2006 Comprehensive Annual Financial Report PIMA COUNTY ARIZONA For the Fiscal Year Ended June 30, 2006 Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2006 INTRODUCTORY SECTION Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting Organizational Chart FINANCIAL SECTION STATISTICAL SECTION INTRODUCTION PIMA COUNTY INTRODUCTORY SECTION The purpose of the Introductory Section in a comprehensive annual financial report (CAFR) is to familiarize readers with the organizational structure of the government, the nature and scope of the services it provides and the specifics of its legal operating environment. PIMA COUNTY Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2006 INTRODUCTORY SECTION FINANCIAL SECTION Independent Auditors’ Report Basic Financial Statements Required Supplementary Information Other than Management’s Discussion and Analysis Combining Statements and Other Schedules STATISTICAL SECTION FINANCIAL Management’s Discussion and Analysis FINANCIAL SECTION The Financial Section contains government-wide, combined, combining, and individual fund financial statements and schedules, which present a financial “overview” of Pima County. Management’s Discussion and Analysis OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the County's basic financial statements. The County's basic financial statements consist of four components: (1) Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the basic financial statements. Required supplementary information (4) is included in addition to the basic financial statements. Government-wide Financial Statements are designed to provide readers with a broad overview of County finances, in a manner similar to a private-sector business. The statement of net assets presents information on all County assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. The statement of activities presents information showing how net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation or sick leave). Both of these government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or in part a portion of their costs through user fees and charges (businesstype activities). The governmental activities of the County include general government, public safety, highways and streets, sanitation, health, welfare, culture and recreation, and education and economic opportunity. The business-type activities of the County include Pima Health System & Services, Wastewater Management, Development Services and the County’s downtown parking garages. A discretely presented component unit is included in the basic financial statements and consists of a legally separate entity for which the County is financially accountable. The County reports the Southwestern Fair Commission, which operates the County Fairgrounds and the annual Pima County Fair, as a discretely presented component unit. The government-wide financial statements can be found on pages 29-31 of this report. Fund Financial Statements are groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The County, like other state and local governments, uses fund accounting to ensure and demonstrate finance-related legal compliance with applicable State statutes and federal OMB budgeting guidelines. All of the funds can be divided into three categories: (1) governmental funds, (2) proprietary funds, and (3) fiduciary funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds financial statements focus on near-term inflows and outflows of expendable resources, as well as on balances of expendable resources available at the end of the fiscal year. Such information may be useful in evaluating the County’s near-term financing requirements. 14 Basic Financial Statements Required Supplementary Information Other Than Management’s Discussion & Analysis Combining Statements and Other Schedules Other (Nonmajor) Governmental Funds OTHER GOVERNMENTAL FUNDS (Nonmajor) Health and Animal Control Fund - to account for resources used to finance activities involved in the conservation and improvement of public health. Major sources of funding include Federal and State grants, charges for services provided, and operating transfers from the General Fund. Regional Flood Control District Fund - to account for amounts expended to protect persons and property from floodwaters. Revenues are provided by taxes on real property and government grants. The Regional Flood Control District is a blended component unit of Pima County. Employment and Training Fund - to account for resources controlled by the County as a prime sponsor under the Workforce Investment Act. Financing is provided by the Federal Government. Other Special Revenue Fund - to account for resources specifically identified to be expended for the various other programs of the County. These include various probation programs, consumer protection programs, family support, antiracketeering programs, law library, etc. Revenues are provided by fines, intergovernmental revenues, fees and forfeitures, and charges for services. Other Special Revenue Grants Fund - to account for Federal and State grants received by the County not required to be accounted for in a separate fund. Each grant has a specific project objective and the grants funds must be used for a stated purpose. School Reserve Fund - to account for Federal and State grants received by the Superintendent of Schools. Each grant has a specific project objective and the grants funds must be used for a stated purpose. Environmental Quality Fund - to account for resources specifically identified to be expended for protection of water, air and land from pollutants. Revenues are provided by fines, fees and forfeitures, licenses, permits and Federal and State grants. Special Districts Fund - to account for financial activity related to Improvement Districts, which are legally separate districts not accounted for elsewhere. Solid Waste Fund – to account for the resources used to finance the operations of the County’s landfills and transfer stations, and to account for the state shared revenue tax for the tire recycling program. Library District Fund – to account for the resources used to finance activities to provide library services to Pima County and the City of Tucson. Revenues are provided primarily by Library District taxes. The Library District is a blended component unit of Pima County. Stadium District Fund - to account for resources specifically identified to be expended for the Stadium District. Revenues are provided by the car rental, hotel/motel bed and recreation vehicle park taxes and charges for services provided. The Stadium District is a blended component unit of Pima County. Debt Service Fund - to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest. Combining Statements and Other Schedules Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual – Other Governmental Funds Combining Statements and Other Schedules Other (Nonmajor) Enterprise Funds Other (Nonmajor) Enterprise Funds Development Services – to account for the operations of providing zoning permits, enforcing ordinances in compliance with state statutes and administering uniform building codes. Parking Garages – to account for the management and operation of six public parking garages located in downtown Tucson. Combining Statements and Other Schedules Internal Service Funds Internal Service Funds Self Insurance Trust Fund – to account for the risk management function of the County. The Fund provides self-insurance coverage to the County for medical malpractice, workers’ compensation, unemployment, dental, general liability, environmental liability and property damage as well as acquiring coverage for other risks. Other Internal Service – to account for the acquisition, operation and maintenance of automotive equipment provided to County departments, as well as to account for the provision of printing, graphics and telecommunication services to County departments. Combining Statements and Other Schedules Fiduciary Funds PIMA COUNTY Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2006 INTRODUCTORY SECTION FINANCIAL SECTION STATISTICAL SECTION Financial Trends Information Revenue Capacity Information Debt Capacity Information Demographic and Economic Information Operating Information STATISTICAL STATISTICAL SECTION FINANCIAL TRENDS: The financial trends schedules are intended to provide users with information to assist them in understanding and assessing how a government’s financial position has changed over time. Financial trends information is considered to be a primary source of the historical perspective that helps users comprehend the direction in which a government’s economic condition is heading. It also serves the purpose of giving users a form of information that is among their most highly valued, comparative information over time. STATISTICAL SECTION REVENUE CAPACITY: The revenue capacity information is intended to assist users to understand and assess the factors affecting a government’s ability to generate its own-source revenues. The presentation here is not limited to property tax revenues, but certain other revenues are presented to comply with debt disclosure requirements, e.g., hotel taxes, car rental and RV taxes and street and highway revenues. STATISTICAL SECTION DEBT CAPACITY: The debt capacity information is intended to assist users to understand and assess a government’s debt burden and ability to issue debt. Debt capacity information is cited as being very useful for assessing economic condition as frequently as revenue or tax capacity. Five of the schedules presented provide tenyear comparisons. Certain schedules, for example; leases, lease-purchase and purchase agreements, are provided to comply with debt disclosure requirements. STATISTICAL SECTION DEMOGRAPHIC AND ECONOMIC INFORMATION: The dual objectives of the demographic and economic information are to assist users in understanding certain aspects of the environment in which a government operates and to provide information that facilitates the comparisons of financial statement data over time and across governments. Information of this type can help readers assess a government’s condition by providing information about community expansion, average age increases or decreases, and changes in personal income and unemployment. This type of data is important to readers in assessing economic condition. STATISTICAL SECTION OPERATING INFORMATION: The objectives of the operating information are to provide contextual information about a government’s operations and resources to assist users in using financial information to understand and assess a government’s economic condition. Two types of information are considered important. 1. Basic information about infrastructure assets, utilities and public works; in essence, the capital resources at the government’s disposal. Examples include miles of streets and sewers and wastewater treatment volume. 2. Descriptive service information, which would help to evaluate the size of the government. This would include types of services, the related demand and volume, and the non-financial resources employed to provide the services.