SmokingGunMCFY06finconditionrpt

7/31/2019 SmokingGunMCFY06finconditionrpt

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Fiscal Year 2006

Internal Audit Department

Maricopa County, Arizona


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The County Auditor is appointed by the Board of Supervisors. The mission of theInternal Audit Department is to provide objective, accurate, and meaningful information

about County operations so the Board of Supervisors can makeinformed decisions to better serve County citizens.

The mission of Maricopa County is to provide

regional leadership and fiscally responsible,

necessary public services so that residents can

enjoy living in a healthy and safe community.

Audit Team Members

Eve Murillo, CPA, CFE, MBA, Deputy County Auditor

Carla Harris, CPA, CIA, CFE, Audit Supervisor

Patra E. Carroll, CPA, CIA, Audit Supervisor

Kimmie Wong, MPA, Senior Auditor

Nic Harrison, CISA, Staff Auditor

Jenny Eng, Staff Auditor

Special Thanks to John Lewis, Financial Reporting Manager, Department of Finance

Copies of the County Auditors reports are available by request.

Please contact us at:

Many of our reports can be found in electronic format at:

www.maricopa.gov/internal_audit


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Maricopa CountyInternal Audit Department

301 West Jefferson StSuite 660

Phx, AZ 85003-2143

Phone: 602-506-1585

Fax: 602-506-8957

www.maricopa.gov

April 18, 2008

Andrew Kunasek, Chairman, Board of SupervisorsFulton Brock, Supervisor, District IDon Stapley, Supervisor, District IIMax Wilson, Supervisor, District IVMary Rose Wilcox, Supervisor, District V

We have completed the Fiscal Year (FY) 2006 edition of the Maricopa CountyFinancial Condition Report based primarily on the FY 2006 CAFR issued inOctober 2007. This work, which is part of our Board-approved audit plan,

provides information on current and historical County financial trends.

For FY 2006, we again highlight the financial strength of the Countys GeneralFund within the context of population growth that led the nation. The GeneralFund unreserved fund balance continued to grow, and long-term debt levelsdecreased. Key financial indicators compare very favorably to national andlocal benchmarks.

This year we include a benchmark comparison of investment portfolios betweenthe County Treasurer and the Arizona State Treasurer. Highlights includecomparative analyses of investment yields and the composition ofinvestment pool by asset type.

We also provide updated information about County employee pension plansdue to the deteriorating financial trends experienced locally and nationally sinceFY 2000.

We would like to commend the Board of Supervisors and County leadership forthe conservative fiscal policies that have led to the strong financial conditionhighlighted throughout this report. The foresight and restraint applied in prioryears will significantly help soften the impact of the current economic downturn.

Sincerely,

Ross L. Tate

County Auditor


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Maricopa County Internal Audit FY06 Financial Condition ReportApril 2008

Westrivetoprotectandenhancethequalityoflifeinourcommunityandmeasurethe

differencewemake.Westrivetocreatevaluewithourservicesandinfrastructureinvestments

muchthe

same

as

aprivate

corporation

would

do.

We

audit

ourselves

internally

and

externally

usingmeasuressuchasArizonaQualityAwards,MalcolmBaldrigeAwardcriteria,benchmarking,

andvariousothercompetitivereviewprocesses.Wearefrequentlyaskedbyothergovernments

foradviceandcounsel.Icanonlyassumeitisbecausewearedoingwhatwesaywewilldo.

DavidSmith,CountyManager

ManagingforResultsAnnualReportFY07

Population[Source:U.S.CensusBureau]3.77

million

people

call

Maricopa

County

home,

the

4th

largest

population

in

the

nation

behindLosAngelesCounty(California),CookCounty(Chicago,Illinois),andHarrisCounty

(Houston,Texas).

TheCountyspopulationincreasedby130,000fromJuly2005toJuly2006,thebiggest

countypopulationincreaseinthenation.

TheCountyspopulationgrewby596,000fromJuly2001toJuly2006.

Size

[Source:Maricopa

County

website]

At9,226squaremiles,MaricopaCountyislargerthanseveralstates,including

Connecticut,Delaware,Hawaii,Massachusetts,NewHampshire,NewJersey,RhodeIsland,

aswellastheDistrictofColombia.Financial [Source:MaricopaCountyFY06CAFR]

AsofJune30,2006,theCountyTreasurerheld$3.1billionincashandinvestments,

whichincludesspecialdistrictsandschooldistrictsalongwithCountyfunds.

TheCountyreceived$1.9billioninrevenueduringFY06.

TheUnreservedGeneralFundBalancereached$540millioninFY06,up$112millionfrom

thepreviousyear.

History[Source:MaricopaCountywebsite]Establishedin1871,Maricopawasthefifthcountytobeformedinwhatwasthenthe

ArizonaTerritory.

MaricopaCountyBasicsMaricopaCountyBasics


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Maricopa County Internal Audit FY06 Financial Condition ReportApril 2008

General

Fund

Key

Financial

Indicators..........................1

GeneralFundRevenueSources..................................... 4

LongTermDebt.............................................................. 4

GovernmentalFunds......................................................5

GovernmentalFundsTaxRevenues ............................. 9

TaxRevenueBudgettoActualVariance.......................10

NetAssets ....................................................................... 11

CountyTreasurer ............................................................13

ArizonaCountyBenchmarks .........................................17

MaricopaCountyRetirementPlans ..............................21

PopulationGrowthandEmploymentRates .................27

ReportMethodology ..................................................... 29

TableofContentsTableofContents


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Maricopa County Internal Audit 1 FY06 Financial Condition ReportApril 2008

GeneralFundKeyGeneralFundKey

FinancialIndicatorsFinancialIndicators

TheGeneralFundistheCountysprimaryoperatingfund.

TheGeneralFundaccountsforallfinancialresourcesof

thegeneralgovernment,exceptforthoserequiredtobe

accountedforseparatelyinadifferentfund(suchas

transportation,jail

operations,

etc.).

The

use

of

separate

fundsmaybeusedforlegalrequirements(federaland

state)andforfinancialadministrationpurposes.


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Unreserved General Fund BalanceThe unreserved fund balance represents the funds available to meet the Countys currentand future financial needs. It is a useful measure of a governments liquidity. Conservativebudget strategies, combined with conservative revenue estimates, have resulted in largeGeneral Fund balance increases. The County is setting aside resources to fund severallarge construction projects under a pay as you go policy.

The unreserved General Fund balance rose to $539.6 million in FY06, for an increase of $111.6million, or 26% over the prior year. This is attributable primarily to increased revenue of $113.7million from all sources; expenditures also increased by $33.3 million, for a net increase fromoperations of $80.4 million.

UnreservedGeneralFundBalance

NotAdjusted

for

Inflation

(in

millions)

$78.1

$539.6

$

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

GeneralFundKeyFinancialIndicatorsGeneralFundKeyFinancialIndicators

GeneralFund

SOURCE: Maricopa County Comprehensive Annual Financial Reports (CAFRs)


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Since FY97, Maricopa Countys General Fund has achieved a healthy fund balance inrelation to its revenues. Maricopa has significantly surpassed the national benchmarkaverage for this financial measure for the past 10 years (see page 30 for a list of nationalbenchmark counties).

The liquidity ratio is a measure of theCountys ability to pay currentobligations, and is measured bydividing fund assets by fund liabilities.

Maricopa continues to significantlyoutperform the national benchmark

average with a liquidity ratio of over14-to-1. This means that there areample funds ($14.30) available in cashor equivalents to pay every $1 incurrent liabilities.

This measure reflectsthe availability offinancial reserves tomeet unforeseenneeds.

A ratio of 15% or more

is generally considereddesirable.


asaPercentofRevenues

14%

47%

19%

13%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

Maricopa Avgof10BenchmarkCounties

GeneralFundLiquidityRatio

(excluding"DueTo/From"otherfunds)

4.2

14.3

3.02.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

FY01

FY02

FY03

FY04

FY05

FY06

Maricopa Benchmarks

GeneralFundKeyFinancialIndicatorsGeneralFundKeyFinancialIndicatorscontdcontd

SOURCE: Maricopa County CAFRs



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Intergovernmental revenues accounted for 61% of General Fund revenues, while taxesaccounted for 33%. Intergovernmental revenues are funds received from federal, stateand other local government sources in the form of grants, shared revenues, and paymentsin lieu of taxes. (For a breakdown of the composition of Intergovernmental and TaxRevenue sources, please refer to the Governmental Funds section, page 8.)

In FY06, General Fund revenuesincreased by $114 million, or11%, to $1.148 billion.

This increase was attributable toan increase in the sales taxapportionment of $60.1 millionand the vehicle license taxapportionment of $15.4 million. Inaddition, property tax revenuesincreased by $34.4 million (due toan increase in assessed valuesand new housing). Theseincreases can be attributed to theCountys continued strongeconomy throughout FY 2006,increasing population, and higherproperty values.

Maricopa Countys long-term debt per personhas decreased 59% since FY02. The Countyhas extremely low debt levels compared to thenational benchmark average. The Countys lowdebt level has resulted from a conservative pay

as you go policy.

FY04 was the last year of the Countys 1986voter-approved General Obligation debtfinancing for capital projects. On July 1, 2004,Maricopa County paid off the remaining $20.2million of General Obligation debt.

GeneralFundRevenueSourcesGeneralFundRevenueSources

GeneralFund

Long

Term

Debt LongLongTermDebtTermDebt

SOURCE: FY05 and FY06 CAFRs


LongTermDebtPerPerson

ComparisontoNationalBenchmarks

(adjustedforinflation)

$64

$609$671

$634$588 $595

$157$98 $80 $75

$0

$100

$200

$300

$400

$500

$600

$700

$800

FY02 FY03 FY04 FY05 FY06

Maricopa Avgof10BenchmarkCounties

$615

$695

$360 $379

$58 $74

$0

$100

$200

$300

$400

$500

$600

$700

Intergovernmental Taxes ChargesforService

andOtherMisc.

GeneralFundRevenueSourcesfor FY05&FY06

(in millions)

F Y05 F Y06


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GovernmentalFundsGovernmentalFunds

ThefocusoftheprecedingpageswasontheCountys

primaryoperatingfund,theGeneralFund. Thefollowing

pagesprovideamorecomprehensivelookatCounty

financialtrends,byfocusingonallGovernmentalFunds,whichincludethe:

GeneralFund

SpecialRevenueFunds

DebtServiceFunds

CapitalProjectsFunds

Governmental

funds

are

used

to

account

for

activities

thatareprincipallysupportedbytaxesand

intergovernmentalrevenues(governmentalactivities),as

opposedtootherbusinesstypeactivitiesthatare

supportedprimarilybyuserfees,suchasfeebased

departmentsliketheCountysHealthPlans.


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ExpendituresFY06 expenditures totaled$1.646 billion, an 8%increase from FY05.

A total of 71% ofexpenditures were forPublic Safety (45%) andHealth, Welfare andSanitation (26%).

Revenues

Total Governmental Fundsrevenues increased 12% inFY06 to $1.853 billion. Thisis attributed to the increasesto General Fund revenuesdiscussed on page 4.

Intergovernmental revenuescomprised 55% of totalrevenues, taxes comprised

33%, and other revenuescomprised 12%.

ExpendituresbyFunctionforGovernmentalFunds

(inmillions)

$113$130

$637

$438

$206

$119$131

$733

$431

$233

$0

$200

$400

$600

$800

PublicSafety Health,Welfare

andSanitation

CapitalOutlay G eneral

Government

Other

FY0 5 FY 06

GovernmentalFundsGovernmentalFundsRevenues&ExpendituresRevenues&Expenditures

GovernmentalFunds

RevenuebySourceforGovernmentalFunds

(inmillions)

$192

$557

$904

$226

$601

$1,026

$0

$200

$400

$600

$800

$1,000

$1,200

Intergovernmental Taxes Other

FY05 FY06




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Expenditures Per Person

Expenditures per person havedecreased 8% since FY97,and were down from the 10-year average of $440(adjusted for inflation).

The downward trend reversed

with a 4% increase in FY05.

Revenues Per Person

Revenues per person haveincreased 12% since FY97,and were 6.5% higher thanthe 10-year average of $458(adjusted for inflation).

This includes allGovernmental Funds

revenues (including taxes,intergovernmental revenues,and other sources).

Revenues&ExpendituresPerPersonRevenues&ExpendituresPerPersonGov

ernm

en

talF

un

ds



RevenuesPerPerson

GovernmentalFunds


$433

$489

$460

$350

$400

$450

$500

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

ExpendituresPerPerson

GovernmentalFunds


$434

$416

$454

$421

$471

$350

$400

$450

$500

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06


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Intergovernmental revenues accounted for 55% of all governmental funds revenue. State-shared sales tax is the Countys largest source of intergovernmental revenue, as shown on thetop left, followed by vehicle license tax revenue, grants, and the highway user fund.

Tax revenues accounted for 33% of all governmental funds revenue. The composition of theserevenues is shown on the top right. For the first time since FY02, state-shared sales tax is theCountys largest source of tax revenue. The composition of all taxes revenues is shown below.

Total Tax Revenues - Governmental Funds

State-shared sales tax and general propertytax are the two largest sources of taxrevenue, accounting for 70% of all taxrevenue.

Tax revenues increased by $128 million from$1.179 billion in FY05 to $1.307 billion inFY06. Tax revenues increased primarily dueto increases in State-shared sales taxrevenue of $60 million and property taxrevenue of $25 million between FY05 andFY06.

FY06Intergovernmental RevenuesbySource

GovernmentalFunds

(in

millions)

Highway

UserFund

$97 (9%)Grants

$136(13%)

Vehicle

LicenseTax

$147(14%)

Other

$187(18%)

SalesTax

$458(46%)

FY06TaxRevenuesby Source

(excludingIntergovernmental

Revenues)

GovernmentalFunds (inmillions)

General

Property

Tax

$457

(76%)

JailExcise

Tax

$138

(23%)

Other

$6

(1%)

FY06TotalTaxRevenuesbySource

GovernmentalFunds

(inmillions) StateSharedSalesTax

$458

(35%)

General

PropertyTax

$457

(35%)

Other

$10

(1%)

HighwayUser

FuelTax

$97

(7%)

JailExcise

Tax

$138

(11%)

Vehicle

LicenseTax

$147

(11%)

GovernmentalFundsGovernmentalFundsRevenuebySourceRevenuebySource

GovernmentalFunds

SOURCE: Intergovernmental Revenue report, Department of Finance SOURCE: FY06 CAFR

SOURCE: FY06 CAFR


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Sales Tax and Property Tax asa Percent of Total Revenues

In FY06, property tax revenuesaccounted for 35% of all taxrevenues, or $456.9 million.

Sales tax revenues of $457.8million account for an increasingproportion of all tax revenues, at35%.

Tax Revenues Per Person

While total revenues per personhave increased 12% from FY97 toFY06 (as discussed on page 7), taxrevenues per person increased at aslower rate of 5% during the sameperiod (adjusted for inflation). The10-year average for tax revenuesper person was $327.

GovernmentalFundsGovernmentalFundsTaxRevenuesTaxRevenues



StateSharedSalesTaxandPropertyTax

asa%ofTotalTaxRevenues

25%

28%

31%

34%

37%

40%

FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06

PropertyTax SalesTax

TaxRevenuesPerPerson

GovernmentalFunds


$345

$327

$230

$250

$270

$290

$310

$330

$350

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06


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Property Tax

Property tax revenues are morepredictable and are thereforeeasier to budget.

In FY06, actual property taxrevenues exceeded the originalbudget by $8.9 million or less than2%.

State-Shared Sales Tax

Sales tax revenues can be

difficult to predict, as they aresubject to economic forces.

In FY06, actual sales taxrevenues exceeded the originalbudget by $50.5 million, or 12%.

Vehicle License Tax

Vehicle license tax revenues canbe difficult to predict, as citizenscan prepay for one or two years.

In FY06, actual vehicle licensetax revenues exceeded theoriginal budget by $12.7 million,or 9.5%.

StateSharedSalesTax

VarianceBetweenOriginalBudgetandActual

(inmillions)

$50.5

$22.8$22.5

($5.2)

($15.8)

$5.6

$22.4

$22

$12

$2

$8

$18

$28

$38

$48

$58

FY00

FY01

FY02

FY03

FY04

FY05

FY06

VehicleLicenseTax

VarianceBetweenOriginalBudgetandActual

(inmillions)

$12.7

$4.9

$7.4

$1.9

$6.0$6.0

$17.4

$0

$5

$10

$15

$20

FY00

FY01

FY02

FY03

FY04

FY05

FY06

PropertyTax

Variance BetweenOriginalBudgetandActual

(inmillions)

($0.3)

($2.4)

$0.1

$2.4$3.3

$1.6

$8.9

$4

$2

$0

$2

$4

$6

$8

$10

$12

FY00

FY01

FY02

FY03

FY04

FY05

FY06

TaxRevenueBudgetTaxRevenueBudgettotoActualVarianceActualVariance

GovernmentalFunds

SOURCE: Maricopa County CAFRs and Annual Business Strategy (Budget) Books




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NetAssetsNetAssets


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The Countys assets for governmental and business-type activities exceeded liabilities atyear end by over $3.3 billion (net assets). This is a 10% increase from FY05.

Over time, total net assets serve as a useful indicator of whether the financial condition of theCounty is improving or deteriorating. Total net assets increased 64% from FY02 to FY06.The total increase from FY05 to FY06 was $344.8 million.

Net assets are divided into three components: (1) Investments in capital assets, net ofrelated debt (such as land, building, machinery, and equipment); (2) Restricted Net Assets

(assets that are subject to external restrictions on how they may be used); and (3)Unrestricted Net Assets (assets not subject to external restrictions on how they may beused).

Just under 75% of net assets are invested in capital assets (net of related debt), 10% arerestricted (primarily for public safety and highways and streets functions), and 17% areunrestricted (these assets can be used to meet the Countys ongoing obligations).

TotalNet Assets

(inmillions)

$2,042$2,302

$2,942 $3,002

$3,347

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000


NetAssetsNetAssets

NetAssets


SOURCE: FY06 CAFR

FY06CompositionofNetAssets

(inmillions)

Restricted

$345.2 (10%)

Unrestricted

$556.8 (17%)

InvestedIn

CapitalAssets

$2,445.2(73%)


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TheCountyTreasurerpoolsdepositsoftheCounty,

schooldistricts,andspecialdistricts. Cashnotrequired

forliquidityisinvestedinaccordancewithStatelawand

underastrategy

that

gives

highest

priority

to:

Safetyofprincipal

SufficientliquiditytomeettheneedsoftheCounty

anditssubdivisions

Returnoninvestment

Forthefirsttime,thisyearwehaveincludedabenchmark

comparisonof

investment

portfolios

between

the

County

TreasurerandtheArizonaStateTreasurer,includinga

comparativeanalysisofinvestmentyieldsandthe

compositionoftheinvestmentpoolsbyassettype.

CountyTreasurerCountyTreasurer


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Arizona Revised Statutes requirecommunity colleges, schooldistricts, and other localgovernments to deposit certainpublic monies with the CountyTreasurer.

Total cash and investments heldby the Treasurer increased to$3.1 billion in FY06.

County funds totaled $921 million, or 30%of the $3.1 billion held by the Treasureras of 6/30/06.

SOURCE: FY06 CAFR


CashandInvestmentsHeldbytheCountyTreasurer

(inbillions)

$1.9 $2.0

$2.7

$3.1

$2.2

$

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5


Who TheMoneyBelongsTo

(inmillions)

NonCounty

Funds

$2,158(70%)

OtherCounty

Funds

$464(15%)

County

GeneralFund

$457(15%)

AverageWeightedYieldtoMaturity(YTM)fortheTreasurer'sInvestments

byinvestmenttype(asof9/30/06)

5.20% 5.20% 5.18% 5.12% 5.07%

4.34%4.14%

3.84%3.76%

3.00%

4.00%

5.00%

6.00%

Federal

National

Discount

Note

Federal

Home

Discount

Note

Federal

Mortgage

Center

Discount

Note

FarmCredit

Discount

Note

Warrants Federal

HomeLoan

Mortgage

Center

Federal

National

Mortgage

Corporation

Federal

HomeLoan

Banks

Federal

FarmCredit

Banks

The yield to maturity foreach of the Treasurers

investments as of 9/30/06 isshown to the right.

The average weighted yieldto maturity across allinvestments is 4.6%.

SOURCE: Maricopa County

Internal Audit of County Treasurer ( FY07)

$3.1BillionManagedbyCountyTreasurer$3.1BillionManagedbyCountyTreasurer

Treasurer


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The Arizona StateTreasurers Officemanages $12 billiontotal, $3.1 billion ofwhich is invested in aLocal GovernmentInvestment Pool(LGIP). The LGIPprovides professionalshort-term investmentservices for a widearray of public entities.

The County Treasureroperates an investmentpool of $3.1 billion,comparable in functionto the LGIP fund. Annualyields for both funds have improved over the last three years, as shown above.

As of 12/31/07, State LGIP funds were held primarily in money market investments issued bygovernment sponsored enterprises (GSEs), with 59% held in Federal Mortgage investments(e.g. Fannie Mae, Freddie Mac), as shown on the left below. GSEs are privately-ownedcorporations authorized to make loans and loan guarantees, but are not backed or funded byU.S. government, nor do the securities they issue benefit from any explicit governmentguarantee or protection. As of 12/31/07, County Treasurers funds were invested in GSEs, with97% held in Federal Mortgage investments, as shown on the right below.


SOURCE: State Treasurer Market Report, 12/31/2007 SOURCE: County Treasurer Summary Report, 12/31/07

ComparativeInvestmentYieldsStateTreasurerLocalGovernmentInvestmentPoolvs.

MaricopaCounty

0%

1%

2%

3%

4%

5%

6%

7%

8%

FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

StateTreasurerLocalGovernmentInvestmentPoolMaricopaCountyTreasurer

ArizonaStateTreasurer

LGIPPoolComposition(inmillions)

FederalHome

LoanMortgage

Center

$435.8(13%)

Commercial

Paper

$195.1(6%)

FederalFarm

CreditBanks

$177.8(5%)

CashDeposits

$45.0(1%)

FederalHome

LoanBanks

$993.9(30%)

Federal

National

Mortgage

Corporation

$554.4(17%)

Corporate

Notes

$942.0(28%)

MaricopaCountyTreasurer

Investment PoolComposition(inmillions)

FederalFarm

CreditBanks

$70.0(2%)

FarmCredit

DiscountNote

$30.0(1%)

FederalHome

DiscountNote

$212.2(6%)

Federal

Agricultural

Mortgage

Corporation

$20.6(1%)

FederalHome

LoanBanks

$1,101.0(33%)

Federal

Mortgage

Center

DiscountNote

$270.4(8%)

FederalHome

LoanMortgage

Center

$369.5(11%)

Federal

National

Mortgage

Corporation

$648.1(19%)

Federal

National

DiscountNote

$638.4(19%)

TreasurersInvestmentPoolTreasurersInvestmentPool

SOURCES: State Treasurer historical yield reports; County Treasurer Investment Officer


22/37



23/37


ToprovidelocalcontextforMaricopaCountys

performance,theFinancialConditionReportincludes

comparisonstosixArizonaCountybenchmarks. This

informationispresentedonthefollowingthreepages.

(Nationalbenchmarkcomparisonswerepresented

earlierinthisreport.)

ArizonaCountyArizonaCounty

BenchmarksBenchmarks


24/37


Unreserved Fund Balance

Unreserved fund balances represent the monies available to meet the Countys current andfuture needs. Maricopa County continued to significantly outperform the Arizona bench-mark average for this financial measure from FY03 - FY06 (bottom left), as well as each ofthe benchmark counties individually in FY06 (bottom right).

This year, Maricopa County was again benchmarked against the following six Arizonacounties:

Cochise 135

Mohave 198

Pima 981

Pinal 300

Yavapai 213

Yuma 196

Arizona Benchmarks - Population (in thousands)


asa%ofRevenues

FourYearComparisontoArizonaBenchmark

Average

36.8%

41.4%

47.0%

36.7%

17.1%

18.7%

16.8%16.9%

0%

5%

10%

15%20%

25%

30%

35%

40%

45%

50%

FY03

FY04

FY05

FY06

Maricopa BenchmarkAvgs


asa%ofRevenues

FY06ComparisontoArizonaBenchmarks

14.7%

34.1%

47.0%

29.7%26.9%

10.8%10.2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Yavapai

Pima

Mohave

Yuma

Cochise

Pinal

Maricopa

ComparisontoArizonaCountyBenchmarksComparisontoArizonaCountyBenchmarks

ArizonaBenchmarks

SOURCE: Maricopa and benchmark county CAFRs SOURCE: FY06 Maricopa and benchmark county CAFRs

SOURCE: State of Arizona Department of Economic Security, 7/1/2006


25/37


In FY06, Maricopa Countys liquidityratio was very strong at 14.3-to-1,meaning that there were ample funds($14.30) in cash and equivalents forevery $1.00 in current liabilities.

Maricopas liquidity ratio continues tosurpass the benchmark average.

Individual liquidity ratios for MaricopaCounty and the Arizona benchmarkcounties are reflected below for FY06.


(excluding

"Due

To/From"

other

funds)FourYearComparisontoArizonaBenchmark

Averages

6.6 6.6

14.313.4

2.8 3.03.1 3.0

0

2

4

6

8

10

12

14

16

FY03 FY04 FY05 FY06

Maricopa AZCountyBenchmarkAverage


(excluding"DueTo/From"otherfunds)

FY06ComparisontoArizonaBenchmarkCounties

2.4

14.3

4.04.7

5.4

2.9

7.6

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Ya va pa i Pi ma Moha ve Yuma Cochi s e Pi na l Ma ri copa

ComparisontoArizonaBenchmarksComparisontoArizonaBenchmarkscontdcontd

SOURCE: Maricopa and benchmark county CAFRs

SOURCE: FY06 Maricopa and benchmark county CAFRs


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Maricopa County has a very low levelof debt per person.

Maricopa Countys long-term debt perperson has decreased 35% duringthe four years shown, while thebenchmark average increased 12%.

Maricopa County hasthe lowest level oflong-term debt perperson whencompared to theArizona benchmarkcounties.

LongTermDebtPer Person

MaricopaCounty

vs.

Arizona

Benchmarks


$249 $246

$285 $278

$98$80

$75 $64

$0

$50

$100

$150

$200

$250

$300

FY03 FY04 FY05 FY06

AZCountyBenchmarkAverage MaricopaCounty

ComparisontoArizonaBenchmarksComparisontoArizonaBenchmarkscontdcontd

ArizonaBenchmarks

FY06LongTermDebtPerPerson

ComparisontoArizonaBenchmarks

$244

$168

$93 $94

$618

$455

$64

$0

$100

$200

$300

$400

$500

$600

$700

Mari copa Cochi s e Yava pai Mohave Yuma Pi ma Pi na l

SOURCE: Maricopa and benchmark county CAFRs

SOURCE: FY06 Maricopa and benchmark county CAFRs


27/37


MaricopaCountyMaricopaCounty

RetirementPlansRetirementPlans

Countypensionplaninformationwasfirstincludedinthe

FinancialConditionreportlastyearduetodeteriorating

financialtrendsexperiencedlocallyandnationally.

Updatedinformationisprovidedinthefollowingsection,

basedontheFY06MaricopaCountyCAFR,andtheFY07

CAFRsissuedbytheArizonaStateRetirementSystem

(ASRS)andthePublicSafetyPersonnelRetirementSystem

(PSPRS). InformationforFY08wasobtainedfromother

sourcesandisalsoincludedherein.


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ASRSFundingRatio

82.8%

120%

70%

80%

90%

100%

110%

120%

130%

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07


SURPLUS

DEFICIT

Funded Status Defined

Perhaps the most recognized measure of a public retirement plans health is its funding ratio,

derived by dividing the actuarial value of plan net assets by the present value of accruedliabilities (projected future retirement payments). A pension plan whose assets equal itsliabilities is 100% funded, or fully funded. A plan with assets that are less than its liabilities isconsidered to be underfunded.

The dollar difference between plan assets and accrued liabilities is the unfunded actuarialaccrued liability(UAAL), which is a common measure of a pension plans financial condition.

Methods used to value assets and liabilities can be complex and may vary from plan to plan,making direct comparisons among plans difficult or impossible. This report shows thefunding ratios based on the actuarial value of assets. The amount of accrued liabilities

depends on the assumptions and cost method. Actual calculations are very technical innature and are outside the scope of this report. It is noted, however, that ASRS discountsfuture benefits at 8.0% per year, while PSPRS discounts future benefits at 8.5%, whichprecludes a direct comparison of funding ratios.

ASRS Funding Status

ASRS reported a strong 17.8% rate of return on the total ASRS fund in FY07, as shown onpage 26, and was named a top performer in a nationwide pension plan study performed byan independent nonprofit charitable trust. However, the unfunded actuarial accrued liability(UAAL) grew by nearly $674 million, or 14%, to $5.5 billion in FY07, due largely to thedelayed recognition of losses that have occurred in earlier years (see lower rightgraph). Investment losses are recognized in actuarial assets over a 10-year period. Thefunded status of the total plan decreased from 83.7% for FY06 to 82.8% for FY07.

ASRSFundingStatusASRSFundingStatus

RetirementPlans

ASRSUnfundedLiabilities

(inmillions)

($6,000)

($4,000)

($2,000)

$0

$2,000

$4,000

$6,000

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

SURPLUS

DEFICIT

SOURCE: ASRS CAFRs and annual actuarial reports SOURCE: ASRS CAFRs and annual actuarial reports

FULLYFUNDED

UNDERFUNDED

(belowtheline)


29/37

PSPRSActuarialAssetsvs.Liabilities

(inmillions)

$2,600

$2,200$1,800

$1,400

$1,000

$600

$200

$200

$600

$1,000

$1,400

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

PublicSafety Correct ionsOfficers ElectedOfficials


PublicSafetyPersonnelRetirementSystem

(includes

PSPRS,

CORP,

and

EORP)

PSPRS Funding Status

The funding ratios of the threePSPRS plans have declinedsignificantly since FY01.Funding ratios as of 6/30/07were:

66.4% - Public Safety84.6% - Corrections Officers74.6% - Elected Officials

The UAAL (unfunded liability)for each of the three PSPRSplans as of 6/30/07 was:

(in millions)

$2,182 - Public Safety$ 122 - Corrections Officers$ 102 - Elected Officials

PSPRSFundingStatusPSPRSFundingStatus

PSPRS HistoricalFundingRatios

60%

70%

80%

90%

100%

110%

120%

130%

140%

150%

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

PublicSafety CorrectionsOfficers ElectedOfficials

SURPLUS

DEFICIT

SOURCE: FY07 PSPRS CAFR

SOURCE: PSPRS CAFRs

FULLYFUNDED

(abovetheline)

UNDERFUNDED

(belowtheline)


30/37


Plan Participation

Maricopa County employees and electedofficials participate in two State retirementplans:

About 9,500 County employees participatein the Arizona State Retirement System(ASRS)

About 3,000 County employees participatein the Public Safety Personnel RetirementSystem (PSPRS), which includes:

Elected Officials Retirement Plan Corrections Officers Retirement Plan Public Safety Personnel Plan

PSPRS Contribution Rates

Employee contribution rates arefixed by State statute based upon

a set percentage of employeecompensation. Any changesrequire legislation. Thus,employee contribution rates for thethree plans remain relativelystable. Employer contributionrates, however, have increasedsignificantly since 2003. Thecombined contribution rates(employee + employer) are shownin the graph on the right.

FY07 contribution rates for thePSPRS plans are shown below:

Plan Employee % Employer %Public Safety Personnel 7.65% 26.06%*Elected Officials 7.00% 11.00%Corrections Officers 7.96% 5.00%

*Weighted average

PlanParticipationandContributionRatesPlanParticipationandContributionRates

RetirementPlans

PSPRSCombinedContributionRates

forMaricopaCountyMembers

5%

10%

15%

20%

25%

30%

FY00 FY01 FY02 FY03 F Y04 FY05 FY06 FY07 FY08

PublicSafety(WeightedAvg)ElectedOfficialsCorrections

Officers

FY07CountyRetirementPlan

Participation

ASRS

Membership

9,499(76%)

PSPRS

Membership

2,997(24%)

About 76% of County retirement planparticipants are ASRS members.

SOURCE: Maricopa County Human Resources

SOURCE: Maricopa County Human Resources; PSPRS staff


31/37


Since FY00, total County

pension plan contributions toASRS and PSPRS haveincreased 289%, from $15.7million in FY00 to $61.1million in FY07, as shown onthe graph to the right.

From FY06 to FY07, Countycontributions increased 44%overall, or $15.5 million.(Does not include employee

contributions.)

MaricopaCountyPSPRSPlanContributions(FY00 FY07)

$

$1,500,000

$3,000,000

$4,500,000

$6,000,000

$7,500,000

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07

ElectedOfficials CorrectionsOffi cer s P ub li cSafety

Since FY00, County contributionsinto PSPRS have increased 164%,from $5.8 million in FY00 to $15.3million in FY07. Total Countycontributions for the three PSPRSplans are shown on the graph to theleft.

From FY06 to FY07, Countycontributions to PSPRS increased13% overall, or about $1.7 million.

CountyPensionContributionsCountyPensionContributions

SOURCE: Maricopa County CAFRs and unaudited FY07 CAFR Notes


MaricopaCountyASRSPlanContributions(FY00FY07)

$12,352,160

$45,806,290

$9,916,689

$29,855,413

$

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000



Since FY00, County contributionsinto ASRS have increased 362%,from $9.9 million in FY00 to $45.8million in FY07, as shown on thegraph to the left.

From FY06 to FY07, County

contributions to ASRS increased43% overall, or about $13.7 million.

MaricopaCountyTotalPensionPlanContributions(FY00 FY07)

$15,713,277

$36,791,353

$16,767,539

$61,115,738

$

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000



32/37

PSPRS Investment Returns

For FY07, the three PSPRS fundsexperienced rates of return between16% - 17%, which exceeded theassumed rate of 8.5%. However,overall fund performance declinedbecause the recognized rate of return(based on the smoothedmarket valueof assets discussed below) was lessthan the assumed rate.

The smoothedmarket value spreadsthe difference between the actual andassumed return over seven years.

Like ASRS, although the actual returnexceeded the assumed rate duringFY07, this is offset by negativeexperience carried forward from prioryears.


ASRS Investment Returns

For FY07, ASRS reported a strong17.8% rate of return on the total ASRSfund in FY07; however, overall fundperformance declined. This isbecause the recognizedrate of returnis based on the smoothedmarketvalue of assets, as discussed below,which was less than the assumed rateof 8%.

The smoothedmarket value spreads

the difference between the actual andassumed return over 10 years.Although the actual return exceededthe assumed rate during FY07, this isoffset by negative experience carriedforward from prior years.

InvestmentReturnsInvestmentReturns

RetirementPlans

ASRSInvestment

Return

Actualvs.Assumed

20%

10%

0%

10%

20%

30%


ActualRateofReturn AssumedRateofReturn

SOURCE: FY07 PSPRS CAFRs and PSPRS staff

SOURCE: ASRS historical yields report

PSPRSInvestmentReturn

Actualvs.

Assumed

20%

10%

0%

10%

20%

30%


PublicSafety CorrectionsOfficersElectedOfficials AssumedRate


33/37


PopulationGrowthPopulation

Growth

andand

EmploymentRatesEmploymentRates


34/37


Maricopa Countyspopulation increased innumber more than anyother county in thenation from July 2005 toJuly 2006.

Maricopa Countycontinues to enjoy

unemployment ratesbelow national andState averages.

In 2006, MaricopaCounty was ranked thefourth most populous ofall 3,141 counties in thenation.

TopFiveCountieswithLargestNumericalIncreaseinPopulation

July2005toJuly2006

68,175

123,363129,642

81,411

51,629

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Maricopa

County

Harris County,TX

Riverside

County,CA ClarkCounty,NV TarrantCounty,TX

UnemploymentRateHistory

3.6%

4.2%

4.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

County State UnitedStates

PopulationGrowthandEmploymentPopulationGrowthandEmployment

PopulationandEmployment

SOURCE: 2006 U.S. Census Bureau reports

SOURCE: 2006 U.S. Census Bureau reports


TopFiveU.S.CountiesbyTotalPopulation

July2006

9,948,081

3,886,207 3,768,1235,288,655

3,002,048

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Los Angeles

County,CA

CookCounty,IL HarrisCounty,

TX

Maricopa

County

Orange

County,CA


35/37


ReportMethodologyReportMethodology


36/37

Definition

Financial Condition is defined as a local governments ability to finance services on a

continuing basis. A county in good financial condition can sustain existing services to thepublic, withstand economic slumps, and meet the demands of changing service needs.

Objectives, Scope, and Methodology

The objective of this report is to evaluate Maricopa Countys financial condition using keyfinancial indicators. Indicators were selected from authoritative sources on evaluatinggovernmental entity financial condition, and were judged to be the most indicative of acountys overall financial health.

Our primary information sources were the audited Comprehensive Annual FinancialReports (CAFR) issued by the Arizona State Retirement System, Public Safety PersonnelRetirement System, ten national benchmark counties, six Arizona counties, and MaricopaCounty. The benchmark counties are:

Other sources include actuarial reports, the U.S. Census Bureau, GovernmentalAccounting Standards Board, the International City/County Managers Association,Arizona Department of Economic Security Research Administration, Maricopa CountysStrategic Plans (budgetary documents), Auditor General Reports, and correspondencewith internal and external staff.

Trend analysis is used in this report. Trend analysis involves examining historical data.Adjustments for inflation were made according to the U.S. Consumer Price IndexAllItems.

Arizona Benchmarks

County Population

Cochise 135 thousand Mohave 198 Pima 981

Pinal 300 Yavapai 213

Yuma 196


National Benchmarks

County Population Major Metro Area

Clark 1.9 million Las Vegas, NV

Harris 3.7 Houston, TX

King 1.8 Seattle, WA

Los Angeles 10.2 Los Angeles, CAMultnomah 0.7 Portland, OR

Orange 3.1 Santa Ana/Anaheim, CA

Pima 0.9 Tucson, AZ

Salt Lake 1.0 Salt Lake City, UT

San Diego 3.1 San Diego, CA

Santa Clara 1.8 San Jose, CA

ReportMethodologyReportMethodology

Methodology

SOURCE: State of Arizona Department of

Economic Security, 7/1/2006

SOURCE: Respective Counties FY06 CAFRs


37/37

Maricopa County Internal Audit

301 W. Jefferson, Suite 660

Phoenix, AZ 85003

Telephone: (602) 506-1585

Facsimile: (602) 506-8957E-Mail: [email protected]

ApictureoftheSecuritybuildinginthe1940s,takenfromthecornerofVanBurenandCentralAve.Builtin1928,thebuildingwaspurchasedbytheCountyin2001andiscurrentlyundergoinghistoricalrenovations.

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