Cochise County Arizona single audit reporting package

              COCHISE COUNTY, ARIZONA
Single Audit Reporting Package
June 30, 2001
COCHISE COUNTY, ARIZONA
Single Audit Reporting Package
June 30, 2001
Table of Contents Page
Report on Audit of Primary Government Financial Statements
Independent Auditors' Report………………………………………………………………... 1
Combined Balance Sheet—All Fund Types and Account Groups………………………. 4
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances—All
Governmental Fund Types……………………………………………………………….. 6
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual—General and Special Revenue Fund Types……………………
7
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual—Capital Projects Fund Types……………………………………. 10
Combined Statement of Revenues, Expenses, and Changes in Fund Equity--
All Proprietary Fund Types…………………………………………………………………… 11
Combined Statement of Cash Flows—All Proprietary Fund Types……………………… 12
Statement of Net Assets—Investment Trust Fund…………………………. 13
Statement of Changes in Net Assets—Investment Trust Fund…………… 14
Notes to Financial Statements………………………………………………………………. 15
Supplementary Information
Schedule of Expenditures of Federal Awards…………………………………………. 35
Notes to Schedule of Expenditures of Federal Awards………………………………. 38
Reports on Compliance and Internal Control
Report on Compliance and on Internal Control over Financial Reporting Based on an
Audit of Primary Government Financial Statements Performed in Accordance
withGovernment AuditingStandards..………………………………………………….. 41
COCHISE COUNTY, ARIZONA
Single Audit Reporting Package
June 30, 2001
(Continued)
Report on Compliance with Requirements Applicable to Each Major Program and on
Internal Control over Compliance in Accordance with OMB Circular A-133…………… 43
Schedule of Findings and Questioned Costs
Summary of Auditors’ Results…………………………………………………………… 46
Financial Statement Findings……………………………………………………………. 47
Federal Award Findings and Questioned Costs...…………………………………….. 48
County Responses
Corrective Action Plan………………………………………………………………………... 52
1
The Auditor General of the State of Arizona
The Board of Supervisors of
Cochise County, Arizona
We have audited the accompanying primary government financial statements of Cochise County,
Arizona, as of and for the year ended June 30, 2001, as listed in the table of contents. These primary
government financial statements are the responsibility of the County’s management. Our responsibility
is to express an opinion on these primary government financial statements based on our audit.
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 provides a reasonable basis for our opinion.
A primary government is a legal entity or body politic and includes all funds, organizations, institutions,
agencies, departments, and offices that are not legally separate. Such legally separate entities are
referred to as component units. In our opinion, the primary government financial statements referred to
above present fairly, in all material respects, the financial postion of the primary government of Cochise
County as of June 30, 2001, and the results of its operations, the cash flows of its proprietary fund
types, and the net assets and changes in net assets of its investment trust fund for the year then
ended in conformity with U.S. generally accepted accounting principles.
However, the primary government financial statements, because they do not include the financial data
of the component unit of Cochise County do not purport to, and do not, present fairly the financial
position of Cochise County, as of June 30, 2001, and the results of its operations, the cash flows of its
proprietary fund types, and the net assets and changes in net assets of its investment trust fund for
the year then ended in conformity with U.S. generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the primary government financial
statements of Cochise County taken as a whole. The accompanying schedule of expenditures of
federal awards listed in the table of contents is presented for purposes of additional analysis as
Cochise County, Arizona
December 12, 2001
2
required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizations, and is not a required part of the primary government
financial statements. Such information has been subjected to the auditing procedures applied in the
audit of the primary governement financial statements and, in our opinion, is fairly stated, in all material
respects, in relation to the primary government financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued our report dated December
12, 2001, on our consideration of the County’s internal control over financial reporting and our tests of
its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an
integral part of an audit performed in accordance with Government Auditing Standards and should be
read in conjunction with this report in considering the results of our audit.
CHRISTENSEN, GALE & MCLAREN, LLP
December 12, 2001
3
THIS PAGE LEFT BLANK INTENTIONALLY
COCHISE COUNTY
Combined Balance Sheet — All Fund Types and Account Groups
June 30, 2001
Fiduciary
Governmental Fund Types Proprietary Fund Types Fund Types Account Groups
Special Capital Internal Trust and General General Long-
Assets General Revenue Projects Enterprise Service Agency Fixed Assets Term Debt
Cash and cash equivalents $ 125,530 $ 546,855 $ $ 1,050 $ 200 $ 1,111,947 $ $
Cash and Investments held by County Treasurer 7,311,458 8,019,771 4,358,610 3,918,904 405,445 58,970,542
Cash and investments held by trustee 369,839
Investments 3,860,954
Receivables (net of allowances for uncollectibles):
Property taxes 805,957 140,091
Accounts 463,470 194,515 322,471 19,625
Accrued interest 23,281 25,537 13,879 29,333 1,292 184,908
Other
Due from:
Other funds 630,200 682,464 578,520 130,690
Other governments 1,771,089 3,063,254 265,433 372,155 3,776
Prepaid items 43,750 26,775
Fixed assets:
Land 1,591,500 1,798,660
Buildings 1,041,963 160,160 14,805,813
Accumulated depreciation (320,535) (11,281)
Improvements other than buildings 515,456 886,286
Accumulated depreciation (210,490)
Machinery and equipment 1,661,123 5,984,569 9,224,232
Accumulated depreciation (1,150,120) (3,203,679)
Construction in progress (estimated cost to
complete - $ 917,000) 3,185,183 5,708,848
Amount to be provided for retirement of general
long-term debt 4,627,608
Total assets $ 11,500,824 $ 12,672,487 $ 4,637,922 $ 15,441,217 $ 3,517,572 $ 60,267,397 $ 32,423,839 $ 4,627,608
(Continued)
See accompanying notes to financial statements.
4
COCHISE COUNTY
Combined Balance Sheet — All Fund Types and Account Groups
June 30, 2001
(Continued)
Fiduciary
Governmental Fund Types Proprietary Fund Types Fund Types Account Groups
Special Capital Internal Trust and General General Long-
Liabilities and Fund Equity General Revenue Projects Enterprise Service Agency Fixed Assets Term Debt
Liabilities:
Accounts payable $ 646,431 $ 964,100 $ 160,464 $ 2,155,678 $ 140,520 $ $ $
Accrued payroll and employee benefits 611,637 234,146 135,057 9,107 2,420,652
Due to:
Other funds 242,196 835,906 5,407 922,808 15,557
Other governments 324,349
Deposits held for others 209,904 1,111,947
Obligations under capital leases 66,956
Landfill closure and postclosure care costs payable 1,671,398
Certificates of participation payable 2,140,000
Deferred revenues 656,763 230,937 2,280
Total liabilities 2,157,027 2,799,342 165,871 4,887,221 165,184 1,111,947 - 4,627,608
Fund equity:
Contributed capital 158,906 671,958
Investment in general fixed assets 32,423,839
Retained earnings, unreserved 10,395,090 2,680,430
Fund balances:
Reserved for certificates of participation 370,754
Reserved for investment trust participants 59,155,450
Unreserved 8,973,043 9,873,145 4,472,051
Total fund equity 9,343,797 9,873,145 4,472,051 10,553,996 3,352,388 59,155,450 32,423,839 -
Total liabilities and fund equity $ 11,500,824 $ 12,672,487 $ 4,637,922 $ 15,441,217 $ 3,517,572 $ 60,267,397 $ 32,423,839 $ 4,627,608
See accompanying notes to financial statements.
5
COCHISE COUNTY
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
All Governmental Fund Types
Year Ended June 30, 2001
Governmental Fund Types
Special Capital
General Revenue Projects
Revenues:
Taxes $ 20,351,576 $ 2,222,802 $ 1,684,961
Licenses and permits 194,012
Intergovernmental 11,860,652 20,197,311 1,947,973
Charges for services 1,791,104 1,731,624
Fines and forfeits 1,715,110 833,630
Investment income 614,941 445,197 285,899
Miscellaneous 364,088 596,740 -
Total revenues 36,891,483 26,027,304 3,918,833
Expenditures:
Current:
General government 15,547,115 6,699,217 31,038
Public safety 9,618,986 2,031,010
Highways and streets 8,276,868
Sanitation 430,116 208,812
Health and welfare 8,522,508 3,456,909
Culture and recreation 85,888 839,611
Education 273,499 226,669
Capital outlay 1,433,477 1,052,972 3,988,055
Debt service:
Principal retirement 400,000
Interest and fiscal charges 114,115 8,331
Total expenditures 36,425,704 22,800,399 4,019,093
Excess of revenues over (under) expenditures 465,779 3,226,905 (100,260)
Other financing sources (uses):
Operating transfers in 129,136 917,464 900,808
Operating transfers out (638,358) (987,406) (905,337)
Reversion to grantors (79,479)
Capital lease agreements 60,048
Total other financing sources (uses) (509,222) (89,373) (4,529)
Excess of revenues and other sources over
(under) expenditures and other uses (43,443) 3,137,532 (104,789)
Fund balances, July 1, 2000 9,384,983 6,749,223 4,565,839
Residual equity transfers in 2,257 5,797 11,001
Residual equity transfers out (19,407)
Fund balances, June 30, 2001 $ 9,343,797 $ 9,873,145 $ 4,472,051
See accompanying notes to financial statements.
6
COCHISE COUNTY
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual—General and Special Revenue Fund Types
Year Ended June 30, 2001
General Fund Special Revenue Funds
Budget Actual Variance Budget Actual Variance
Revenues:
Taxes $ 20,346,613 $ 20,351,576 $ 4,963 $ 2,261,411 $ 2,222,802 $ (38,609)
Licenses and permits 19,000 194,012 175,012
Intergovernmental 11,585,757 11,860,652 274,895 22,118,718 20,197,311 (1,921,407)
Charges for services 1,571,670 1,791,104 219,434 1,545,666 1,731,624 185,958
Fines and forfeits 1,600,888 1,715,110 114,222 281,998 833,630 551,632
Investment income 327,000 614,941 287,941 238,077 445,197 207,120
Miscellaneous 123,350 364,088 240,738 2,859,287 596,740 (2,262,547)
Total revenues 35,574,278 36,891,483 1,317,205 29,305,157 26,027,304 (3,277,853)
Expenditures:
Current:
General government:
Assessor 1,272,911 1,220,688 52,223
Attorney 1,262,438 1,219,968 42,470 2,446,972 1,430,307 1,016,665
Board of Supervisors 685,984 584,769 101,215
Elections 221,191 234,390 (13,199)
Finance 473,875 459,537 14,338
Purchasing 123,221 137,035 (13,814)
Human Resources 253,826 244,170 9,656
Risk Management 684,288 595,178 89,110
Planning and Zoning 459,928 436,321 23,607
Community Development 105,400 85,888 19,512 604,880 209,001 395,879
Recorder 194,102 191,427 2,675 199,604 124,254 75,350
Voter Registration 70,638 60,383 10,255
Treasurer 909,518 849,886 59,632
Public Defender 848,150 778,080 70,070 20,284 20,284
Legal Defender 570,483 529,176 41,307 9,200 7,094 2,106
Willcox airport operations 24,275 12,611 11,664
Facilities management 1,090,768 1,063,525 27,243
Utilities 626,784 641,256 (14,472)
General government 1,912,309 (1,572,708) 3,485,017 3,723,300 2,327,724 1,395,576
Justice of the Peace Courts 1,480,190 1,387,350 92,840
Court administration 645,357 593,945 51,412
Superior Court divisions 754,044 720,653 33,391
Mandatory judicial services 210,101 192,341 17,760
Mandatory indigent defense 554,906 639,281 (84,375)
Court security 195,637 213,408 (17,771)
Clerk of the Superior Court 1,008,575 998,090 10,485
Adult probation 324,912 308,476 16,436 1,737,480 1,548,783 188,697
Juvenile court services 752,278 750,786 1,492 1,217,605 1,052,054 165,551
Sierra Vista Constable 134,532 131,482 3,050
Constables 68 62 6
Information Technologies 833,205 787,022 46,183
IT Communications 659,898 602,749 57,149
IT capital reserve 1,445,530 449,890 995,640
High intensity drug trafficking areas 235,118 235,118
Total general government 20,789,322 15,547,115 5,242,207 10,194,443 6,699,217 3,495,226
(Continued)
See accompanying notes to financial statements.
7
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual—General and Special Revenue Fund Types
Year Ended June 30, 2001
General Fund Special Revenue Funds
Budget Actual Variance Budget Actual Variance
Public Safety:
Sheriff 8,276,952 7,990,655 286,297 1,276,621 281,753 994,868
Emergency services 72,352 71,376 976
Medical Examiner 150,000 150,000
Juvenile detention 682,125 613,027 69,098
Jail medical services 456,808 419,274 37,534
Jail counselor 63,755 52,483 11,272
Building inspection division 334,778 322,171 12,607
General government 2,108,302 1,455,474 652,828
High intensity drug trafficking areas 973,449 293,783 679,666
Total public safety 10,036,770 9,618,986 417,784 4,358,372 2,031,010 2,327,362
Highways and streets:
Public Works 10,901,953 8,276,868 2,625,085
Sanitation:
Environmental health 469,367 430,116 39,251 122,362 208,812 (86,450)
Health and welfare:
Administration 595,166 454,513 140,653
Medical assistance 7,075,323 7,026,177 49,146
Respite 11,000 10,928 72
Nursing and community services 560,609 499,153 61,456
Mental health 180,772 178,944 1,828
Public fiduciary 366,959 352,793 14,166
Health and social services 3,563,699 3,456,909 106,790
Housing 1,665,248 1,665,248
Total health and welfare 8,789,829 8,522,508 267,321 5,228,947 3,456,909 1,772,038
Culture and recreation:
County library 85,888 (85,888) 984,857 839,611 145,246
Education:
School Superintendent 278,526 273,499 5,027 408,640 226,669 181,971
Capital outlay: 2,288,664 1,433,477 855,187 2,508,539 1,052,972 1,455,567
Debt Service:
Principal retirement 402,998 400,000 2,998 16,094 8,331 7,763
Interest and fiscal charges 114,115 114,115
Total debt service 517,113 514,115 2,998 16,094 8,331 7,763
Total expenditures 43,169,591 36,425,704 6,743,887 34,724,207 22,800,399 11,923,808
Excess of revenues over (under)
expenditures (7,595,313) 465,779 8,061,092 (5,419,050) 3,226,905 8,645,955
(Continued)
See accompanying notes to financial statements.
8
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual—General and Special Revenue Fund Types
Year Ended June 30, 2001
General Fund Special Revenue Funds
Budget Actual Variance Budget Actual Variance
Other financing sources (uses)
Operating transfers in 631,021 129,136 (501,885) 758,202 917,464 159,262
Operating transfers out (523,715) (638,358) (114,643) (1,149,249) (987,406) 161,843
Capital lease agreements 60,048 60,048
Reversion to grantors (79,479) (79,479)
Total other financing sources (uses) 107,306 (509,222) (616,528) (391,047) (89,373) 301,674
Excess of revenues and other sources over
(under) expenditures and other uses (7,488,007) (43,443) 7,444,564 (5,810,097) 3,137,532 8,947,629
Fund balances, July 1, 2000 7,488,007 9,384,983 1,896,976 5,811,280 6,749,223 937,943
Residual equity transfer, net 2,257 2,257 (1,183) (13,610) (12,427)
Fund balances, June 30, 2001 $ $ 9,343,797 $ 9,343,797 $ $ 9,873,145 $ 9,873,145
See accompanying notes to financial statements.
9
COCHISE COUNTY
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual—Capital Projects Fund Types
Year Ended June 30, 2001
Capital Projects Fund
Budget Actual Variance
Revenues:
Taxes $ 1,748,050 $ 1,684,961 $ (63,089)
Intergovernmental Revenue 2,147,973 1,947,973 (200,000)
Investment Income 150,000 285,899 135,899
Miscellaneous Revenue (8,299) (8,299)
Total Revenues 4,046,023 3,910,534 (135,489)
Expenditures:
General Government 3,817,539 22,739 3,794,800
Capital Outlay 4,685,630 3,988,055 697,575
Total Expenditures 8,503,169 4,010,794 4,492,375
Excess of revenues over (under) expenditures (4,457,146) (100,260) 4,356,886
Other financing sources (uses):
Operating transfers in 900,808 900,808
Operating transfers out (981,491) (905,337) 76,154
Total other financing sources (80,683) (4,529) 76,154
Excess of revenues and other sources over
expenditures and other uses (4,537,829) (104,789) 4,433,040
Fund balance, July 1, 2000 4,537,829 4,565,839 28,010
Residual equity transfers in 11,001 11,001
Fund balances June 30, 2001 $ $ 4,472,051 $ 4,472,051
See accompanying notes to financial statements.
10
COCHISE COUNTY
Combined Statement of Revenues, Expenses, and Changes in
Fund Equity — All Proprietary Fund Types
Year Ended June 30, 2001
Enterprise Internal Service
Funds Funds
Operating revenues:
Charges for services $ 23,461,026 $ 1,225,842
Health plan contributions 3,058,353
Miscellaneous 53,809 373,297
Total operating revenues 23,514,835 4,657,492
Operating expenses:
Personal services 2,181,281 209,832
Supplies 546,470 584,695
Professional services 18,401,399
Contractual services 1,039,865 3,217,292
Repairs and maintenance 4,291
Landfill closure and postclosure care costs 229,834
Depreciation 157,540 530,169
Other 522,473 25,118
Total operating expenses 23,078,862 4,571,397
Operating income 435,973 86,095
Nonoperating revenues (expenses):
Intergovernmental 362,547 24,170
Investment income 565,356 36,504
Gain (Loss) on disposal of fixed assets (2,222) 821
Total nonoperating revenues 925,681 61,495
Income before operating transfers 1,361,654 147,590
Operating transfers in 958,814 573,498
Operating transfers out (948,619)
Net income 1,371,849 721,088
Fund equity, July 1, 2000, as restated 9,181,796 2,631,300
Increase in contributed capital 351
Fund equity, June 30, 2001 $ 10,553,996 $ 3,352,388
See accompanying notes to financial statements.
11
COCHISE COUNTY
Combined Statement of Cash Flows — All Proprietary Fund Types
Year Ended June 30, 2001
Enterprise Internal Service
Funds Funds
Cash flows from operating activities:
Operating income $ 435,973 $ 86,095
Adjustments to reconcile operating income to net cash
provided by operating activities:
Depreciation 157,540 530,169
Changes in assets and liabilities:
Increase in:
Accounts receivable (167,686) (10,616)
Due from other funds (342,501)
Due from other governments (3,776)
Prepaid items (26,775)
Accounts payable 393,593 94,365
Accrued payroll and employee benefits 5,712
Due to other funds 779,441 14,118
Landfill closure and postclosure care costs payable 229,834
Deferred revenue 2,280
Decrease in:
Prepaid items 25,000
Accrued payroll and employee benefits (1,286)
Net cash provided by operating activities 1,519,186 682,294
Cash flows from noncapital financing activities:
Grant receipts 362,549 24,170
Cash transfers from other funds 958,814 573,498
Cash transfers to other funds (948,619)
Residual equity transfer 351
Due from other funds 11,589
Due from other governments 108,552
Net cash provided by noncapital financing activities 481,647 609,257
Cash flows from capital and related financing activities:
Acquisition of capital assets (3,030,178) (1,528,236)
Proceeds from sale of equipment 31,300
Net cash used for capital
and related financing activities (3,030,178) (1,496,936)
Cash flows from investing activities:
Acquisition of investments (2,192,173)
Interest received on investments 581,479 38,326
Net cash provided by (used for) investing activities (1,610,694) 38,326
Net decrease in cash and cash equivalents (2,640,039) (167,059)
Cash and cash equivalents, July 1, 2000, as restated 6,559,993 572,704
Cash and cash equivalents, June 30, 2001 $ 3,919,954 $ 405,645
Cash and Cash Equivalents, July 1, 2001, consist of:
Cash in bank and on hand $ 1,050 200
Cash and investments held by County Treasurer 3,918,904 405,445
Totals $ 3,919,954 $ 405,645
Noncash capital activities:
(Gain) loss on disposal of assets $ 2,222 $ (821)
12
See accompanying notes to financial statements.
COCHISE COUNTY
Statement of Net Assets
Investment Trust Fund
Year Ended June 30, 2001
Treasurer's
Investment
Assets Pool
Cash and cash equivalents $ 196,194
Investments 58,774,348
Interest and dividends receivable 184,908
Total assets 59,155,450
Liabilities
Total liabilities
Net assets held in trust $ 59,155,450
See accompanying notes to financial statements.
13
COCHISE COUNTY
Statement of Changes in Net Assets
Investment Trust Fund
Year Ended June 30, 2001
Treasurer's
Investment
Pool
Additions:
Contributions from participants $ 160,436,909
Investment income:
Interest and dividend income 5,352,916
Total investment income 5,352,916
Total additions 165,789,825
Deductions:
Distributions to participants 165,765,870
Total deductions 165,765,870
Net increase in net assets 23,955
Net assets held in trust:
July 1, 2000 59,131,495
June 30, 2001 $ 59,155,450
See accompanying notes to financial statements.
14
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
15
Note 1 - Summary of Significant Accounting Policies
The accounting policies of Cochise County conform to U.S. generally accepted accounting
principles applicable to governmental units adopted by the Governmental Accounting Standards
Board (GASB). A summary of the County's more significant accounting policies follows.
The County's major operations include general government, public safety, highway and street
maintenance and construction, sanitation, health, welfare, culture and recreation, and education. In
addition, the County owns and operates two enterprise activities: a landfill and an airport.
A. Reporting Entity
The County is a general purpose local government that is governed by a separately elected board
of three county supervisors. These general purpose financial statements present all the fund types
and account groups of the County (a primary government).
Component units are legally separate entities for which the County is considered to be financially
accountable. Blended component units, although legally separate entities, are in substance part of
the County's operations. Therefore, data from these units is combined with data of the primary
government. Discretely presented component units, on the other hand, are reported in a separate
column in the combined financial statements to emphasize they are legally separate from the
County. The County has no blended component units.
Although the Cochise Private Industry Council, Inc. is a legally separate entity from the County, the
Board of Supervisors of the County appoints all members of the Council’s governing board and
therefore the Council meets the criteria for discrete presentation. However, the Council has
separate independent auditors and its audited financial statements for its June 30 year-ends are
generally not available by the primary government’s financial statements’ issuance date.
Consequently, the Council is not included in this report as a discretely presented component unit.
When available, complete annual financial statements of the Council may be obtained at its
administrative offices at 77 Calle Portal, Suite C-220, Sierra Vista, AZ 85635.
B. Fund Accounting
The County's accounts are maintained in accordance with the principles of fund accounting to
ensure that limitations and restrictions on the County's available resources are observed. The
principles of fund accounting require that resources be classified for accounting and reporting
purposes into funds or account groups in accordance with the activities or objectives specified for
those resources.
Each fund is considered a separate accounting entity, and its operations are accounted for in a
separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues,
and expenditures or expenses. Account groups are reporting devices to account for certain assets
and liabilities of the governmental funds not recorded directly in those funds.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
16
Note 1 - Summary of Significant Accounting Policies (continued)
Accounts are separately maintained for each fund and account group; however, in the
accompanying financial statements, funds that have similar characteristics have been combined
into generic fund types that are further classified into broad fund categories. A description of the
County’s fund categories, types, and account groups follows.
1. Governmental Funds account for the County's general government activities using the flow
of current financial resources measurement focus and include the following fund types:
The General Fund is the County's primary operating fund. It accounts for all financial resources of
the County, except those required to be accounted for in other funds.
The Special Revenue Funds account for specific revenue sources, other than major capital
projects, that are legally restricted to expenditures for specified purposes.
The Capital Projects Funds account for resources to be used for acquiring or constructing major
capital facilities, other than those financed by Proprietary Funds.
2. Proprietary Funds account for the County's ongoing activities that are similar to those found
in the private sector using the flow of economic resources measurement focus. The County applies
all applicable Financial Accounting Standards Board Statements and Interpretations, Accounting
Principles Board Opinions, and Accounting Research Bulletins to its proprietary activities unless
those pronouncements conflict with or contradict GASB pronouncements. The County's
proprietary funds include the following fund types.
The Enterprise Funds account for operations that are financed and operated in a manner similar to
private business enterprises, in which the intent of the Board of Supervisors is that the costs
(expenses, including depreciation) of providing goods or services to the general public on a
continuing basis be financed or recovered primarily through user charges; or for which the Board
of Supervisors has decided that periodic determination of revenues earned, expenses incurred, or
net income is appropriate for capital maintenance, public policy, management control,
accountability, or other purposes.
The Internal Service Funds account for the financing of goods or services provided by the
department or agency to other County departments or agencies, or to other governments on a
cost-reimbursement basis.
3. Fiduciary Funds account for assets the County holds on behalf of others, and include the
following fund types.
The Investment Trust Funds account for investments made by the County on behalf of other
governmental entities using the economic resources measurement focus.
The Agency Fund is custodial in nature and does not present results of operations or have a
measurement focus. This fund is used to account for assets that the government holds for others
in an agency capacity.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
17
Note 1 - Summary of Significant Accounting Policies (continued)
4. Account Groups are used to establish control and accountability for certain County assets
and liabilities that are not recorded in the funds and include the following two groups.
The General Fixed Assets Account Group accounts for all of the County’s fixed assets, except
those accounted for in Proprietary Funds.
The General Long-Term Debt Account Group accounts for all of the County’s long-term
obligations, except those accounted for in Proprietary Funds.
C. Basis of Accounting
The financial statements of the Governmental and Agency Funds are presented on the modified
accrual basis of accounting. Revenues are recognized when they become measurable and
available to finance current-period expenditures. Expenditures are recognized when the related
fund liability is incurred, except for principal and interest on general long-term debt that are
recognized when due.
Revenues susceptible to accrual are property taxes; franchise taxes; special assessments;
licenses and permits; intergovernmental aid, grants, and reimbursements; interest revenue;
charges for services; and sales taxes collected and held by the State at year-end on the County’s
behalf. Fines and forfeits, rents, contributions, and miscellaneous revenues are not susceptible to
accrual because generally they are not measurable until received in cash.
The financial statements of the Proprietary and Investment Trust Funds are presented on the
accrual basis of accounting. Revenues are recognized when they are earned, and expenses are
recognized when they are incurred.
D. Budgeting and Budgetary Control
Arizona Revised Statutes (A.R.S.) require the County to prepare and adopt a balanced budget
annually for each separate fund. The Board of Supervisors must approve such operating budgets
on or before the third Monday in July to allow sufficient time for the legal announcements and
hearings required for the adoption of the property tax levy on the third Monday in August. A.R.S.
prohibit expenditures or liabilities in excess of the amounts budgeted.
Essentially, the County prepares its budget on the same modified accrual basis of accounting used
to record actual revenues and expenditures.
The County has adopted budgets in accordance with the A.R.S. requirements for the General,
Special Revenue and Capital Projects Funds. Formal budget integration is not employed for the
Internal Service and Enterprise Funds because effective budgetary control is alternatively
achieved through the capability of cost recovery.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
18
Note 1 - Summary of Significant Accounting Policies (continued)
Expenditures may not legally exceed appropriations at the department level. In certain instances,
transfers of appropriations between departments or from the contingency account to a department
may be made upon approval of the Board of Supervisors. With the exception of the General Fund,
each fund includes only one department.
Encumbrance accounting, under which purchase orders, contracts, and other commitments to
expend monies are recorded to reserve that portion of the applicable fund balance, is employed as
an extension of formal budgetary control. Encumbrances outstanding at year-end for goods or
services that were not received before fiscal year-end are canceled. However, the County may
draw warrants against encumbered amounts for goods or services received but unpaid at June 30
for 60 days immediately following the close of the fiscal year. After 60 days the remaining
encumbered balances lapse.
E. Cash and Investments
For purposes of its statement 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.
F. Inventories
Purchases of inventory items are recorded at the time of purchase as expenditures in the funds
from which the purchases were made; and because the amounts on hand at June 30, 2001, were
immaterial, they are not included in the balance sheet.
G. Fixed Assets
Purchased fixed assets capitalized in the General Fixed Assets Account Group are recorded at the
time of purchase as expenditures in the funds from which the expenditures were made. Such
assets are capitalized at cost . Donated fixed assets are capitalized at their estimated fair market
value at the time received.
Depreciation on general fixed assets is not recorded, and interest incurred during construction is
not capitalized. Also, public domain (infrastructure) general fixed assets consisting of certain
improvements other than buildings, such as roads, bridges, curbs and gutters, streets and
sidewalks, drainage, and lighting systems, are not capitalized.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
19
Note 1 - Summary of Significant Accounting Policies (continued)
Purchased fixed assets of the Proprietary Funds are capitalized in those funds at cost. Major
outlays for assets or improvements to them are capitalized as projects are constructed. Interest
incurred during the construction phase of the project is capitalized net of interest earned on the
invested proceeds over the same period. Donated fixed assets are capitalized at their estimated
fair market value at the time received. Depreciation of fixed assets in the Proprietary Funds is
charged as an expense against operations. These assets are depreciated over their estimated
useful lives using the straight-line method. The estimated useful lives are as follows:
Buildings 50 years
Improvements other than buildings 20 years
Machinery and equipment 5 – 20 years
Vehicles 8 years
H. 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 up to 240 hours of vacation depending on years of service, but any
vacation hours in excess of the maximum amount that are unused at year-end are forfeited. Upon
termination of employment, all unused and unforfeited 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. However, for employees who have completed 15 years of service, sick leave benefits up
to 1,040 hours (or 3,120 hours for Ambulance Drivers) do vest and, therefore, are accrued.
The amount of compensated absences expected to be paid by available financial resources is
recorded as a current liability at June 30 in the General and Special Revenue Funds. The
remaining noncurrent amount of compensated absences of the Governmental Funds is recorded in
the General Long-Term Debt Account Group. Vested compensated absences of the Proprietary
Funds are recorded as expenses and liabilities of those funds as the benefits accrue to
employees.
I. Investment Income
Investment income is composed of interest, dividends, and net changes in the fair value of
applicable investments.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
20
Note 1 - Summary of Significant Accounting Policies (continued)
J. Property Taxes
Property taxes are recognized as revenues in the fiscal year they are levied and collected or if they
are collected within 60 days subsequent to fiscal year-end. Property taxes not collected within 60
days subsequent to fiscal year-end, or collected in advance of the fiscal year for which they are
levied, are reported as deferred revenues.
K. Intergovernmental Grants and Aid
Grants and assistance awards made on the basis of entitlement periods are recorded as
intergovernmental receivables and revenues when entitlement occurs. Reimbursement grants for
the acquisition of fixed assets of Proprietary Fund Types are recorded as intergovernmental
receivables and contributed capital when the related expense is incurred. All other reimbursement
grants are recorded as intergovernmental receivables and revenues when the related
expenditures or expenses are incurred. Reimbursements not received within 60 days subsequent
to fiscal year-end are reported as deferred revenues.
Note 2 - Individual Fund Deficits
The deficit fund balances in individual Special Revenue Funds at June 30, 2001, were as follows:
Fund Deficit Balance
Special Revenue Funds:
Adult Probation Comm. Punishment $ 976
Juv. Probation State Aid Enhancement 7,275
Diversion Intake 13,625
Adult Probation I.P.S. Grant 26,847
Juv. Probation Surveillance Grant 4,015
Court Improvement Program 2,043
Sunsites Light District 152
Gold Acres Light District 57
Pirtleville Light District 1,394
Sierra Vista Burglary 92
Local JCEF JP #1 2,744
JAIBG Detention Project 41
CASA Grant 6,789
These deficits resulted from operations during the year, but are expected to be corrected through
normal operations or operating transfers from the General Fund in fiscal year 2001-2002.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
21
Note 3 - Deposits and Investments
Arizona Revised Statutes authorize the County to invest public monies in the State Treasurer's
investment pool; U.S. Treasury obligations; specified state and local government bonds; and
interest-earning investments such as savings accounts, certificates of deposit, and repurchase
agreements in eligible depositories. The statutes require collateral for demand deposits,
certificates of deposit, and repurchase agreements at 101 percent of all deposits not covered by
federal depository insurance.
County Treasurer’s Investment Pool—Arizona Revised Statutes require community colleges,
school districts, and other local governments to deposit certain public monies with the County
Treasurer (see Note 13). Those monies are pooled with County monies for investment purposes.
Deposits—At June 30, 2001, the investments pool had cash on hand of $130,665. The carrying
amount of the pool’s total cash in bank was $615,083 and the bank balance was $856,035. Of the
bank balance, $500,000 was covered by federal depository insurance and $356,035 was covered
by collateral held by the pledging financial institution’s trust department or agent in the County’s
name.
Investments—At June 30, 2001, the investments in the County Treasurer’s investment pool
consisted of the following.
Fair
Value
Investment in State Treasurer’s
Investment pool $ 72,138,982
U.S. government securities 10,100,000
Total $ 82,238,982
The State Board of Deposit provides oversight for the State Treasurer’s pools and the Local
Government Investment Pool Advisory Committee provides consultation and advice to the
Treasurer. The fair value of a participant’s position in the pool approximates the value of that
participant’s pool shares. Those shares are not identified with specific investments and are not
subject to custodial credit risk. All other investments were insured or registered in the County’s
name, or were held by the County or its agent in the County’s name.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
22
Note 3 - Deposits and Investments (continued)
Other Deposits—At June 30, 2001, the total nonpooled cash on hand was $5,315. The carrying
amount of the County’s total nonpooled cash in bank was $1,780,267 and the bank balance was
$1,951,112. Of the bank balance 877,222 was covered by federal depository insurance or by
collateral held by the County or its agent in the County’s name; and $1,073,890 was covered by
collateral held by the pledging financial institution’s trust department or agent in the County’s
name.
Other Investments—At June 30, 2001, the County’s nonpooled investments consisted of the
following.
Fair
Value
Investment in State Treasurer’s
investment pool $ 3,860,954
The State Board of Deposit provides oversight for the State Treasurer’s pools and the Local
Government Investment Pool Advisory Committee provides consultation and advice to the
Treasurer. The fair value of a participant’s position in the pool approximates the value of that
participant’s pool shares. Those shares are not identified with specific investments and are not
subject to custodial credit risk.
Cash & Investments held by trustee— At June 30, 2001, the County’s cash and investments
held by trustee totaling $369,839, was the reserve requirement for the Series 1996 Certificates of
Participation. All of the balance, was covered by collateral with securities held by the counterparty,
or by its trust department or agent but not in the County’s name.
A reconciliation of cash and investments to amounts shown on the combined balance sheet follows.
Cash and investments:
County
Treasurer’s
Investment Pool Other Total
Cash on hand $ 130,665 $ 5,315 $ 135,980
Carrying amount of
deposits 615,083 2,150,106 2,765,189
Reported amount of
investments 82,238,982 3,860,954 86,099,936
Total $ 82,984,730 $ 6,016,375 $ 89,001,105
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
23
Note 3 - Deposits and Investments (continued)
Combined balance sheet:
Cash and cash equivalents $ 1,785,582
Cash and investments held
by County Treasurer 82,984,730
Cash and investments held
by trustee 369,839
Investments
Total
3,860,954
$ 89,001,105
Note 4 - Property Taxes Receivable
The County levies real 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 various 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.
Property taxes receivable consist of uncollected property taxes as determined from the records of
the County Treasurer's Office. At June 30, 2001, the uncollected property taxes and related
allowances for uncollectibles were as follows:
Fiscal Year
General
Fund
Special
Rev Funds
2000-01 $ 796,620 $ 139,064
Prior 311,629 47,664
1,108,249 186,728
Less allowances
for uncollectibles 302,292 46,637
Net total $ 805,957 $ 140,091
That portion of property taxes receivable not collected within 60 days after June 30, 2001, has
been deferred and, consequently, is not included in current-year revenues.
Note 5 - Due from Other Governments
Amounts due from other governments at June 30, 2001, include $615,142 in state-shared revenue
from highway user taxes and $778,665 in state sales tax, $588,416 in state vehicle license tax, and
$868,728 in county excise tax. The balance of $2,624,756 represents various grants from the
state and federal governments.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
24
Note 6 - Changes in General Fixed Assets
A summary of the changes in general fixed assets follows:
Balance
July 1, 2000 Additions Deletions
Balance
June 30, 2001
Land $ 1,822,160$ $ 23,500 $ 1,798,660
Buildings 14,787,240 18,573 14,805,813
Improvements other than
buildings 886,286 886,286
Machinery and equipment
7,773,506 2,128,368 677,642 9,224,232
Construction in progress 1,729,938 3,997,483 18,573 5,708,848
Total $ 26,999,130 $ 6,144,424 $ 719,715 $ 32,423,839
Note 7 - Certificates of Participation Payable
During the year ended June 30, 1997, the County issued $3,600,000 in certificates of participation
with an average interest rate of 4.52 percent to refund $3,475,000 of outstanding certificates of
participation, with an average interest rate of 6.52 percent. The certificates are callable on or
after August 1, 2001, with interest payable semiannually.
Principal and interest requirements at June 30, 2001, were as follows:
Description
Interest
Rates Maturities
Outstanding
Principal
July 1, 2000 Retirements
Outstanding
Principal
June 30, 2001
PHS Mortgage,
Inc.1996 Series
4.0% to
4.9% 1997-2005 $ 2,540,000 $ 400,000 $ 2,140,000
Total $ 2,540,000 $ 400,000 $ 2,140,000
Certificates of participation debt service requirements to maturity, including $264,665 of interest,
are as follows:
Year ending June 30,
2002 $ 516,090
2003 529,750
2004 540,122
2005 536,965
2006 281,738
Total $ 2,404,665
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
25
Note 8 - Obligations Under Leases
Capital Leases—The County has acquired buildings, office equipment, and vehicles under the
provisions of various long-term lease agreements classified as capital leases for accounting
purposes because they provide for a bargain purchase option or a transfer of ownership by the
end of the lease term. Accordingly, such assets totaling $115,867 at June 30, 2001, are capitalized
in the General Fixed Assets Account Group.
The future minimum lease payments under the capital leases, together with the present value of
the net minimum lease payments at June 30, 2001, were as follows:
General
Long-Term Debt
Account Group
Year ending June 30,
2002 $ 25,880
2003
2004
2005
25,880
15,293
8,620
Total minimum lease payments 75,673
Less amount representing interest 8,717
Present value of net minimum
lease payments $ 66,956
Operating Leases—The County leases buildings, office equipment, and vehicles under the
provisions of various long-term lease agreements classified as operating leases for accounting
purposes. Rental expenditures under the terms of the operating leases were $332,894 for the year
ended June 30, 2001. The operating leases have remaining noncancelable lease terms of 5
months to 10 years and provide renewal options.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
26
Note 8 - Obligations Under Leases (continued)
The future minimum rental payments required under the operating leases at June 30, 2001, were
as follows:
General
Fund
Special
Rev Funds
Enterprise
Funds
Year ending June 30,
2002 $ 43,703 $ 20,084 $ 3,017
2003 8,169 7,536 877
2004 8,169 3,100
2005 4,671 3,100
2006 1,200 3,100
Thereafter 4,800
Total minimum payments required $ 70,712 $ 36,920 $ 3,894
Note 9 - Landfill Closure and Postclosure Care Costs
State and federal laws and regulations require the County to place a final cover on its Eastern
Regional Landfill (ERL) site when it stops accepting waste and to perform certain maintenance and
monitoring functions at the site for 30 years after closure. Although closure and postclosure care
costs will not be paid until near or after the date that the landfill stops accepting waste, the County
reports a portion of these closure and postclosure care costs as an operating expense in each
period based on landfill capacity used as of each balance sheet date. In addition, the County has
entered into intergovernmental agreements to provide for the closure of five other municipalities’
landfills. Theses five landfills have stopped accepting waste and the closure activities have been
completed as of the balance sheet date. The $1,671,398 reported as landfill closure and
postclosure care liability at June 30, 2001, represents the cumulative amount reported to date
based on the use of 95 percent of the estimated capacity of the landfill. The County will recognize
the remaining estimated cost of closure and postclosure care of $58,129 as the remaining
estimated capacity is filled. These amounts are based on what it would cost to perform all closure
and postclosure care in fiscal year 2001. The County expects to close the landfill in the fiscal year
2002, and the actual cost may be higher due to inflation, changes in technology, or changes in
regulations.
According to state and federal laws and regulations, the County must comply with the local
government financial test requirements that assure the County can meet the costs of landfill
closure, postclosure, and corrective action when needed. The County is in compliance with these
requirements.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
27
Note 10 - Risk Management
The County is exposed to various risks of loss related to torts; theft of, damage to, and destruction
of assets; errors and omissions; injuries to employees; and natural disasters; but was unable to
obtain insurance at a cost it considered to be economically justifiable. Therefore, the County
joined and is covered by two public entity risk pools: the Arizona Counties Property and
Casualty Pool and the Arizona Counties Workers’ Compensation Pool.
The Arizona Counties Property and Casualty Pool is a public entity risk pool currently composed of
11 member counties. The pool provides member counties catastrophic loss coverage for risks of
loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and
natural disasters; and provides risk management services. Such coverage includes all defense
costs as well as the amount of any judgment or settlement. The County is responsible for paying a
premium, based on its exposure in relation to the exposure of the other participants, and
a deductible of $25,000 for each property damage and crime occurrence or $50,000
for each liability occurrence. The County is also responsible for any payments in excess of
the maximum coverage of $10 million for each occurrence. A County must participate in the pool at
least three years after becoming a member; however, it may withdraw after the initial three-year
period. If the pool were to become insolvent, the County would be assessed an additional
contribution.
The Arizona Counties Workers’ Compensation Pool is a public entity risk pool currently composed
of 11 member counties. The pool provides member counties with workers’ compensation coverage,
as required by law, and risk management services. The County is responsible for paying a
premium, based on an experience rating formula, that allocates pool expenditures and liabilities
among the members.
The Arizona Counties Property and Casualty Pool and the Arizona Counties Workers’
Compensation Pool receive independent audits annually and an audit by the Arizona Department
of Insurance triennially. Both pools accrue liabilities for losses that have been incurred but not
reported. These liabilities are determined annually based on an independent actuarial valuation.
Note 11 - Changes in Long-Term Liabilities
A summary of changes in the liabilities reported in the General Long-Term Debt Account Group
were as follows:
Balance
July 1, 2000 Additions Reductions
Balance
June 30, 2001
Accrued payroll and
employee benefits
Obligations under capital
leases
$ 2,217,974
25,968
$ 202,678
60,048
$
19,060
$ 2,420,652
66,956
Certificates of participation
Payable 2,540,000 400,000 2,140,000
Total $ 4,783,942 $ 262,726 $ 419,060 $ 4,627,608
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
28
Note 12 - Retirement Plans
Plan Descriptions—The County contributes to the three plans described below. Benefits are
established by state statute and generally provide retirement, death, long-term disability, survivor,
and health insurance premium benefits. In addition, the County contributes to the Elected Officials
Retirement Plan (EORP), which is not described due to the plan’s relative insignificance to the
County’s financial statements.
The Arizona State Retirement System (ASRS) administers a cost-sharing multiple-employer
defined benefit pension plan that covers general employees of the County. The ASRS is governed
by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38,
Chapter 5, Article 2.
The Public Safety Personnel Retirement System (PSPRS) is an agent multiple-employer defined
benefit pension plan that covers public safety personnel who are regularly assigned hazardous
duty as employees of the State of Arizona or one of its political subdivisions. The PSPRS, acting as
a common investment and administrative agent, is governed by a five-member board, known as
The Fund Manager, and 189 local boards according to the provisions of A.R.S. Title 38, Chapter 5,
Article 4.
The Corrections Officer Retirement Plan (CORP) is an agent multiple-employer defined benefit
pension plan that covers certain employees of the State of Arizona, Departments of Corrections
and Juvenile Corrections, and County employees whose primary duties require direct inmate
contact. The CORP is governed by The Fund Manager of PSPRS and 12 local boards according to
the provisions of A.R.S. Title 38, Chapter 5, Article 6.
Each plan issues a publicly available annual financial report that includes its financial statements
and required supplementary information. A report may be obtained by writing or calling the
applicable plan.
ASRS PSPRS, CORP, and EORP
3300 N. Central Ave.
P.O. Box 33910
Phoenix, AZ 85067-3910
1020 E. Missouri Ave.
Phoenix, AZ 85014
(602) 240-2000 or (800) 621-3778 (602) 255-5575
Funding Policy—The Arizona State Legislature establishes and may amend active plan members’
and the County’s contribution rates.
Cost-sharing plans—For the year ended June 30, 2001, active ASRS members and the County
were each required by statute to contribute at the actuarially determined rate of 2.66 percent (2.17
percent retirement and 0.49 percent long-term disability) of the members’ annual covered payroll.
The County’s contributions to ASRS for the years ended June 30, 2001, 2000, and 1999 were
$592,297, $572,164 and $678,276, respectively, which were equal to the required contributions for
the year.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
29
Note 12 - Retirement Plans (continued)
Agent plans—For the year ended June 30, 2001, active PSPRS members were required by statute
to contribute 7.65 percent of the members’ annual covered payroll, and the County was required to
contribute at the actuarially determined rate of 10.81 percent. Active CORP members were
required by statute to contribute 8.5 percent of the members’ annual covered payroll, and the
County was required to contribute at the actuarially determined rate of 2.27 percent.
Annual Pension Cost—The County’s pension cost for the two agent plans for the year ended
June 30, 2001, and related information follows.
PSPRS CORP
Contribution rates:
County 10.81% 2.27%
Plan members 7.65% 8.50%
Annual pension cost $282,738 $32,717
Contributions made $282,738 $32,717
The current-year annual required contributions for both the PSPRS and CORP were determined as
part of their June 30, 2001, actuarial valuations using the entry-age actuarial cost method. The
actuarial assumptions included (a) 9 percent investment rate of return and (b) projected salary
increases ranging from 6.5 percent to 9.5 percent per year. Both (a) and (b) included an inflation
component of 5.5 percent. The assumptions did not include cost-of-living adjustments. The
actuarial value of assets was determined using techniques that smooth the effects of short-term
volatility in the market value of investments over a 4-year period. The unfunded actuarial accrued
liability is being amortized as a level percentage of projected payroll on an open basis. The
remaining amortization period at June 30, 2001, was 20 years.
Trend Information—Annual pension cost information for the current and two preceding years
follows for each of the agent plans.
Plan
Year Ended
June 30
Annual
Pension
Cost
Percentage of
APC
Contributed
Net Pension
Obligation
PSPRS
CORP
2001
2000
1999
2001
2000
1999
$ 282,738
203,024
211,590
32,717
59,770
58,315
100%
100
100
100
100
100
$ 0
0
0
0
0
0
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
30
Note 12 - Retirement Plans (continued)
Analysis of Funding Progress—The following information was obtained from the three most
recent actuarial valuations of the agent plans.
PSPRS
Actuarial
Valuation
Date
Actuarial
Value of Plan
Assets
(a)
Actuarial
Accrued
Liability
(b)
Funding
(Liability)
Excess
(a-b)
Funded
Ratio
(a/b)
Annual
Covered
Payroll
(c)
Unfunded
Liability as
Percentage
of Covered
Payroll
([a-b]/c)
6/30/01
6/30/00
6/30/99
$ 13,819,208
12,734,601
11,197,758
$ 12,617,044
12,547,235
11,379,883
$1,202,164
187,366
(182,125)
109.5%
101.5
98.4
$2,679,198
2,543,102
2,391,905
--
7.6%
CORP
Actuarial
Valuation
Date
Actuarial
Value of Plan
Assets
(a)
Actuarial
Accrued
Liability
(b)
Funding
(Liability)
Excess
(a-b)
Funded
Ratio
(a/b)
Annual
Covered
Payroll
(c)
Unfunded
Liability as
Percentage
of Covered
Payroll
([a-b]/c)
6/30/01
6/30/00
6/30/99
$ 3,930,055
3,634,911
3,147,547
$2,376,160
2,269,455
2,283,340
$1,553,895
1,365,456
864,207
165.4%
160.2
137.8
$1,463,174
1,488,627
1,562,869
---
Note 13 - County Treasurer’s Investment Pool
Arizona Revised Statutes require community colleges, school districts, and other local governments
to deposit certain public monies with the County Treasurer. The Treasurer has a fiduciary
responsibility to administer those and the County monies under her stewardship. The Treasurer
invests, on a pool basis, all idle monies not specifically invested for a fund or program. In addition,
the Treasurer determines the fair value of those pooled investments annually at June 30.
The County Treasurer’s investment pool is not registered with the Securities and Exchange
Commission as an investment company and there is no regulatory oversight of its operations. The
pool’s structure does not provide for shares and the County has not provided or obtained any
legally binding guarantees to support the value of the participants’ investments.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
31
Note 13 - County Treasurer’s Investment Pool (continued)
Details of each major investment classification follow.
Investment Type Principal
Interest
Rates Maturities Fair Value
Investment in Arizona
State Treasurer’s
Investment pool $ 72,138,982 6.0617% N/A $ 72,138,982
U.S. Government
securities 10,100,100 5.000% 7/5/2002 10,100,100
A condensed statement of the investment pool’s net assets and changes in net assets follows.
Statement of Net Assets
Assets $ 83,262,960
Net assets $ 83,262,960
Net assets held in trust for:
Internal participants $ 24,107,510
External participants 59,155,450
Total net assets held in trust $ 83,262,960
Statement of Changes in Net Assets
Total additions $ 247,618,609
Total deductions 244,863,585
Net increase 2,755,024
Net assets held in trust:
July 1, 2000 80,507,936
June 30, 2001 $ 83,262,960
Note 14 – Contingent Liabilities
Litigation Claims – At June 30, 2001 there were several claims and lawsuits pending against the
County, the ultimate outcome of which is unpredictable. Consequently, no provision for any liability
has been made.
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
32
Note 15 – Interfund Assets and Liabilities
The interfund receivables, payables, and operating transfers by fund are as follows:
Due from Due to Operating Operating
Funds Other Funds Other Funds Transfers In Transfers Out
General $ 630,200 $ 242,196 $ 129,136 $ 638,358
Special Revenue 682,464 835,906 917,464 987,406
Capital Projects - 5,407 900,808 905,337
Enterprise 578,520 922,808 958,814 948,619
Internal Service 130,690 15,557 573,498 _
Total $ 2,021,874 $ 2,021,874 $ 3,479,720 $ 3,479,720
Note 16 – Residual Equity Transfers
Residual equity transfers for the fiscal year ended June 30, 2001, were funds transferred due
to the closing of several Special Revenue Funds.
Note 17 – Segment Information – Enterprise Funds
Bisbee Cochise Health
Douglas System Long- Soild Waste
International Term Care Management
Airport Health System System Total
Operating Revenues $ 457,073 $ 20,582,298 $ 2,421,655 $ 23,461,026
Depreciation expense 3,465 9,535 144,540 157,540
Operating income 17,026 322,670 96,277 435,973
Intergovernmental
revenues 362,547 362,547
Operating transfers in 958,814 958,814
Operating transfers out (948,619) (948,619)
Residual equity
transfers out 351 351
Net income 32,568 703,815 635,466 1,371,849
Net working capital 210,597 2,225,036 3,477,961 5,913,594
Total assets 1,909,471 4,545,632 8,986,114 15,441,217
Equipment additions 6,267 102,131 91,905 200,303
Landfill closure and
post-closure care
costs payable 1,671,398 1,671,398
Contributed capital 158,906 158,906
Retained earnings 1,867,030 2,299,157 6,228,903 10,395,090
COCHISE COUNTY
Notes to Financial Statements
June 30, 2001
33
Note 18 – Restatement of Enterprise Fund Equity
At June 30, 2001, a correction of an error was made to the prior period of $168,781 in the County’s
Enterprise Fund for interest income that was previously not recorded. This interest income was
earned by cash held in the State Treasurer’s Investment Pool for the County’s Solid Waste
Management System. The effect of this correction was an increase in net income for the year
ended June 30, 2000, and an increase in beginning fund equity at July 1, 2001, of $168,781 in the
County’s Enterprise Fund.
34
Supplementary Information
Federal Grantor/Pass-Through CFDA Pass-Through
Grantor/Program Title Number Grantor's Number Expenditures
U.S. DEPARTMENT OF AGRICULTURE
Passed through the Arizona Department of Health Services
Special Supplemental Food Program for
Women, Infants and Children 10.557 761089 $ 515,709
Passed through Arizona State Treasurer
Schools and Roads - Grants to State and Counties 10.665 NONE 48,374
Passed through the Arizona Department of Education
Child Nutrition Program 10.555 NONE 15,056
U.S. Forest Service
Cooperative Forestry Act 10.664 4,211
Emergency Watershed Protection Program 10.68945714 63,146
Total U.S. Department of Agriculture 646,496
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Section 8 Cluster
Section 8 Rental Voucher Program 14.871 1,287,606
Passed through the Arizona Department of Commerce
Community Development Block Grants 14.228 NONE 67,892
Total U.S. Department of Housing and Urban Development 1,355,498
U.S. DEPARTMENT OF JUSTICE
Immigration and Naturalization Act 16.572 257,437
Passed through the Arizona Department of Public Safety
Crime Victim Compensation 16.575 2000-VA-GX-0004 68,724
Crime Victim Assistance 16.576 NONE 9,387
Drug Control and System Improvement 16.579 PC-050-01
AC-080-01
CRI-01-032 307,728
Public Safety Partnership and Community Policing Grants 16.710 58,535
Local Law Enforcement Block Grant 16.592 12,315
Drug Free Workplace 16.589 130,634
Omnibus Crime Control and Safe Streets 16.580 489,039
Passed through State of Arizona Governor's Community Policy
Office Juvenile Accountability Incentive Block Grant 16.523 00JAIBG-02 147,973
Cannabis Eradication Program 16.UNKNOWN 3,003
Executive Office for the United States Attorney
Southwest Border Local Assistance Initiative 16.UNKNOWN 943,302
Total U.S. Department of Justice 2,428,077
See accompanying notes to schedule.
35
COCHISE COUNTY
Schedule of Expenditures of Federal Awards
Year Ended June 30, 2001
(continued)
Federal Grantor/Pass-Through CFDA Pass-Through
Grantor Program Title Number Grantor's Number Expenditures
U.S. DEPARTMENT OF LABOR
Passed through the Arizona Department of Economic Security
Workforce Investment Act 17.250 E5709011 1,111,911
Total U.S. Department of Labor 1,111,911
U.S. DEPARTMENT OF TRANSPORTATION
Passed through the Arizona Department of Emergency and Military Affairs
Emergency Preparedness Planning Grant 20.703 NONE 14,526
Passed through the Arizona Department of Public Safety
Enhanced Highway Safety Enforcement Program 20.600 NONE 71,376
Total U.S. Department of Transportation 85,902
U.S. DEPARTMENT OF EDUCATION
Passed through the Arizona Supreme Court
Title I Program for Disadvantaged Children 84.010 NONE 14,551
Total U.S. Department of Education 14,551
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
Passed through the Southeastern Arizona Governments Organization
Social Service Block Grant
Special Programs for the Aging-Title III Part B 93.044 NONE 176,911
Passed through the Arizona Department of Health Services
HIV Prevention 93.940 152010 25,683
Preventive Health and Health Services 93.991 952014
Block Grant 304057 110,118
HIV Care Formula Grants 93.917 652041 168,109
Preventive Health Services - Sexually
Transmitted Dieases Control Grants 93.977 052006 1,140
Maternal and Child Health Services
Block Grant to the State 93.994 961121 73,025
Passed through the Arizona Department of Economic Security
Child Support Enforcement 93.563 E7201003 551,989
Total U.S. Department of Health and Human Services 1,106,975
See accompanying notes to schedule.
36
COCHISE COUNTY
Schedule of Expenditures of Federal Awards
Year Ended June 30, 2001
(continued)
Federal Grantor/Pass-Through CFDA Pass-Through
Grantor Program Title Number Grantor's Number Expenditures
OFFICE OF NATIONAL DRUG CONTROL POLICY
Passed through the Pima County Sheriff's Department
High Intensity Drug Trafficking Areas 07.UNKNOWN I1PSAP549 482,407
Total Office of National Drug Control Policy 482,407
U.S. DEPARTMENT OF THE INTERIOR
Payment in Lieu of Taxes - Section I 15.226 657,510
Passed through the Arizona State Treasurer
Taylor Grazing 15.UNKNOWN NONE 10,091
Total U.S. Department of the Interior 667,601
TOTAL EXPENDITURES OF FEDERAL AWARDS $ 7,899,418
See accompanying notes to schedule.
37
Schedule of Expenditures of Federal Awards
Year Ended June 30, 2001
COCHISE COUNTY
COCHISE COUNTY
Notes to Schedule of Expenditures of Federal Awards
Year Ended June 30, 2001
38
Note 1 - Basis of Accounting
The accompanying schedule of expenditures of federal awards includes the federal grant activity of
Cochise County and is presented on the modified accrual basis of accounting. The information in
this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in
this schedule may differ from amounts presented in, or used in the preparation of, the financial
statements.
Note 2 - Catalog of Federal Domestic Assistance (CFDA) Numbers
The program titles and CFDA numbers were obtained from the federal or pass-through grantor or
the 2001 Catalog of Federal Domestic Assistance. When no CFDA number had been assigned to
a program, the federal contract number was used.
Note 3 - Subrecipients
From the federal expenditures presented in the schedule, the County awarded the following to
subrecipients.
Program Title CFDA Number Amount
Workforce Investment Act 17.250 $ 1,111,911
39
REPORTS ON COMPLIANCE AND INTERNAL CONTROL
40
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41
Independent Auditors’ Report on Compliance and on Internal Control over
Financial Reporting Based on an Audit of Primary Government Financial Statements
Performed in Accordance with Government Auditing Standards
The Auditor General of the State of Arizona
The Board of Supervisors of
Cochise County, Arizona
We have audited the primary government financial statements of Cochise County as of and for the
year ended June 30, 2001, and have issued our report thereon dated December 12, 2001, which was
modified due to the omission of the component unit’s financial data. 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.
Compliance
As part of obtaining reasonable assurance about whether the County’s primary government financial
statements are free of material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct
and material effect on the determination of primary government financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audit and,
accordingly, we do not express such an opinion. The results of our tests disclosed no instances of
noncompliance that are required to be reported under Government Auditing Standards.
Internal Control over Financial Reporting
In planning and performing our audit, we considered the County’s internal control over financial
reporting in order to determine our auditing procedures for the purpose of expressing our opinion on
the primary government financial statements and not to provide assurance on internal control over
financial reporting. However, we noted certain matters involving internal control over financial reporting
and its operation that we consider to be reportable conditions. Reportable conditions involve matters
coming to our attention relating to significant deficiencies in the design or operation of internal control
over financial reporting that, in our judgment, could adversely affect the County’s
Cochise County, Arizona
Page Two
December 12, 2001
42
ability to record, process, summarize, and report financial data consistent with the assertions of
management in the primary government financial statements. The reportable conditions are described
in the accompanying schedule of findings and questioned costs as item 01-01 and 01-02.
A material weakness is a condition in which the design or operation of one or more of the internal
control components does not reduce to a relatively low level the risk that misstatements in amounts
that would be material in relation to the primary government financial statements being audited may
occur and not be detected within a timely period by employees in the normal course of performing their
assigned functions. Our consideration of internal control over financial reporting would not necessarily
disclose all such internal control matters that might be reportable conditions and, accordingly, would
not necessarily disclose all reportable conditions that are also considered to be material weaknesses.
However, we consider the reportable conditions described above as item 01-01 and 01-02 to be a
material weaknesses. We also noted other matters involving internal control over financial reporting
that we have reported to the County’s management in a separate letter dated December 12, 2001.
This report is intended solely for the information and use of the members of the Arizona State
Legislature, the Auditor General of the State of Arizona, the County’s Board of Supervisors, federal
awarding agencies, and pass-through entities. It is not intended to be and should not be used by
anyone other than these specified parties. However, this report is a matter of public record and its
distribution is not limited.
CHRISTENSEN, GALE & MCLAREN, LLP
December 12, 2001
43
Independent Auditors’ Report on Compliance with Requirements
Applicable to Each Major Program and on Internal Control over Compliance in
Accordance with OMB Circular A-133
The Auditor General of the State of Arizona
The Board of Supervisors of
Cochise County, Arizona
Compliance
We have audited the compliance of Cochise County with the types of compliance requirements
described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance
Supplement that are applicable to each of its major federal programs for the year ended June 30,
2001. The County’s major federal programs are identified in the summary of auditor’s results section
of the accompanying schedule of findings and questioned costs. Compliance with the requirements of
laws, regulations, contracts, and grants applicable to each of its major federal programs is the
responsibility of the County’s management. Our responsibility is to express an opinion on the County’s
compliance based on our audit and the report of the other auditors.
Cochise County’s primary government financial statements and schedule of expenditures of federal
awards do not include the financial data of the Cochise Private Industry Council, Inc. (CPIC), a
component unit of Cochise County administering the Workforce Investment Act (WIA). Our audit,
described below, did not include the operations of the CPIC because that component unit engaged
other auditors to perform an audit in accordance with OMB Circular A-133.
We conducted our audit of compliance in accordance with U.S. generally accepted auditing standards;
the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that
we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the
types of compliance requirements referred to above that could have a direct and material effect on a
major federal program occurred. An audit includes examining, on a test basis, evidence about the
County’s compliance with those requirements and performing such other procedures, as we
considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the
County’s compliance with those requirements.
Cochise County, Arizona
Page Two
December 12, 2001
44
As described in item 01-05 in the accompanying section of federal award findings, Cochise County did
not comply with the requirement of taking a physical inventory of fixed assets that is applicable to the
Child Support Enforcement Program. Compliance with such a requirement is necessary, in our
opinion, for the County to comply with its requirement applicable to this program.
In our opinion, based on our audit, except for the noncompliance described in the preceding
paragraph, the County complied, in all material respects, with the requirements referred to above that
are applicable to each of its major federal programs for the year ended June 30, 2001. The results of
our auditing procedures also disclosed other instances of noncompliance with those requirements that
are required to be reported in accordance with OMB Circular A-133 and which are described in the
accompanying schedule of findings as items 01-03, 01-04 and 01-06 through 01-09.
Internal Control Over Compliance
The County’s management is responsible for establishing and maintaining effective internal control
over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal
programs. In planning and performing our audit, we considered the County’s internal control over
compliance with requirements that could have a direct and material effect on a major federal program
in order to determine our auditing procedures for the purpose of expressing our opinion on compliance
and to test and report on internal control over compliance in accordance with OMB Circular A-133.
We noted certain matters involving the internal control over compliance and its operation that we
consider to be reportable conditions. Reportable conditions involve matters coming to our attention
relating to significant deficiencies in the design or operation of the internal control over compliance
that, in our judgment, could adversely affect the County’s ability to administer a major federal program
in accordance with the applicable requirements of laws, regulations, contracts, and grants. Reportable
conditions are described in the accompanying schedule of findings and questioned costs as items 01-
03, 01-04 and 01-06 through 01-09.
A material weakness is a condition in which the design or operation of one or more of the internal
control components does not reduce to a relatively low level the risk that noncompliance with the
applicable requirements of laws, regulations, contracts, and grants that would be material in relation to
a major federal program being audited may occur and not be detected within a timely period by
employees in the normal course of performing their assigned functions. Our consideration of the
internal control over compliance would not necessarily disclose all such internal control matters that
might be reportable conditions and, accordingly would not necessarily disclose all reportable conditions
that are also considered to be material weaknesses. However, we believe none of the reportable
conditions described above are material weaknesses.
This report is intended solely for the information and use of the members of the Arizona State
Legislature, Auditor General of the State of Arizona, the Cochise County Board of Supervisors,
Cochise County, Arizona
Page Three
December 12, 2001
45
federal awarding agencies, and pass-through entities. It is not intended to be and should not be used
by anyone other than these specified parties. However, this report is a matter of public record and its
distribution is not limited.
CHRISTENSEN, GALE & MCLAREN, LLP
December 12, 2001
COCHISE COUNTY
Schedule of Findings and Questioned Costs
Year Ended June 30, 2001
46
Summary of Auditors’ Results
Financial Statements
Type of auditor’s report issued: Unqualified
Yes No
Material weakness identified in internal control over financial reporting? _X_ ___
Reportable conditions identified not considered to be material weaknesses? ___ _ X_
Noncompliance material to the financial statements noted? _X_ ___
Federal Awards
Material weakness identified in internal control over major programs? _X_ ___
Reportable conditions identified not considered to be material weaknesses? _X_ ___
Type of auditor’s report issued on compliance for major programs: Qualified
Any audit findings disclosed that are required to be reported in accordance with Circular
A-133 (section .510[a])? _X_ ___
Identification of major programs:
CFDA Number Name of Federal Program or Cluster
14.871 Section 8 Housing Choice Vouchers
93.563 Child Support Enforcement
10.557 Special Supplemental Nutrition Program for Women, Infants, and Children
16.579 Byrne Formula Grant Program
17.250 Workforce Investment Act
15.226 Payment in Lieu of Taxes – Section I
07.UNKNOWN High Intensity Drug Trafficking Areas
16.580 Omnibus Crime Control and Safe Streets
Dollar threshold used to distinguish between Type A and Type B programs: $ 300,000
Auditee qualified as low-risk auditee? ___ _X_
Other Matters
Auditee's summary schedule of prior audit findings required to be reported in accordance
with Circular A-133 (section .315[b])? __ _X_
COCHISE COUNTY
Schedule of Findings and Questioned Costs
Year Ended June 30, 2001
47
Financial Statement Findings
01-01
The County did not adequately account for its fixed assets
The County has not performed a physical inventory of fixed assets within two years prior to June 30,
2001. An updated list of substantiated fixed assets was not available for comparison to the fixed
assets recorded to the general ledger.
The County should implement an annual physical inventory of fixed assets to occur near the end of the
fiscal year. This should be done by employees of the County or contracted with an outside source.
This inventory should be observed by the outside accounting firm engaged to audit the County’s
general purpose financial statements.
We consider this to be a material weakness.
01-02
The County did not record necessary transactions
In several instances the County did not record the necessary transactions to the accounting system in
order to prevent the financial statements from being materially misstated. We noted the following
unrecorded transactions to the County’s books:
1. The County Treasurer did not record interest received on investments held by the treasurer for
June 2001. This unrecorded amount understated revenues by approximately $180,000.
2. The County Treasurer did not record interest received on investments held by the treasurer
from inception of the Landfill investment account. The unrecorded amount understated income
by approximately $170,000.
3. Several outstanding County warrants that were outstanding for more than one year were not
voided as required by Arizona Revised Statutes.
We recommend the County adopt the necessary procedures to ensure that all the required
transactions are recorded to their accounting system to reduce the risk of material misstatements to
the financial statements.
We consider this to be a material weakness.
COCHISE COUNTY
Schedule of Findings and Questioned Costs
Year Ended June 30, 2001
48
Federal Award Findings
The County’s Department of Housing and Urban Development (HUD) department did not reconcile
amounts reported to HUD with the County’s general ledger. Each area of the balance sheet and
income statement contained differences between the annual report (Form HUD-52681) filed with HUD
and the amounts recorded in the County’s general ledger. The questioned costs equal a net of
$131,897 of net income and $172,020 in the fund balance.
The County should prepare a reconciliation of the balances before reporting the annual activity on
Form HUD-52681. When the amounts do not agree, the County should make the necessary
adjustments to correct the differences.
01-04
CFDA No.: 14.871 Section 8 Housing Choice Vouchers
U.S. Department of Housing and Urban Development
Award Year: October 1, 2000 through September 30, 2001
Special Tests and Provisions
Questioned Cost—$42,000
At the time of fieldwork, the County’s HUD department had issued approximately 309 of the 404
vouchers the County is allotted to issue. The administration fee the County is allowed is $36.90 per
month for each participant. The County has forgone approximately $42,000 (annualized) of
administration fees that can be used for administration costs of the program.
The County should increase the number of briefings held each month to accelerate the number of new
participants to the program and use up the allotted 404 vouchers.
The County’s HUD department had utility allowance worksheets that had not been reviewed at least
once annually.
The County should date all of their utility allowance worksheets to ensure that utility allowances are
reviewed at least annually.
1-03
CFDA No.: 14.871 Section 8 Housing Choice Vouchers
U.S. Department of Housing and Urban Development
Award Year: October 1, 2000 through September 30, 2001
Reporting
Questioned Cost—$172,020
COCHISE COUNTY
Schedule of Findings and Questioned Costs
Year Ended June 30, 2001
49
01-05
CFDA No.: 93.563 Child Support Enforcement
U.S. Department of Health and Human Services
Award Year: July 1, 2000 through July 30, 2001
As subcontracted from Arizona Department of Economic Security
Contract Number E7201003
Equipment and Real Property Management
Questioned Cost—Unknown
The County conducted a physical inventory of fixed assets more than two years ago. Refer to the
Financial Statement Finding 01-01 for additional information.
In addition to requiring a physical inventory at least once every two years, the Arizona Department of
Economic Security (DES) requires the Department of Child Support Enforcement (DCSE) to keep
accurate inventory records with several contract stipulations. Those required items not found on the
inventory records include the following:
·  original cost of the asset
·  percentage of Federal participation in the cost
·  condition or status of asset
·  method used to determine current fair market value (replacement cost)
The County should implement: 1) a fixed asset inventory system, or 2) supplemental reports, to record
the additional required information for each area of its federal and state award programs.
01-06
CFDA No.: 93.563 Child Support Enforcement
U.S. Department of Health and Human Services
Award Year: July 1, 2000 through July 30, 2001
As subcontracted from Arizona Department of Economic Security
Contract Number E7201003
Procurement
Questioned Cost—Unknown
The County did not provide evidence or documentation on one of twenty-seven items tested to indicate
that oral or written bids were obtained according to County procurement procedures.
The County should provide documentation with the purchase orders and check copies to document
that procurement procedures were followed.
COCHISE COUNTY
Schedule of Findings and Questioned Costs
Year Ended June 30, 2001
50
01-07
CFDA No.: 93.563 Child Support Enforcement
U.S. Department of Health and Human Services
Award Year: July 1, 2000 through July 30, 2001
As subcontracted from Arizona Department of Economic Security
Contract Number E7201003
Matching, Level of Effort, Earmarking
Questioned Cost—Unknown
The County is required to provide “level of effort” monitoring. No evidence was produced during
fieldwork to indicate the County is monitoring or following-up on the level of efforts and enforcement by
the DCSE staff. In addition, we relied on other auditors of the State of Arizona for the audit of their
computer software system—Arizona Tracking and Locate Automated System (ATLAS)—implemented
and maintained by Arizona DES. The Cochise County DCSE is required to utilize ATLAS to abide by
the contract. The scope of our audit did not include procedures to audit the management and
implementation of ATLAS at the state level. Therefore, the following comments are based on the use
of ATLAS.
a. We relied on other auditors of the State of Arizona to confirm that DES applications for child
support were processed by the State and entered into ATLAS. The scope of our audit did not
include auditing the State’s central processing for controls of input.
b. We noted no evidence of written or verbal control measures to ensure that cases are
established or attempted for child support obligations by DCSE staff.
c. We noted no evidence of written or verbal control measures to ensure that follow-up
actions take place on the items presented on ATLAS requiring DCSE staff attention.
d. We noted no evidence of written or verbal control measures to ensure that follow-up
procedures to establish and/or enforce medical support by DCSE staff were in place.
01-08
CFDA No.: 93.563 Child Support Enforcement
U.S. Department of Health and Human Services
Award Year: July 1, 2000 through July 30, 2001
As subcontracted from Arizona Department of Economic Security
Contract Number E7201003
Reporting
Questioned Cost—Unknown
The County is reimbursed according to the submitted budget of DCSE for portions of the administrative
costs in conducting child support enforcement including wages, employee related expenses, and
department equipment. The DCSE is required to file financial reports—which serves as the cost
reimbursement application—no later than the 28th day following each reporting month during the
agreement term. Such reports shall cover contract services and expenditures for child support
personnel, equipment, services, and supplies for the proceeding reporting month. These reports were
consistently filed after the due date.
The County should file these reports on a timely basis to accelerate the time frame to recovering these
costs.
COCHISE COUNTY
Schedule of Findings and Questioned Costs
Year Ended June 30, 2001
51
01-09
CFDA No.: 93.563 Child Support Enforcement
U.S. Department of Health and Human Services
Award Year: July 1, 2000 through July 30, 2001
As subcontracted from Arizona Department of Economic Security
Contract Number E7201003
Special Tests and Provisions
Questioned Cost—Unknown
Included in the contract with Arizona DES, the contractor (Cochise County) must provide Worker’s
Compensation insurance. Proof of Insurance certificates were unavailable at the time of fieldwork.
The County should maintain copies of all Proof of Insurance certificates indicating coverage for each
fiscal year in one central location.
52
County of Cochise
Finance Director P.O. BOX 225 Fax (520) 432-9208
Email: bpender@co.cochise.az.us BISBEE, ARIZONA 85603
March 27, 2002
Ms. Debra K. Davenport, CPA
Auditor General
2910 N. 44th Street, Suite 410
Phoenix, AZ 85018
Dear Ms. Davenport:
The accompanying corrective action plan has been prepared as required by U.S. Office of
Management and Budget Circular A-133. Specifically, we are providing you with the names of the
contact persons responsible for corrective action, the corrective action planned, and the anticipated
completion date for each audit finding included in the current year’s schedule of findings and
questioned costs.
Sincerely,
Robert W. Pender
Finance Director
53
Financial Statement Findings and Questioned Costs
The reportable conditions from the June 30, 2001 Schedule of Findings and Questioned Costs are
discussed below. The findings are numbered consistently with the numbers assigned in the
schedule.
01-01
Physical Inventory of Fixed Assets
Contact Person: Robert Pender, Finance Director
Anticipated Completion Date: June 30, 2002
Program recommendations include:
The County should implement an annual physical inventory of fixed assets to occur near the end of
the fiscal year. This should be done by employees of the County or contracted with an outside
source. This inventory should be observed by the outside accounting firm engaged to audit the
County’s general purpose financial statements.
Action Planned: An inventory of fixed assets is scheduled to be completed by County staff not later
than June 30, 2002.
01-02
Recording of County’s Transactions
Contact Person: Darlene Loper, Accounting Supervisor
Anticipated Completion Date: June 30, 2002
Program recommendations include:
1. The County Treasurer should record interest received on the investments held by the
treasurer for June of the current fiscal year.
2. The County Treasurer should record interest received on the investments held by the
treasurer for the Landfill account.
3. The County should ensure that all warrants outstanding for more than one year are voided and
the County’s cash balance adjusted accordingly.
Action Planned: The Finance Department will establish procedures to monitor investment accounts
and ensure that earned interest is properly recorded.
The warrants outstanding for more than one year are restitution payments to individuals issued
primarily in the judicial departments. Procedures will be reviewed and modified as necessary to
ensure that departments are complying with the applicable statutes and the State’s abandoned
property laws.
54
Federal Award Findings and Questioned Costs
01-03
CFDA No.: 14.871 Section 8 Housing Choice Vouchers
Contact Person: Jarrie Tent, Acting Director
Anticipated Completion Date: June 30, 2002
Program recommendations include:
1. The County should prepare a reconciliation of the amounts before reporting the annual activity
on Form HUD-52681 when the amounts do not agree and make the necessary adjustments to
correct the differences.
2. The County should increase the number of briefings held each month to accelerate more new
participants to the program and use up all of the allotted 404 vouchers.
Action Planned: The Finance Department will establish procedures to reconcile the County’s
financial records with those of the Housing Department’s outside accounting service as reported on
Form HUD-52681. Required corrections will be posted by the County or reported to the outside
accountants as appropriate.
The Housing Division has hired an additional intake person for the specific purpose of increasing
the number of housing units (vouchers used). The number of leased units has increased to 350 in
February 2002.
01-04
CFDA No.: 14.871 Section 8 Housing Choice Vouchers
Contact Person: Jarrie Tent, Acting Director
Anticipated Completion Date: June 30, 2002
Program recommendations include:
1. The County should date all of their utility allowance worksheets to ensure that utility allowances
are reviewed at least annually.
Action Planned: The Housing Division will review the Utility Allowance Worksheets at least annually
and maintain a file on each area of the County. The most recent copies on file are dated July 1,
2001. The Utility Allowance Worksheets will be reviewed again not later than July 2002.
55
01-05
CFDA No.: 93.563 Child Support Enforcement
Contact Person: Robert Pender, Finance Director
Anticipated Completion Date: June 30, 2002
Program recommendations include:
1. The County should implement a fixed asset inventory system or supplemental report to record
the required information for each area of its federal and state award programs requiring
additional information and reporting on its fixed assets.
Action Planned: A fixed asset inventory is scheduled to be completed by County staff not later than
June 30, 2002. The information required for assets acquired by federal or state programs will
either be recorded in the current fixed asset system if possible or supplemental records will be
maintained.
01-06
CFDA No.: 93.563 Child Support Enforcement
Contact Person: Carol Nichols, Purchasing Supervisor
Anticipated Completion Date: June 30, 2002
Program recommendations include:
1. The County should provide documentation with the purchase orders and check copies to
document that procurement procedures were followed.
Action Planned: Most computer equipment is purchased through the County’s cooperative
purchasing agreement with the State of Arizona utilizing contracts issued by the Arizona State
Procurement Office. The Purchasing Division of the Finance Department will establish procedures
to ensure that the provisions of the County purchasing policy are followed e.g. cite the state
contract used or document the quotations received.
01-07
CFDA No.: 93.563 Child Support Enforcement
Contact Person: Jeanne Benda Whitney, Deputy County Attorney
Anticipated Completion Date: June 30. 2002
Program recommendations include:
1. The County should adopt written procedures to better monitor the program as specified in
the contract.
Action Planned: Procedures will be reviewed and documented as necessary to ensure that the
Child Support Enforcement Program is monitored as specified in the contract.
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01-08
CFDA No.: 93.563 Child Support Enforcement
Contact Person: Frank Cruz, Finance Manager; Jeanne Benda Whitney, Deputy County
Attorney
Anticipated Completion Date: June 30, 2002
Program recommendations include:
1. The County should file the required Child Support Enforcement reports for expense
reimbursement on a timely basis to accelerate the time frame to recovering these costs.
Action Planned: Procedures have been established between the Child Support Enforcement
Division and the County Attorney’s Finance Manager to ensure that expense reimbursement
reports are filed on a timely basis.
01-09
CFDA No.: 93.563 Child Support Enforcement
Contact Person: Chris Mullinax, Risk Manager
Anticipated Completion Date: June 30, 2002
Program recommendations include:
1. Included in the contract with Arizona DES, the contractor (Cochise County) must provide
Worker’s Compensation insurance. Proof of Insurance certificates were unavailable at the time
of fieldwork.
Action Planned: Proof of Workers Compensation insurance coverage is maintained by the
County’s Risk Manager in the Human Resources Department.