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.
For the second consecutive year, auditors
reported material internal control
weaknesses and were unable to
determine whether the information
reported in each program’s financial
statements was accurate. This resulted in
disclaimers of opinions for the Maricopa
Health Plan Fund and the ALTCS Fund,
which represented two of Maricopa
County’s major funds in the County’s
2004 and 2005 CAFRs. A disclaimer of
opinion was also expressed on the
County’s business-type activities since
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 two major funds and
business-type activities are fairly
presented in conformity with U.S.
generally accepted accounting principles.
For fiscal year 2005, MMCS’ material
internal control weaknesses were as
follows:
• MMCS contracted with outside service
organizations to process and pay all
medical, dental, prescription drug, and
group home claims. However, MMCS
2005
Year Ended June 30, 2005
Maricopa County
Subject
Maricopa County issues
a Comprehensive
Annual Financial Report
(CAFR). 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 two major
healthcare funds.
However, governmental
activities, the discretely
presented component
unit, other major funds,
aggregate remaining
fund information 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
did not require these organizations to
have effective systems of internal
controls in place to ensure that paid
claims were accurate and complete.
• For one of MMCS’ largest contractors
used for processing acute care
claims, MMCS did not take the
necessary steps to ensure that this
contractor’s claims processing system
was properly designed and fully tested
prior to processing medical claims for
MMCS.
• MMCS used its trial balance report to
prepare each program’s financial
statements. However, MMCS did not
reconcile paid claims to the trial
balance reports to ensure its
accounting records were accurately
maintained.
• Prior to fiscal year 2005, MMCS made
significant overpayments through its
OAO claims processing system to
medical service providers and did not
accurately account for prepayments.
During fiscal year 2005, MMCS hired a
recovery firm to identify overpayments
and outstanding prepayments for 22
percent of the medical providers’
claims and entered into written
settlement agreements with providers
for the remainder; however, MMCS
may not have identified all likely
amounts due them. Therefore, MMCS
should continue to identify and recover
all overpayments and outstanding
prepayments, which represent gifts of
public monies since there was no
public purpose served and the
amounts paid to medical providers
exceeded the value received.
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
page2
Net Assets and Statement of Activities reported
in the 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, 2005
Total Governmental
and Business-Type
Activities
Current and other assets $1,135,918,472
Capital assets 2,443,478,792
Total assets 3,579,397,264
Current and other liabilities 269,683,156
Long-term liabilities 271,435,574
Total liabilities 541,118,730
Net assets
Invested in capital assets,
net of related debt 2,347,299,275
Restricted net assets 260,502,317
Unrestricted net assets 430,476,942
Total net assets $3,038,278,534
Statement of Activities
Year Ended June 30, 2005
Total Governmental
and Business-Type
Activities
Program revenues:
Governmental activities $ 588,850,893
Business-type activities 520,840,533
General revenues, special items,
and transfers:
Governmental activities 1,046,477,531
Business-type activities (70,715,016)
Total revenues, special
items, and transfers 2,085,453,941
Expenses:
Governmental activities 1,405,618,226
Business-type activities 583,390,427
Total expenses 1,989,008,653
Change in net assets 96,445,288
Net assets—beginning, as
restated 2,941,833,246
Net assets—ending $3,038,278,534
County Retroactively Reports
Infrastructure Assets and Implements
New Financial Reporting Standard
On July 1, 2004, the County retroactively
reported Flood Control District infrastructure
assets owned and acquired from July 1, 1980 to
June 30, 2001, to comply with Governmental
Accounting Standards Board (GASB) Statement
No. 34, Basic Financial Statements—and
Management’s Discussion and Analysis—for
State and Local Governments. As a result, the
Auditors noted similar internal control
weaknesses for the healthcare programs for the
year ended June 30, 2004. These deficiencies
caused a significant delay in the completion of
each fund’s financial statements and in the
issuance of the County’s CAFRs for both fiscal
years.
Maricopa County terminated its contracts for the
following healthcare programs:
• 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.
page3
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
page 1. In addition, these programs had
significant operating losses during fiscal years
2004 and 2005.
County restated beginning capital assets
balances for governmental activities by $372.5
million, net of accumulated depreciation.
During fiscal year 2005, the County also
implemented GASB Statement No. 40, Deposit
and Investment Risk Disclosures. This reporting
standard establishes and modifies the risk
disclosures about the County’s deposits and
investments. Since it requires only additional
disclosures, it had no effect on reported
amounts for deposits, investments, net assets, or
changes in net assets.
The County Discontinued
Operating Three
Healthcare Programs
The County Discontinued
Operating the Maricopa
Medical Center
The Maricopa Medical Center provides quality
health care and professional education to the
community. However, for more than a decade,
the Medical Center has experienced significant
operating losses and cash deficits, which the
County has subsidized from the County General
Fund since fiscal year 1994. During fiscal year
2005, the County discontinued its operation of
the Medical Center.
In November 2003, county voters approved the
Maricopa County Special Health Care District
and, in November 2004, county voters elected
the District’s Board of Directors, who took office
on January 1, 2005. As of that date, the Medical
Center became part of the Maricopa
County Special Health Care District, which is a
separate legal, tax-levying entity that is not part
of the County’s reporting entity. Certain capital
assets and long-term liabilities, which were
reported in the Medical Center Fund, a major
enterprise fund, remained with the County and
were transferred to governmental activities on
January 1, 2005. The remaining assets and
liabilities of the Medical Center were transitioned
to the Maricopa County Special Health Care
District. As a result, the County recognized a loss
of $108,765,405 for the closure of this business
activity. In addition, on June 8, 2005, the County
entered into an intergovernmental agreement
with the District to assist with certain financing
and to help assure the District’s fiscal viability.
Maricopa County
REPORT
HIGHLIGHTS
FINANCIAL STATEMENT AUDIT
Year Ended June 30, 2005
The General Fund’s fund balance,
as reported on the County’s fiscal
year 2005 Comprehensive Annual
Financial Report, was $431.3
million at June 30, 2005, an
increase of 36 percent from fiscal
year 2004 and 168 percent from
fiscal year 2001. 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 year 2001
through 2005, have contributed to
the increasing fund balance.
Property tax revenues, as
reported for fiscal year 2005,
increased 50 percent from fiscal
year 2001, and intergovernmental
revenues, as reported for fiscal
year 2005, increased 46 percent
from fiscal year 2001. Fund
balance increased $270.1 million
from 2001 to 2005. 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.
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:
Kathleen Wood
TO OBTAIN
MORE INFORMATION
page 4
The General Fund’s
Fund Balance
Continues to Increase
General Fund
Ending Fund Balance
Past 5 Years
$292.7
$318.3
$431.3
$254.1
$161.2
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
2001 2002 2003 2004 2005
(In Millions) General Fund
Revenues/Other Financing Sources and
Expenditures/Other Financing Uses
Fiscal Years 2001 through 2005
$1,082.9
$865.7
$804.2 $807.2
$731.7
$970.9
$840.1
$715.0
$768.7
$731.3
$0
$200
$400
$600
$800
$1,000
$1,200 (In Millions)
Revenues Expenditures
2001 2002 2003 2004 2005
