Maricopa County, through the Maricopa
Managed Care Systems (MMCS),
administered the following programs:
• Arizona Health Care Cost Containment
System (AHCCCS)—Acute Health Care
program reported in the Maricopa
Health Plan Fund.
• AHCCCS—Arizona Long-Term Care
System (ALTCS) program reported in
the ALTCS Fund.
• Senior Select, a federal
medicare/medicaid program, reported
in the Non-AHCCCS Health Plans
Fund.
• Health Select, a county healthcare
program, reported in the Non-AHCCCS
Health Plans Fund.
During fiscal year 2004, MMCS did not
establish effective internal controls over
these programs to ensure proper claims
adjudication and accountability for
outstanding claims payable. Auditors
noted:
• The claims processing system did not
always identify duplicate claims, use
proper pay rates, and adjust payments
for enrollees’ share of costs. Also,
MMCS did not adequately test and
document changes made to the
system prior to processing medical
claims. These deficiencies resulted in
claims paid for incorrect amounts, to
ineligible enrollees, for uncovered
medical services, more than once for
the same services, or overpaid by the
enrollees’ shares of cost.
• The programs prepaid providers before
the related claims were adjudicated.
The prepayments were not reconciled
to the adjudicated claims for proper
accountability. Auditors noted
2004
Year Ended June 30, 2004
Maricopa County
Subject
Maricopa County issues a
Comprehensive Annual
Financial Report. The County
is responsible for preparing
financial statements,
maintaining strong internal
controls, and demonstrating
accountability for its use of
public monies. As the
auditors, our job is to
determine whether the
County has met its
responsibilities.
Our Conclusion
A modification of opinion was
expressed on the County’s
financial statements because
we were unable to express
opinions on the business-type
activities and three
major healthcare funds.
However, the governmental
activities, the discretely
presented component unit,
and the Fiduciary Funds
were fairly presented.
REPORT
HIGHLIGHTS
FINANCIAL STATEMENT AUDIT
Lack of Effective Controls over County
Healthcare Programs Resulted in Audit Opinion
Disclaimers and a CAFR Issuance Delay
approximately $20 million in unresolved
prepayments. As a result, we were unable
to determine whether prepaid expenses
and medical expenses were properly
stated.
• The records used to track medical claims
payment history were not updated for
negotiated and settled claims, and for
claims paid for incorrect amounts. In
addition, paid dates for claims applied to
prepayments were not accurately
reported. As a result, the MMCS was
unable to determine an accurate balance
for medical claims payable at June 30,
2004.
Because of these deficiencies, MMCS’
records were not reliable, and auditors were
unable to determine whether medical
expenses, prepaid expenses, and medical
claims payable were accurate. These
deficiencies resulted in disclaimers of
opinion for the Maricopa Health Plan Fund,
the ALTCS Fund, and the Non-AHCCCS
Health Plans Fund, which represent three of
Maricopa County’s major funds in the
County’s 2004 CAFR. A disclaimer of
opinion was also expressed on the County’s
business-type activities as these funds were
significant to that opinion unit. A disclaimer
of opinion states that the auditors do not
express an opinion as to whether the
financial statements of these three major
funds and business-type activities are fairly
presented in conformity with generally
accepted accounting principles.
The deficiencies noted above caused a
significant delay in the completion of each
fund’s financial statements for the year-ended
June 30, 2004, and resulted in a 15-
month delay in the issuance of the County’s
2004 CAFR.
The County’s government-wide financial
statements are designed to provide readers with a
broad overview of the County’s finances in a
manner similar to private-sector businesses. These
statements report the financial activities of the
overall government, except for fiduciary activities.
The tables below present a summarized version of
the County’s government-wide Statement of Net
Assets and Statement of Activities reported in the
page2
current year Comprehensive Annual Financial
Report for the primary government.
The Statement of Net Assets presents information
on all county assets and liabilities, with the
difference between the two reported as net assets.
The Statement of Activities presents information
showing how net assets changed during the most
recent fiscal year.
Summary of the County’s
Government-wide Financial Data
Statement of Net Assets
June 30, 2004
Total Governmental
and Business-Type
Activities
Current and other assets $1,098,746,484
Capital assets 1,997,063,364
Total assets 3,095,809,848
Current and other liabilities 276,997,065
Long-term liabilities 297,039,104
Total liabilities 574,036,169
Net assets
Invested in capital assets,
net of related debt 1,883,725,427
Restricted net assets 220,783,631
Unrestricted net assets 417,264,621
Total net assets $2,521,773,679
Statement of Activities
Year Ended June 30, 2004
Total Governmental
and Business-Type
Activities
Program revenues:
Governmental activities $ 459,300,708
Business-type activities 819,778,442
General revenues and transfers:
Governmental activities 977,716,456
Business-type activities 59,074,996
Total revenues 2,315,870,602
Expenses:
Governmental activities 1,199,118,770
Business-type activities 896,577,454
Total expenses 2,095,696,224
Change in net assets 220,174,378
Net assets—beginning, as restated 2,301,599,301
Net assets—ending $2,521,773,679
The County Discontinued
Operating Three
Healthcare Programs
Maricopa County terminated its contracts for the
following healthcare programs subsequent to
fiscal year 2004:
• Senior Select, a medicare/medicaid program
contracted with the federal Center for Medicare
and Medicaid Services, was terminated as of
December 31, 2004.
• The Acute Health Care program and the
Arizona Long-Term Care System program
contracted with the Arizona Health Care Cost
Containment System were terminated as of
September 30, 2005.
All three programs were administered by the
Maricopa Managed Care Systems (MMCS), and
the County will be responsible for claims
pertaining to services performed prior to each
program’s termination date. MMCS was having
significant operating problems regarding claims
processing in recent years as described on the
prior page. In addition, these programs had
significant operating losses during fiscal year
2004.
The General Fund’s fund balance,
as reported on the County’s fiscal
year 2004 Comprehensive Annual
Financial Report, was $318.3 million
at June 30, 2004, an increase of 9
percent from fiscal year 2003 and
98 percent from fiscal year 2000.
This increase is shown in the figure
to the right.
Property taxes and
intergovernmental revenues,
consisting of state-shared sales
taxes and vehicle license taxes,
representing more than 90 percent
of General Fund revenues from
fiscal years 2000 through 2004,
have contributed to the increasing
fund balance. Property tax
revenues, as reported for fiscal year
2004, increased 47 percent from
fiscal year 2000, and
intergovernmental revenues, as
reported for fiscal year 2004,
increased 20 percent from fiscal
year 2000. Fund balance increased
$157.5 million from 2000 to 2004.
This resulted from revenues and
other financing sources exceeding
expenditures and other financing
uses in each of the 5 fiscal years,
as illustrated in the figure to the
right.
page3
The General Fund’s
Fund Balance
Continues to Increase
General Fund
Ending Fund Balance
Past 5 Years
$254.1
$292.7
$318.3
$160.8 $161.2
$0
$50
$100
$150
$200
$250
$300
$350
2000 2001 2002 2003 2004
(In Millions)
General Fund
Revenues/Other Financing Sources and
Expenditures/Other Financing Uses
Fiscal Years 2000 through 2004
$714.1 $731.7
$804.2 $807.2
$865.7
$698.3 $715.0 $731.3
$768.7
$840.1
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
(In Millions)
Rev enues Ex penditures
2000 2001 2002 2003 2004
Maricopa County
REPORT
HIGHLIGHTS
FINANCIAL STATEMENT AUDIT
Year Ended June 30, 2004
The Housing Authority provides efficient
and affordable rental housing to low-income
households of Maricopa County.
Prior to fiscal year 2004, the Housing
Authority was a department of Maricopa
County. Beginning July 1, 2003, the
Housing Authority became a legally
separate entity pursuant to Arizona
Revised Statutes §36-1404. The Housing
Authority is reported as a discretely
presented component unit, as the
Maricopa County Board of Supervisors
may dissolve the Authority at any time at
A copy of the full report
can be obtained by calling
(602) 553-0333
or by visiting
our Web site at:
www.azauditor.gov
Contact person for
this report:
Dennis Levine
TO OBTAIN
MORE INFORMATION
page 4
the sole discretion of the County,
therefore, a financial benefit or burden
exists. A public accounting firm audited
the Authority. Our opinion is based on the
work of those other auditors.
The tables below present a summarized
version of the Housing Authority’s
Statement of Net Assets and Statement of
Activities reported in the current year
Comprehensive Annual Financial Report
in the government-wide financial
statements.
Housing Authority Becomes a
Legally Separate Entity
Statement of Net Assets
June 30, 2004
Housing
Authority
Current and other assets $ 5,898,259
Capital assets 25,129,430
Total assets 31,027,689
Current and other liabilities 565,073
Long-term liabilities 280,637
Total liabilities 845,710
Net assets
Invested in capital assets,
net of related debt 25,129,430
Unrestricted net assets 5,052,549
Total net assets $30,181,979
Statement of Activities
Year Ended June 30, 2004
Housing
Authority
Program revenues $15,918,490
Expenses 16,532,616
Change in net assets (614,126)
Net assets—beginning,
as restated 30,796,105
Net assets—ending $30,181,979
The County Substantially
Completes Two Jail Facilities
The County substantially completed the
4th Avenue Jail and the Lower Buckeye
Jail during fiscal year 2004. These
facilities were funded by the 1/5 of one-cent
sales tax approved by voters for the
construction and operation of adult and
juvenile detention facilities. The 4th
Avenue Jail cost approximately $137
million and contains 1,360 cells. The
Lower Buckeye Jail cost approximately
$216.6 million and contains 1,867 cells.
These facilities were opened in fiscal year
2005. The total cost of $353.6 million for
these two facilities represents 74 percent
of the $475 million spent on detention
facilities since fiscal year 1999 when the
sales tax collection began.
