable climate and mild weather conditions, tourism is also a large factor in the strength of the local economy. Major sporting events can be held year around and many people come to the area during the winter months. Maricopa County is the home to teams from major league professional sports, which include the Arizona Cardinals of the National Football League (NFL), Phoenix Suns of the National Basketball Association (NBA), Arizona Diamondbacks of the Major League Baseball (MLB) and the Phoenix Coyotes of the National Hockey League (NHL). Maricopa County also hosts nine major league baseball teams for the annual spring training Cactus League. Maricopa County is also a host to other major sporting events such as the FBR Open, formerly known as the Phoenix Open, golf tournament, and Phoenix International Raceway, which at this time hosts two major NASCAR events each year. Cities within Maricopa County also host college bowl games such as the Fiesta Bowl, Insight Bowl, and the BCS National Championship Game. In January of 2008, the city of Glendale will also host the NFL Super Bowl. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awards a Certificate of Achievement for Excellence in Financial Reporting to governments to recognize and encourage excellence in financial reporting. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report on a timely basis. Maricopa County received this award for fifteen consecutive years for fiscal years ending 1989 through 2003. As a result of a disclaimer of opinion on two of the County’s major enterprise funds (Maricopa Health Plan Fund and the ALTCS Fund) and on the government-wide business type activities, the County was not eligible for the GFOA Certificate of Achievement for Excellence for fiscal years 2004, 2005, or 2006 due to delays in obtaining the financial reports from related entities. The County will reapply to the GFOA for consideration of the Certificate for fiscal year ending 2007 as the major enterprise funds have either been closed or transferred and there will no longer be delays in receiving their financial statements. The preparation of this report could not be accomplished without the efficient and dedicated services of the Department of Finance staff, the assistance of administrative personnel in the various departments, and the competent service of the Office of the Auditor General. We appreciate all of those who assisted in and contributed to the preparation of this report. We also wish to express our sincere appreciation to the Board of Supervisors for their support in planning and overseeing the financial operations of the County in a responsible and progressive manner. Respectfully submitted, David R. Smith Tom Manos County Manager Chief Financial Officer x DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051 Independent Auditors’ Report Members of the Arizona State Legislature The Board of Supervisors of Maricopa County, Arizona We have audited the accompanying financial statements of the governmental activities, business-type activities, the discretely presented component units, each major fund, and aggregate remaining fund information of Maricopa County as of and for the year ended June 30, 2006, which collectively comprise the County’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the County’s management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of two departments and the discretely presented component units, which account for the following percentages of the assets, liabilities, revenues and other sources, and expenses or expenditures and other uses of the opinion units affected: Opinion Unit/Department Assets Liabilities Revenues/ Sources Expenses/ Expenditures/Uses Government-wide Statements Governmental activities: Stadium District 9.33% 12.99% 0.69% 0.81% Accommodation Schools 0.40% 0.77% 0.78% 0.87% Discretely presented component units: Housing Authority 99.50% 99.80% 97.20% 97.50% Sports Commission 0.50% 0.20% 2.80% 2.50% Fund Statements Aggregate remaining fund information: Stadium District 0.99% 0.09% 0.13% 0.14% Accommodation Schools 0.17% 2.25% 0.11% 0.10% Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinions, insofar as they relate to the amounts included for those entities, are based solely on the reports of the other auditors. Except as discussed in the following paragraph, we conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinions. The Maricopa Managed Care Systems had inadequate internal controls for processing medical claims and accounting for prepayments made to medical providers. As a result, we could not rely on the Systems’ financial reporting system to generate reliable information for medical expenses, prepaid expenses, and medical claims payable. Further, the Systems’ records did not permit us to apply auditing procedures sufficient to determine whether the amounts reported for medical expenses, prepaid expenses, and medical claims payable in the financial statements of the Maricopa Health Plan Fund, the Arizona Long-Term Care System (ALTCS) Fund, and business-type activities were accurate. In addition, these control deficiencies affected the amounts reported in those funds and business-type activities for charges for services revenues, accounts receivable, and due to other funds. Since the Maricopa Managed Care Systems did not maintain adequate internal controls for processing medical claims and accounting for prepayments made to medical providers, and we were not able to apply auditing procedures to satisfy ourselves as to the amounts reported for medical expenses, prepaids, and medical claims payable, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on the financial statements of the Maricopa Health Plan Fund, the ALTCS Fund, and business-type activities as of and for the year ended June 30, 2006. In addition, in our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the discretely presented component units, General Fund, Detention Operations Fund, County Improvement Debt Fund, Solid Waste Management Fund, and aggregate remaining fund information of Maricopa County as of June 30, 2006, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with U.S. generally accepted accounting principles. As described in Notes 2 and 3, beginning in fiscal year 2006, the Maricopa County Sports Commission is reported as a discretely presented component unit. In prior years, the Commission was part of the primary government and was reported as the Sports Authority Fund, a special revenue nonmajor governmental fund. This change constitutes a change in the County’s reporting entity. The Management’s Discussion and Analysis on pages 3 through 17, the Budgetary Comparison Schedules on pages 83 through 87, the Schedule of Agent Retirement Plans’ Funding Progress on page 88, and the Infrastructure Assets information on page 89 are not a required part of the basic financial statements, but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County’s basic financial statements. The introductory section, combining and individual fund statements and schedules, and statistical section listed in the table of contents are presented for purposes of additional analysis and are not required parts of the basic financial statements. The combining and individual fund statements and schedules have been subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements and, in our opinion, based on our audit and the reports of the other auditors, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in our audit of the basic financial statements and, accordingly, we express no opinion on them. In accordance with Government Auditing Standards, we will also issue our report on our consideration of the County’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters at a future date. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Debbie Davenport Auditor General October 12, 2007 Maricopa County Management’s Discussion and Analysis 3 This discussion and analysis is intended to be an easily readable analysis of Maricopa County’s (County) financial activities based on currently known facts, decisions or conditions. This analysis focuses on current year activities and should be read in conjunction with the Transmittal Letter that begins on page vii and with the County’s basic financial statements following this section. Financial Highlights • The total assets of the County exceeded its liabilities at the close of the fiscal year by $3,347.1 million (net assets), an increase of 10.2 percent from the prior year. Of this amount, $556.7 million (unrestricted net assets) may be used to meet the County’s ongoing obligations to citizens and creditors. Composition of Net Assets (in millions) Unrestricted - $556.7 (16.6%) Restricted - $345.2 (10.3%) Invested in capital assets, net of related debt - $2,445.2 (73.1%) • The County’s total net assets as reported in the Statement of Activities increased by $344.8 million, a 257.3 percent increase over the prior period’s increase in net assets. Of this amount, $316.0 million is attributed to governmental activities and $28.8 million is attributable to business-type activities. The significant increase from fiscal year 2005 is partly attributable to the transition of the Medical Center to the Maricopa County Special Health Care District, a separate legal entity, in fiscal year 2005. The transition resulted in a $108.7 million loss on the closure of the Medical Center (business-type activities) during fiscal year 2005, of which there was no related activity in fiscal year 2006. Net Assets by Activity (in millions) 2006 2005 2006 2005 $(500) $- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 Governmental Activities Business-type Activities • The County’s governmental funds reported combined fund balances of $981.6 million, an increase in fund balance of $167.2 million over the prior fiscal year. Approximately 95.1 percent of the combined fund balances or $933.6 million is unreserved and available to meet the County’s current and future needs. Management’s Discussion and Analysis (Continued) 4 • Unreserved fund balance for the General Fund increased by 26.1 percent to $539.6 million; approximately 66.1 percent of total General Fund expenditures. In accordance with Arizona Revised Statutes (A.R.S.), this entire amount is budgeted to be spent in the next fiscal year. A.R.S. §42-17151 requires that total estimated sources of revenue must equal the total estimated expenditures in the budget for the current fiscal year. In addition, A.R.S. §42-17102 stipulates that the estimated expenditures may include an amount for unanticipated contingencies or emergencies. • The County’s proprietary funds reported combined total net assets of ($3.3) million, of which total unrestricted net assets were ($4.6) million. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the County’s basic financial statements. The County’s basic financial statements consist of three components: 1) Government-wide financial statements, 2) Fund financial statements, and 3) Notes to the basic financial statements. Required Supplementary Information is included in addition to the basic financial statements. The Combining and Individual Fund Statements and Schedules – Nonmajor Funds begin on page 100. Government-wide Financial Statements are designed to provide readers with a broad overview of the County’s finances, in a manner similar to private-sector businesses. • The Statement of Net Assets presents information on all County assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. • The Statement of Activities presents information showing how net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of these government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a portion of their costs through user fees and charges (business-type activities). The governmental activities of the County include general government; public safety; highways and streets; health, welfare and sanitation; culture and recreation; education; and interest on long-term debt. The business-type activities of the County include the Arizona Health Care Cost Containment System (AHCCCS)—Arizona Long-Term Care System (ALTCS) program, AHCCCS— Acute Health Care program, Non-AHCCCS Health Care program (Senior Select), and Solid Waste Management. Component units are legally separate entities for which the County is considered to be financially accountable. Blended component units, although legally separate entities, are in substance part of the County’s operations. Therefore, data from these units is combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the government-wide financial statements to emphasize they are legally separate from the County. The reporting entity is comprised of the primary government, which includes Maricopa County Flood Control District, Maricopa County Library District, Maricopa County Public Finance Corporation, Maricopa County Special Assessment Districts, Maricopa County Stadium District, and the Maricopa County Street Lighting Districts. The Housing Authority of Maricopa County and Maricopa County Sports Commission are reported as a discretely presented component units. The Government-wide financial statements can be found on pages 23-25 of this report. Management’s Discussion and Analysis (Continued) 5 Fund Financial Statements are groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The County, like other state and local governments, uses fund accounting to ensure and demonstrate finance-related legal compliance. All of the funds of the County can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. • Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a county’s near-term financing requirements. Governmental funds include the general, special revenue, debt service, and capital projects funds. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental funds Balance Sheet and the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The County reports three major governmental funds. Information is presented separately in the governmental funds Balance Sheet and in the governmental funds Statement of Revenues, Expenditures, and Changes in Fund Balances for the General, Detention Operations, and County Improvement Debt funds. Data from the other governmental funds (nonmajor) are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements, which begin on page 100 of this report. The governmental funds financial statements can be found on pages 26-30 of this report. • Proprietary funds are maintained two ways. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The County uses enterprise funds to account for the Arizona Health Care Cost Containment System (AHCCCS)— Acute Health Care program, AHCCCS—Arizona Long-Term Care System (ALTCS) program, and the Non-AHCCCS Health Care program (Senior Select). The County also reports the operations of Solid Waste Management as an enterprise fund. Internal service funds are an accounting device used to accumulate and allocate costs internally among the County’s various functions. The County uses internal service funds to account for its equipment services, telecommunications, reprographics, risk management, employee benefits trust, and sheriff warehouse functions. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Fund financial statements for the proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The AHCCCS—ALTCS program (ALTCS Fund), the AHCCCS—Acute Health Care program (Maricopa Health Plan Fund), and Solid Waste Management Fund operations are considered to be major funds of the County. The County’s internal service funds are combined into a single, aggregated presentation in the proprietary funds financial statements. Individual fund data for the internal service funds is provided in the form of combining statements, which begin on page 229 of this report. The proprietary fund financial statements can be found on pages 32-37 of this report. Management’s Discussion and Analysis (Continued) 6 • Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The fiduciary funds financial statements can be found on pages 38-39 of this report. Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found on pages 44-79 of this report. Required Supplementary Information is presented concerning the County’s General Fund and Detention Operations Fund. A budgetary comparison schedule has been provided for both of these funds to demonstrate compliance with budget and additional information is provided by the Notes to Budgetary Comparison Schedules. Also presented is the schedule of funding progress for the County’s two agent retirement plans and infrastructure assets reported using the modified approach. Required supplementary information can be found on pages 83-89 of this report. Government-wide Financial Analysis This year is the fifth fiscal year that the County applied Governmental Accounting Standards Board (GASB) Statement No. 34. Net Assets As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. The following table reflects the condensed Statement of Net Assets of the County for June 30, 2006, as compared to the prior year. Statement of Net Assets As of June 30 (in millions) Governmental Business-type Activities Activities Total 2006 2005* 2006 2005* 2006 2005* % Chg P/Y Current and other assets $ 1,226.9 $ 1,082.7 $ 26.8 $ 55.5 $ 1,253.7 $ 1,138.2 10.2% Capital assets 2,546.2 2,412.4 1.4 1.5 2,547.6 2,413.9 5.5 Total assets 3,773.1 3,495.1 28.2 57.0 3,801.3 3,552.1 7.0 Current liabilities 180.9 199.0 13.1 71.9 194.0 270.9 (28.4) Long-term liabilities 241.8 261.7 18.4 17.2 260.2 278.9 (6.7) Total liabilities 422.7 460.7 31.5 89.1 454.2 549.8 (17.4) Net assets Invested in capital assets, Net of related debt 2,443.9 2,316.3 1.3 1.4 2,445.2 2,317.7 5.5 Restricted 345.2 260.5 0.0 0.0 345.2 260.5 32.5 Unrestricted 561.3 457.6 (4.6) (33.5) 556.7 424.1 31.3 Total net assets $ 3,350.4 $ 3,034.4 (3.3) $ (32.1) $ 3,347.1 $ 3,002.3 11.5 * The business-type activities and total columns’ total net assets and long-term liabilities amount for fiscal year 2005 were restated for a change in the liability for closure and postclosure cost in the amount of $7.3 million. This restatement was a result of the County reassessing the cost for closure and postclosure costs with the assistance of a consultant. In addition, the governmental activities and total columns’ total net assets amount for fiscal year 2005 were restated by ($28.7) million for various adjustments related to the prior period. See Note 3 – Beginning Balances Restated for additional information. The largest increase in the County’s Statement of Net Assets was in current and other assets, which increased $115.5 million or 10.2 percent from the prior fiscal year. This is due to an increase in cash of $113.8 million, which is comprised of $127.1 and ($13.3) million in governmental and business-type Management’s Discussion and Analysis (Continued) 7 activities, respectively. The increase in governmental activities cash is due to an increase in revenues of $200.9 million, which exceeded the increase in expenditures of $104.3 million. See page 9 for additional information. The decrease in business-type activities cash is due to the closure or transfer of the health plans. See pages 9 and 12 for additional information. The other large fluctuation on the Statement of Net Assets was in current liabilities, with a decrease of $76.9 million or 28.4 percent from the prior fiscal year, of which $58.8 million is attributed to business-type activities. The decrease in business-type activities current liabilities is due to a decrease in medical claims payable of $51.8 million from the prior fiscal year and is a result of the closure or transfer of the health plans. See pages 9 and 12 for additional information. At June 30, 2006, the County’s combined governmental activities and business-type activities assets exceeded liabilities by approximately $3.3 billion. The governmental activities comprise 91.6 percent of the increase from the prior year, with an increase in net assets as reported in the statement of activities of $316.0 million. The increase for governmental activities is attributed to the increase in the County’s capital assets and tax revenue, as discussed below. The increase in business-type activities net assets of $28.8 million from the prior year is mainly attributed to transfers in from the General Fund to cover deficits in the Maricopa Health Plan, ALTCS and Non-AHCCCS Health Plans Funds. By far, the largest portion - $2.4 billion or 73.1 percent - of the County’s net assets reflects the investment in capital assets (e.g., land, buildings and improvements, machinery and equipment, infrastructure and construction in progress), less accumulated depreciation and any related debt used to acquire those assets that is still outstanding. The County uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the County’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The governmental activities comprise 99.9 percent of this component of net assets. This component of net assets for governmental activities increased by $127.6 million due to the County’s investment in its capital assets, particularly the construction related to the justice courts and administrative facilities, for which a total of $46.0 million was expended and included $32.6 million in the County Improvement Fund, $7.3 million in the General Fund County Improvement Fund, $5.6 million in the Detention Capital Projects Fund, and $.5 million in the Intergovernmental Capital Projects Fund. A large portion of the remaining increase can be attributed to the infrastructure capital projects of the Flood Control District and the Transportation Department. These projects are accounted for in the Flood Control Capital Projects Fund and the Transportation Capital Projects Fund, which had capital outlay expenditures of $58.0 and $83.4 million, respectively. Further, the County received $29.0 million in Transportation infrastructure capital asset donations that were received from other jurisdictions. The business-type activities invested in capital assets did not significantly change from the prior fiscal year and any changes mainly represent increases in accumulated depreciation. The second component of the County’s total net assets, $345.2 million or approximately 10.3 percent, represents resources that are subject to external restrictions on how they may be used. The governmental activities comprise 100 percent of this component of net assets. This component increased for governmental activities by $84.7 million. The increase in governmental activities restricted net assets is mainly attributable to the public safety function, with a fund balance increase of $82.5 million from the prior fiscal year. The net asset increase in this function is attributable to an increase in sales taxes for detention operations of $18.7 million and a decrease in the expenditures and transfers out related to the detention facilities construction of $9.9 and $32.6 million, respectively. The final component consists of unrestricted net assets, $556.7 million or 16.6 percent, and may be used to meet the County’s ongoing obligations. The governmental activities comprise 100.8 percent of this component. Unrestricted net assets for governmental activities increased from fiscal year 2005 by $103.7 million, or 22.7 percent. The increase in unrestricted net assets can be attributed to an increase in tax revenue recorded in the General Fund. Unrestricted property tax, sales tax and vehicle license tax revenues increased $37.7, $60.1, and $15.4 million, respectively, from the prior fiscal year. Management’s Discussion and Analysis (Continued) 8 Changes in Net Assets As discussed previously, the County’s total net assets of $3.3 billion increased by $344.8 million as reported in the Statement of Activities. Of this amount, $316.0 million, or 91.6 percent, is attributable to governmental activities, and $28.8 million is related to business-type activities. A discussion of each is presented below. The following table reflects the condensed Statement of Activities of the County for the fiscal year 2006 compared to the prior year and indicates the changes in net assets for Governmental and Business-type Activities: Statement of Activities For the Fiscal Years Ended June 30, 2006 and June 30, 2005 (in millions) Governmental Business-type Activities Activities Total % Chg 2006 2005* 2006 2005* 2006 2005* P/Y Revenues: Program revenues: Charges for services $ 203.7 $ 167.4 $ 84.0 $ 518.3 $ 287.7 $ 685.7 (58.0)% Operating grants and contributions 393.4 382.4 2.5 393.4 384.9 2.2 Capital grants and contributions 42.5 39.0 .1 42.5 39.1 8.7 General revenues: Taxes 1,207.5 1,075.1 1,207.5 1,075.1 12.3 Other 44.9 27.2 0.5 1.0 45.4 28.2 61.0 Total Revenues 1,892.0 1,691.1 84.5 521.9 1,976.5 2,213.0 (10.7) Expenses: General government 163.0 157.8 163.0 157.8 3.3 Public safety 782.1 685.8 782.1 685.8 14.0 Health, welfare and sanitation 433.8 439.8 433.8 439.8 (1.4) Other** 131.1 122.3 131.1 122.3 7.2 AHCCCS–ALTCS program 56.7 252.2 56.7 252.2 (77.5) AHCCCS–Acute Health Care program 40.0 132.3 40.0 132.3 (69.7) Non-AHCCCS Health Care program 29.6 29.6 (100.0) Solid Waste Management 2.4 0.3 2.4 0.3 700.0 Medical Center 169.0 169.0 (100.0) Total Expenses 1,510.0 1,405.7 99.1 583.4 1,609.1 1,989.1 (19.1) Excess (deficiency) before gain (loss) on disposal of capital assets and transfers 382.0 285.4 (14.6) (61.5) 367.4 223.9 64.1 Gain (loss) on disposal of capital assets (22.6) (18.7) (22.6) (18.7) 20.9 Special item – loss on closure of business activity (108.7) (108.7) (100.0) Transfers (43.4) (37.0) 43.4 37.0 Change in net assets 316.0 229.7 28.8 (133.2) 344.8 96.5 257.3 Net assets – beginning 3,034.4 2,804.7 (32.1) 101.1 3,002.3 2,905.8 3.3 Net assets – ending $ 3,350.4 $ 3,034.4 $ (3.3) $ (32.1) $ 3,347.1 $ 3,002.3 11.5 * The business-type activities and total columns’ total net asset amount for fiscal year 2005 were restated for a change in the liability for closure and postclosure cost in the amount of $7.3 million. This restatement was a result of the County reassessing the cost for closure and postclosure costs with the assistance of a consultant. In addition, the governmental activities and total columns’ total net assets amount for fiscal year 2005 were restated by ($28.7) million for various adjustments related to the prior period. See Note 3 – Beginning Balances Restated for additional information. ** The functions of highways and streets, culture and recreation, and education along with interest on long-term debt are shown in the condensed statement of activities above as other expenses. Governmental Activities As previously mentioned, governmental activities contributed $316.0 million, or 91.6 percent, of the $344.8 million increase in net assets of the County. This increase can be attributed to the treatment of capital outlay and depreciation expense in the government-wide statements and to the increase in tax revenues. Management’s Discussion and Analysis (Continued) 9 One of the main differences a reader will see between the governmental funds reported in the fund financial statements and the Statement of Activities is that governmental funds in the fund financial statements report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is reported as a capital asset and the expense of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay expenditures exceeded depreciation expense in the current period by $127.0 million. As a result, net capital assets increased by this amount, resulting in a net positive change to net assets. In the government-wide statement of activities, the significant revenues reported for governmental activities included County-levied taxes, general sales taxes, vehicle license taxes and operating grants. Taxes and operating grants represent 63.8 and 20.8 percent, respectively, of total governmental activities revenues for fiscal year 2006. Tax revenues increased by $132.4 million from sales taxes of $60.1 million, property taxes levied of $37.7 million, other County-levied taxes of $19.2 million, and vehicle license taxes of $15.4 million. The increase in tax revenues can be attributed to a strong economy, increasing County population, and higher property values. Operating grants remained stable, increasing only $11.0 million. Tax and other operating revenues provide the principal support for the functions of the County, which include general government; public safety; highways and streets; health, welfare and sanitation; culture and recreation; and education. Although governmental activities revenues increased by $200.9 million, or 11.9 percent, over the prior period, this increase was offset by an increase in expenses. Governmental activities expenses increased by $104.3 million, or 7.4 percent, over the prior period. The largest increase is from the public safety function of $96.3 million and includes increases in the General Fund of $64.8 million and Detention Operations Fund of $41.1 million. The increases in both the General and Detention Operations funds were mainly due to an increase in personnel and payroll expenses. These increases can be attributed to an increase in staffing for the justice departments and the various detention and justice facilities, which completed construction in fiscal year 2005 and were fully operational in fiscal year 2006. In addition, County-wide market rate salary adjustments were implemented during fiscal year 2006. Business-Type Activities As discussed earlier, the business-type activities of the County include Solid Waste Management and the Maricopa Managed Care Systems, which is comprised of Arizona Health Care Cost Containment System (AHCCCS) — Acute Health Care program, AHCCCS — Arizona Long-Term Care System (ALTCS) program, and the Non-AHCCCS Health Care program (Senior Select). Business-type activities total net assets increased by $28.8 million from the prior fiscal year, for total net assets at June 30, 2006, of ($3.3) million. Solid Waste Management comprised ($1.6) million or (5.6) percent of the change in net assets for fiscal year 2006. Solid Waste Management realized an increase in the Hassyampa Superfund Site Liability of $1.8 million during fiscal year 2006, which contributed to the decrease in net assets of ($1.6) million. Besides the increase in Superfund Liability, Solid Waste Management activities during fiscal year 2006 remained consistent with the prior year. The Maricopa Managed Care Systems (MMCS) comprised $30.4 million or 105.6 percent of the total increase in business-type activities. The increase in MMCS net assets is primarily from General Fund subsidies to the three health care programs, which totaled $43.4 million. Overall, MMCS revenues and expenditures decreased 78.2 and 84.1 percent, respectively, from fiscal year 2005 due to the closure or transfer of the various health care programs. On September 30, 2005, the AHCCCS – Acute Health Care program was transferred to the Maricopa County Special Health Care District, a separate legal entity, and the AHCCCS — ALTCS program was discontinued. Further, the Senior Select program was closed during the prior fiscal year. These programs also experienced decreasing membership prior to their actual discontinuations. The primary revenue source for business-type activities is charges for services, which comprise $84.0 million or 99.4 percent of total business-type operating revenues. This component consists mainly of patient service revenues and charges for services revenues from the Maricopa Managed Care Systems, which include inpatient and outpatient medical and nursing services; attendant care services; and managed institutional, home, and community-based long-term care services. The primary expense for Management’s Discussion and Analysis (Continued) 10 business-type activities consists of medical and personal services costs that account for $87.8 million of the $97.0 million in operating expenses. As noted above, Maricopa Managed Care Systems revenues and expenditures decreased 78.2 percent and 84.1 percent, respectively, from fiscal year 2005 due to the closure or transfer of the various health care programs. Financial Analysis of the County’s Funds As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds. Governmental activities are contained in the general, special revenue, debt service, and capital projects funds. The focus of the County’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of June 30, 2006, the governmental funds reported combined fund balances of $981.6 million and an increase in fund balance of $167.2 million over the prior fiscal year. Approximately 95.1 percent of the combined fund balances or $933.6 million is available to meet the County’s current and future needs (unreserved fund balance). The remaining fund balance is reserved for inventories, intergovernmental loans, advances and debt service. The following funds are the County’s major governmental funds: The General Fund is the County’s primary operating fund. At the end of the current fiscal year, unreserved fund balance of the General Fund was $539.6 million, while total fund balance reached $565.2 million. This represents an increase in fund balance from the prior year of $134.0 million, or 31.1 percent. This increase can be attributed to increases in tax revenue of $27.4 million and intergovernmental revenue of $71.0 million. These increases were offset by increases in public safety expenditures of $45.6 million and operating transfers out of $20.6 million. See pages 11 and 12 for additional information. As a measure of the General Fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to the total fund expenditures. Unreserved fund balance represents 66.1 percent of the total fiscal year 2006 General Fund expenditures, while total fund balance represents 69.3 percent of that same amount. These ratios indicate a strong fund balance position in comparison to expenditures. The Detention Operations Fund is a special revenue fund that was established under the authority of propositions 400 and 401, which were passed in the General Election of November 3, 1998. These propositions authorized a temporary 1/5 of one-cent sales tax to be used for the construction and operation of adult and juvenile detention facilities. On November 5, 2002, the voters approved the extension of the 1/5 of one-cent sales tax in the General Election to be used for jail facility operations. The extension begins in the month following the expiration of the original tax and may continue for not more than twenty years after the date the tax collection begins. The Detention Operations Fund accounts for the jail tax revenue along with transfers from the General Fund for maintenance of effort (MOE). The MOE transfer from the General Fund is used to support the jail detention operations. Arizona Revised Statutes require the County to calculate the maintenance of effort transfer on an annual basis. The Detention Operations Fund transfers monies to the Detention Capital Projects Fund for the construction of the jail facilities. At the end of the current fiscal year, total fund balance of the Detention Operations Fund was $123.8 million, of which more than 99 percent is unreserved. This was an increase in total fund balance of $47.0 million, or 61.3 percent, from the prior fiscal year. Although the fund had more expenditures than revenues by $83.8 million, the increase in fund balance can be partially attributed to net transfers of $130.7 million, which was a net increase of $45.2 million over the prior year. Transfers from the General Fund for maintenance of effort were $145.7 million while transfers to the Detention Capital Projects Fund were $15.0 million. The amount to be transferred to the Detention Capital Projects Fund for any given year is determined through the budget planning process. Management’s Discussion and Analysis (Continued) 11 The County Improvement Debt Fund is a debt service fund that accounts for the debt service on the Lease Revenue Bonds, Series 2001; Lease Revenue Refunding Bonds, Series 2003; Lease Trust Certificates, Series 2004; and other long-term obligations. The fund balance is set aside for future debt service on the Lease Revenue Bonds, Series 2001, and each year the fund balance will be reduced by the annual debt service payment until the debt is satisfied. Funding for the Lease Revenue Refunding Bonds, Series 2003, is provided by transfers from the departments who benefited by the refunding bond issue and intergovernmental revenue from the Maricopa County Special Health Care District. Funding for the Lease Trust Certificates, Series 2004, is provided by pledged contributions from various donors that are used to repay Maricopa County for long-term financing pertaining to the Human Services Campus improvements. At the end of the current fiscal year, unreserved fund balance of the County Improvement Debt Fund was $18.8 million, while total fund balance was $27.2 million. The following table presents the amount of all governmental funds revenues from various sources as well as increases or decreases from the prior year. Revenues Classified by Source Governmental Funds (in millions) 2006 2005 Increase/(Decrease) Percent Percent % Chg Revenues by Source Amount of Total Amount of Total Amount P/Y Taxes $ 601.2 33% $ 556.8 34% $ 44.4 8.0% Intergovernmental 1,025.7 55 904.2 55 121.5 13.4 Other 226.0 12 191.6 11 34.4 18.0 Totals $ 1,852.9 100% $ 1,652.6 100% $ 200.3 12.1 During fiscal year 2006, the County experienced an increase in governmental revenues from the previous year of $200.3 million, a 12.1 percent increase. This increase is attributable to increases in taxes revenue and intergovernmental revenue of $44.4 and $121.5 million, respectively. Intergovernmental and taxes revenues comprises 88 percent of total governmental funds revenue. Tax revenues increased primarily from property tax revenue of $34.4 million. Although the County decreased their property tax levy rate, an increase in the assessed value and new housing resulted in the additional revenue. The intergovernmental revenues increase was mainly attributable to an increase in the sales tax apportionment of $60.1 million and vehicle license tax apportionment of $15.4 million, as reported in the General Fund. The increases of sales and vehicle license tax apportionment can be attributed to the County’s increasing economic vitality. The following table presents the amount of all governmental funds expenditures by function compared to prior year amounts. Expenditures by Function Governmental Funds (in millions) 2006 2005 Increase/(Decrease) Expenditures by Function Amount Percent of Total Amount Percent of Total Amount % Chg P/Y General government $ 131.0 8% $ 130.1 9% $ .9 .7% Public safety 733.2 45 636.9 41 96.3 15.1 Health, welfare and sanitation 430.6 26 437.8 29 (7.2) (1.6) Capital outlay 232.9 14 205.9 14 27.0 13.1 Other 118.7 7 113.3 7 5.4 4.8 Totals $ 1,646.4 100% $ 1,524.0 100% $ 122.4 8.0 Expenditures from governmental fund types for fiscal year 2006 increased by $122.4 million, an 8.0 percent increase from the prior year. The most significant changes were in public safety and capital outlay expenditures with increases of $96.3 and $27.0 million, respectively. The increase in public safety was attributed to $86.6 million in additional payroll and personnel expenditures. The increase in personnel and payroll expenditures is partially attributed to the County-wide market rate salary adjustments implemented during fiscal year 2006. In addition, the increase in personnel and payroll can be attributed Management’s Discussion and Analysis (Continued) 12 to an increase in staffing for the justice departments and the various detention and justice facilities, which completed construction in fiscal year 2005 and were fully operational in fiscal year 2006. The increase in capital outlay expenditures is attributed to increases in transportation and flood control capital projects of $32.7 and $15.3 million, respectively, during fiscal year 2006. These increases were offset by decreases in capital outlay expenditures in detention and general county improvement capital outlay expenditures of $9.9 and $ 12.5 million, respectively. Proprietary funds. The County’s proprietary funds (enterprise funds) provide the same information found in the government-wide financial statements (business-type activities), but in more detail. Internal Service Funds, although proprietary funds, are not included in the following section. As of June 30, 2006, the proprietary funds reported combined net assets of ($3.3) million and an increase in fund balance of $28.8 million over the prior fiscal year. Of the total fund balance, $1.3 million is invested in capital assets, net of related debt, $7.6 thousand is restricted for debt service, and the remainder is unrestricted. The following funds are the County’s major enterprise funds: The Arizona Long-Term Care System (ALTCS) Fund accounts for the AHCCCS—Arizona Long-Term Care System (ALTCS) program, which is a managed care, long-term care program operated by Maricopa Managed Care Systems (MMCS). Chronically ill and physically disabled patients receive medical services as a result of an annual contract with the Arizona Health Care Cost Containment System (AHCCCS). On September 30, 2005, the AHCCCS—ALTCS program was discontinued. As a result, the ALTCS Fund had a $166.9 million or 75.6 percent decrease in operating revenues and a $192.4 million or 77.7 percent decrease in operating expenses from the prior year. Operating revenues consist of charges for patient services of $53.8 million and operating expenses consisted primarily of medical and personal services of $50.9 and $2.7 million, respectively. The ALTCS Fund had a $1.4 million operating loss for fiscal year 2006. During the fiscal year, the County General Fund transferred $4.8 million as a subsidy. The Fund’s fiscal year-end net assets balance increased $2.0 million to ($4.8) million, this increase can be attributed to the General Fund subsidy of $4.8 million. The Maricopa Health Plan Fund is an acute health care program operated by Maricopa Managed Care Systems (MMCS). MMCS contracts with the Arizona Health Care Cost Containment System (AHCCCS), which provides monthly capitation revenues based on AHCCCS—Acute Health Care program enrollment. On September 30, 2005, the AHCCCS—Acute Health Care program was transferred to the Maricopa County Special Health Care District, a separate legal entity. As a result, operating revenues decreased by $87.8 million or 74.7 percent and operating expenses decreased $90.1 million or 69.6 percent. Operating revenues consist entirely of charges for services revenue of $29.8 million and operating expenses consist mainly of personal services of $4.2 million and medical services of $29.5 million. The Maricopa Health Plan Fund had a net operating loss of $9.6 million. During fiscal year 2006, the County General Fund transferred $35.2 million as a subsidy. The Fund’s fiscal year-end net assets balance increased $24.9 million to $4.2 million from the prior fiscal year-end. This increase in net assets is attributable to the General Fund subsidy of $35.2 million. The Solid Waste Management Fund accounts for the activities that assist the cities and towns, businesses, and citizens in continuously improving regional waste management systems. This includes managing the County’s landfills and transfer stations, which provide solid waste transfer, disposal and recycling services to County residents. The Solid Waste Management Fund also accounts for the County’s environmental liabilities for closure and postclosure care costs associated with its landfills. The beginning net assets balance for Solid Waste Management was restated to ($1.2) million for a change in the liability for closure and postclosure cost in the amount of ($7.3) million. This restatement was a result of the County reassessing the cost for closure and postclosure costs with the assistance of a consultant. Operating revenues consist primarily of charges for services to citizens and municipalities for solid waste management services of $360.9 thousand. Operating expenses for the fiscal year consisted primarily of the increase in the Hassyampa Superfund Site Liability of $1.8 million. Besides the increase in Management’s Discussion and Analysis (Continued) 13 Superfund Liability, Solid Waste Management activities during the fiscal year remained consistent with the prior fiscal year. The fund’s fiscal year-end net assets balance decreased $1.6 million to ($2.8) million at June 30, 2006. This decrease can be attributed to an increase in the Hassyampa Superfund Site Liability during fiscal year 2006. The following table shows actual revenues, expenses and results of operations for the current fiscal year for all proprietary funds (enterprise funds): Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds (in millions) Increase/(Decrease) 2006 2005 Amount % Chg P/Y Operating revenues $ 84.0 $ 518.3 $ (434.3) (83.8)% Operating expenses 97.0 574.9 (477.9) (83.1) Operating loss (13.0) (56.6) 43.6 (77.0) Nonoperating revenues (expenses), net (1.6) (4.9) 3.3 (67.3) Loss before transfers and special item (14.6) (61.5) 46.9 (76.3) Special item – loss on closure of business activity (108.7) 108.7 (100.0) Transfers, net 43.4 37.0 6.4 17.3 Change in net assets $ 28.8 $ (133.2) $ 162.0 (121.6) At June 30, 2006, revenues and expenses for business-type activities accounted for 4.3 and 5.7 percent of the County’s total fund-based revenues and expenses, respectively. The Maricopa Managed Care Systems (MMCS) comprised 99.1 and 97.5 percent of the proprietary funds operating revenues and expenses, respectively. The increase in net assets of $28.8 million is primarily from General Fund subsidies of the three health care programs operated by MMCS, which totaled $43.4 million. Overall, revenues and expenses decreased significantly from fiscal year 2005 due to the closure of the health care programs. On September 30, 2005, the Arizona Health Care Cost Containment System (AHCCCS) – Acute Health Care program was transferred to the Maricopa County Special Health Care District, a separate legal entity, and the AHCCCS—Arizona Long-Term Care System (ALTCS) program was discontinued. These programs also experienced decreasing membership prior to their actual discontinuations. General Fund Budgetary Highlights The difference between the original budget and the final amended budget for the General Fund resulted in an increase in revenue of $18.3 million and a decrease in expenditures of $ .9 million. The revenue increase was a result of a $16.2 million increase in budgeted intergovernmental revenue for disproportionate share revenue. Significant favorable expenditure variances, as compared to the budget, were incurred in the General Government Department (general government function) of $141.7 million. The savings were a result of spending from contingency and reserve funds that was less than anticipated. No variances between the budget to actual amounts were significant enough to affect the County’s ability to provide future services. Capital Assets and Long-Term Liabilities Capital Assets The County’s capital assets balance for its governmental and business-type activities as of June 30, 2006, were $2.5 billion (net of accumulated depreciation). Capital assets include land, buildings and improvements, infrastructure, machinery and equipment, and construction in progress. Capital assets, net of accumulated depreciation, increased by $133.7 million, or 5.5 percent, from the prior year. Of this amount, $133.8 million, or 100.1 percent, is attributable to governmental activities, and ($.1) million is related to business-type activities. Management’s Discussion and Analysis (Continued) 14 Capital assets for the governmental and business-type activities are presented below (in millions) to illustrate changes from the prior year: Governmental Activities Business-type Activities Total % Chg 2006 2005* 2006 2005 2006 2005* P/Y Land $ 496.7 $ 483.8 $ 1.2 $ 1.2 $ 497.9 $ 485.0 2.7% Infrastructure 553.0 507.3 0.0 0.0 553.0 507.3 9.0 Buildings and improvements (net of accumulated depreciation) 1,046.1 1,021.7 0.0 0.0 1,046.1 1,021.7 2.4 Machinery and equipment (net of accumulated depreciation) 71.9 67.0 0.2 0.3 72.1 67.3 7.1 Construction in progress 207.3 156.8 0.0 0.0 207.3 156.8 32.2 Infrastructure (net of accumulated depreciation) 171.2 175.8 0.0 0.0 171.2 175.8 (2.6) Totals $ 2,546.2 $ 2,412.4 $ 1.4 $ 1.5 $ 2,547.6 $ 2,413.9 5.5 * The governmental activities and total columns’ capital asset amounts for fiscal year 2005 were restated for various prior period corrections. See Note 3 – Beginning Balances Restated for additional information. The most significant impact on the increase in governmental activities capital assets for the fiscal year ended June 30, 2006, was in the increase in infrastructure-related construction in progress of $54.4 million and Transportation Department completed infrastructure assets of $17.8 million. The County reports infrastructure assets, which consist of the Flood Control District and Transportation Department infrastructure, in the government-wide financial statements in accordance with GASB Statement No. 34. Additional information regarding infrastructure assets can be found in the Notes to the Financial Statements (Note 1 – Summary of Significant Accounting Policies and Note 11 – Capital Assets). The Flood Control District infrastructure assets consist of drainage systems, dams, flood channels and canals. Flood Control infrastructure is reported using the depreciation approach and the County uses the straight-line method of depreciation on these assets. At June 30, 2006, Flood Control District infrastructure-related assets consisted of land, infrastructure and construction in progress of $260.9, $171.2, and $115.8 million, respectively, net of any related accumulated depreciation. The Transportation Department infrastructure assets consist of a roadway system and a bridge system. Both systems are reported under the modified approach, which means the County will maintain the assets using an asset management system and will document that the infrastructure assets are being preserved at the established condition level. During fiscal year 2006, the condition level of both systems was within the established condition level. Further, for the roadway system, there were no significant differences of the actual maintenance/preservation costs from the estimated costs. Actual maintenance/preservation costs of the bridge system were $154,902 below estimated costs. See Required Supplementary Information on page 89 for additional information. At June 30, 2006, Transportation Department infrastructure-related assets consisted of land, infrastructure and construction in progress of $133.0, $552.6, and $47.9 million, respectively. Capital assets for business-type activities decreased $.1 million during the fiscal year, which is attributed to the annual depreciation of the Solid Waste Management assets. Due to the closure of the three health care programs during fiscal year 2006, assets associated with these programs were deleted; however, as these assets were fully depreciated, these disposals did not affect the net capital asset balance at June 30, 2006. Management’s Discussion and Analysis (Continued) 15 Long-Term Liabilities At June 30, 2006, the County had total long-term liabilities (noncurrent liabilities due within one year and more than one year) of $260.2 million, which represents an $18.5 million decrease from the restated prior year balance of $278.7 million. The County restated the beginning balance for a ` in the liability for closure and postclosure cost in the amount of $7.3 million. This restatement was a result of the County reassessing the cost for closure and postclosure costs with the assistance of a consultant. See Note 3 – Beginning Balances Restated for additional information. The majority of the $18.5 million decrease is attributable to the defeasance of Lease Revenue Bonds, Series 2001, of $10.6 million and debt service payments made during fiscal year 2006 for Lease Revenue Bonds ($9.3 million), Lease Trust Certificates ($4.6 million), Stadium District revenue bonds ($2.7 million), and Stadium District contractual obligations ($2 million). The largest components of long-term liabilities at June 30, 2006, consisted of Lease Revenue Bonds - $81.2 million, Stadium District revenue bonds - $50.1 million, and reported claims and incurred but not reported claims - $59.3 million. Maricopa County recently received an upgrade on all of its bond ratings from Moody’s Investor Services, Fitch Ratings, and Standard & Poor’s. On April 26, 2007, Moody’s Investor Services upgraded Maricopa County’s lease revenue bonds and certificate of participation ratings to Aa2 and Aa3, respectively. On April 25, 2007, Fitch Ratings rated Maricopa County’s lease revenue bonds and certificates of participation at AA+. In addition, Moody’s Investor Services and Fitch Ratings assigned an implied (issuer credit rating) general obligation rating of Aa1 and AAA, respectively. On August 21, 2007, Standard & Poor’s rated Maricopa County’s lease revenue bonds at AA+. Standard & Poor’s also gave Maricopa County an implied (issuer credit rating) general obligation rating of AAA. At June 30, 2006, the County had no general obligation bonds outstanding. All rating agencies referred to the County’s stable economic environment, strong financial profile, low debt burdens, and complete insulation from the health care system as reasons for the upgraded ratings. Lease revenue bonds applicable to governmental activities are paid from the County Improvement Debt Fund (debt service fund) that was funded in prior years by transfers from the General Fund and is predominately unrestricted. At June 30, 2006, the fund balance in the County Improvement Debt Fund to pay future liabilities was $27.2 million. Proceeds from the bonds are currently being used for capital projects. Stadium District revenue bonds are special obligations of the District. The bonds are payable solely from pledged revenues, consisting of car rental surcharges levied and collected by the Stadium District pursuant to A.R.S. §48-4234. On June 5, 2002, the Stadium District issued Revenue Refunding Bonds in the amount of $58.2 million (par value) of which, $50.1 million remains outstanding. Reported and incurred but not reported claims applicable to governmental activities of $59.3 million are reported in the Risk Management and Employee Benefits Trust funds (internal service funds). This is an increase of $4.7 million from the prior year primarily related to actuarial estimates for the County’s self-insured portion of future claims for general litigation related to torts; thefts of, damage to, and destruction of assets; errors and omissions; injuries to employees; natural disasters; and certain health benefits that are paid through the operations of the funds. Additional information regarding long-term liabilities can be found in the Notes to Financial Statements (Note 13 – Long-Term Liabilities and Note 17 – Risk Management). Management’s Discussion and Analysis (Continued) 16 Economic Factors and Next Year’s Budget and Rates • Arizona’s economy is projected to grow at a faster rate than the nation in 2007 and 2008, according to the Arizona Department of Economic Security. The State of Arizona expects payroll jobs to grow at 4.3 percent during the forecast period (www.workforce.az.gov). • The population in Maricopa County continues to grow at a rapid pace. The U.S. Census Bureau reports that Maricopa County’s population increased by 3.5 percent from fiscal year 2005 to 2006 (www.census.gov). The unemployment rate in Maricopa County, according to Arizona’s Workforce, in July 2007 was 3.3 percent, which remains below both the state average of 3.7 percent and national average of 4.6 percent (www.workforce.az.gov). The job outlook is promising and Arizona is on track to add an additional 113,700 new jobs this year (www.workforce.az.gov). • As reported by the U.S. Census Bureau, Maricopa County’s population increased 22.6 percent from April 1, 2000 to July 1, 2006, which is higher than the United States overall population increase of 6.4 percent for the same time period. This suggests that more people are migrating to Arizona than to most other states (quickfacts.census.gov). As part of the annual budget planning process, the County’s Office of Management and Budget developed a financial forecast to assist in both short and long range financial planning. This forecast provides a conservative estimate of the County’s fiscal condition through the next five years given a realistic economic forecast, current Board policies and existing laws. The forecast was instrumental in the determination of the fiscal year 2007 budget and tax rate. It was based on the following assumptions: • Continued steady growth in assessed values, but at lower levels than current. As Maricopa County’s primary (general operating) property tax levy hit its constitutional limit in FY 2005-06, increases in assessed values due to market appreciation have and will continue to drive reductions in the primary property tax rate. • Normalized revenue growth in other State Shared Sales Tax, Vehicle License Tax, and Sales Tax (Detention Fund) revenues. These revenue sources have seen unprecedented growth over the last year, but this growth is not sustainable. Revenues will continue to grow, but at a more moderate pace. • Discontinuation of Maricopa County’s role as a managed care plan provider for the Arizona Health Care Cost Containment System (AHCCCS) and Arizona Long Term Care System (ALTCS) health plans, and no further patient care liabilities for these plans beyond FY 2006-07. The County will, nonetheless, continue to make mandated contributions to the State to fund the non-Federal match for these programs overall. The County’s discontinuation of its ALTCS plan will cause an increase in capitation rates, which will drive up County contributions in the near term. • The County’s continued policy of “pay-as-you-go” financing of capital improvements. In the most likely scenario, a substantial portion of General Fund operating surpluses are applied to debt service payments associated with funding the Capital Improvement Program in lieu of a bond issue supported by dedicated taxes. • Escalating costs associated with jail and juvenile detention operations due to opening of new facilities, as well as the general impact of criminal justice system caseloads that are increasing faster than the growth in the overall population. • Steady increases in employee compensation and health care, including continuing efforts to restore salary levels to market-competitive levels. Management’s Discussion and Analysis (Continued) 17 At the end of the fiscal year, unreserved fund balance for the General Fund was $539.6, or 66.1 percent of total General Fund expenditures. Unreserved fund balance increased by almost 31.1 percent from the prior year. This is due to actual revenues in excess of actual expenditures. In accordance with Arizona Revised Statutes (A.R.S.), the entire amount will be budgeted in the next fiscal year. A.R.S. §42-17151 requires that total estimated sources of revenue must equal the total estimated expenditures in the budget for the current fiscal year. The estimated expenditures may include an amount for unanticipated contingencies or emergencies, per A.R.S. §42-17102. Request for Information This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the County’s finances and to demonstrate the County’s accountability for the money it receives. If you have any questions about this report or need additional financial information, please contact Maricopa County Department of Finance, 301 W. Jefferson, Suite 960, Phoenix, AZ 85003, or at www.maricopa.gov. 18 Maricopa County Definitions of Government-wide Financial Statements and Listing of Major Funds 21 Government-wide Financial Statements The Statement of Net Assets presents information on all of Maricopa County’s assets and liabilities, with the difference between the two reported as net assets. The Statement of Activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. The above two statements are presented utilizing the following types of activities: Governmental Activities – generally are financed through taxes and intergovernmental revenues. Business-type Activities – are financed in whole or in part by fees charged to external parties. Major Funds General Fund – is the County’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Special Revenue Funds Detention Operations Fund – was established under the authority of propositions 400 and 401, which were passed in the General Election of November 3, 1998. These propositions authorized a temporary 1/5 of one-cent sales tax to be used for the construction and operation of adult and juvenile detention facilities. On November 5, 2002, the voters approved the extension of the 1/5 of one-cent sales tax in the General Election to be used for jail facility operations. The extension begins in the month following the expiration of the original tax and may continue for not more than twenty years after the date the tax collection begins. The Detention Operations Fund accounts for the receipt of tax revenue, jail operations expenditures, and transfers to the Detention Capital Projects Fund for construction of the adult and juvenile detention facilities. Debt Service Funds County Improvement Debt Fund – accounts for the debt service on the Lease Revenue Bonds, Series 2001, the Lease Revenue Refunding Bonds, Series 2003, Lease Trust Certificates, Series 2004, and other long-term debt. Funding is provided by transfers from the General Fund, intergovernmental revenue from the Maricopa County Special Health Care District, a legally separate entity, and pledged contributions from various donors for the Human Services Campus. Maricopa County Definitions of Government-wide Financial Statements and Listing of Major Funds 22 Enterprise Funds The Arizona Long-Term Care System (ALTCS) Fund – is a managed care, long-term care program operated by Maricopa Managed Care Systems (MMCS). Chronically ill and physically disabled patients receive medical services as a result of an annual contract with the Arizona Health Care Cost Containment System (AHCCCS). Maricopa Health Plan Fund – Accounts for the operation of the Acute Health Care program, an ambulatory health care program operated by Maricopa Managed Care Systems (MMCS). MMCS contracts with the Arizona Health Care Cost Containment System (AHCCCS), which provides monthly capitation revenues based on Acute Health Care program enrollment. Solid Waste Management Fund – assists the cities and towns, businesses, and citizens in continuously improving regional waste management systems. This includes an ever-increasing focus on reducing the amount of waste generated, maximizing resource recovery, proper management of special wastes, and environmentally sound disposal. Maricopa County Statement of Net Assets June 30, 2006 23 PRIMARY GOVERNMENT COMPONENT UNITS Governmental Business-type Housing Sports Activities Activities Total Authority Commission Total ASSETS Cash in bank and on hand $ 13,124,581 $ 1,475 $ 13,126,056 $ 3,154,135 $ 144,284 $ 3,298,419 Cash and investments held by County Treasurer 906,681,852 14,306,705 920,988,557 Receivables (net of allowances for uncollectibles) 23,298,775 12,300,072 35,598,847 5,601,647 5,601,647 Internal balances 7,079,352 (7,079,352) Due from other governmental units 196,667,773 196,667,773 Inventories 9,354,090 9,354,090 131,989 131,989 Prepaids 2,005,021 7,280,749 9,285,770 4,193 4,193 Deferred costs 3,239,997 3,239,997 Miscellaneous 5,162,363 3,944 5,166,307 Intergovernmental loans 21,052,400 21,052,400 Advances to other funds 60,834 60,834 Cash and investments held by trustee – restricted 39,145,301 7,556 39,152,857 Capital assets: Land 496,721,222 1,187,486 497,908,708 4,830,082 4,830,082 Buildings and improvements 1,293,406,697 979,795 1,294,386,492 38,332,221 38,332,221 Machinery and equipment 207,224,634 1,597,801 208,822,435 645,570 25,272 670,842 Infrastructure – nondepreciable 552,968,897 552,968,897 Infrastructure – depreciable 224,835,151 224,835,151 Construction in progress 207,289,501 207,289,501 3,546,393 3,546,393 (Accumulated depreciation) (436,207,360) (2,413,368) (438,620,728) (24,991,904) (23,764) (25,015,668) Total assets 3,773,111,081 28,172,863 3,801,283,944 31,254,326 145,792 31,400,118 LIABILITIES Accounts payable 62,469,303 4,245,582 66,714,885 105,533 1,182 106,715 Accrued liabilities 7,469,781 319,235 7,789,016 Employee compensation payable 70,015,835 56,280 70,072,115 95,323 95,323 Interest payable 2,415,661 580 2,416,241 Medical claims payable 8,448,256 8,448,256 Deferred revenue 37,123,179 37,123,179 Due to other governmental units 173,643 173,643 Deposits held for other parties 1,252,920 1,252,920 149,908 149,908 Noncurrent liabilities: Due within one year 49,411,423 1,323,164 50,734,587 Due in more than one year 192,392,564 17,087,233 209,479,797 294,122 294,122 Total liabilities 422,724,309 31,480,330 454,204,639 644,886 1,182 646,068 NET ASSETS Invested in capital assets, net of related debt 2,443,905,934 1,253,947 2,445,159,881 22,362,362 22,362,362 Restricted for: General government 11,970,062 11,970,062 Public safety 224,907,701 224,907,701 Highways and streets 44,055,886 44,055,886 Health, welfare and sanitation 17,430,024 17,430,024 1,239,117 1,239,117 Culture and recreation 27,497,794 27,497,794 Education 26,729 26,729 Debt service 19,259,069 7,556 19,266,625 Unrestricted 561,333,573 (4,568,970) 556,764,603 7,007,961 144,610 7,152,571 Total net assets $3,350,386,772 $ (3,307,467) $3,347,079,305 $30,609,440 $ 144,610 $ 30,754,050 The notes to the financial statements are an integral part of this statement. Maricopa County Statement of Activities For the Fiscal Year Ended June 30, 2006 24 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions Functions/Programs Primary government: Governmental activities: General government $ 163,009,587 $ 45,332,986 $ 4,138,950 $ 3,468,017 Public safety 782,136,857 102,807,289 96,077,144 384,540 Highways and streets 70,418,156 12,380,453 98,134,763 37,827,055 Health, welfare and sanitation 433,776,254 33,726,958 178,349,242 26,840 Culture and recreation 32,596,971 9,378,993 1,693,043 831,443 Education 20,220,846 82,561 14,982,370 Interest on long-term debt 7,763,995 Total governmental activities 1,509,922,666 203,709,240 393,375,512 42,537,895 Business-type activities: Arizona Health Care Cost Containment System (AHCCCS) – Arizona Long-Term Care System (ALTCS) program 56,657,239 53,842,048 AHCCCS – Acute Health Care program 40,048,082 29,801,116 Solid Waste Management 2,400,374 360,864 Other business-type activity Total business-type activities 99,105,695 84,004,028 Total primary government $ 1,609,028,361 $ 287,713,268 $ 393,375,512 $ 42,537,895 Component units: Housing Authority $ 16,729,967 $ 1,532,264 $ 15,211,092 $ 1,220,162 Sports Commission 430,181 323,641 192,396 Total component units $ 17,160,148 $ 1,855,905 $ 15,403,488 $ 1,220,162 General revenues: Taxes: Property taxes, levied for general purposes Property taxes, levied for Flood Control District Property taxes, levied for Library District Share of state sales taxes Sales tax – Jail construction and operation Surcharge tax – Stadium District Vehicle license tax Grants and contributions not restricted to specific programs Unrestricted investment earnings Gain (loss) on disposal of capital assets Miscellaneous Transfers Total general revenues and transfers Change in net assets Net assets (deficit), beginning, as restated Net assets (deficit), ending The notes to the financial statements are an integral part of this statement. 25 Net (Expense) Revenue and Changes in Net Assets Primary Government Component Units Governmental Business-type Housing Sports Activities Activities Total Authority Commission Total $ (110,069,634) $ $ (110,069,634) (582,867,884) (582,867,884) 77,924,115 77,924,115 (221,673,214) (221,673,214) (20,693,492) (20,693,492) (5,155,915) (5,155,915) (7,763,995) (7,763,995) (870,300,019) (870,300,019) (2,815,191) (2,815,191) (10,246,966) (10,246,966) (2,039,510) (2,039,510) (15,101,667) (15,101,667) (870,300,019) (15,101,667) (885,401,686) $ 1,233,551 $ $ 1,233,551 85,856 85,856 $ 1,233,551 $ 85,856 $ 1,319,407 388,190,146 388,190,146 61,763,471 61,763,471 17,366,792 17,366,792 457,785,985 457,785,985 137,876,660 137,876,660 6,498,814 6,498,814 138,003,052 138,003,052 1,858,155 1,858,155 29,479,569 447,790 29,927,359 (22,618,680) 6,883 (22,611,797) 13,558,451 12,914 13,571,365 (43,435,540) 43,435,540 1,186,326,875 43,903,127 1,230,230,002 316,026,856 28,801,460 344,828,316 1,233,551 85,856 1,319,407 3,034,359,916 (32,108,927) 3,002,250,989 29,375,889 58,754 29,434,643 $ 3,350,386,772 $ (3,307,467) $ 3,347,079,305 $ 30,609,440 $ 144,610 $ 30,754,050 Maricopa County Balance Sheet Governmental Funds June 30, 2006 26 Detention County General Operations Improvement Debt ASSETS Cash in bank and on hand $ 99,100 $ 200 $ Cash and investments held by County Treasurer 456,912,995 105,892,388 18,697,446 Receivables 14,265,561 719,279 4,071,159 Due from other funds 12,640,833 Due from other governmental units 97,174,779 27,908,451 22,115,360 Inventories 4,524,734 191,572 Miscellaneous 549,233 Intergovernmental loans 21,052,400 Advances to other funds 60,834 Cash and investments held by trustee - restricted 19,651,785 Total assets $ 607,280,469 $ 134,711,890 $ 64,535,750 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 17,801,743 $ 5,264,012 $ Employee compensation payable 13,754,605 5,621,630 Accrued liabilities 1,206,896 451 Due to other funds Due to other governmental units 3,391 Interest payable 2,179,912 Bonds payable 9,068,024 Special assessment debt with governmental commitment Deferred revenue 9,338,101 26,075,156 Deposits held for other parties Total liabilities 42,101,345 10,889,484 37,323,092 Fund balances: Reserved for: Inventories 4,524,734 191,572 Intergovernmental loans 20,984,387 Advances 48,668 Debt service 8,403,849 Unreserved, reported in: General fund 539,621,335 Special revenue funds 123,630,834 Capital projects funds Debt service funds 18,808,809 Total fund balances 565,179,124 123,822,406 27,212,658 Total liabilities and fund balances $ 607,280,469 $ 134,711,890 $ 64,535,750 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Other assets are not available to pay for current period expenditures and, therefore, are deferred in the funds. Internal service funds are used by management to charge the costs of equipment services, telecommunications, reprographics, risk management, employee benefits, and the sheriff warehouse to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the Statement of Net Assets. Some long-term liabilities and compensated absences are not due and payable shortly after June 30, 2006, and, therefore, are not reported in the funds. Net assets of governmental activities The notes to the financial statements are an integral part of this statement. 27 Other Total Governmental Governmental Funds Funds $ 627,108 $ 726,408 267,002,210 848,505,039 3,882,005 22,938,004 7,482,865 20,123,698 49,469,183 196,667,773 3,010,204 7,726,510 2,502,492 3,051,725 21,052,400 60,834 19,493,516 39,145,301 $ 353,469,583 $ 1,159,997,692 $ 36,757,438 $ 59,823,193 6,311,652 25,687,887 5,730,071 6,937,418 11,417,592 11,417,592 170,252 173,643 6,040 2,185,952 9,068,024 7,960 7,960 26,432,216 61,845,473 1,252,920 1,252,920 88,086,141 178,400,062 3,010,204 7,726,510 20,984,387 48,668 10,855,220 19,259,069 539,621,335 135,732,215 259,363,049 115,785,803 115,785,803 18,808,809 265,383,442 981,597,630 $ 353,469,583 2,541,661,349 24,722,294 16,290,336 (213,884,837) $ 3,350,386,772 Maricopa County Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2006 28 Detention County General Operations Improvement Debt REVENUES Taxes $ 378,705,924 $ 137,876,660 $ Licenses and permits 2,349,225 Intergovernmental 694,985,737 25,751,229 1,395,932 Charges for services 33,156,417 6,544 Fines and forfeits 15,646,209 Special assessments Miscellaneous 22,714,172 2,654,061 4,547,357 Total revenues 1,147,557,684 166,288,494 5,943,289 EXPENDITURES Current: General government 123,583,211 Public safety 363,057,473 241,641,260 Highways and streets Health, welfare and sanitation 303,832,165 Culture and recreation 1,466,743 Education 1,981,911 Debt service: Principal 14,014,076 Interest 5,507,349 Other expenditures 16,258 Capital outlay 21,990,921 8,401,759 Total expenditures 815,912,424 250,043,019 19,537,683 Excess (deficiency) of revenues over expenditures 331,645,260 (83,754,525) (13,594,394) OTHER FINANCING SOURCES (USES) Transfers in 211,615 145,724,861 4,116,017 Transfers out (208,960,968) (14,977,841) Capital lease agreements 9,395,689 Proceeds from bond issuance Payment to escrow agent (10,605,000) Total other financing sources (uses) (199,353,664) 130,747,020 (6,488,983) Net change in fund balances 132,291,596 46,992,495 (20,083,377) Fund balances at beginning of year, as restated 431,277,454 76,746,745 47,296,035 Increase in reserve for inventories 1,610,074 83,166 Fund balances at end of year $ 565,179,124 $ 123,822,406 $ 27,212,658 The notes to the financial statements are an integral part of this statement. 29 Other Total Governmental Governmental Funds Funds $ 84,648,860 $ 601,231,444 39,917,437 42,266,662 303,604,350 1,025,737,248 53,762,927 86,925,888 7,719,799 23,366,008 3,770,790 3,770,790 39,673,924 69,589,514 533,098,087 1,852,887,554 7,447,858 131,031,069 128,545,719 733,244,452 47,763,048 47,763,048 126,782,127 430,614,292 23,158,550 24,625,293 16,903,307 18,885,218 4,766,191 18,780,267 2,989,859 8,497,208 1,250 17,508 202,529,835 232,922,515 560,887,744 1,646,380,870 (27,789,657) 206,506,684 163,952,106 314,004,599 (133,501,330) (357,440,139) 9,395,689 3,000,000 3,000,000 (10,605,000) 33,450,776 (41,644,851) 5,661,119 164,861,833 259,079,810 814,400,044 642,513 2,335,753 $ 265,383,442 $ 981,597,630 Maricopa County Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2006 30 Net change in fund balances – total governmental funds (page 29) $ 164,861,833 Amounts reported for governmental activities in the Statement of Activities pages 24 – 25 are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 127,028,521 The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase net assets. 6,339,996 Collection of revenues in the governmental funds exceeded revenues reported in the Statement of Activities. (4,188,335) The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. 23,844,485 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (2,749,979) Internal service funds are used by management to charge the costs of equipment services, telecommunications, reprographics, risk management, employee benefits, and the sheriff warehouse to individual funds. The net revenue of internal service funds is reported with governmental activities 890,335 Change in net assets of governmental activities (page 25) $ 316,026,856 The notes to the financial statements are an integral part of this statement. 31 Maricopa County Statement of Net Assets Proprietary Funds June 30, 2006 32 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS Maricopa Health Solid Waste ALTCS Plan Management ASSETS Current assets: Cash in bank and on hand $ $ $ 1,475 Cash and investments held by County Treasurer 14,306,705 Receivables 3,192,538 9,027,695 79,839 Inventories Prepaids 3,785,959 3,494,790 Miscellaneous 3,944 Total current assets 6,978,497 12,522,485 14,391,963 Noncurrent assets: Restricted: Cash and investments held by trustee 7,556 Capital assets: Land 1,187,486 Buildings and improvements 979,795 Machinery and equipment 1,597,801 Less accumulated depreciation (2,413,368) Total noncurrent assets 1,359,270 Total assets 6,978,497 12,522,485 15,751,233 LIABILITIES Current liabilities: Accounts payable 2,973,607 1,240,410 31,565 Employee compensation payable 56,280 Accrued liabilities 78,408 233,732 7,095 Interest payable 580 Due to other funds 1,428,750 5,650,602 Medical claims payable 7,264,771 1,183,485 Lease revenue bonds payable (current portion) 6,976 Advances from other funds (current portion) 12,166 Leases payable (current portion) Liability for reported and incurred but not reported claims (current portion) Liability for closure and postclosure costs (current portion) 1,304,022 Total current liabilities 11,745,536 8,308,229 1,418,684 Noncurrent liabilities: Leases payable Lease revenue bonds payable 29,957 Advances from other funds 48,668 Liability for reported and incurred but not reported claims Liability for closure and postclosure costs 17,008,608 Total noncurrent liabilities 17,087,233 Total liabilities 11,745,536 8,308,229 18,505,917 NET ASSETS Invested in capital assets, net of related debt 1,253,947 Restricted for debt service 7,556 Unrestricted (deficit) (4,767,039) 4,214,256 (4,016,187) Total net assets (deficit) $ (4,767,039) $ 4,214,256 $ (2,754,684) The notes to the financial statements are an integral part of this statement. 33 Governmental Activities - Internal Service Total Funds $ 1,475 $ 12,398,173 14,306,705 58,176,813 12,300,072 360,771 1,627,580 7,280,749 2,005,021 3,944 2,110,638 33,892,945 76,678,996 7,556 1,187,486 979,795 323,649 1,597,801 9,507,815 (2,413,368) (5,254,071) 1,359,270 4,577,393 35,252,215 81,256,389 4,245,582 2,646,110 56,280 719,018 319,235 532,363 580 7,079,352 1,626,754 8,448,256 6,976 12,166 91,214 26,440,104 1,304,022 21,472,449 32,055,563 62,216 29,957 48,668 32,848,274 17,008,608 17,087,233 32,910,490 38,559,682 64,966,053 1,253,947 4,423,963 7,556 (4,568,970) 11,866,373 $ (3,307,467) $ 16,290,336 Maricopa County Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Fiscal Year Ended June 30, 2006 34 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS Maricopa Solid Health Waste ALTCS Plan Management OPERATING REVENUES Net patient service revenue $ 53,842,048 $ $ Charges for services 29,801,116 360,864 Miscellaneous 12,914 Total operating revenues 53,842,048 29,801,116 373,778 OPERATING EXPENSES Personal services 2,722,770 4,157,473 477,009 Supplies 15,519 26,177 36,904 Medical services 50,924,046 29,497,996 Other services 1,134,280 4,344,730 1,832,403 Legal Insurance Leases and rentals 193,894 512,977 Repairs and maintenance 17,252 Travel and transportation 921 Utilities 2,851 Depreciation 149,162 31,154 Miscellaneous 77,370 885,763 720 Total operating expenses 55,217,041 39,425,116 2,399,214 Operating loss (1,374,993) (9,624,000) (2,025,436) NONOPERATING REVENUES (EXPENSES) Investment income 447,790 Interest expense (1,160) Premium tax (1,440,198) (622,966) Gain (loss) on disposal of capital assets 6,883 Total nonoperating revenues (expenses) (1,440,198) (622,966) 453,513 Income (loss) before contributions and transfers (2,815,191) (10,246,966) (1,571,923) Capital contributions Transfers in 4,808,761 35,129,812 Change in net assets 1,993,570 24,882,846 (1,571,923) Total net assets (deficit) – beginning, as restated (6,760,609) (20,668,590) (1,182,761) Total net assets (deficit) – ending $ (4,767,039) $ 4,214,256 $ (2,754,684) The notes to the financial statements are an integral part of this statement. 35 Governmental Nonmajor Fund- Activities - Non-AHCCCS Internal Service Health Plans Total Funds $ $ 53,842,048 $ 30,161,980 91,120,428 12,914 2,244,898 84,016,942 93,365,326 7,357,252 7,310,186 78,600 7,350,676 80,422,042 7,311,413 11,321,229 8,632,861 49,260,253 706,871 2,207,003 17,252 2,191,852 921 29,615 2,851 5,498,356 180,316 814,517 963,853 97,041,371 94,616,548 (13,024,429) (1,251,222) 447,790 1,857,002 (1,160) (86,232) (2,063,164) 6,883 (3,540) (1,609,651) 1,767,230 (14,634,080) 516,008 374,327 3,496,967 43,435,540 3,496,967 28,801,460 890,335 (3,496,967) (32,108,927) 15,400,001 $ $ (3,307,467) $ 16,290,336 Maricopa County Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2006 36 BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS Solid Maricopa Waste ALTCS Health Plan Management CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from contractors, patients and other payors $ 62,527,690 $ 35,684,278 $ Charges for services 360,864 Other receipts 12,914 Payments for goods and services (75,391,433) (65,154,183) (974,587) Payments for personal services (3,391,465) (4,954,922) (440,480) Net cash provided by (used for) operating activities (16,255,208) (34,424,827) (1,041,289) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Advances from General Fund Cash transfers from other funds 4,808,761 35,129,812 Interest payments Loan payments to General Fund (12,166) Premium tax (1,248,261) (704,985) Net cash provided by (used for) noncapital financing activities 3,560,500 34,424,827 (12,166) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of capital assets (27,173) Proceeds from sale of capital assets 6,883 Capital lease payments Principal payments on long-term debt (6,566) Interest payments on long-term debt (1,291) Net cash used for capital and related financing activities (28,147) CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends 2,092 437,228 Net cash provided by investing activities 2,092 437,228 Net increase (decrease) in cash and cash equivalents (12,692,616) (644,374) Cash and cash equivalents, July 1, 2005 12,692,616 14,960,110 Cash and cash equivalents, June 30, 2006 $ $ $ 14,315,736 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES Operating loss $ (1,374,993) $ (9,624,000) $ (2,025,436) Adjustments to reconcile operating loss to net cash provided by (used for) operating activities Depreciation expense 149,162 31,154 Liability for reported and incurred but not reported claims – noncurrent Net change in liability for postclosure costs – noncurrent 211,582 Changes in assets [(increase) / decrease] and liabilities [increase / (decrease)]: Accounts receivable 8,885,332 6,003,585 Inventories Prepaids 1,734,046 6,343,430 Miscellaneous Accounts payable (5,164,177) 39,866 (266,333) Employee compensation payable 36,529 Accrued liabilities (668,695) (797,449) Due to other funds 1,428,750 (8,673,744) Medical claims payable (21,244,633) (27,716,515) Liability for reported and incurred but not reported claims – current Liability for closure and postclosure costs – current 971,215 Net cash provided by (used for) operating activities $ (16,255,208) $ (34,424,827) $ (1,041,289) SCHEDULE OF NONCASH INVESTING, CAPITAL AND NONCAPITAL FINANCING ACTIVITIES – Debit (Credit) Accumulated depreciation from disposed capital assets $ $ $ 18,792 Machinery and equipment disposed (18,792) Loss on disposal of capital assets Capital contributions Capital assets transferred from governmental activities Accumulated depreciation transferred from governmental activities Capital assets transferred to governmental activities Accumulated depreciation transferred to governmental activities The notes to the financial statements are an integral part of this statement. 37 Governmental Nonmajor Fund- Activities - Non-AHCCCS Internal Service Health Plans Total Funds $ $ 98,211,968 $ 360,864 91,730,594 12,914 3,164,461 (3,494,307) (145,014,510) (81,784,137) (2,660) (8,789,527) (7,226,824) (3,496,967) (55,218,291) 5,884,094 1,626,754 3,496,967 43,435,540 (81,240) (12,166) (2,594,207) (1,953,246) 3,496,967 41,470,128 (1,048,693) (27,173) (956,749) 6,883 (81,440) (6,566) (1,291) (4,992) (28,147) (1,043,181) 439,320 1,739,081 439,320 1,739,081 (13,336,990) 5,531,301 27,652,726 65,043,685 $ $ 14,315,736 $ 70,574,986 $ $ (13,024,429) $ (1,251,222) 180,316 814,517 2,507,670 211,582 14,888,917 177,750 657,460 8,734,936 973,603 7,750 7,750 610,166 (322,258) (5,712,902) (772,073) (2,660) 33,869 83,362 (1,466,144) 531,099 (1,017,002) (8,261,996) (2,820,257) (51,781,405) 2,209,222 971,215 $ (3,496,967) $ (55,218,291) $ 5,884,094 $ 18,792 $ 18,792 $ 363,051 (18,792) (18,792) (366,591) 3,540 (374,327) 726,723 (352,396) (25,805) 25,805 Maricopa County Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2006 38 Investment Trust Fund Treasurer’s Investment Agency Pool Fund Assets Cash in bank and on hand $ $ 43,919,767 Cash and investments held by County Treasurer 2,143,086,842 15,320,889 Receivables: Accrued interest 11,636,501 Accounts 3,537,539 Total assets 2,158,260,882 $ 59,240,656 Liabilities Deposits held for other parties 59,240,656 Total liabilities $ 59,240,656 Net Assets Held in trust for investment participants $ 2,158,260,882 The notes to the financial statements are an integral part of this statement. Maricopa County Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Fiscal Year Ended June 30, 2006 39 Investment Trust Fund Treasurer’s Investment Pool Additions: Contributions from participants $ 12,597,359,388 Investment income: Interest income 58,722,438 Net decrease in fair value of investments (6,463,701) Net investment earnings 52,258,737 Total additions 12,649,618,125 Deductions: Distributions to participants 12,341,743,604 Total deductions 12,341,743,604 Change in net assets 307,874,521 Net assets – beginning 1,850,386,361 Net assets – ending $ 2,158,260,882 The notes to the financial statements are an integral part of this statement. 40 Maricopa County Basic Financial Statements – Notes 43 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTE 2 REPORTING CHANGES NOTE 3 BEGINNING BALANCES RESTATED NOTE 4 RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS NOTE 5 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY NOTE 6 DEPOSITS AND INVESTMENTS NOTE 7 CONDENSED FINANCIAL STATEMENTS OF COUNTY TREASURER’S INVESTMENT POOL NOTE 8 RECEIVABLES NOTE 9 DUE FROM OTHER GOVERNMENTAL UNITS NOTE 10 INTERGOVERNMENTAL LOANS NOTE 11 CAPITAL ASSETS NOTE 12 CONSTRUCTION AND OTHER SIGNIFICANT COMMITMENTS NOTE 13 LONG-TERM LIABILITIES NOTE 14 MUNICIPAL LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS NOTE 15 MUNICIPAL REVOLVING LINE OF CREDIT AND IRREVOCABLE STANDBY LETTER OF CREDIT NOTE 16 OPERATING LEASES NOTE 17 RISK MANAGEMENT NOTE 18 EMPLOYEE RETIREMENT PLANS NOTE 19 INTERFUND BALANCES AND ACTIVITY NOTE 20 DISPROPORTIONATE SHARE SETTLEMENT NOTE 21 SUBSEQUENT EVENTS Notes to the Financial Statements (Continued) 44 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of Maricopa County conform to generally accepted accounting principles applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB). A. Reporting Entity Maricopa County is a general purpose local government governed by a separately elected board of five county supervisors. The accompanying financial statements present the activities of the County (the primary government) and its component units. Component units are legally separate entities for which the County is considered to be financially accountable. Blended component units, although legally separate entities, are in substance part of the County’s operations. Therefore, data from these units is combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the combined financial statements to emphasize they are legally separate from the County. Each blended and discretely presented component unit discussed below has a June 30 year-end. The reporting entity is comprised of the primary government, Maricopa County Flood Control District, Maricopa County Library District, Maricopa County Public Finance Corporation, Maricopa County Special Assessment Districts, Maricopa County Stadium District, Maricopa County Street Lighting Districts, Housing Authority of Maricopa County, and Maricopa County Sports Commission. The blended component units are as follows: Maricopa County Flood Control District The Maricopa County Flood Control District is a legally separate, tax-levying entity that provides flood control facilities and regulates floodplains and drainage to prevent flooding of property in Maricopa County. As the Maricopa County Board of Supervisors serves as the Board of Directors of the Flood Control District, it is able to significantly influence the programs, projects, activities, or level of services provided by the District; therefore, the District is considered a blended component unit of the County. Maricopa County Library District The Maricopa County Library District is a legally separate, tax-levying entity that provides and maintains library services for the residents of Maricopa County. As the Maricopa County Board of Supervisors serves as the Board of Directors of the Library District, it is able to significantly influence the programs, projects, activities, or level of services provided by the District; therefore, the District is considered a blended component unit of the County. Maricopa County Public Finance Corporation Maricopa County Public Finance Corporation is a nonprofit corporation created by the Maricopa County Board of Supervisors that exists primarily to assist the County in the acquisition, construction, and improvement of County facilities, including real property and personal property. The Board of Directors of the Public Finance Corporation is subject to the approval of the County Board of Supervisors and the corporation exists primarily for the benefit of the County; therefore, the corporation is considered a blended component unit of the County. The corporation has issued certificates of participation, lease revenue bonds, and lease trust certificates that evidence undivided proportionate interests in rent payments to be made under the lease agreements, with an option to purchase, between Maricopa County and the Corporation. Since this debt is in substance the County’s obligation, these liabilities and resulting assets are reported on the County’s financial statements. Notes to the Financial Statements (Continued) 45 Maricopa County Special Assessment Districts The Special Assessment Districts are legally separate entities that provide improvements to various properties within the County. As the Maricopa County Board of Supervisors serves as the Board of Directors of the Maricopa County Special Assessment Districts, it is able to significantly influence the activities or level of services provided by the Districts; therefore, the Districts are considered a blended component unit of the County. Maricopa County Stadium District The Maricopa County Stadium District is a legally separate entity that provides regional leadership and fiscal resources to assure the presence of Major League Baseball in Maricopa County. As the Maricopa County Board of Supervisors serves as the Board of Directors of the Stadium District, it is able to significantly influence the programs, projects, activities, or level of services provided by the District; therefore, the District is considered a blended component unit of the County. Complete financial statements for the Maricopa County Stadium District may be obtained at the entity’s administrative office listed below: Maricopa County Stadium District 401 East Jefferson Phoenix, Arizona 85004 www.maricopa.gov/stadiumdistrict Maricopa County Street Lighting Districts The Street Lighting Districts are legally separate entities that provide street lighting in areas of the County that are not under local city jurisdictions. As the Maricopa County Board of Supervisors serves as the Board of Directors of the Maricopa County Street Lighting Districts, the Districts are considered a blended component unit of the County. The discretely presented component units are as follows: Housing Authority of Maricopa County On July 1, 2003, the Housing Authority of Maricopa County became a legally separate entity pursuant to A.R.S. §36-1404. The Housing Authority provides efficient and affordable rental housing to low-income households of Maricopa County. Each member of the Maricopa County Board of Supervisors appoints one member to the Board of Commissioners while the sixth member shall be based on the recommendation of the County Administrative Officer and the seventh member shall be appointed by a majority vote of the Maricopa County Board of Supervisors. The County does not have the ability to impose its will on the Housing Authority. The Housing Authority is a discretely presented component unit, as the Maricopa County Board of Supervisors may dissolve the Authority at any time at the sole discretion of the County and, therefore, a financial benefit or burden exists. Complete financial statements for the Housing Authority of Maricopa County may be obtained at the entity’s administrative office listed below: Housing Authority of Maricopa County 2024 North Seventh Street, Suite 101 Phoenix, Arizona 85006 www.maricopahousing.org Notes to the Financial Statements (Continued) 46 Maricopa County Sports Commission The Maricopa County Sports Commission (Sports Authority) is a legally separate entity pursuant to A.R.S. §11-701(F). The Sports Authority provides the citizens of Maricopa County with a variety of sporting experiences by assisting in the promotion and acquisition of events, teams, and youth programs. The Sports Authority’s governing board consists of fifteen members, of whom the Maricopa County Board of Supervisors appoints five members, a state university president appoints one member, and the remaining nine members are appointed by the seven most populous city’s mayors within the County. The County does not have the ability to impose its will on the Sports Authority. The Sports Authority is a discretely presented component unit, as the Maricopa County Board of Supervisors may dissolve the Authority at any time at the sole discretion of the County and, therefore, a financial benefit or burden exists. Complete financial statements for the Maricopa County Sports Commission may be obtained at the entity’s administrative office listed below: Maricopa County Sports Commission 400 East Van Buren, Suite 600 Phoenix, Arizona 85004 www.phxsports.org Related Organization The Industrial Development Authority of Maricopa County (Authority) is a legally separate entity that was created to assist in the financing of commercial and industrial enterprises; safe, sanitary, and affordable housing; and healthcare facilities. The Authority fulfills its function through the issuance of tax exempt or taxable revenue bonds. The County Board of Supervisors appoints the Authority’s Board of Directors. The Authority’s operations are completely separate from the County and the County is not financially accountable for the Authority. Therefore, the financial activities of the Authority have not been i |
