Gila County single audit: year ended June 30,...

              Gila County, Arizona
Single Audit Reporting Package
June 30, 2001
Table of Contents
Page
Independent Auditors' Report.................................................................................................. 1-2
General Purpose Financial Statements
Combined Balance Sheet-All Fund Types and Account Groups........................................... 3-4
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
All Governmental Fund Types................................................................................................5
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances
Budget and Actual-All Governmental Fund Types ............................................................ 6-8
Statement of Net Assets-Investment Trust Fund .......................................................................9
Statement of Changes in Net Assets-Investment Trust Fund ..................................................10
Notes to Financial Statements............................................................................................ 11-24
Supplementary Information
Schedule of Expenditures of Federal Awards.................................................................... 26-28
Notes to Schedule of Expenditures of Federal Awards ...........................................................29
Reports on Compliance and Internal Control
Report on Compliance and on Internal Control over Financial Reporting Based on an
Audit of General Purpose Financial Statements Performed in Accordance with
Government Auditing Standards..................................................................................... 31-32
Report on Compliance with Requirements Applicable to Each Major Program and on
Internal Control over Compliance in Accordance with OMB Circular A-1 33.............. 33-34
Schedule of Findings and Questioned Costs
Summary of Auditors' Results.............................................................................................35
Financial Statement Findings ........................................................................................ 36-37
County Responses
Corrective Action Plan....................................................................................................... 39-42
Summary Schedule of Prior Audit Findings...................................................................... 43-44
1
Independent Auditors' Report
The Auditor General of the State of Arizona
The Board of Supervisors of
Gila County, Arizona
We have audited the accompanying general purpose financial statements of Gila County as of
and for the year ended June 30, 2001, as listed in the table of contents. These general purpose
financial statements are the responsibility of the County's management. Our responsibility is to
express an opinion on these general purpose financial statements based on our audit.
Except as explained in the third and fourth paragraphs, 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 general purpose financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the general purpose financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating
the overall general purpose financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The County did not maintain adequate accounting records to support interfund receivables and
payables. As a result, we were unable to satisfy ourselves as to the amounts at which interfund
receivables and payables are reported in the general purpose financial statements.
The records of the General Fixed Assets Account Group were incomplete as to cost. As a result,
we were unable to satisfy ourselves as to the stated cost of the assets reported in the General
Fixed Assets Account Group.
In our opinion, except for the effects, if any, of the matters set forth in the third and fourth
paragraphs, the general purpose financial statements referred to above present fairly, in all
material respects, the financial position of Gila County as of June 30, 2001, and the results of its
operations, 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.
2
Our audit was made for the purpose of forming an opinion on the general purpose financial
statements of Gila 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
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 general purpose
financial statements. Such information has been subjected to the auditing procedures applied in
the audit of the general purpose financial statements and, in our opinion, is fairly stated, in all
material respects, in relation to the general purpose financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued our report dated June 7,
2002 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.
Walker & Armstrong LLP
Certified Public Accountans
Phoenix, Arizona
June 7, 2002
Fiduciary
Fund Type
Special Debt Trust and General General Long-
General Revenue Service Agency Fixed Assets Term Debt
Assets and Other Debits
Cash and cash equivalents $ 3,319,163 $ 4,841,318 $ 392 $ 50,608,856 $ - $ -
Investments held by trustee 2,653,515 - 326,366 - - -
Receivables:
Property taxes 533,431 31,105 - - - -
Other 231,088 349,893 - - - -
Due from:
Other funds 1,398,902 1,871,883 - - - -
Other governments 815,780 1,560,728 - - - -
Prepaid items 44,724 925 - - - -
Fixed assets:
Land - - - - 621,377 -
Buildings and improvements - - - - 7,060,395 -
Machinery and equipment - - - - 15,643,281 -
Amount available in debt service fund - - - - - 326,758
Amount to be provided for retirement
of general long-term debt - - - - - 10,011,310
Total assets $ 8,996,603 $ 8,655,852 $ 326,758 $ 50,608,856 $ 23,325,053 $ 10,338,068
Governmental Fund Types Account Groups
Gila County
Combined Balance Sheet - All Fund Types and Account Groups
June 30, 2001
The accompanying notes are an integral part of these financial statements.
3
Fiduciary
Fund Type
Special Debt Trust and General General Long-
General Revenue Service Agency Fixed Assets Term Debt
Liabilities, Fund Equity and Other Credits
Liabilities:
Accounts payable $ 1,426,628 $ 1,197,707 $ - $ - $ - $ -
Accrued payroll and employee benefits 434,842 295,405 - - - 1,114,931
Due to:
Other funds 1,056,716 2,839,313 - - - -
Other governments - 10,929 - 199,291 - -
Deposits held for others - - - 379,135 - -
Obligations under capital leases - - - - - 4,206,989
Landfill closure and postclosure costs - - - - - 2,126,148
Certificates of participation payable - - - - - 2,890,000
Deferred revenues 370,291 21,297 - - - -
Total liabilities 3,288,477 4,364,651 - 578,426 - 10,338,068
Fund equity and other credits:
Investment in general fixed assets - - - - 23,325,053 -
Fund balances:
Reserved for investment trust participants - - - 50,030,430 - -
Unreserved 5,708,126 4,291,201 326,758 - - -
Total fund equity and other credits 5,708,126 4,291,201 326,758 50,030,430 23,325,053 -
Total liabilities, fund equity, and other credits $ 8,996,603 $ 8,655,852 $ 326,758 $ 50,608,856 $ 23,325,053 $ 10,338,068
Gila County
Combined Balance Sheet - All Fund Types and Account Groups - Continued
Governmental Fund Types Account Groups
June 30, 2001
The accompanying notes are an integral part of these financial statements.
4
Special Debt
General Revenue Service
Revenues:
Taxes $ 20,166,014 $ 4,197,397 $ -
Licenses and permits 350,918 308,540 -
Intergovernmental 2,410,168 12,431,311 -
Charges for services 3,507,153 430,311 -
Fines and forfeits 842,961 216,685 -
Investment income 406,824 250,432 5,981
Miscellaneous 884,259 1,035,287 -
Total revenues 28,568,297 18,869,963 5,981
Expenditures:
Current:
General government 9,903,759 1,725,459 -
Public safety 7,346,370 2,578,555 -
Highways and streets 21,083 6,711,622 -
Health, welfare, and sanitation 8,539,863 6,184,031 -
Culture and recreation 101,962 672,887 -
Education 1,163,422 186,224 -
Capital outlay 1,321,890 948,474 -
Debt service:
Principal retirement - - 140,000
Interest and fiscal charges - - 191,840
Total expenditures 28,398,349 19,007,252 331,840
Excess (deficiency) of revenues over expenditures 169,948 (137,289) (325,859)
Other financing sources (uses):
Operating transfers in 2,077,648 2,561,593 319,546
Operating transfers out (3,916,938) (1,041,849) -
Net other financing sources (uses) (1,839,290) 1,519,744 319,546
Excess (deficiency) of revenues and other
financing sources over expenditures and other uses (1,669,342) 1,382,455 (6,313)
Fund balances, beginning of year 7,377,468 2,908,746 333,071
Fund balances, end of year $ 5,708,126 $ 4,291,201 $ 326,758
Gila County
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances -
Year Ended June 30, 2001
All Governmental Fund Types
The accompanying notes are an integral part of these financial statements.
5
Gila County
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances -
Budget and Actual - All Governmental Fund Types
Year Ended June 30, 2001
Special Revenue Funds Debt Service Fund
Budget Actual Variance Budget Actual Variance Budget Actual Variance
Revenues:
Taxes $ 18,807,953 $ 20,166,014 $ 1,358,061 $ 3,590,785 $ 4,197,397 $ 606,612 $ - $ - $ -
Licenses and permits 415,000 350,918 (64,082) 326,270 308,540 (17,730) - - -
Intergovernmental 3,134,572 2,410,168 (724,404) 11,617,717 12,431,311 813,594 - - -
Charges for services 2,691,112 3,507,153 816,041 155,700 430,311 274,611 - - -
Fines and forfeits 635,000 842,961 207,961 255,050 216,685 (38,365) - - -
Investment income 150,000 406,824 256,824 30,000 250,432 220,432 - 5,981 5,981
Miscellaneous 407,543 884,259 476,716 378,014 1,035,287 657,273 - - -
Total revenues 26,241,180 28,568,297 2,327,117 16,353,536 18,869,963 2,516,427 - 5,981 5,981
Expenditures:
Current:
General government
Administrative services 72,604 75,028 (2,424) - - - - - -
Assessor 595,543 614,573 (19,030) - - - - - -
Board of Supervisors 410,224 401,106 9,118 - - - - - -
Clerk of the Superior Court 757,147 737,717 19,430 145,005 24,805 120,200 - - -
Computer services 392,678 546,735 (154,057) - - - - - -
Constable - Globe 46,982 42,132 4,850 - - - - - -
Constable - Payson 76,236 74,946 1,290 - - - - - -
County Attorney - - - 887,675 1,087,087 (199,412) - - -
Elections 247,342 243,116 4,226 - - - - - -
Facilities management 878,862 806,927 71,935 - - - - - -
Finance 396,655 518,003 (121,348) - 88,853 (88,853) - - -
General administration 4,835,544 2,372,839 2,462,705 - - - - - -
Indigent legal 936,043 852,471 83,572 - - - - - -
Justice Court - Globe 409,434 395,880 13,554 48,300 - 48,300 - - -
Justice Court - Payson 366,845 350,687 16,158 90,000 - 90,000 - - -
Law library - - - 104,787 93,290 11,497 - - -
Multi-information systems - - - 203,970 185,092 18,878 - - -
Payroll costs 295,000 207,645 87,355 - - - - - -
Personnel 132,696 127,203 5,493 - - - - - -
Purchasing 52,369 45,942 6,427 - - - - - -
Recorder 353,715 353,416 299 84,100 75,333 8,767 - - -
Superior Court - general 505,149 460,412 44,737 249,984 170,999 78,985 - - -
Superior Court - division I 185,782 192,885 (7,103) - - - - - -
Superior Court - division II 160,275 160,108 167 - - - - - -
Treasurer 325,787 323,988 1,799 15,700 - 15,700 - - -
Total general government 12,432,912 9,903,759 2,529,153 1,829,521 1,725,459 104,062 - - -
General Fund
The accompanying notes are an integral part of these financial statements.
6
Gila County
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances -
Budget and Actual - All Governmental Fund Types - Continued
Year Ended June 30, 2001
Special Revenue Funds Debt Service Fund
Budget Actual Variance Budget Actual Variance Budget Actual Variance
Public safety
County attorney $ 1,111,029 $ 712,262 $ 398,767 $ - $ - $ - $ - $ - $ -
County attorney - child support 460,140 480,533 (20,393) - - - - - -
County sheriff 4,836,021 4,685,931 150,090 879,400 517,391 362,009 - - -
Juvenile detention 384,783 649,509 (264,726) - - - - - -
Probation 658,542 818,135 (159,593) 2,178,728 2,050,493 128,235 - - -
Street light improvement districts - - - - 10,671 (10,671) - - -
Total public safety 7,450,515 7,346,370 104,145 3,058,128 2,578,555 479,573 - - -
Highways and streets
Engineering services - - - 1,606,327 1,493,973 112,354 - - -
Road fund - 21,083 (21,083) 5,680,240 5,217,649 462,591 - - -
Total highways and streets - 21,083 (21,083) 7,286,567 6,711,622 574,945 - - -
Health, welfare, and sanitation
9-1-1 installation 258,188 249,382 8,806 - - - - - -
Community development 780,822 754,331 26,491 4,973,320 4,557,738 415,582 - - -
Emergency services 172,285 166,703 5,582 - - - - - -
Flood plain management 25,320 24,847 473 - - - - - -
Health services - - - 1,577,748 1,515,428 62,320 - - -
Indigent health 634,640 3,185,570 (2,550,930) - - - - - -
Public fiduciary 180,309 1,200,581 (1,020,272) - - - - - -
Rural addressing/GIS 61,363 39,408 21,955 - - - - - -
Solid waste 3,999,500 2,919,041 1,080,459 170,000 110,865 59,135 - - -
Total health, welfare, and sanitation 6,112,427 8,539,863 (2,427,436) 6,721,068 6,184,031 537,037 - - -
Culture and recreation
Fairgrounds 114,535 101,962 12,573 - - - - - -
Library district - - - 663,817 672,887 (9,070) - - -
Total culture and recreation 114,535 101,962 12,573 663,817 672,887 (9,070) - - -
General Fund
The accompanying notes are an integral part of these financial statements.
7
Gila County
Combined Statement of Revenues, Expenditures, and Changes in Fund Balances -
Budget and Actual - All Governmental Fund Types - Continued
Year Ended June 30, 2001
Special Revenue Funds Debt Service Fund
Budget Actual Variance Budget Actual Variance Budget Actual Variance
Education
School superintendent $ 208,811 $ 207,811 $ 1,000 $ 227,870 $ 186,224 $ 41,646 $ - $ - $ -
Community college development 955,482 955,611 (129) - - - - - -
Total education 1,164,293 1,163,422 871 227,870 186,224 41,646 - - -
Contingency 477,044 - 477,044 - - - - - -
Capital outlay 331,451 1,321,890 (990,439) 670,727 948,474 (277,747) - - -
Debt service
Principal retirement - - - - - - 140,000 140,000 -
Interest and fiscal charges - - - - - - 201,840 191,840 10,000
Total debt service - - - - - - 341,840 331,840 10,000
Total expenditures 28,083,177 28,398,349 (315,172) 20,457,698 19,007,252 1,450,446 341,840 331,840 10,000
Excess (deficiency)
of revenues over expenditures (1,841,997) 169,948 2,011,945 (4,104,162) (137,289) 3,966,873 (341,840) (325,859) 15,981
Other financing sources (uses)
Operating transfers in 1,065,672 2,077,648 1,011,976 1,552,069 2,561,593 1,009,524 - 319,546 319,546
Operating transfers out (2,547,741) (3,916,938) (1,369,197) (70,000) (1,041,849) (971,849) - - -
Net other financing sources (uses) (1,482,069) (1,839,290) (357,221) 1,482,069 1,519,744 37,675 - 319,546 319,546
Excess (deficiency) of revenues and other financing
sources over expenditures and other uses (3,324,066) (1,669,342) 1,654,724 (2,622,093) 1,382,455 4,004,548 (341,840) (6,313) 335,527
Fund balances, beginning of year 3,324,066 7,377,468 4,053,402 2,622,093 2,908,746 286,653 341,840 333,071 (8,769)
Fund balances, end of year $ - $ 5,708,126 $ 5,708,126 $ - $ 4,291,201 $ 4,291,201 $ - $ 326,758 $ 326,758
General Fund
The accompanying notes are an integral part of these financial statements.
8
Assets
Cash and cash equivalents $ 50,030,430
Total Assets 50,030,430
Total Liabilities -
Net assets held in trust $ 50,030,430
Gila County
Statement of Net Assets
Investment Trust Fund
Year Ended June 30, 2001
The accompanying notes are an integral part of these financial statements.
9
Additions:
Contributions from participants $ 85,633,194
Net investment income 2,753,923
Total Additions 88,387,117
Deductions:
Distributions to participants 80,152,771
Net increase in net assets 8,234,346
Net assets held in trust
July 1, 2000 41,796,084
June 30, 2001 $ 50,030,430
Gila County
Statement of Changes in Net Assets
Investment Trust Fund
Year Ended June 30, 2001
The accompanying notes are an integral part of these financial statements.
10
Gila County
Notes to Financial Statements
June 30, 2001
11
Note 1 – Summary of Significant Accounting Policies
The accounting policies of Gila 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, health, welfare, and sanitation, culture and recreation, and
education.
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) and its component units.
Component units are legally separate entities for which the County is considered to be financially
accountable. Blended component units, although legally separate entities, are in substance part
of the County's operations. Therefore, data from these units is combined with data of the
primary government. Discretely presented component units, on the other hand, are reported in a
separate column in the combined financial statements to emphasize they are legally separate
from the County. The blended component unit discussed below has a June 30 year-end. The
County has no discretely presented component units.
Blended Component Unit – The Gila County Municipal Property Corporation is a nonprofit
organization established under Arizona law for the purpose of acquiring property and building
improvements for the County. The County Board of Supervisors appoints the Corporation's
Board of Directors and, therefore, the Corporation's transactions have been accounted for within
the County's governmental fund types and account groups.
Separate financial statements of the Gila County Municipal Property Corporation are not
prepared.
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. Account groups are reporting devices to account for certain
assets and liabilities of the governmental funds not recorded directly in those funds.
Notes to Financial Statements – Continued
12
Note 1 – Summary of Significant Accounting Policies – Continued
Fund Accounting – 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.
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 that are legally restricted to
expenditures for specified purposes.
The Debt Service Fund accounts for resources accumulated and used for the payment of general
long-term debt principal, interest, and related costs.
Fiduciary Funds account for assets the County holds on behalf of others, and include the
following fund types.
The Investment Trust Fund accounts 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.
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.
The General Long-Term Debt Account Group accounts for all of the County's long-term
obligations.
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.
Notes to Financial Statements – Continued
13
Note 1 – Summary of Significant Accounting Policies – Continued
Basis of Accounting – Continued
Revenues susceptible to accrual are property taxes; 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 and miscellaneous
revenues are not susceptible to accrual because generally they are not measurable until received
in cash.
The financial statements of the Investment Trust Fund are presented on the accrual basis of
accounting. Revenues are recognized when they are earned, and expenses are recognized when
they are incurred.
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 Debt Service Funds.
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.
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.
Cash and Investments
All investments are stated at fair value.
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.
Notes to Financial Statements – Continued
14
Note 1 – Summary of Significant Accounting Policies – Continued
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, and drainage and lighting systems, are not capitalized.
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 do not vest with employees and
therefore, are not accrued. However upon retirement, employees who have accumulated at least
1,000 hours of sick leave receive a $3,000 bonus.
The liability for vested compensated absences of the Governmental Funds is recorded in the
General Long-Term Debt Account Group since the amount expected to be paid from current
financial resources is not significant.
Investment Income
Investment income is composed of interest, dividends, and net changes in the fair value of
applicable investments.
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.
Notes to Financial Statements – Continued
15
Note 1 – Summary of Significant Accounting Policies – Continued
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 are
recorded as intergovernmental receivables and revenues when the related expenditures are
incurred. Reimbursements not received within 60 days subsequent to fiscal year-end are
reported as deferred revenues.
Note 2 – Excess of Expenditures over Appropriations
Thirteen General Fund departments and five Special Revenue Funds had an excess of actual
expenditures over appropriations as reported on the Combined Statement of Revenues,
Expenditures, and Changes in Fund Balance-Budget and Actual-All Governmental Fund Types.
Generally, the excesses were the result of unexpected expenditures in those departments during
the year.
Note 3 – Individual Fund Deficits
The following Special Revenue Funds had significant fund deficits as of June 30, 2001:
Fund Deficit
Attorney’s Justice Enhancement $ 10,973
Bad Check-County Attorney 7,422
Drug Enforcement – Superior Court 11,351
Case Processing Fund 2,684
Criminal History Improvement 10,511
Video Conference 226,054
Health Services Fund 412,921
Indigent Defense Extraordinary 10,000
Adult Drug Court 9,823
Adult Intensive Probation Services 52,314
Adult Probation Service Fees 35,390
Community Punishment Program 2,152
Court Appointed Special Advocate 10,251
Diversion – Consequences 22,386
Drug Treatment Education 12,051
Juvenile Drug Court 5,501
Parole Services 1,127
Globe Safe Schools 1,367
State Aid Enhancement 110,267
District Two Equipment 4,132
Narcotics Task Force/Sheriff 19,465
Juvenile Victim’s Rights 7,688
Drug Prosecution 135,331
Crime Victim Compensation Fund 22,049
Notes to Financial Statements – Continued
16
Note 3 – Individual Fund Deficits - Continued
These fund deficits resulted either from operations or a carryover deficit from prior years, but are
expected to be corrected through normal operations or through General Fund operating transfers
in future years.
Note 4 – 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 investment pool had cash on hand of $6,000. The carrying
amount of the investment pool's total cash in bank was $822,935, and the bank balance was
$849,864. Of the bank balance, $61,897 was covered by federal depository insurance and
$787,967 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 U.S. government securities with a fair value of $54,153,782 and money market
funds invested in U.S. government securities with a fair value of $2,733,915. The County's
investments in U.S. government securities were uninsured and unregistered with the securities
held by the counterparty, but not in the County's name. The County's investments in the money
market funds represents a proportionate interest in that fund's portfolio; however, the County's
portion is not identified with specific investments and, therefore, not subject to custodial credit
risk.
Other Deposits-At June 30, 2001, the carrying amount of the County's total nonpooled cash on
hand was $2,070. The carrying amount of the County's total nonpooled cash in bank was
$1,051,027, and the bank balance was $1,060,529. Of the bank balance, $381,141 was covered
by federal depository insurance; $325,969 was covered by collateral held by the pledging
financial institution's trust department or agent in the County's name; and $353,419 was
uninsured and uncollateralized.
Investments held by trustee – The $2,979,881 of investments held by the trustee, consisting of
U.S. government securities, were uninsured and unregistered with the securities held by the
counterparty, but not in the County's name.
Notes to Financial Statements – Continued
17
Note 4 – Deposits and Investments – Continued
A reconciliation of cash and investments to amounts shown on the combined balance sheet
follows.
County
Treasurer’s
Investment Pool Other Total
Cash and investments:
Cash on hand $ 6,000 $ 2,070 $ 8,070
Carrying amount of deposits 822,935 1,051,027 1,873,962
Reported amount of investments 56,887,697 2,979,881 59,867,578
Total cash and investments $ 57,716,632 $ 4,032,978 $ 61,749,610
Combined Balance Sheet:
Cash and cash equivalents $ 58,769,729
Investments held by trustee 2,979,881
Total $ 61,749,610
Note 5 – 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 proceeding
assessment and levy.
Property taxes receivable consist of uncollected property taxes as determined from the records of
the County Treasurer’s Office, and at June 30, 2001, were as follows:
Fiscal Year General Fund
Special
Revenue Fund
2000-2001 $ 499,547 $ 30,535
Prior 33,884 570
Total $ 533,431 $ 31,105
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.
Notes to Financial Statements – Continued
18
Note 6 – Due from Other Governments
Amounts due from other governments at June 30, 2001, in the General Fund include $226,872 in
county excise taxes; $134,688 in sales taxes form the State of Arizona; $48,125 in vehicle
license taxes from the State of Arizona; $202,800 in disproportionate share revenue from the
State of Arizona; and $203,295 from various other grants.
Amounts due from other governments in the Special Revenue Funds include $295,873 in state-shared
revenue form highway user taxes and $231,137 in county excise taxes. The remaining
balance of $1,033,718 consists of grants from the state and federal governments.
Note 7 – Certificates of Participation Payable
During the year ended June 30, 2000, the County issued $3,245,000 in certificates of
participation with an interest rate of 6.4 percent to finance renovation costs for a newly-acquired
county administration building and several other County buildings, and to refund the outstanding
1991 Series A certificates of participation. The certificates are generally noncallable, with
interest payable semiannually.
Principal and interest requirements at June 30, 2001, were as follows:
Description
Interest
Rates Maturities
Outstanding
Principal
July 1, 2000 Issues Retirements
Outstanding
Principal
June 30, 2001
Series 1999 6.4% 11/24/00-5/24/14 $ 3,030,000 $ - $ 140,000 $ 2,890,000
Certificates of participation debt service requirements to maturity, including $1,409,120 of
interest, are as follows:
Year ending June 30,
2002 $ 332,560
2003 327,960
2004 332,720
2005 331,680
2006 330,000
Thereafter 2,644,200
Total $ 4,299,120
Note 8 – Obligations Under Capital Leases
The County has acquired machinery and equipment 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 $6,274,379 at June 30, 2001, are capitalized in the General Fixed Assets
Account Group. In addition, capital lease proceeds of $535,871 are being held by the County
Treasurer for future landfill projects.
Notes to Financial Statements – Continued
19
Note 8 – Obligations Under Capital Leases – Continued
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 $ 1,220,707
2003 1,087,269
2004 781,158
2005 442,745
2006 396,305
Thereafter 990,843
Total minimum lease payments 4,919,027
Less amount representing interest 712,038
Present value of net minimum lease payments $ 4,206,989
Note 9 – Landfill Closure and Postclosure Care Costs
State and federal laws and regulations require the County to place a final cover on its six landfill
sites when they stop accepting waste and to perform certain maintenance and monitoring
functions at the sites for 30 years after closure. Although closure and postclosure care costs will
not be paid until near or after the date that the landfills stop accepting waste, the County reports a
portion of these closure and postclosure care costs as an addition to the General Long-Term Debt
Account Group in each period based on landfill capacity used as of each balance sheet date. The
$2,126,148 reported as landfill closure and postclosure care liability at June 30, 2001, represents
the cumulative amount reported to date based on the approximate use of 47 percent of the
estimated capacity of the landfills. The County will recognize the remaining estimated cost of
closure and postclosure care of $2,134,079 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 has closed four of its landfills as of June 30, 1996, and expects to close the
two remaining landfills in 2009 and 2017. The actual costs may be higher due to inflation,
changes in technology, or changes in regulations.
In order to comply with state and federal laws and regulations, the County obtained a letter of
credit on September 22, 1999, to ensure the costs of landfill closure, postclosure, and possible
corrective action can be met. As part of the agreement for the line of credit, the County
established a mandatory sinking fund with an escrow agent. The sinking fund balance will equal
the estimated landfill closure and postclosure care costs when the landfills are expected to close.
The County's annual payments to comply with this agreement total $518,756. The County
entered this agreement as an alternative to complying with the local government financial test
requirements.
Notes to Financial Statements – Continued
20
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 three public entity risk pools: the Arizona Counties Property
and Casualty Pool, the Arizona Counties Workers' Compensation Pool, and the Arizona Local
Government Employee Benefit Trust which are described below.
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 occurrence. The County is also responsible for any payments in
excess of the maximum coverage of $100 million per occurrence for property claims and $15
million per occurrence for liability claims. 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.
The County provides life, health, and disability benefits to its employees and their dependents
through the Arizona Local Government Employee Benefit Trust currently composed of six
member counties. The Trust provides the benefits through a self-funding agreement with its
participants and administers the program. The County is responsible for paying the premium and
may require its employees to contribute a portion of that premium. If it withdraws from the
Trust, the County is responsible for any claims run-out costs, including claims reported but not
settled, claims incurred but not reported, and administrative costs. If the Trust were to terminate,
the County would be responsible for its proportional share of any Trust deficit.
Notes to Financial Statements – Continued
21
Note 11 – Changes in Long-Term Liabilities
A summary of changes in the liabilities reported in the General Long-Term Debt Account Group
follows.
Balance
July 1, 2000 Additions Reductions
Balance
June 30, 2001
Accrued payroll and employee benefits $ 882,886 $ 232,045 $ - $ 1,114,931
Obligations under capital leases 6,071,604 - 1,864,615 4,206,989
Landfill closure and postclosure care
costs payable 1,530,736 595,412 - 2,126,148
Certificates of participation payable 3,030,000 - 140,000 2,890,000
Total $ 11,515,226 $ 827,457 $ 2,004,615 $ 10,338,068
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.
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 Elected Officials Retirement Plan (EORP) is a cost-sharing multiple-employer defined
benefit pension plan that covers elected officials and judges of certain state and local
governments. The EORP is governed by The Fund Manager of PSPRS according to the
provisions of A.R.S. Title 38, Chapter 5, Article 3.
Each plan issues a publicly available 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 and EORP
3300 N. Central Ave. 1020 E. Missouri Avenue
P.O. Box 33910 Phoenix, AZ 85014
Phoenix, AZ 85067-3910
(602) 240-2000 or (800) 621-3778 (602) 255-5575
Notes to Financial Statements – Continued
22
Note 12 – Retirement Plans – Continued
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 $293,375, $361,711 and $416,421, respectively, which were equal to the required
contributions for the year.
In addition, active EORP members were required by statute to contribute 7 percent of the
members' annual covered payroll. The County was required to remit a designated portion of
court docket fees plus additional contributions of 0.73 percent of the member's annual covered
payroll, as determined by actuarial valuation. The County’s contributions to EORP for the years
ended June 30, 2001, 2000, and 1999 were $6,013, $6,947, and $0, respectively, which were
equal to the required contributions for the year.
Agent plan-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 8.74 percent.
Annual Pension Cost – The County's pension cost for the PSPRS for the year ended June 30,
2001, and related information follow.
PSPRS
Contribution rates:
County 8.74%
Plan members 7.65%
Annual pension costs $112,694
Contributions made $112,694
The current-year annual required contribution for the PSPRS was determined as apart of their
June 30, 1999, actuarial valuation 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 four 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, 1999, was 20 years.
Trend Information – Annual pension cost information for the current and two preceding years
follows for the PSPRS plan.
Notes to Financial Statements – Continued
23
Note 12 – Retirement Plans – Continued
Plan
Year Ended
June 30
Annual
Pension Cost
(APC)
Percentage
of APC
Contributed
Net Pension
Obligation
PSPRS 2001 $ 112,694 100% $ -
2000 75,174 100 -
1999 89,513 100 -
Analysis of Funding Progress – The following information was obtained from the three most
recent actuarial valuations of the PSPRS plan.
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 $ 5,588,847 $ 4,612,648 $ 976,199 121.2% $ 1,128,987 -
6/30/00 5,015,760 4,424,431 591,329 113.4 1,341,317 -
6/30/99 4,431,615 4,163,302 268,313 106.4 1,266,143 -
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.
Details of each investment classification follow:
Investment Type Principal
Interest
Rates Maturities Fair Value
U.S. government securities $ 53,825,976 3.35-7.09% 7/23/01-5/24/04 $ 54,153,782
U.S. government securities
money market 2,733,915 None stated None stated 2,733,915
Notes to Financial Statements – Continued
24
Note 13 – County Treasurer's Investment Pool – Continued
A condensed statement of the investment pool’s net assets and changes in net assets follows:
Statement of Net Assets
Assets $ 57,716,632
Liabilities -
Net assets $ 57,716,632
Net assets held in trust for:
Internal participants $ 7,686,202
External participants 50,030,430
Total net assets held in trust $ 57,716,632
Statement of Changes in Net Assets
Total additions $ 145,878,502
Total deductions 137,374,830
Net increase 8,503,672
Net assets held in trust
July 1, 2000 49,212,960
June 30, 2001 $ 57,716,632
Note 14 – Reimbursement of Misused Public Fiduciary Funds
During the year ended June 30, 2001, the County General Fund paid $1,012,303 to the County
Public Fiduciary's Office to replace the monies of various wards of the County that had been
embezzled and misused over the past several years by the former Public Fiduciary. In September
2000, the County received a $300,000 reimbursement from the Arizona Counties Property and
Casualty Pool, but it also is seeking reimbursement from the Pool of the $712,303 unreimbursed
balance.
Note 15 – Implementation of GASB No. 34
Beginning with fiscal year 2003, the County will prepare its external financial reports following
the requirements of GASB Statement No. 34, Basic Financial Statements – and Management’s
Discussion and Analysis – for State and Local Governments. Implementing this standard will
significantly change the accounting principles and reporting format used by the County in future
financial reports.
Supplementary Information
Pass-Through
Federal Grantor/Pass-Through CFDA Grantor's
Grantor/Program Title Number Number Expenditures
U.S. Department of Agriculture
Passed through the Arizona Department of Health Services
Special Supplemental Nutrition Program
for Women, Infants, and Children 10.557 761091 $ 123,637
Commodity Supplemental Food Program 10.565 761116 1,508
Passed through the Arizona State Treasurer
Schools and Roads-Grants to States 10.665 None 18,999
Total U.S. Department of Agriculture 144,144
U.S. Department of Housing and Urban Development
Passed through the Arizona Department of Commerce
Community Development Block Grants/State's
Program 14.228 114-00, 126-99, 032-01 119,599
HOME Investment Partnerships Program 14.239 232-98 20,193
Passed through the Arizona Department of Economic Security
Community Shelters Grant Program 14.231 E6301005 36,332
Total U.S. Department of Housing and Urban Development 176,124
U.S. Department of the Interior
Payments in Lieu of Taxes 15.226 1,046,563
U.S. Department of Justice
Drug Court Discretionary Grant Program 16.585 17,413
Passed through the Arizona Criminal Justice Commission
Byrne Formula Grant Program 16.579 AC-110-99 334,991
Total U.S. Department of Justice 352,404
U.S. Department of Labor
Passed through the Arizona Department of Economic Security
Employment and Training Assistance - 17.255 E5700021
Dislocated Workers E5700022
E5701035
E5701001
E5701002
E4370232 2,764,789
Gila County
Schedule of Expenditures of Federal Awards
Year Ended June 30, 2001
See the accompanying notes to schedule.
26
Pass-Through
Federal Grantor/Pass-Through CFDA Grantor's
Grantor/Program Title Number Number Expenditures
U.S. Department of Energy
Passed through the Arizona Department of Commerce
Weatherization Assistance for Low-Income
Persons 81.042 203-00 $ 49,720
U.S. Federal Emergency Management Agency
Emergency Food and Shelter National
Board Program 83.523 5,593
U.S. Department of Education
Passed through the Arizona Department of Economic Security
Rehabilitation Services - Vocational 84.126 E5311526
Rehabilitation Grants to States E5319040
E5319042 109,329
Supported Employment Services for
Individuals with Severe Disabilities 84.187 E2509006 73,556
Total U.S. Department of Education 182,885
U.S. Department of Health and Human Services
Immunizations 93.268 30-4060.7
152040 32,631
Passed through the Arizona Department of Economic Security
Temporary Assistance for Needy Families 93.558 E5900009
E6301031
E5900071
E6300155
E6307038
E6301005 358,690
Child Support Enforcement 93.563 E7208007
E7209007 586,221
Low-Income Home Energy Assistance 93.568 E6309031
E6301005
E6307038 62,847
Gila County
Schedule of Expenditures of Federal Awards - Continued
Year Ended June 30, 2001
See the accompanying notes to schedule.
27
Pass-Through
Federal Grantor/Pass-Through CFDA Grantor's
Grantor/Program Title Number Number Expenditures
Gila County
Schedule of Expenditures of Federal Awards - Continued
Year Ended June 30, 2001
U.S. Department of Health and Human Services - Continued
Passed through the Arizona
Department of Economic Security - Continued
Community Services Block Grant 93.569 E6301005
E6307038 $ 81,847
Social Services Block Grant 93.667 E6301005
E6307038 20,513
Passed through the Arizona Department of Commerce
Low-Income Home Energy Assistance 93.568 203-00 84,914
Passed through the Arizona Department of Health Services
HIV Prevention Activities - Health
Department Based 93.940 85-2024
15-2012 2,489
Preventive Health and Health Services
Block Grant 93.991 952016 47,253
Maternal and Child Health Services Block
Grant to the States 93.994 96-1123 5,965
Total U.S. Department of Health and Human Services 1,283,370
Total Expenditures of Federal Awards $ 6,005,592
See the accompanying notes to schedule.
28
Gila County
Supplementary Information
Notes to Schedule of Expenditures of Federal Awards
Year Ended June 30, 2001
29
Note 1 - Basis of Accounting
The accompanying schedule of expenditures of federal awards includes the federal grant
activity of Gila 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-1 33, 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 2001 Catalog of Federal
Domestic Assistance.
Reports on Compliance and Internal Control
31
Independent Auditors' Report on Compliance and on Internal Control over
Financial Reporting Based on an Audit of General Purpose Financial Statements
Performed in Accordance with Government Auditing Standards
The Auditor General of the State of Arizona
The Board of Supervisors of Gila County, Arizona
We have audited the general purpose financial statements of Gila County as of and for the year
ended June 30, 2001, and have issued our report thereon dated June 7, 2002 which was qualified
as to interfund receivables and payables and the General Fixed Assets Account Group. 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 general purpose 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 general purpose 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. However, we noted certain immaterial instances of noncompliance that we have
reported to the County's management in a separate letter dated June 7, 2002.
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 general purpose 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 ability to record, process, summarize, and report financial data consistent with the
assertions of management in the general purpose financial statements. Reportable conditions are
described in the accompanying schedule of findings and questioned costs as items 01-01, 01-02
and 01-03.
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 general purpose financial statements being
audited may occur and not be detected within a timely period by employees in the normal course
32
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, of the reportable conditions described above,
we consider items 01-01 and 01-02 to be 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 June 7, 2002.
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 Board of Supervisors, federal
awarding agencies, and pass-through entities and 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.
Walker & Armstrong LLP
Certified Public Accountants
Phoenix, Arizona
June 7, 2002
33
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 Gila County, Arizona
Compliance
We have audited the compliance of Gila 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 auditors' 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.
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.
In our opinion, Gila 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.
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.
34
Our consideration of the internal control over compliance would not necessarily disclose all
matters in the internal control that might be material weaknesses. 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 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. We noted no matters
involving the internal control over compliance and its operation that we consider to be material
weaknesses.
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 Board of Supervisors, federal
awarding agencies, and pass-through entities and 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.
Walker & Armstrong LLP
Certified Public Accountants
Phoenix, Arizona
June 7, 2002
Gila County
Schedule of Findings and Questioned Costs
Year Ended June 30, 2001
35
Summary of Auditors’ Results
Financial Statements
Type of auditors report issued: Qualified
Yes No
Material weaknesses 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
(None
reported)
Type of auditors report issued on compliance for major programs: Unqualified
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
15.226 Payments in lieu of taxes
16.579 Byrne Formula Grant Program
17.255 Employment and training assistance - dislocated workers
93.558 Temporary assistance for needy families
93.563 Child support enforcement
Dollar threshold to distinguish between Type A and Type B programs: $ 300,000
Auditee qualified as a low risk auditee? X
Auditee’s Summary Schedule of Prior Audit Findings required to be reported in
accordance with Circular A-133 (section .315[b])? X
Gila County
Schedule of Findings and Questioned Costs – Continued
Year Ended June 30, 2001
36
Financial Statement Findings
01-01 The County's General Fixed Assets System of Accountability Is Inadequate
As reported in prior years, the County's general fixed assets system of accountability was
inadequate, as evidenced by the following weaknesses in internal control policies and
procedures. As a result of these weaknesses, we were unable to determine the propriety of the
assets' costs recorded in the County's General Fixed Assets Account Group.
· Documentation supporting the historical costs of such assets was not maintained.
· Although a listing of general fixed assets was provided, a reconciliation of the
beginning balances could not be performed.
· The County did not prepare an annual reconciliation of capital outlay
expenditures to capitalized additions.
· The County did not have adequate policies and procedures to differentiate
between repair and maintenance expenditures and fixed asset betterment.
To help ensure that fixed assets are accounted for in compliance with the Uniform Accounting
Manual for Arizona Counties, section VI-E, adequately safeguarded, and reported in accordance
with U.S. generally accepted accounting principles, the County should maintain a complete and
accurate listing of capitalized land, buildings, improvements, and machinery and equipment and
related costs excluding expenditures for repair and maintenance. In addition, documentation
supporting the recorded costs of such assets should be retained for three years after the asset's
disposal date. Also, the County should reconcile its fixed assets listing to the general ledger, the
prior year balances to the current year balances, and capital outlay expenditures to capitalized
additions annually.
01-02 The County Did Not Maintain Supporting Documentation for Interfund Receivables
and Payables
As reported in prior years, the County did not maintain documentation supporting the interfund
receivable and payable balances reported on the financial statements. In addition, interfund
receivables did not equal interfund payables by $625,244 at June 30, 2001, which included
$362,764 in differences in the current year. Further, a number of transactions affecting the
balances were from previous years and should have been eliminated. As a result, we were unable
to determine the propriety of the June 30, 2001, account balances.
Gila County
Schedule of Findings and Questioned Costs – Continued
Year Ended June 30, 2001
37
01-02 The County Did Not Maintain Supporting Documentation for Interfund Receivables
and Payables - Continued
County management should establish policies and procedures that will ensure that all financial
transactions are supported by adequate documentation. The County should maintain a list of
interfund receivables and payables referenced to supporting documentation and periodically
transfer the cash or reverse the balances as necessary to prevent balances from accumulating for
years. Also, the County should balance interfund receivables to interfund payables at least
monthly.
01-03 Control over Cash Receipts and Account Receivables
Although the County Finance Department has changed the control procedures over cash receipts,
the County has not prepared written policies and procedures. Various departments outside of the
Finance Department have yet to ensure effective control over and accountability for cash receipts
and accounts receivable.
Cash Receipt Procedures — County departments were not provided with guidelines to properly
safeguard and account for cash receipts, which increased the susceptibility of these monies to
potential abuse. The County needs to improve controls over the consistent preparation of cash
receipt forms and the restrictive endorsement immediately upon receipt of checks received.
Furthermore, detailed accounting records should be maintained for cash receipts. In addition,
cash receipts need to be adequately safeguarded prior to deposit and deposited in a timely
manner. Some cash receipts are not transferred from the departments' bank accounts to the
County Treasurer's Office in a timely manner and many departments still maintain significant
balances after the transfers are made. Such deficiencies were noted in following departments:
Assessor's Office, Community Development, Globe Constable’s Office, Sheriffs Office, and
Solid Waste.
Accounting for Receivables — The Finance Department has not prepared policies and
procedures to request accounts receivable information from the various departments, as
recommended in the prior year. Also, there are no guidelines to help ensure that receivables are
analyzed and adjusted for uncollectible accounts at year-end.
In order to properly account for and safeguard cash, County management should establish
policies and procedures to control cash receipts, record accounts receivable, and adjust accounts
receivable for uncollectible accounts. Furthermore, County management should enforce and
monitor department compliance with the policies and procedures established.
County Responses
39
January 31, 2003
Ms. Debbie Davenport
Auditor General
2910 North 44th Street, Suite 410
Phoenix, Arizona 85018
Dear Ms. Davenport:
The accompanying corrective action plan for the year ended June 30, 2001 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 each audit finding included
in the current year’s schedule of findings and questioned costs.
Sincerely,
John F. Nelson
County Manager/Administrator
40
Gila County
Corrective Action Plan
June 30, 2001
________
FINANCIAL STATEMENT FINDINGS
Finding No. 01-01
The County's General Fixed Assets System of Accountability Is Inadequate
Contact Person: Don White, Manager Purchasing
Phone Number: 928-473-7659
Anticipated Completion Date: Completed May 7, 2002
On May 7, 2002, Procurement Policy and Procedures were adopted by Gila County’s Board
of Supervisors. The adopted Procurement Policy and Procedures consists of Article 1.0
Purchasing Procedures and Article 2.0 Material Management Procedures. These procedures
became effective July 1, 2002.
Article 2.0, Material Management Procedures, addresses the issues stated above effective
July 1, 2002. Gila County will maintain a complete and accurate listing of capitalized land,
buildings, improvements, and machinery and equipment and related costs excluding
expenditures for repair and maintenance. In addition, documentation supporting the recorded
costs of such assets will be retained for three years after the asset's disposal date. Also, the
County will reconcile its fixed assets listing to the general ledger, prior year balances, and
current year balances, and capital outlay expenditures to capitalized additions, annually.
Finding No. 01-02
The County Did Not Maintain Supporting Documentation
for Interfund Receivables and Payables
Contact Person: David Patterson, Finance Director
Phone Number: 928-425-3231 ext 8777
Anticipated Completion Date: Completed June 30, 2002
The discrepancies between Interfund Receivables and Payables were the result of
unintentional errors when creating and posting journal entries to transfer monies or loan
monies between funds.
The creation and use of Interfund Receivables (Due From) and Interfund Payables (Due To)
to transfer monies between funds was confusing and resulted in numerous errors. Sometimes
only the Treasurer’s Journal or the General Journal were posted, but not both journals
simultaneously. This error would result in an Interfund Receivable and Payable being
permanent. However, the Interfund Receivable and Payable would be equal but would go
forward from one year to the next.
The error that generated inequity between Interfund Receivables and Payables occurred
through the inadvertent misclassification of one side of the transaction on a journal entry as a
balance sheet item and the other side as an item that would be closed to fund balance at year
end. An example of this type of inadvertent classification would be the designation of an
41
Gila County
Corrective Action Plan - Continued
June 30, 2001
________
Interfund Receivable as a Budget Transfer Out with the offset as an Interfund Payable. At
year end the Budget Transfer amount is closed to Fund Balance whereas the Interfund
Payable amount carries over to future years. This type of transaction has occurred when
transferring loan/payback monies between funds.
To correct the above problems, several initiatives have been implemented. First, an adjusting
entry was made to correct the inequality between Interfund Receivables and Interfund
Payables. As of June 30, 2002, Interfund Receivables and Payables are equal.
Second, on May 7, 2002, a process has been established whereby the two-journal entry
process, Treasurer and General, is no longer necessary. The procedure addresses
Transfers/Corrections Between Funds. When transfer of monies between funds is necessary
from either an incorrect posting of a deposit or expense, the requesting department fills out a
“Demand on Gila County” identifying the fund/account where an expense will be charged
and the amount of the expense. When a deposit is in error the Demand is submitted against
the fund where the incorrect deposit is made. When an expense is in error the Demand is
submitted against the fund where the expense should have been charged. The requesting
department submits a Treasurer’s Receipt that identifies the fund/account where the monies
are to be deposited and the amount of the deposit along with documentation supporting the
reason for the transfer/correction between funds. Once the monies have been transferred a
General Journal is used to remove the error. Depending on whether the error was a deposit
or an expense will determine how a General Journal will be used. If the error was a deposit,
the General Journal will be used to remove the expense created by the Demand and the
incorrect deposit. If the error was an expense, the General Journal will be used to remove the
incorrect expense and the deposit created by the Treasurer’s Receipt.
Third, the Treasurer has established a line of credit with a bank. This line of credit is
accessed whenever a Fund incurs expenses greater than its available cash. In the past
departments would receive budgeted monies from the General Fund semi-annually. This
semi-annual transfer of budgeted monies would result in departments incurring expenses
greater than their available cash. When the line of credit for all funds nears the overall
available limit, the Treasurer’s office will notify the Finance Department resulting in the
loaning of monies from the General Fund to other departments until budgeted monies are
transferred. Then the loans will be paid back. This will result in errors by trying to combine
budget transfers with payback of loaned monies. A procedure has been established to
transfer budgeted monies to departments once a month. Even though some departments still
exceed their available cash and access the line of credit, we have not approached the credit
line limit since implementing this procedure on October 2, 2002.
We are now in the process of identifying those funds that have available cash to payback
their loans. The goal is to remove those chronic outstanding Interfund Receivables and
Payables that seem to carry over from year to year by March 31, 2003.
42
Gila County
Corrective Action Plan - Continued
June 30, 2001
________
Finding No. 01-03
Control over Cash Receipts and Account Receivables
Contact Person: David Patterson, Finance Director
Phone Number: 928-425-3231 ext 8777
Anticipated Completion Date: March 31, 2003
Cash Receipt Procedures — Those departments identified as having Cash Receipt Procedure
deficiencies are to be interviewed to determine how cash is received, handled, deposited, and
transferred. Based on this information, a Cash Receipt Procedure will be documented,
distributed, and discussed with those departments that receive cash. This endeavor should be
completed by March 31, 2003.
Accounting for Receivables — Gila County uses the modified accrual basis of accounting,
which recognizes increases and decreases in financial resources only to the extent that they
reflect near-term inflows or outflows of cash. Under the modified accrual basis of
accounting, amounts are recognized as revenue when earned, only so long as they are
collectible within the period or soon enough afterwards to be used to pay liabilities of the
current period. Revenues are only recognized under modified accrual accounting to the
degree that they are available to finance expenditures of the fiscal period.
Gila County implements an accrual process whereby revenues received within 60 days after
June 30 that can be identified to the year just ended are recognized as a receivable in the year
just ended. This receivable is necessary as the Treasurer’s books are closed the end of June
so deposits made after June 30 can only be recognized as a receivable. This receivable is in
name only as the monies are received prior to a receivable being recognized. This is in
accordance with the modified accrual basis of accounting whereby revenue is recognized as
earned, only so long as they are collectible soon enough after the year just ended. Gila
County records receivables for the recognition of revenue at year-end only when monies
have actually been collected within 60 days of the year-end. Since the recording of a
receivable is after monies have been received, receivables do not need to be analyzed and
adjusted for uncollectible amounts at year-end.
Account for and Safeguard Cash — See the responses above to Cash Receipt Procedures
and Accounting for Receivables.
43
January 31, 2003
Debbie Davenport
Auditor General
2910 N. 44th Street, Suite 410
Phoenix, AZ 85018
Dear Ms. Davenport:
The accompanying Summary Schedule of Prior Audit Findings has been prepared as required by
U.S. Office of Management and Budget Circular A-133. Specifically, we are reporting the status
of audit findings included in the prior audit’s Schedule of Findings and Questioned Costs related
to federal awards.
Sincerely,
John F. Nelson
County Manager/Administrator
44
Gila County
Summary Schedule of Prior Audit Findings
June 30, 2001
________
STATUS OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Finding No. 00-101
CFDA No. 93.563 Child Support Enforcement
Status: Completed
Contact Person: Margaret Toot, Clerk of the Superior Court
Phone Number: 928-425-3231 ext. 8553
Anticipated Completion Date: Completed on June 30, 2002
The finding is fully corrected. The Arizona Department of Economic Security Contracts Division
assisted and advised the County in determining a reasonable approach for allocation of the
Family Law Commissioner’s time to this program.