Comprehensive annual financial report / Maricopa County, Arizona

              Fiscal Year Ended June 30, 2011
YUMA
APACHE
COCHISE
COCONINO
GILA
GRAHAM
GREENLEE
MARICOPA
COUNTY
MOHAVE
NAVAJO
PIMA
PINAL
SANTA CRUZ
YAVAPAI
LA PAZDistrict 1 District 2
District 3
District 4 District 5
Comprehensive Annual Financial Report
Maricopa County Phoenix, Arizona For the Fiscal Year July 1, 2010 to June 30, 2011 Prepared By
Department of Finance Shelby L. Scharbach, Chief Financial OfficerINTRODUCTORY SECTION
Table of Contents
Listing of Maricopa County Officials
Organizational Chart
Letter of Transmittal
Citizens Audit Advisory Committee Letter
Certificate of Achievement for Excellence in Financial ReportingComprehensive Annual Financial Report
Table of Contents
For the Fiscal Year Ended June 30, 2011
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
xi
Certificate of Achievement for Excellence in Financial Reporting
xii
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
17
Government-wide Financial Statements
Statement of Net Assets
18
Statement of Activities
19
Fund Financial Statements
Governmental Funds Financial Statements
Balance Sheet
20
Statement of Revenues, Expenditures, and Changes in Fund Balances
22
Reconciliation of the Statement of Revenues, Expenditures, and Changes in
Fund Balances of Governmental Funds to the Statement of Activities
24
Proprietary Funds Financial Statements
Statement of Net Assets
26
Statement of Revenues, Expenses, and Changes in Fund Net Assets
27
Statement of Cash Flows
28
Fiduciary Funds Financial Statements
Statement of Fiduciary Net Assets
30
Statement of Changes in Fiduciary Net Assets
31
Basic Financial Statements – Notes
35
Required Supplementary Information
Budgetary Comparison Schedules – General Fund and Major Special Revenue Fund
General Fund
73
Detention Operations Fund
75
Note to Budgetary Comparison Schedules
76 Table of Contents (Continued)
For the Fiscal Year Ended June 30, 2011
ii
Page
Schedule of Agent Retirement Plans’ Funding Progress
77
Note to Schedule of Agent Retirement Plans’ Funding Progress
78
Modified Approach for Infrastructure Assets
79
Combining and Individual Fund Statements and Schedules
Listing of Nonmajor Governmental Funds
83
Governmental Funds
Combining Balance Sheet – Nonmajor Governmental Funds
90
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances –
Nonmajor Governmental Funds
106
Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget
and Actual
Special Revenue Funds
Adult Probation Fees Fund
123
Adult Probation Grants Fund
124
Air Quality Fees Fund
125
Air Quality Grants Fund
126
Animal Control Field Operations Fund
127
Animal Control Grants Fund
128
Animal Control License/Shelter Fund
129
Ballpark Operations Fund
130
Cactus League Operations Fund
131
CDBG Housing Trust Fund
132
Check Enforcement Program Fund
133
Child Support Enhancement Fund
134
Children‘s Issues Education Fund
135
Clerk of Court Fill the Gap Fund
136
Clerk of the Court EDMS Fund
137
Clerk of the Court Grants Fund
138
Conciliation Court Fees Fund
139
Correctional Health Grants Fund
140
County Attorney Fill the Gap Fund
141
County Attorney Grants Fund
142
County Attorney RICO Fund
143
County School Indirect Cost Fund
144
Court Document Retrieval Fund
145
Criminal Justice Enhancement Fund
146
Del Webb Special Revenue Fund
147
Diversion Fund
148
Domestic Relations Mediation Education Fund
149
Elections Grants Fund
150
Emergency Management Fund
151
Environmental Services Environmental Health Fund
152
Environmental Services Grants Fund
153
Expedited Child Support Fund
154
Table of Contents (Continued)
For the Fiscal Year Ended June 30, 2011
iii
Page
Special Revenue Funds (Continued)
Flood Control Fund
155
Flood Control Grants Fund
156
General Government Grants Fund
157
Human Services Grants Fund
158
Inmate Health Services Fund
159
Inmate Services Fund
160
Judicial Enhancement Fund
161
Justice Court Judicial Enhancement Fund
162
Justice Court Special Revenue Fund
163
Justice Courts Photo Enhancement Fund
164
Juvenile Probation Diversion Fund
165
Juvenile Probation Grants Fund
166
Juvenile Probation Special Fees Fund
167
Juvenile Restitution Fund
168
Lake Pleasant Recreation Services Fund
169
Law Library Fees Fund
170
Legal Defender Fill the Gap Fund
171
Library District Fund
172
Library District Grants Fund
173
Medical Examiner Grants Fund
174
Palo Verde Fund
175
Parks and Recreation Grants Fund
176
Parks Donations Fund
177
Parks Enhancement Fund
178
Parks Souvenir Fund
179
Parks Spur Cross Ranch Conservation Fund
180
Planning and Development Fees Fund
181
Probate Fees Fund
182
Public Defender Fill the Gap Fund
183
Public Defender Grants Fund
184
Public Defender Training Fund
185
Public Health Fund
186
Public Health Fees Fund
187
Recorder‘s Surcharge Fund
188
School Communication Expense Fund
189
School Grants Fund
190
School Transportation Fund
191
Sheriff Donations Fund
192
Sheriff Grants Fund
193
Sheriff Jail Enhancement Fund
194
Sheriff RICO Fund
195
Small School Service Fund
196
Solid Waste Grants Fund
197
Solid Waste Management Fund
198
Spousal Maintenance Enforcement Enhancement Fund
199
Superior Court Fill the Gap Fund
200
Taxpayer Information Fund
201
Transportation Grants Fund
202
Transportation Operations Fund
203
Trial Court Grants Fund
204
Trial Court Special Revenue Fund
205
Victim Compensation Interest Fund
206
Victim Compensation Restitution Fund
207
Table of Contents (Continued)
For the Fiscal Year Ended June 30, 2011
iv
Page
Special Revenue Funds (Continued)
Victim Location Fund
208
Waste Management Fund
209
Waste Tire Fund
210
Debt Service Funds
County Improvement Debt Fund
211
Stadium District Debt Service Fund
212
Capital Projects Funds
County Improvement Fund
213
Detention Capital Projects Fund
214
Detention Technology Capital Projects Fund
215
Flood Control Capital Projects Fund
216
General Fund County Improvements Fund
217
Intergovernmental Capital Projects Fund
218
Library District Capital Improvement Fund
219
Long Term Project Reserve Fund
220
Technology Capital Projects Fund
221
Transportation Capital Projects Fund
222
Schedule of Capital Projects – Budget and Actual
All Capital Improvement Projects
223
Internal Service Funds
Listing of Internal Service Funds
231
Combining Statement of Net Assets
232
Combining Statement of Revenues, Expenses, and Changes in Net Assets
234
Combining Statement of Cash Flows
236
Agency Fund
Listing of Agency Fund
241
Statement of Changes in Assets and Liabilities
242
Statistical Section
Listing of Statistical Information
245
Net Assets by Component
246
Changes in Net Assets
247
Fund Balances, Governmental Funds
249
Changes in Fund Balances, Governmental Funds
250
Tax Revenues by Source, Governmental Funds
252
Assessed Value and Estimated Market Value of Taxable Property
253
Direct and Overlapping Property Tax Rates
254
Principal Property Tax Payers
255
Property Tax Levies and Collections
256
Ratios of Outstanding Debt by Type
257
Legal Debt Margin Information
258
Pledged Revenue Coverage
259
Demographic and Economic Statistics
260
Principal Employers
261
Budgeted Full-time Equivalent County Employees by Function/Program
262
Operating Indicators by Function/Program
263
Capital Asset Statistics by Function/Program
264
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
Shelby L. Scharbach
Organizational Chart
vi
Appointed
Elected
Maricopa County Citizens
County
Manager
Legal Defender
Risk Management
Community
Development
Human Services
Board of
Supervisors
Clerk of the
Court
Treasurer
Sheriff
Constables
County
Attorney
Assessor
Superintendent
of Schools
Medical
Examiner
Contract Counsel
Public Defender
Legal Advocate
Integrated Criminal Justice Systems
Correctional
Health
Public Health
Workforce Management &
Development
Research and
Reporting
Health Care Programs
Non-
Departmental
Employee Health
Initiatives
Management and
Budget
Materials
Management
Animal Care and
Control
Regional Development
Services Assistant County Manager
Recorder
Elections
STAR Call Center
Community Collaboration Assistant County Manager
Public Works
Assistant County
Manager
Solid
Waste
Transportation
Environmental
Services
Equipment
Services
Facilities
Management
Emergency
Management
Planning and
Development
Internal Audit
Clerk of the Board
Enterprise
Technology
Juvenile Defender
General
Counsel
Air Quality
Special
Litigation
Deputy County
Manager
Public Defense
Services
County Attorney
Civil Division
Finance
Public Fiduciary
Parks and
Recreation 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
December 19, 2011
The Honorable Board of Supervisors
Maricopa County
County Administration Building
301 W. Jefferson Street
Phoenix, AZ 85003
Arizona Revised Statute (A.R.S.) §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, 2011.
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 assets from loss, theft, or misuse and to compile sufficient reliable information for preparation of Maricopa County‘s financial statements in conformity with 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, 2011, 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 an unqualified opinion on the Maricopa County financial statements for the fiscal year ended June 30, 2011. The auditors concluded that the financial statements 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
GAAP requires management‘s discussion and analysis (MD&A) immediately following the independent auditor‘s report and provides a narrative introduction, overview, and analysis of the basic financial statements. This MD&A complements this letter of transmittal and should be read in conjunction with it.
County Profile
Maricopa County was established on February 14, 1871 and is located in the south-central portion of the State of Arizona. According to Arizona Department of Commerce, at July 1, 2011, Maricopa County contained 59.7 percent of the State‘s total population (www.azcommerce.com). The County occupies 9,224 square miles of which 2,145 square miles are incorporated. Phoenix is the capital of Arizona as well as the county seat for Maricopa County.
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. The 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 offers a wide variety of governmental services, including:
 Community Resources: Library District, Stadium District, and Superintendent of Schools
 County Administration: Board of Supervisors, County Administrator, Assessor‘s Office, Clerk of the Board, Elections, Finance, Human Resources, Information Technology, Treasurer‘s Office and Facilities Management
 Justice and Law Enforcement: Clerk of the Superior Court, County Attorney, Trial Court, Adult Probation, Juvenile Probation, Sheriff‘s Department, Public Defender and Public Fiduciary
 Medical Services: Public Health, Human Services and Medical Examiner
 Public Works: Flood Control District, Transportation Department and Solid Waste Management
The annual budget serves as the foundation for Maricopa County‘s financial planning and control. The County is required by A.R.S. §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/.
Economic Outlook
Maricopa County has a variety of industries within its boundaries with the majority comprised of high tech, financial, and service industries. Some of the major employers located in the state include Wal-Mart, Banner Health Systems, Wells Fargo & Co. and various local governments (The Book of Lists).
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 several 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 Waste Management Phoenix Open golf tournament, and Phoenix International Raceway. Cities within Maricopa County also host college bowl games such as the Fiesta Bowl and the Insight Bowl.
Arizona is slowly starting to recover from the economic downturn; however, a full recovery is still several years away (Elliot D. Pollack & Co.). According to the W.P. Carey School of Business, it will take Arizona three to four years to return to pre-recession levels of economic activity and four to five years to once again be among the national leaders in growth (http://knowledge.wpcarey.asu.edu). Maricopa County‘s unemployment rate is 7.9 percent as of October 2011, which remains below both the State of Arizona and the United States unemployment rates of 9.0 percent (www.workforce.az.gov).
Financial Policies and Long-Term Financial Planning
Financial Planning – Maricopa County has a fiscally conservative management philosophy, which has allowed the County to be financially successful. Maricopa County prepares a five-year financial forecast, with the assistance of an economist, which is updated on a quarterly basis for several major funds, including the General Fund and Detention Operations Fund. The five-year forecast provides a conservative estimate of the County‘s fiscal condition given realistic economic trends, current Board policies, and existing laws. The forecast does not incorporate anticipated policy changes, spending priorities, or proposed new revenue sources.
Capital Improvement Program – Maricopa County‘s Capital Improvement Program (CIP) identifies capital projects to be completed over the next five years. Because these projects typically span more than one fiscal year, the plans are updated annually to track existing projects, identify new projects, and update funding estimates and forecasts. It is the County‘s policy that new capital projects will be undertaken only if future operating revenues are reasonably estimated to be sufficient to support associated future operating costs. Operating costs associated with new facilities are budgeted by the user department in conjunction with the Facilities Management Department. Estimated operating costs, as well as anticipated savings in lease costs and operating costs of facilities to be replaced are factored into the County‘s ten-year financial forecast.
Debt Management – Maricopa County utilizes a modified ―pay as you go‖ financial policy for large capital improvement projects and other infrastructure. The County pays cash for many capital improvements, or utilizes lease reversions or other funding sources from the General Fund to pay for large dollar projects.
Cash Management – Maricopa County maintains deposits and investments in the Treasurer‘s Pool and outside of the Treasurer‘s Pool. The Treasurer‘s Pool invests all idle monies not specifically invested for a fund or program. In addition, the Treasurer determines the fair value of those pooled investments monthly and at June 30. Deposits and investments held outside of the Treasurer‘s Investment Pool represent a small portion of the County‘s total investments.
It is the County‘s investment policy to: collateralize all deposits by at least 101 percent of the deposits not covered by depository insurance; preserve the principal value and the interest income of an investment; hold investments to maturity, where practical, to avoid any loss on investments resulting from an early sale or retirement of an investment; and require all of the Treasurer‘s securities be held by the agent or trust department and in the County‘s name.
Expenditure Limitation – 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 x
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.
Awards and Acknowledgements
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Maricopa County for its comprehensive annual financial report for the fiscal year ended June 30, 2010. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both U.S. general accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program‘s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
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
Shelby L. Scharbach
County Manager
Chief Financial Officer xi
xii
FINANCIAL SECTION
Independent Auditors' Report
Management's Discussion and Analysis
Basic Financial Statements
Basic Financial Statements - Notes
Required Supplementary Information
Budgetary Comparison Schedules - General Fund and Major
Special Revenue Fund
Note to Budgetary Comparison Schedules
Schedule of Agent Retirement Plans' Funding Progress
Modified Approach for Infrastructure Assets
Combining and Individual Fund Statements and Schedules
Nonmajor Governmental Funds
Internal Service Funds
Agency Fund
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, each major fund, and aggregate remaining fund information of Maricopa County as of and for the year ended June 30, 2011, which collectively comprise the County’s basic financial statements as listed in the table of contents.
These financial statements are the responsibility of 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 three departments, which account for the following percentages of the assets and liabilities of the opinion units affected:
Opinion Unit/Department Assets Liabilities Government-wide Statements
Governmental activities:
Stadium District 6.43% 8.01% Risk Management Trust 1.27% 24.91% Employee Benefits Trust 1.17% 3.34% Fund Statements
Aggregate remaining fund information:
Stadium District 0.99% 0.00% Risk Management Trust 2.06% 48.29% Employee Benefits Trust 1.91% 6.48% 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 the Stadium District, which
includes the Ballpark Operations and Cactus League Operations Special Revenue Funds, the Stadium District Debt Service Fund, and the Long Term Project Reserve Capital Projects Fund; and the Risk
Management and Employee Benefits Trust Internal Service Funds, are based solely on the reports of the other auditors.
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.
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,
each major fund, and aggregate remaining fund information of Maricopa County as of June 30, 2011, 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 Note 1, the County implemented the provisions of the Governmental Accounting
Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, for
the year ended June 30, 2011, which represents a change in accounting principle.
The Management’s Discussion and Analysis on pages 3 through 13, the Budgetary Comparison Schedules on pages 73 through 76, the Schedule of Agent Retirement Plans’ Funding Progress on pages
77 and 78, and the Infrastructure Assets information on page 79 are not required parts 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 the 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
December 19, 2011 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 $4,490.5 million (net assets), an increase of 3.9 percent from the prior year. Of this amount, $766.4 million (unrestricted net assets) may be used to meet the County‘s ongoing obligations to citizens and creditors.
 The County‘s total net assets as reported in the Statement of Activities increased by $166.9 million from the prior year. The County‘s primary sources of revenue are from taxes, charges for services, and grants and contributions.
 The County‘s governmental funds reported combined fund balances of $1,494.8 million, a decrease in fund balance of $28.3 million over the prior fiscal year. Approximately 98.5 percent of the combined fund balances or $1,471.6 million is spendable and available to meet the County‘s current and future needs.
Invested in capital assets, net of related debt - $3,096.6 (69%)
Restricted - $627.5 (14%)
Unrestricted -
$766.4 (17%)
Composition of Net Assets (in millions)
Taxes - $1,228.1 (65%)
Charges for Services - $274.6 (15%)
Operating Grants & Contributions - $286.4 (15%)
Capital Grants & Contributions - $58.9 (3%)
Other - $32.7 (2%)
Revenue Sources (in millions) Management’s Discussion and Analysis (Continued)
4
 Spendable fund balance for the General Fund decreased by 16.4 percent to $409.0 million; approximately 50.6 percent of total General Fund expenditures. See page 8 for a description of spendable fund balance. 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.
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 90.
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 County has no business-type activities.
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 Housing Authority of Maricopa County, the 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 are reported as blended component units. The County has no discretely presented component units.
The Government-wide financial statements can be found on pages 18-19 of this report.
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.
Management’s Discussion and Analysis (Continued)
5
 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 five 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 Fund, Detention Operations Fund, Detention Capital Projects Fund, County Improvement Debt Fund, and General Fund County Improvements Fund.
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 90 of this report.
The governmental funds financial statements can be found on pages 20-24 of this report.
 Proprietary funds are used to account for the County‘s internal service funds. 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.
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 232 of this report.
The proprietary fund financial statements can be found on pages 26-28 of this report.
 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 30-31 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 35-69 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 Note to Budgetary Comparison Schedules. Also presented is the schedule of funding progress for the County‘s two agent Management’s Discussion and Analysis (Continued)
6
retirement plans and infrastructure assets reported using the modified approach. Required supplementary information can be found on pages 73-79 of this report.
Government-wide Financial Analysis
This is the tenth fiscal year that the County applied Governmental Accounting Standards Board (GASB) Statement No. 34.
Net Assets
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, 2011, as compared to the prior year.
Statement of Net Assets
As of June 30
(in millions)
Governmental
Activities
2011
2010*
% Chg P/Y
Current and other assets
$ 1,789.7
$ 1,814.7
(1.4)%
Capital assets
3,236.5
3,040.2
6.5
Total assets
5,026.2
4,854.9
3.5
Current liabilities
186.9
189.3
(1.3)
Long-term liabilities
348.8
342.0
2.0
Total liabilities
535.7
531.3
0.8
Net assets
Invested in capital assets,
net of related debt
3,096.6
2,870.0
7.9
Restricted
627.5
605.0
3.7
Unrestricted
766.4
848.6
(9.7)
Total net assets
$ 4,490.5
$ 4,323.6
3.9
* Assets, liabilities, and net assets for fiscal year 2010 were adjusted by $22.8 million for inclusion of and restatement to the Housing Authority of Maricopa County and corrections of prior periods related to the Employee Health Initiatives Fund fully-insured benefit products. See Note 4 – Beginning Balances Restated for additional information.
By far, the largest portion - $3.1 billion or 69.0 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. Net assets invested in capital assets increased by $226.6 million due to an increase in net capital assets of $196.3 million and a decrease in capital related debt, net of unspent proceeds, of $30.3 million. The decrease in capital related debt was a result of the early payment of several capital lease agreements totaling $12.5 million, as well as the payment of regularly scheduled debt payments. The large increase in capital assets is mainly attributed to an increase in construction in progress, land, and infrastructure of $122.2, $42.0 and $43.8 million, respectively. The increase in construction in progress is primarily due to the Criminal Court Tower Project, for which the County had $121.4 million in project additions during fiscal year 2011. The increase in land and infrastructure is due to an increase in Transportation infrastructure-related land and infrastructure assets of $37.1 and $30.2 million, respectively, and an increase in Flood Control District infrastructure of $18.6 million.
The County uses 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.
Management’s Discussion and Analysis (Continued)
7
The second component of the County‘s total net assets, $627.5 million or approximately 14.0 percent, represents resources that are subject to external restrictions on how they may be used. This component increased by $22.5 million from the prior year. This increase can be attributed to revenues exceeding expenses for the fiscal year. Although revenues increased from the prior fiscal year, the economic environment is still not fully recovered. The County was able to ensure that expenses did not exceed revenues by employing a conservative approach to forecasting and budgeting. The County has continued to minimize the negative impact of the economy by utilizing budget balancing tactics, while still providing the citizens with mandated services.
The final component consists of unrestricted net assets, $766.4 million or 17.0 percent, and may be used to meet the County‘s ongoing obligations. Unrestricted net assets decreased from fiscal year 2010 by $90.3 million. This decrease is a result of an increase in General Fund expenditures of $40.4 million (see page 9 for further explanation) and an increase in Risk Management Fund unpaid liabilities from the prior year of $45.5 million. The increase in Risk Management Fund unpaid liabilities is a result of new claims in addition to new lines of businesses being incorporated into the fund due to a revision in the Risk Management Trust.
Changes in Net Assets
As discussed previously, the County‘s total net assets of $4.5 billion increased by $166.9 million as reported in the Statement of Activities. The following table reflects the condensed Statement of Activities of the County for the fiscal year 2011 compared to the prior year and indicates the changes in net assets for governmental activities:
Governmental
Activities
% Chg
2011
2010*
P/Y
Revenues:
Program revenues:
Charges for services
$ 274.6
$ 269.0
2.1%
Operating grants and contributions
286.4
255.6
12.1
Capital grants and contributions
58.9
95.3
(38.2)
General revenues:
Taxes
1,228.1
1,207.3
1.7
Other
32.7
36.3
(9.9)
Total Revenues
1,880.7
1,863.5
0.9
Expenses:
General government
248.4
235.2
5.6
Public safety
893.8
888.9
0.6
Highways and streets
123.6
83.2
48.6
Health, welfare and sanitation
387.9
331.3
17.1
Other**
60.2
52.3
15.1
Total Expenses
1,713.9
1,590.9
7.7
Change in net assets
166.9
272.5
(38.8)
Net assets – beginning, as restated
4,323.6
4,051.1
6.7
Net assets – ending
$4,490.5
$ 4,323.6
3.9
* Net assets for fiscal year 2010 were adjusted by $22.8 million for inclusion of and restatement to the Housing Authority of Maricopa County and corrections of prior periods related to the Employee Health Initiatives Fund fully-insured benefit products. See Note 4 – Beginning Balances Restated for additional information.
** The functions of culture and recreation, and education along with interest on long-term debt are shown in the condensed Statement of Activities above as other expenses.
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 Management’s Discussion and Analysis (Continued)
8
estimated useful lives and reported as depreciation expense. Capital outlay expenditures exceeded depreciation expense in the current period by $196.9 million.
In the government-wide Statement of Activities, the significant revenues reported included taxes (County-levied, general sales, and vehicle license taxes), charges for services, and operating grants, which represent 65.3, 14.6 and 15.2 percent, respectively, of total governmental activities revenues for fiscal year 2011. Tax revenues in total increased $20.7 million from the prior year mainly due to increase in sales taxes of $19.2 million as a result of an improving economy. Charges for services revenue increased $5.6 million from the prior year primarily due to an increase in Air Quality and Environmental Services fees revenue of $2.4 million and an inclusion of intergovernmental revenue of $3.4 million for the Housing Authority of Maricopa County, which was reported as a discretely presented component unit in prior years. Operating grants revenue increased $30.8 million from the prior year primarily from an increase in federal grant monies from the American Recovery and Reinvestment Act.
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. Total expenses increased $122.9 million or 7.7 percent from the prior fiscal year. The most significant fluctuations were in the general government, highways and streets; and health, welfare and sanitation functions, with net changes of $13.2, $40.4, and $56.6 million, respectively. The increase in general government is primarily attributed to $15.0 million increase in loss and loss expenses in the Risk Management Fund. The increase in highways and streets expenses is mainly due to an increase in loss on disposal of capital assets as a result of Transportation infrastructure asset deletions of $32.4 million. The increase in health, welfare, and sanitation expenses is due to an increase in total ALTCS contributions of $27.3 million (see page 9 for further information) and an inclusion of expenditures of $20.9 million for the Housing Authority of Maricopa County, which was reported as a discretely presented component unit in prior years.
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. For the year ended June 30, 2011, the County implemented GASB 54, Fund Balance Reporting and Governmental Fund Type Definitions, which modified the fund balance classifications (see Note 1 - Summary of Significant Accounting Policies and Note 2 – Fund Balance Classifications of the Governmental Funds). In order to provide comparative discussion of fund balances to the prior year, the analysis below of ‗spendable‘ balance represents restricted, committed, assigned, and unassigned fund balance, which in prior year was classified as unreserved.
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, spendable 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, 2011, the governmental funds reported combined fund balances of $1,494.8 million and a decrease in fund balance of $28.3 million from the prior fiscal year. Approximately 98.5 percent of the combined fund balances or $1,471.6 million is available to meet the County‘s current and future needs (spendable fund balance). The remaining fund balance is nonspendable for inventories and intergovernmental loans.
The following funds are the County‘s major governmental funds:
General Fund
The General Fund is the County‘s primary operating fund. At the end of the current fiscal year, spendable fund balance of the General Fund was $409.0 million, while total fund balance was $429.4 million. This represents a decrease in the spendable fund balance from the prior year of $80.0 million, or 16.4 percent. Management’s Discussion and Analysis (Continued)
9
As a measure of the General Fund‘s liquidity, it may be useful to compare both spendable fund balance and total fund balance to the total fund expenditures. Spendable fund balance represents 50.6 percent of the total fiscal year 2011 General Fund expenditures, while total fund balance represents 53.2 percent of that same amount. These ratios indicate a strong fund balance position in comparison to expenditures.
During fiscal year 2011, the General Fund experienced a change in fund balance of ($80.1) million, a decrease in change in fund balance of $158.7 million from the prior fiscal year. While revenues stayed flat in comparison to prior year, operating transfers out increased $131.4 million and expenditures increased $40.4 million. The increase in operating transfers out is primarily due transfers to the Technology Capital Improvement Fund for technology related projects of $151.7 million. The increase in expenditures is primarily a result of an increase in total ALTCS contributions of $27.3 million. Total ALTCS contributions increased as a result of a reduction in Federal Medical Assistance Percentages (FMAP) stimulus monies of $31.8 million from the prior fiscal year.
Detention Operations Fund
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 and detention facilities. At the end of the current fiscal year, total fund balance of the Detention Operations Fund was $56.9 million, of which 99.7 percent is restricted and .3 percent is committed, both are considered spendable. This was a decrease in total fund balance of $163.7 million, or 74.2 percent, from the prior fiscal year. The decrease in fund balance can be attributed to an increase in operating transfers out of $204.7 million as a result of operating transfers out to the Detention Capital Projects Fund and Detention Technology Capital Improvement Fund of $197.3 and $10 million, respectively. Operating transfers in from the General Fund for maintenance of effort were $176.5 million. The amount to be transferred to the Detention Capital Projects Fund and the Detention Technology Capital Improvement Fund for any given year is determined through the budget planning process.
County Improvement Debt Fund
The County Improvement Debt Fund is a debt service fund that accounts for the debt service on the Lease Revenue Bonds, Series 2001; the Lease Revenue Refunding Bonds, Series 2003; Lease Revenue Bonds, Series 2007A; Lease Revenue Refunding Bonds, Series 2007B; and other long-term obligations. At the end of the current fiscal year, spendable fund balance of the County Improvement Debt Fund was $6.8 million, of which $6.7 million is restricted for debt service. This represents a decrease of $2.1 million from the prior fiscal year and is attributed to the continued payment of debt service obligations. As no new debt issuances occurred during the fiscal year, the primary activity in this fund is debt service payments.
Detention Capital Projects Fund
The Detention Capital Projects Fund is a capital projects fund that accounts for construction associated with the 1/5 of one-cent sales tax approved by voters in the General Election on November 3, 1998, and extended by the voters on November 5, 2002. Funding is provided by transfers from the Detention Operations Fund for construction of the adult and juvenile detention facilities. At the end of the current fiscal year, fund balance of the Detention Capital Projects Fund was $266.2 million, all of which is Management’s Discussion and Analysis (Continued)
10
restricted and considered spendable. The fund balance in this fund increased $183.9 million from the prior fiscal year, which is attributed to transfers in from the Detention Operations Fund of $197.3 million.
General Fund County Improvements Fund
The General Fund County Improvements Fund is a capital projects fund that accounts for capital projects funded by transfers from the General Fund. Projects that are currently funded include justice, administrative and parks facilities. At the end of the current fiscal year, fund balance of the General Fund County Improvements Fund was $282.1 million, all of which is committed and considered spendable. The fund balance in this fund decreased $105.4 million from the prior fiscal year, which is attributed to an increase in capital outlay expenditures of $90.1 million. The increase in capital outlay is a result of expenditures incurred for the Criminal Court Tower project of $122.4 million in fiscal year 2011.
General Fund Budgetary Highlights
The difference between the original budget and the final amended budget for the General Fund resulted in no significant change in revenues and an increase in expenditures of $1.2 million. A significant favorable expenditure variance, as compared to the budget, was incurred in the General Government Department (general government function) and Health Care Programs Department (health, welfare, and sanitation function) of $126.0 million and $34.9 million, respectively. These savings were a result of the General Government Department‘s less than anticipated spending from the contingency and reserve funds and the Health Care Program Department‘s reduction in contributions to and reimbursements from the Arizona Long Term Care System and the Arizona Health Care Cost Containment System. None of the variances between the budget and 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 as of June 30, 2011, was $3.2 billion (net of accumulated depreciation). Capital assets include land, buildings and improvements, infrastructure, machinery and equipment, and construction in progress. 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 12 – 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, 2011, Flood Control District infrastructure-related assets consisted of land, infrastructure and construction in progress of $248.4, $253.9, and $165.9 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 2011, the condition level of both systems was within the established condition level. Actual maintenance/preservation costs varied by ($5,488,295) and $2,366,589 from the estimated costs for the roadway and bridge system, respectively. Roadway maintenance and preservation costs exceeded estimated due to mill and rubber overlay projects that were not included in the estimated costs. Bridge System maintenance projects were met with environmental delays in fiscal year 2011. As a result preservation and maintenance projects were delayed for several months and funds will rollover to fiscal year 2012. See Required Supplementary Information on page 79 for additional information. At June 30, 2011, Transportation Department infrastructure-related assets consisted of land, infrastructure and construction in progress of $330.0, $696.6, and $34.0 million, respectively. Management’s Discussion and Analysis (Continued)
11
Capital assets for governmental activities are presented below (in millions) to illustrate changes from the prior year:
Governmental Activities
2011
2010*
$ Change
% Change
Land
$ 713.3
$ 671.3
$42.0
6.3%
Infrastructure
696.6
666.4
30.2
4.5
Buildings and improvements (net of
accumulated depreciation)
1,090.6
1,098.1
(7.5)
(0.7)
Machinery and equipment
(net of accumulated depreciation)
84.6
88.9
(4.3)
(4.8)
Construction in progress
474.9
352.7
122.2
34.6
Infrastructure (net of accumulated
depreciation)
176.5
162.8
13.7
8.4
Totals
$ 3,236.5
$ 3,040.2
196.3
6.5
* The capital asset amounts for fiscal year 2010 were restated for inclusion of and restatement to the Housing Authority of Maricopa County. See Note 4 – Beginning Balances Restated for additional information.
Capital assets, net of accumulated depreciation, increased by $196.3 million, or 6.5 percent, from the prior year. The most significant impact on the increase in capital assets for the fiscal year ended June 30, 2011, was the increase in construction in progress and infrastructure-related capital assets of $122.2 and $90.4 million, respectively, from the prior fiscal year. During fiscal year 2011, Transportation Department and Flood Control District infrastructure assets changed $58.9 and $30.7 million, respectively, from the prior year and accounted for changes in land, construction in progress, and infrastructure of $42.0, ($1.2) and $48.8 million, respectively. In addition, non-infrastructure-related construction in progress increased significantly due to the Criminal Court Tower Project, which had additions of $121.4 million during fiscal year 2011. The decreases noted in buildings and improvements and machinery and equipment are due to annual depreciation expense charged to those asset categories.
Long-Term Liabilities
Maricopa County has the following bond ratings:
Debt Instrument & Rating Agency
Rating
Date Awarded
General Obligation Bonds (implied or issuer credit rating)
Fitch Ratings
AAA
April 2011
Standard & Poor's
AAA
March 2011
Moody's Investor Services
Aa1
April 2009
Lease Revenue Bonds
Fitch Ratings
AA+
April 2011
Standard & Poor's
AA+
March 2011
Moody's Investor Services
Aa1
May 2010
Certificates of Participation
Fitch Ratings
AA+
April 2011
Moody's Investor Services
Aa2
May 2010
At June 30, 2011, the County had total long-term liabilities (noncurrent liabilities due within one year and more than one year) outstanding of $348.8 million, which represents a $7.3 million increase from the prior year balance of $341.5 million. The increase is attributable to an increase in reported and incurred but not reported claims of $45.5 million as a result of an increase in Risk Management Fund unpaid claims liabilities from the prior year of $41.8 million. The increase in Risk Management Fund unpaid claims liabilities is a result of new claims in addition to new lines of businesses being incorporated into the fund due to a revision in the Risk Management Trust. The increase in unpaid claims liabilities was offset by debt service payments made during the fiscal year of $31.7 million. The majority of the debt service payments made during fiscal year 2011 were for lease revenue bonds ($11.1 million), Stadium District revenue bonds ($3.4 million), and capital leases ($14.5 million). The largest components of long-term Management’s Discussion and Analysis (Continued)
12
liabilities at June 30, 2011, consisted of lease revenue bonds - $142.1 million, Stadium District revenue bonds - $34.5 million, and reported claims and incurred but not reported claims - $144.4 million.
Lease revenue bonds applicable to governmental activities are paid from the County Improvement Debt Fund (debt service fund), which is funded by transfers from the General Fund. At June 30, 2011, the fund balance in the County Improvement Debt Fund to pay future liabilities was $6.8 million.
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 $58,225,000 (par value) of which $34,515,000 remains outstanding.
Capital leases applicable to governmental activities of $433 thousand have been entered into for various lease-purchase agreements, which are callable at par plus accrued interest. The decrease of $14.5 million from the prior year is primarily related to the early payoff of various capital leases.
Reported and incurred but not reported claims applicable to governmental activities of $144.4 million are reported in the Risk Management and Employee Benefits Trust funds (internal service funds). This is an increase of $45.5 million from the prior year as noted above. This liability is 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 14 – Long-Term Liabilities and Note 18 – Risk Management).
Economic Factors and Next Year’s Budget and Rates
 Although the recession has ended, it will take Arizona three to four years to return to pre-recession levels of economic activity and four to five years to once again be among the national leaders in growth (http://knowledge.wpcarey.asu.edu).
 The United States Census Bureau reports that Maricopa County‘s population decreased by 5.1 percent from fiscal year 2009 to 2010 (www.census.gov). The unemployment rate in Maricopa County, according to Arizona Workforce, in October 2011 was 7.9 percent, which remains below both the state and national average of 9.0 percent (www.workforce.az.gov).
 As reported by the Arizona Department of Commerce, Maricopa County‘s population increased 30.2 percent from July 1, 2000 to July 1, 2010, which is higher than the United States‘ overall population increase of 9.5 percent for the same time period (www.azcommerce.com).
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 County policies and existing laws. The forecast was instrumental in the determination of the fiscal year 2012 budget and tax rate, which took into account several significant trends:
 Assessed property tax values are estimated to continue to decline though fiscal year 2015 with only a 2.4 percent anticipated increase in fiscal 2016.
 Annual collections of State Shared Sales Tax, Vehicle License Tax, Highway User Revenues and County Jail Excise Tax revenues are expected to remain flat in fiscal year 2011-12 and are not expected to regain the peak levels of 2004-2006 until after fiscal year 2015.
 Staggering State budget deficits continue to pose a significant risk to Maricopa County‘s fiscal stability. The forecast assumes continuation of the $26.4 million fiscal year 2012 mandated contribution to the State, along with sizable increases in mandated healthcare contributions, in particular for the ALTCS program and reduction of shared revenues for transportation services. Management’s Discussion and Analysis (Continued)
13
The forecast also incorporates the shift of inmates from the State to the County Jail system beginning in 2013.
At the end of the fiscal year, total fund balance for the General Fund was $429.4 million, or 53.2 percent of total General Fund expenditures, of which $409.0 million is considered spendable. Spendable fund balance decreased by 16.4 percent from the prior year. See page 8 for further information. 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. 14
Financial Section
Basic Financial Statements
Basic Financial Statements
Maricopa County
Definitions of Government-wide Financial Statements and
Listing of Major Funds
17
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.
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 Revenue Bonds, Series 2007A; Lease Revenue Refunding Bonds, Series 2007B; and other long-term obligations.
Capital Projects Funds
Detention Capital Projects Fund – Accounts for construction associated with the 1/5 of one-cent sales tax approved by voters in the General Election on November 3, 1998, and extended by voters on November 5, 2002. Funding is provided by transfers from the Detention Operations Fund for construction of the adult and juvenile detention facilities.
General Fund County Improvements Fund – was established to fund current and future capital projects. Fund assets may be used to pay directly for capital projects or may be appropriated by the Board of Supervisors for debt service. None of the funds has been pledged for debt service, and fund assets may be transferred by the Board of Supervisors at any time for any other County purpose. Maricopa County
Statement of Net Assets
June 30, 2011
18
PRIMARY
GOVERNMENT
Governmental
Activities
ASSETS
Cash in bank and on hand
$ 4,457,165
Cash and investments held by County Treasurer
1,529,186,626
Receivables (net of allowances for uncollectibles)
24,889,746
Due from other governmental units
156,441,174
Inventories
9,577,121
Prepaids
1,987,738
Deferred costs
2,708,848
Miscellaneous
2,256,344
Intergovernmental loans
15,433,000
Cash and investments held by trustee – restricted
42,787,763
Capital assets:
Land
713,342,281
Buildings and improvements
1,503,399,780
Machinery and equipment
302,854,871
Infrastructure – nondepreciable
696,584,454
Infrastructure – depreciable
253,889,374
Construction in progress
474,960,416
Less: accumulated depreciation
(708,535,755)
Total assets
5,026,220,946
LIABILITIES
Accounts payable
77,195,914
Accrued liabilities
7,004,881
Employee compensation payable
73,653,738
Interest payable
3,420,107
Unearned revenue
22,995,476
Advances
746,552
Deposits held for other parties
1,836,549
Noncurrent liabilities:
Due within one year
69,742,662
Due in more than one year
279,099,063
Total liabilities
535,694,942
NET ASSETS
Invested in capital assets, net of related debt
3,096,564,562
Restricted for:
General government
6,172,000
Public safety
457,851,073
Highways and streets
73,941,725
Health, welfare and sanitation
25,178,713
Culture and recreation
43,296,644
Education
4,984,386
Debt service
16,102,646
Unrestricted
766,434,255
Total net assets
$ 4,490,526,004
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, 2011
19
Net (Expense)
Program Revenues
Operating
Capital
Revenue and
Charges for
Grants and
Grants and
Changes in Net
Expenses
Services
Contributions
Contributions
Assets
Functions/Programs
Primary government:
Governmental activities:
General government
$ 248,394,846
$ 27,698,094
$ 7,400,465
$
$ (213,296,287)
Public safety
893,760,377
152,507,151
40,608,182
253,947
(700,391,097)
Highways and streets
123,611,300
28,130,243
104,114,028
58,525,073
67,158,044
Health, welfare and sanitation
387,892,315
54,135,715
127,373,751
12,000
(206,370,849)
Culture and recreation
43,325,625
11,928,461
648,713
68,909
(30,679,542)
Education
9,219,564
215,723
6,302,171
(2,701,670)
Interest on long-term debt
7,640,462
(7,640,462)
Total governmental activities
1,713,844,489
274,615,387
286,447,310
58,859,929
(1,093,921,863)
Total primary government
$ 1,713,844,489
$ 274,615,387
$ 286,447,310
$ 58,859,929
(1,093,921,863)
General revenues:
Taxes:
Property taxes, levied for general purposes
518,956,222
Property taxes, levied for Flood Control District
66,723,260
Property taxes, levied for Library District
20,385,799
Property taxes, levied for Street Lighting District
5,432,863
Share of state sales taxes
385,487,679
Sales tax – Jail construction and operation
112,451,803
Surcharge tax – Stadium District
4,989,933
Share of state vehicle license tax
113,649,012
Grants and contributions not restricted to specific programs
2,728,933
Unrestricted investment earnings
14,815,018
Miscellaneous
15,198,561
Total general revenues
1,260,819,083
Change in net assets
166,897,220
Net assets, beginning, as restated
4,323,628,784
Net assets, ending
$ 4,490,526,004
The notes to the financial statements are an integral part of this statement.
Maricopa County
Balance Sheet
Governmental Funds
June 30, 2011
20
Detention
County
General
Operations
Improvement Debt
ASSETS
Cash in bank and on hand
$ 101,500
$ 350
$
Cash and investments held by County Treasurer
342,561,635
42,972,416
38,487
Receivables
20,056,616
19,486
Due from other funds
10,586,588
Due from other governmental units
77,003,677
25,388,105
9,560,164
Inventories
4,939,795
146,249
Miscellaneous
487,556
603,108
Intergovernmental loans
15,433,000
Cash and investments held by trustee – restricted
21,113,433
Total assets
$ 471,170,367
$ 69,129,714
$ 30,712,084
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable
$ 16,102,681
$ 9,752,966
$
Employee compensation payable
6,354,505
2,439,577
Accrued liabilities
622,268
1,270
Due to other funds
Interest payable
3,259,540
Bonds and certificates of participation payable
11,105,000
Special assessment debt with governmental commitment
Advances
746,552
Deferred revenue
17,941,958
9,560,164
Deposits held for other parties
Total liabilities
41,767,964
12,193,813
23,924,704
Fund balances:
Nonspendable
20,372,794
146,249
Restricted
56,789,652
6,748,893
Committed
162,000,000
38,487
Assigned
225,405,703
Unassigned
21,623,906
Total fund balances
429,402,403
56,935,901
6,787,380
Total liabilities and fund balances
$ 471,170,367
$ 69,129,714
$ 30,712,084
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.
Some receivables 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, 2011, 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.
21
Detention
General Fund
Other
Total
Capital
County
Governmental
Governmental
Projects
Improvements
Funds
Funds
$
$
$ 4,343,060
$ 4,444,910
268,476,359
290,334,325
456,227,656
1,400,610,878
3,907,812
23,983,914
941
10,587,529
44,489,228
156,441,174
2,628,184
7,714,228
1,165,680
2,256,344
15,433,000
21,674,330
42,787,763
$ 268,476,359
$ 290,334,325
$ 534,436,891
$ 1,664,259,740
$ 2,291,116
$ 8,183,550
$ 38,483,199
$ 74,813,512
2,391,122
11,185,204
3,993,439
4,616,977
9,976,100
9,976,100
5,317
3,264,857
11,105,000
19,653
19,653
746,552
24,618,756
52,120,878
1,654,571
1,654,571
2,291,116
8,183,550
81,142,157
169,503,304
2,628,184
23,147,227
266,185,243
295,836,182
625,559,970
282,150,775
164,284,920
608,474,182
225,405,703
(9,454,552)
12,169,354
266,185,243
282,150,775
453,294,734
1,494,756,436
$ 268,476,359
$ 290,334,325
$ 534,436,891
3,233,221,600
29,125,402
(17,201,545)
(249,375,889)
$ 4,490,526,004
Maricopa County
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
For the Fiscal Year Ended June 30, 2011
22
Detention
County
General
Operations
Improvement Debt
REVENUES
Taxes
$ 511,166,991
$ 112,451,803
$
Licenses and permits
2,330,510
Intergovernmental
514,511,445
2,819,911
Charges for services
40,745,729
33,332,086
2,640,840
Fines and forfeits
14,356,769
Special assessments
Interest income
8,611,795
2,495,016
31,863
Miscellaneous
5,745,692
31,068
Total revenues
1,097,468,931
151,129,884
2,672,703
EXPENDITURES
Current:
General government
185,721,853
Public safety
410,983,994
283,859,560
Highways and streets
Health, welfare and sanitation
196,904,391
Culture and recreation
693,162
Education
2,143,575
Debt service:
Principal
11,105,000
Interest
6,519,080
Other expenditures
Capital outlay
11,209,273
708,476
Total expenditures
807,656,248
284,568,036
17,624,080
Excess (deficiency) of revenues
over expenditures
289,812,683
(133,438,152)
(14,951,377)
OTHER FINANCING SOURCES (USES)
Transfers in
1,479,313
176,466,336
12,866,180
Transfers out
(371,272,224)
(206,735,710)
(11,649)
Total other financing sources (uses)
(369,792,911)
(30,269,374)
12,854,531
Net change in fund balances
(79,980,228)
(163,707,526)
(2,096,846)
Fund balances at beginning of year, as restated
509,523,800
220,631,161
8,884,226
Changes in nonspendable resources:
Increase (decrease) in inventories
(141,169)
12,266
Fund balances at end of year
$ 429,402,403
$ 56,935,901
$ 6,787,380
The notes to the financial statements are an integral part of this statement.
23
Detention
General Fund
Other
Total
Capital
County
Governmental
Governmental
Projects
Improvements
Funds
Funds
$
$
$ 92,233,037
$ 715,851,831
39,041,819
41,372,329
938,464
284,584,090
802,853,910
108,918,633
185,637,288
19,737,598
34,094,367
5,432,863
5,432,863
2,690,520
13,829,194
9,700,681
15,477,441
938,464
562,339,241
1,814,549,223
7,513,258
193,235,111
135,121,465
829,965,019
53,297,470
53,297,470
187,532,291
384,436,682
29,312,823
30,005,985
6,783,703
8,927,278
4,623,150
15,728,150
2,039,776
8,558,856
1,249
1,249
14,379,704
137,542,053
156,171,609
320,011,115
14,379,704
137,542,053
582,396,794
1,844,166,915
(13,441,240)
(137,542,053)
(20,057,553)
(29,617,692)
197,323,710
43,880,837
244,986,551
677,002,927
(11,701,866)
(85,951,177)
(675,672,626)
197,323,710
32,178,971
159,035,374
1,330,301
183,882,470
(105,363,082)
138,977,821
(28,287,391)
82,302,773
387,513,857
314,232,032
1,523,087,849
84,881
(44,022)
$ 266,185,243
$ 282,150,775
$ 453,294,734
$ 1,494,756,436
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, 2011
24
Net change in fund balances – total governmental funds (page 23)
$ (28,287,391)
Amounts reported for governmental activities in the Statement of Activities on page 19 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.
196,920,655
The net effect of various miscellaneous transactions involving capital assets is to decrease net assets.
(613,932)
Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
1,036,391
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.
30,475,349
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.
8,962,775
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 expense of internal service funds is reported with governmental activities.
(41,596,627)
Change in net assets of governmental activities (page 19)
$ 166,897,220
The notes to the financial statements are an integral part of this statement. 25
Maricopa County
Statement of Net Assets
Proprietary Funds
June 30, 2011
26
Governmental Activities –
Internal Service Funds
ASSETS
Current assets:
Cash in bank and on hand
$ 12,255
Cash and investments held by County Treasurer
128,575,748
Receivables:
Accounts
898,197
Accrued interest
7,635
Inventories
1,862,893
Prepaids
1,987,738
Total current assets
133,344,466
Noncurrent assets:
Capital assets:
Machinery and equipment
12,165,398
Less accumulated depreciation
(8,891,577)
Total noncurrent assets
3,273,821
Total assets
136,618,287
LIABILITIES
Current liabilities:
Accounts payable
2,382,403
Employee compensation payable
4,064,840
Accrued liabilities
2,387,904
Due to other funds
611,429
Liability for reported and incurred but not reported claims (current portion)
50,778,619
Total current liabilities
60,225,195
Noncurrent liabilities:
Liability for reported and incurred but not reported claims
93,594,637
Total noncurrent liabilities
93,594,637
Total liabilities
153,819,832
NET ASSETS
Invested in capital assets
3,273,821
Unrestricted
(20,475,366)
Total net assets
$ (17,201,545)
The notes to the financial statements are an integral part of this statement.
Maricopa County
Statement of Revenues, Expenses, and Changes in Fund Net Assets
Proprietary Funds
For the Fiscal Year Ended June 30, 2011
27
Governmental
Activities –
Internal Service
Funds
OPERATING REVENUES
Charges for services
$ 181,218,018
Miscellaneous
2,174,380
Total operating revenues
183,392,398
OPERATING EXPENSES
Personal services
11,591,789
Supplies
16,241,949
Other services
13,421,580
Legal
4,193,937
Insurance and claims
168,291,285
Leases and rentals
31,613
Repairs and maintenance
2,330,909
Travel and transportation
24,724
Utilities
7,634,056
Depreciation
945,773
Total operating expenses
224,707,615
Operating loss
(41,315,217)
NONOPERATING REVENUES (EXPENSES)
Investment income
1,052,164
Loss on disposal of capital assets
(3,273)
Total nonoperating revenues
1,048,891
Loss before transfers
(40,266,326)
Transfers in
49,990
Transfers out
(1,380,291)
Change in net assets
(41,596,627)
Total net assets – beginning, as restated
24,395,082
Total net deficit – ending
$ (17,201,545)
The notes to the financial statements are an integral part of this statement.
Maricopa County
Statement of Cash Flows
Proprietary Funds
For the Fiscal Year Ended June 30, 2011
28
Governmental
Activities -
Internal Service
Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Charges for services
$ 181,579,884
Other receipts
2,174,380
Payments for goods and services
(169,401,042)
Payments for personal services
(10,535,494)
Net cash provided by operating activities
3,817,728
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Advances from General Fund
49,990
Loan payments to General Fund
(1,594,353)
Net cash used for noncapital financing activities
(1,544,363)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Acquisition of capital assets
(914,319)
Net cash used for capital and related financing activities
(914,319)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends
1,212,018
Net cash provided by investing activities
1,212,018
Net increase in cash and cash equivalents
2,571,064
Cash and cash equivalents, July 1, 2010, as restated
126,016,939
Cash and cash equivalents, June 30, 2011
$ 128,588,003
RECONCILIATION OF OPERATING INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Operating loss
$ (41,315,217)
Adjustments to reconcile operating income to net cash
provided by operating activities
Depreciation expense
945,773
Liability for reported and incurred but not reported claims
45,452,598
Changes in assets [(increase)/decrease] and liabilities [increase/(decrease)]:
Accounts receivable
361,866
Inventories
204,764
Prepaids
(721,921)
Accounts payable
(1,303,734)
Employee compensation payable
1,056,295
Accrued liabilities
(862,696)
Net cash provided by operating activities
$ 3,817,728
SCHEDULE OF NONCASH INVESTING, CAPITAL AND NONCAPITAL
FINANCING ACTIVITIES:
Accumulated depreciation from disposed capital assets
$ 148,008
Machinery and equipment disposed
(148,008)
Capital assets transferred from governmental activities
31,000
Accumulated depreciation transferred from governmental activities
(31,000)
The notes to the financial statements are an integral part of this statement.
29
Maricopa County
Statement of Fiduciary Net Assets
Fiduciary Funds
June 30, 2011
30
Investment
Agency
Trust Fund
Fund
Assets
Cash in bank and on hand
$
$ 40,434,454
Cash and investments held by County Treasurer
2,374,692,019
861,930
Accrued interest receivable
137,164
Miscellaneous
66,564
Total assets
2,374,829,183
$ 41,362,948
Liabilities
Accounts payable
$ 25,447
Accrued liabilities
350,984
Deposits held for other parties
40,986,517
Total liabilities
$ 41,362,948
Net Assets
Held in trust for investment participants
$ 2,374,829,183
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, 2011
31
Investment
Trust Fund
Additions:
Contributions from participants
$ 13,860,576,756
Investment income:
Interest income
16,485,482
Net change (decrease) in fair value of investments
(1,986,451)
Net investment earnings
14,499,031
Total additions
13,875,075,787
Deductions:
Distributions to participants
13,669,900,012
Total deductions
13,669,900,012
Change in net assets
205,175,775
Net assets – beginning, as restated
2,169,653,408
Net assets – ending
$ 2,374,829,183
The notes to the financial statements are an integral part of this statement.
32
Financial Section
Basic Financial Statements - Notes
Basic Financial Statements - Notes
Maricopa County
Basic Financial Statements – Notes
35
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 2 FUND BALANCE CLASSIFICATIONS OF THE GOVERNMENTAL FUNDS
NOTE 3 REPORTING CHANGES
NOTE 4 BEGINNING BALANCES RESTATED
NOTE 5 RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
NOTE 6 STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
NOTE 7 DEPOSITS AND INVESTMENTS
NOTE 8 CONDENSED FINANCIAL STATEMENTS OF COUNTY TREASURER’S INVESTMENT POOL
NOTE 9 RECEIVABLES
NOTE 10 DUE FROM OTHER GOVERNMENTAL UNITS
NOTE 11 INTERGOVERNMENTAL LOANS
NOTE 12 CAPITAL ASSETS
NOTE 13 CONSTRUCTION AND OTHER SIGNIFICANT COMMITMENTS
NOTE 14 LONG-TERM LIABILITIES
NOTE 15 MUNICIPAL LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS
NOTE 16 MUNICIPAL REVOLVING LINE OF CREDIT AND IRREVOCABLE STANDBY LETTER OF CREDIT
NOTE 17 OPERATING LEASES
NOTE 18 RISK MANAGEMENT
NOTE 19 POLLUTION REMEDIATION OBLIGATIONS
NOTE 20 PENSIONS AND OTHER POSTEMPLOYMENT BENEFITS
NOTE 21 INTERFUND BALANCES AND ACTIVITY
NOTE 22 SUBSEQUENT EVENTS
Notes to the Financial Statements
(Continued)
36
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Maricopa County conform to U.S. generally accepted accounting principles applicable to governmental units adopted by the Governmental Accounting Standards Board (GASB).
For the year ended June 30, 2011, the County implemented the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. GASB Statement No. 54 establishes standards for financial reporting, including note disclosures requirements, for fund balance classifications of the governmental funds and clarifies existing governmental fund type definitions. See Note 2 – Fund Balance Classifications of the Governmental Funds.
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 so intertwined with the County that they 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. Maricopa County does not report any discretely presented component units. See Note 3 – Reporting Changes for further information. Each blended 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, and Housing Authority of Maricopa County.
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 pursuant to A.R.S. §48-3602 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 pursuant to A.R.S. §48-3901 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 Notes to the Financial Statements
(Continued)
37
lease revenue bonds and certificates of participation 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.
Maricopa County Special Assessment Districts
The Maricopa County 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 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 pursuant to A.R.S. §48-4202 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 Maricopa County 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 Street Lighting Districts, the Districts are considered a blended component unit of the County.
Housing Authority of Maricopa County
The Housing Authority is a legally separate entity pursuant to A.R.S. §36-1404 that provides efficient and affordable rental housing to low-income households of Maricopa County. As the Maricopa County Board of Supervisors serves as the Housing Authority‘s Board of Commissioners, it is able to significantly influence the programs, projects, activities, or level of services provided by the Housing Authority; therefore, the Housing Authority is a blended component unit of the County. 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 201
Phoenix, Arizona 85006
www.maricopahousing.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 included in the accompanying financial statements. Notes to the Financial Statements
(Continued)
38
B. Basis of Presentation
The basic financial statements include both government-wide statements and fund financial statements. The government-wide statements focus on the County as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the usefulness of the information.
Government-wide financial statements – provide information about the primary government (the County) and its component units. The statements include a statement of net assets and a statement of activities. These statements report the financial activities of the overall government, except for fiduciary activities. They also distinguish between the governmental and business-type activities of the County and between the County and its discretely presented component units. 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. The County has no business-type activities or discretely presented component units.
The statement of activities presents a comparison between direct expenses and program revenues for each function of the County‘s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. The County allocates indirect expenses to programs or functions. Program revenues include:
 charges to customers or applicants for goods, services, or privileges provided,
 operating grants and contributions, and
 capital grants and contributions, including special assessments.
Revenues that are not classified as program revenues, including internally dedicated resources, unrestricted grant revenues, and all County levied taxes or taxes not levied by the County that are not restricted to a specific program, are reported as general revenues.
Generally, the effect of interfund activity has been eliminated from the government-wide financial statements to minimize the double counting of internal activities. However, charges for interfund services provided and used are not eliminated if doing so would distort the direct costs and program revenues reported by the departments concerned.
Fund financial statements – provide information about the County‘s funds, including fiduciary funds and blended component units. Separate statements are presented for the governmental, proprietary, and fiduciary fund categories. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. Internal service and fiduciary funds are aggregated and reported by fund type. The County has no enterprise funds.
Proprietary fund revenues and expenses are classified as either operating or nonoperating. Operating revenues and expenses generally result from transactions associated with the fund‘s principal activity. Accordingly, revenues, such as user charges, in which each party receives and gives up essentially equal values, are reported as operating revenues. Nonoperating revenues, such as investment income, result from transactions in which the parties do not exchange equal values. Operating expenses include the cost of services, administrative expenses, and depreciation on capital assets. Other expenses, such as interest expense, are considered to be nonoperating expenses.
The County reports the following major governmental funds:
The 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. Notes to the Financial Statements
(Continued)
39
The 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. 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 and transfers from the General Fund for maintenance of effort and jail operations expenditures. The Detention Operations Fund transfers monies to the Detention Capital Projects Fund for the construction of the jail facilities. The amount to be transferred to the Detention Capital Projects Fund for any given year is determined through the budget planning process.
The County Improvement Debt Fund – accounts for the debt service on the Lease Revenue Bonds, Series 2001; the Lease Revenue Refunding Bonds, Series 2003; Lease Revenue Bonds, Series 2007A; Lease Revenue Refunding Bonds, Series 2007B; and other long-term obligations. This fund‘s main revenue source is from General Fund transfers for the repayment of debt.
The Detention Capital Projects Fund – accounts for construction associated with the 1/5 of one-cent sales tax approved by voters in the General Election on November 3, 1998, and extended by the voters on November 5, 2002. Funding is provided by transfers from the Detention Operations Fund for construction of the adult and juvenile detention facilities.
The General Fund County Improvements Fund – was established to fund current and future capital projects. Fund assets may be used to pay directly for capital projects or may be appropriated by the Board of Supervisors for debt service. Revenues in this fund consist mainly of transfers from the General Fund. None of the funds has been pledged for debt service, and fund assets may be transferred by the Board of Supervisors at any time for any other County purpose.
The County also reports the following fund types:
The internal service funds – account for automotive maintenance and service, telecommunications services, printing and duplicating services, insurance services, self-insured employee benefits, and warehouse services provided to County departments or to other governments on a cost reimbursement basis.
The investment trust fund – accounts for pooled assets held and invested by the County Treasurer on behalf of other governmental entities.
The agency fund – accounts for assets held by the County as an agent for individuals.
C. Basis of Accounting
The government-wide, proprietary fund, and fiduciary fund financial statements are presented using the economic resources measurement focus, with exception of the agency fund, and the accrual basis of accounting. The agency fund is custodial in nature and does not have a measurement focus. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Property taxes are recognized as revenue in the year for which they are levied. Grants and donations are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental funds in the fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when they become both measurable and available. The County considers all revenues reported in the governmental funds to be available if the revenues are collected within 60 Notes to the Financial Statements
(Continued)
40
days after year-end. The County‘s major revenue sources that are susceptible to accrual are property taxes, intergovernmental, charges for services, and investment income. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they are due and payable. General capital asset acquisitions are reported as expenditures in governmental funds. Loan proceeds and acquisitions under capital lease agreements are reported as other financing sources.
Under the terms of grant agreements, the County funds certain programs by a combination of grants and general revenues. Therefore, when program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. The County applies grant resources to such programs before using general revenues.
The County‘s internal service funds follow FASB Statements and Interpretations issued on or before November 30, 1989; Accounting Principles Board Opinions; and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. The County has chosen the option not to follow FASB Statements and Interpretations issued after November 30, 1989.
D. Cash and Investments
For purposes of its statements of cash flows, the County considers only those highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Nonparticipating interest-earning investment contracts are stated at cost. Money market investments and participating interest-earning investment contracts with a remaining maturity of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value.
E. Inventories
The County accounts for its inventories in the governmental funds using the purchase method. Inventories of the governmental funds consist of expendable supplies held for consumption and are recorded as expenditures at the time of purchase. Amounts on hand at year-end are shown on the balance sheet as an asset for informational purposes only and as nonspendable fund balance to indicate that they do not constitute ―available spendable resources.‖ These inventories are stated at weighted-average cost.
Inventories of government-wide and the internal service funds financial statements are recorded as assets when purchased and expensed when consumed. The amounts shown on the statement of net assets for government-wide and the internal service funds are valued at cost using first-in, first-out and the moving average methods, respectively.
F. Property Tax Calendar
The County levies real property taxes and commercial personal property taxes on or before the third Monday in August that become due and payable in two equal installments. The first installment is due on the first day of October and becomes delinquent after the first business day of November. The second installment is due on the first day of March of the next year and becomes delinquent after the first business day of May.
During the year, the County also levies mobile home personal property taxes that are due the second Monday of the month following receipt of the tax notice and become delinquent 30 days later.
A lien assessed against real and personal property attaches on the first day of January preceding assessment and levy.
Notes to the Financial Statements
(Continued)
41
G. Capital Assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the government-wide statements and the proprietary funds. Capital assets are defined as assets with an initial, individual cost of more than $5,000. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets‘ lives are not capitalized.
Property, plant, and equipment of the primary government and the discretely presented component unit are depreciated using the straight-line method over the following estimated useful lives:
Type of Assets
Estimated Useful Life (In Years)
Buildings and improvements
20 - 50
Infrastructure
25 - 50
Autos and trucks
3 - 10
Other equipment
3 - 20
All infrastructure assets are reported on the government-wide financial statements. Infrastructure maintained by the County Department of Transportation consists of roadways, bridges and related assets. These assets are not depreciated as they are reported using the modified approach. Under the modified approach, the County‘s roadway and bridge systems are being preserved at a specified condition level established by the County. For information on the modified approach, see Required Supplementary Information – Modified Approach for Infrastructure Assets. The Flood Control District accounts for the County‘s remaining infrastructure assets consisting of drainage systems, dams, flood channels and canals.
For the Department of Transportation‘s infrastructure assets owned prior to fiscal year 2002, the County estimated their historical cost. The fair market value for right-of-way assets was estimated based on current regional land acquisitions and deflated by the trended growth rate, as determined by the County assessed valuation from the State of Arizona Department of Revenue Abstract of the Assessment Roll for vacant land, agriculture and government property not including legally exempt land. The fair market value for roadway system assets was estimated based on current construction costs and deflated using the Price Trends for Federal-Aid Highway Construction, published by the U.S. Department of Transportation, Federal Highway Administration, Office of Program Administration and Office of Infrastructure.
Flood Control District infrastructure assets are accounted for using the straight-line depreciation method with a useful life between 25 and 50 years. For infrastructure assets owned prior to fiscal year 2002, the County used internal records, maintained by the department, to estimate Flood Control‘s historical cost for these assets.
H. Fund Balance Classifications
Fund balances of the governmental funds are reported separately within classifications based on a hierarchy of the constraints placed on the use of those resources. The classifications are based on the relative strength of the constraints that control how the specific amounts can be spent. The classifications are nonspendable, restricted, and unrestricted, which includes committed, assigned, and unassigned fund balance classifications.
The nonspendable fund balance classification includes amounts that cannot be spent because they are either not in spendable form such as inventories, or are legally or contractually required to be maintained intact. Restricted fund balances are those that have externally imposed restrictions on Notes to the Financial Statements
(Continued)
42
their usage by creditors, such as through debt covenants, grantors, contributors, or laws and regulations.
The unrestricted fund balance category is comprised of committed, assigned, and unassigned resources. Committed fund balances are self-imposed limitations approved by the County‘s Board of Supervisors, which is the highest level of decision-making authority within the County. The constraints placed on committed fund balances can only be removed or changed by the Board.
Assigned fund balances are resources constrained by the County‘s intent to be used for specific purposes, but are neither restricted nor committed. Only the Board of Supervisors has authorization to assign fund balances.
The unassigned fund balance is the residual classification for the General Fund and includes all spendable amounts not reported in the other classifications. Also, deficits in fund balances of the other governmental funds are reported as unassigned.
The County‘s policy is to account for most restricted and committed revenue sources (subject to legal restriction, etc.) by segregating them in a separate fund; however, by its nature, the General Fund may have several different classifications of fund balance. Therefore, when expending General Fund fund balance, if an expenditure is incurred that can be paid from either restricted or unrestricted fund balances, it‘s the County‘s policy to use unrestricted fund balance first. For the disbursement of unrestricted fund balances, it is the County‘s policy to use unassigned amounts first, followed by assigned amounts, and lastly committed amounts.
I. Investment Income
Investment income is composed of interest, dividends, and net changes in the fair value of applicable investments.
J. Compensated Absences
Compensated absences consist of vacation leave and a calculated amount of sick leave earned by employees based on services already rendered. Employees may accumulate, and roll-over from year-to-year, up to 240 or 320 hours (depending on employee classification) of vacation leave, but any vacation hours in excess of the maximum amount that are unused at calendar year-end convert to sick leave. Upon termination of employment, all unused vacation benefits are paid to employees. Accordingly, vacation benefits are accrued as a liability in the financial statements.
Employees may accumulate an unlimited number of sick leave hours. Generally, sick leave benefits provide for ordinary sick pay and are cumulative but are forfeited upon termination of employment. Because sick leave benefits do not vest with employees, a liability for sick leave benefits is not accrued in the financial statements. However, upon retirement, County employees with accumulated sick leave in excess of 1,000 hours are entitled to a $10,000 nontaxable investment in a Post Employment Health Plan (PEHP) established pursuant to Internal Revenue Code §501(c)(9). The obligations vested at June 30, 2011, under this policy are accrued as a liability.
Compensated absences are substantially paid within one year from fiscal year-end and, therefore, are reported as a current liability on the government-wide financial statements. A liability for these amounts is reported in the governmental funds‘ financial statements only if they have matured, for example, as a result of employee resignations and retirements by fiscal year-end.
Notes to the Financial Statements
(Continued)
43
NOTE 2 – FUND BALANCE CLASSIFICATIONS OF THE GOVERNMENTAL FUNDS
The fund balance classifications of the governmental funds as of June 30, 2011, were as follows:
General Fund
Detention Operations Fund
County Improvement Debt Fund
Detention Capital Projects
Fund
General Fund County Improvement Fund
Other Governmental Funds
Total
Fund balances:
Nonspendable:
Inventory
$ 4,939,794
$ 146,249
$
$
$
$ 2,628,184
$ 7,714,227
Loan receivable
15,433,000
15,433,000
Total nonspendable
20,372,794
146,249
2,628,184
23,147,227
Restricted for:
Capital projects
266,185,243
94,859,826
361,045,069
Debt service
6,748,893
9,353,753
16,102,646
Education
4,984,386
4,984,386
Flood control
49,544,757
49,544,757
Health and welfare
15,868,336
15,868,336
Judicial activities
21,402,968
21,402,968
Law enforcement
56,789,652
18,279,703
75,069,355
Library District
15,737,273
15,737,273
Other purposes
9,921,206
9,921,206
Parks and recreation
4,641,651
4,641,651
Social services
7,582,755
7,582,755
Stadium District
12,111,196
12,111,196
Transportation
29,952,817
29,952,817
Waste management
1,595,555
1,595,555
Total restricted
56,789,652
6,748,893
266,185,243
295,836,182
625,559,970
Committed to:
Capital projects
282,150,775
151,947,504
434,098,279
Debt service
38,487
38,487
General government
162,000,000
162,000,000
Health and welfare
8,199,936
8,199,936
Other purposes
2,127,013
2,127,013
Waste management
2,010,467
2,010,467
Total committed
162,000,000
38,487
282,150,775
164,284,920
608,474,182
Assigned to:
General government
225,405,703
225,405,703
Total assigned
225,405,703
225,405,703
Unassigned
21,623,906
(9,454,552)
12,169,354
Total fund balances
$ 429,402,403
$ 56,935,901
$ 6,787,380
$ 266,185,243
$282,150,775
$453,294,734
$1,494,756,436
Stabilization Arrangements – The Board of Supervisors has the authority to authorize and establish a stabilization arrangement by formal action. Subsequent modification, addition to, or expenditure from any stabilization arrangements also requires formal action by the Board of Supervisors, the highest level of decision-making authority within the County. At June 30, 2011, the General Fund had fund balances of $162,000,000 committed for budget stabilization. These amounts were committed specifically to cover either: a) an unusual revenue shortfall of 5% or more of estimated General Fund operating revenue for fiscal year 2011 due to a natural disaster, a sudden, severe economic downturn and/or actions by the State of Arizona to reduce shared revenues; b) an unusual unanticipated expenditure equaling 5% or more of estimated General Fund operating revenue for fiscal year 2011 that must be funded due to natural disaster, a legal judgment or settlement not covered by the County‘s Risk Management Trust, and/or actions by the State of Arizona that shift significant new expenditures to the County; or c) a combination of the circumstances described in a) and b) that together equal 5% or more of estimated General Fund operating revenue. Notes to the Financial Statements
(Continued)
44
NOTE 3 – REPORTING CHANGES
As a result of a resolution adopted pursuant to Arizona Revised Statutes §36-1404, the Maricopa County Board of Supervisors now serves as the Housing Authority of Maricopa County‘s (Housing Authority) Board of Commissioners and is able to significantly influence the programs, projects, activities and level of services provided by the Housing Authority. Therefore, effective for fiscal year 2011, the Housing Authority is considered a blended component unit of the County and is reported as part of the primary government of Maricopa County. The Housing Authority (special revenue fund) is a nonmajor governmental fund. In prior years, the Housing Authority was reported as a discretely presented component unit. This constitutes a change in reporting entity.
Beginning in fiscal year 2011, the County established the Technology Capital Improvement (capital project fund) and the Detention Technology Capital Improvement (capital project fund) Funds. Both are nonmajor governmental funds.
NOTE 4 – BEGINNING BALANCES RESTATED
On July 1, 2010, the County restated beginning net assets of governmental activities and beginning fund balance of the fund financial statements for inclusion of the Housing Authority of Maricopa County as a blended component unit of the County and for other beginning balance adjustments affecting capital assets and receivables of $52,825 and $57,080, respectively. Prior to fiscal year 2011, the Housing Authority was considered a discretely presented component unit.
On July 1, 2010, the County also restated net assets of governmental activities, the internal service funds and the agency fund for corrections of prior periods related to the Employee Health Initiatives Fund fully-insured benefit products. The assets and liabilities related to these fully-insured benefits were incorrectly included as part of governmental activities and the internal service funds in prior fiscal years, but should have been reported in the agency fund. As part of this restatement, cash and cash equivalents were restated by $1,033,581, which affected the cash flow statement.
Beginning net assets of governmental activities, governmental funds, internal service funds and the agency fund were adjusted for the above, as follows:
Governmental Activities
Internal Service Funds
Governmental Funds
Net assets reported as of June 30, 2010
$ 4,300,843,977
$ 25,304,207
$ 1,517,744,321
Plus: Housing Authority of Maricopa County
23,693,932
5,343,528
Less: fully-insured benefit products
(909,125)
(909,125)
Net assets as of July 1, 2010, as restated
$ 4,323,628,784
$ 24,395,082
$ 1,523,087,849
As the agency fund does not report net assets, beginning assets and liabilities of the agency fund were adjusted for the above, as follows:
Agency Fund
Total Assets/Liabilities as of June 30, 2010
$ 76,515,182
Plus: fully-insured benefit products
1,072,771
Total Assets/Liabilities as of July 1, 2010, as restated
$ 77,587,953
Notes to the Financial Statements
(Continued)
45
NOTE 5 – RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
The Governmental Funds Balance Sheet includes the reconciliation between fund balances – total governmental funds and net assets – Governmental Activities as reported in the government-wide Statement of Net Assets. The details of this reconciliation follow:
Fund balances – total governmental funds
$ 1,494,756,436
Capital assets used in governmental activities are not financial resources and therefore, are not reported in the funds.
Land
713,342,281
Buildings and improvements
1,503,399,780
Machinery and equipment
290,689,473
Infrastructure
950,473,828
Construction in progress
474,960,416
Accumulated depreciation
(699,644,178)
Net governmental funds capital assets at June 30, 2011
3,233,221,600
Some receivables are not available to pay for current period expenditures and therefore, are deferred in the funds.
Deferred revenue for property taxes receivable at June 30, 2011
20,384,568
Deferred revenue for grant revenues receivable at June 30, 2011
8,740,834
29,125,402
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.
(17,201,545)
Some long-term liabilities and compensated absences are not due and payable shortly after June 30, 2011, and therefore, are not reported in the funds.
Noncurrent lease revenue bonds due in more than one year at June 30, 2011
(131,555,000)
Certificates of participation due in more than one year at June 30, 2011
(2,375,000)
Stadium District revenue bonds payable at June 30, 2011
(34,515,000)
Stadium District loan payable at June 30, 2011
(8,106,857)
Special assessment debt with governmental commitment payable at June 30, 2011
(100,880)
Deferred issuance cost at June 30, 2011
2,708,848
Bond premium unamortized at June 30, 2011
(3,615,891)
Governmental funds capital leases payable at June 30, 2011
(432,651)
Claims and judgments at June 30, 2011
(3,333,986)
Governmental funds compensated absences payable at June 30, 2011
(58,403,694)
Liability for closure and postclosure costs at June 30, 2011
(9,308,551)
Other liabilities at June 30, 2011
(181,978)
Accrued interest payable at June 30, 2011
(155,249)
(249,375,889)
Net assets of governmental activities
$ 4,490,526,004
Notes to the Financial Statements
(Continued)
46
The governmental fund reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances is a reconciliation between net changes in fund balances – total governmental funds and changes in net assets of governmental activities as reported in the government-wide Statement of Activities. The details of this reconciliation follow:
Net change in fund balances – total governmental funds
$ (28,287,391)
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.
Governmental funds capital outlay
263,107,484
Government-wide depreciation expense for the year ended June 30, 2011
(67,132,602)
Add: Internal service funds depreciation expense for the year ended June 30, 2011
945,773
196,920,655
The net effect of various miscellaneous transactions involving capital assets is to decrease net assets.
Net value of disposed capital assets for the year ended June 30, 2011
(59,932,269)
Adjustment for the net value of assets capitalized in the current year but acquired in prior years
458,408
Donations of capital assets
58,859,929
(613,932)
Certain revenues and expenses in the Statement of Activities that do not provide or draw on current financial resources are not reported in the funds
Grant revenues earned during the year ended June 30, 2011
1,953,897
Collections of property taxes plus current-year revenues exceeding amount reported as earned during the year ended June 30, 2011
(917,506)
1,036,391
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.
Principal payments on lease revenue bonds
10,585,000
Principal payments on Stadium District revenue bonds
3,390,000
Principal payments on Stadium District loan payable
1,179,241
Principal payments on special assessment debt with governmental commitment
56,749
Net decrease in bond premium
905,486
Principal payments on certificates of participation
520,000
Principal payments on capital leases
14,523,664
Net decrease in deferred issuance costs
(707,115)
Accrued interest payable on long-term debt
22,324
30,475,349
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.
Net decrease in employee compensation payable
2,395,135
Decrease in reserve for inventories
(44,022)
Net decrease in claims and judgments
1,557,295
Net decrease in liability for closure and postclosure costs
4,900,520
Net increase in other liabilities
153,847
8,962,775
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 expense of internal service funds is reported with governmental activities.
(41,596,627)
Change in net assets of governmental activities
$ 166,897,220
Notes to the Financial Statements
(Continued)
47
NOTE 6 – STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
At June 30, 2011, the following funds reported deficits in fund balances or net assets.
FUND
DEFICIT
Governmental Funds:
Adult Probation Grants
$ 209,971
Air Quality Grants
46,014
CDBG Housing Trust
130,930
Clerk of the Court Grants
2,900
County Attorney Grants
46,431
Emergency Management
227,535
Environmental Services Grants
1,001
Flood Control Grants
22,218
General Government Grants
609
Human Services Grants
2,049,595
Juvenile Probation G