Financial Condition Report
Fiscal Year 2006

Internal Audit Department
Maricopa County, Arizona

The County Auditor is appointed by the Board of Supervisors. The mission of the
Internal Audit Department is to provide objective, accurate, and meaningful information
about County operations so the Board of Supervisors can make
informed 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 Auditor’s reports are available by request.
Please contact us at:
Maricopa County Internal Audit
301 W. Jefferson, Suite 660
Phoenix, AZ 85003

(602) 506-1585

Many of our reports can be found in electronic format at:
www.maricopa.gov/internal_audit

Maricopa County
Internal Audit Department

301 West Jefferson St
Suite 660
Phx, AZ 85003-2143
Phone: 602-506-1585
Fax: 602-506-8957
www.maricopa.gov

April 18, 2008
Andrew Kunasek, Chairman, Board of Supervisors
Fulton Brock, Supervisor, District I
Don Stapley, Supervisor, District II
Max Wilson, Supervisor, District IV
Mary Rose Wilcox, Supervisor, District V
We have completed the Fiscal Year (FY) 2006 edition of the Maricopa County
Financial Condition Report based primarily on the FY 2006 CAFR issued in
October 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 County’s General
Fund within the context of population growth that led the nation. The General
Fund unreserved fund balance continued to grow, and long-term debt levels
decreased. Key financial indicators compare very favorably to national and
local benchmarks.
This year we include a benchmark comparison of investment portfolios between
the County Treasurer and the Arizona State Treasurer. Highlights include
comparative analyses of investment yields and the composition of
investment pool by asset type.
We also provide updated information about County employee pension plans
due to the deteriorating financial trends experienced locally and nationally since
FY 2000.
We would like to commend the Board of Supervisors and County leadership for
the conservative fiscal policies that have led to the strong financial condition
highlighted throughout this report. The foresight and restraint applied in prior
years will significantly help soften the impact of the current economic downturn.
Sincerely,

Ross L. Tate
County Auditor

Maricopa County Basics
“We strive to protect and enhance the quality of life in our community and measure the
difference we make. We strive to create value with our services and infrastructure investments
much the same as a private corporation would do. We audit ourselves internally and externally
using measures such as Arizona Quality Awards, Malcolm Baldrige Award criteria, benchmarking,
and various other competitive review processes. We are frequently asked by other governments
for advice and counsel. I can only assume it is because we are doing what we say we will do.”
David Smith, County Manager
Managing for Results Annual Report FY07

Population [Source: U.S. Census Bureau]
3.77 million people call Maricopa County home, the 4th largest population in the nation
behind Los Angeles County (California), Cook County (Chicago, Illinois), and Harris County
(Houston, Texas).
The County’s population increased by 130,000 from July 2005 to July 2006, the biggest
county population increase in the nation.
The County’s population grew by 596,000 from July 2001 to July 2006.

Size [Source: Maricopa County website]
At 9,226 square miles, Maricopa County is larger than several states, including
Connecticut, Delaware, Hawaii, Massachusetts, New Hampshire, New Jersey, Rhode Island,
as well as the District of Colombia.

Financial

[Source: Maricopa County FY06 CAFR]

As of June 30, 2006, the County Treasurer held $3.1 billion in cash and investments,
which includes special districts and school districts along with County funds.
The County received $1.9 billion in revenue during FY06.
The Unreserved General Fund Balance reached $540 million in FY06, up $112 million from
the previous year.

History [Source: Maricopa County website]
Established in 1871, Maricopa was the fifth county to be formed in what was then the
Arizona Territory.

Maricopa County Internal Audit

FY06 Financial Condition Report—April 2008

Table of Contents
General Fund Key Financial Indicators ..........................1
General Fund Revenue Sources..................................... 4
Long‐Term Debt.............................................................. 4
Governmental Funds ......................................................5
Governmental Funds Tax Revenues ............................. 9
Tax Revenue Budget‐to‐Actual Variance.......................10
Net Assets ....................................................................... 11
County Treasurer ............................................................13
Arizona County Benchmarks .........................................17
Maricopa County Retirement Plans ..............................21
Population Growth and Employment Rates .................27
Report Methodology ..................................................... 29

Maricopa County Internal Audit

FY06 Financial Condition Report—April 2008

General Fund

General Fund Key
Financial Indicators

The General Fund is the County’s primary operating fund.
The General Fund accounts for all financial resources of
the general government, except for those required to be
accounted for separately in a different fund (such as
transportation, jail operations, etc.). The use of separate
funds may be used for legal requirements (federal and
state) and for financial administration purposes.

Maricopa County Internal Audit

1

FY06 Financial Condition Report—April 2008

General Fund

General Fund Key Financial Indicators
Unreserved General Fund Balance
The unreserved fund balance represents the funds available to meet the County’s current
and future financial needs. It is a useful measure of a government’s liquidity. Conservative
budget strategies, combined with conservative revenue estimates, have resulted in large
General Fund balance increases. The County is setting aside resources to fund several
large construction projects under a “pay as you go” policy.

Unreserved General Fund Balance
Not Adjusted for Inflation (in millions)

$600.0

$539.6

$500.0
$400.0
$300.0
$200.0
$100.0

$78.1

FY
06

FY
05

FY
04

FY
03

FY
02

FY
01

FY
00

FY
99

FY
98

FY
97

$‐

SOURCE: Maricopa County Comprehensive Annual Financial Reports (CAFRs)

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

Maricopa County Internal Audit

2

FY06 Financial Condition Report—April 2008

Since FY97, Maricopa County’s General Fund has achieved a healthy fund balance in
relation to its revenues. Maricopa has significantly surpassed the national benchmark
average for this financial measure for the past 10 years (see page 30 for a list of national
benchmark counties).
Unreserved General Fund Balance
as a Percent of Revenues

50%

47%

45%
40%
35%

This measure reflects
the availability of
financial reserves to
meet unforeseen
needs.

30%
25%

19%

20%
15%
10%

A ratio of 15% or more
is generally considered
desirable.

14%
13%

5%

Maricopa

FY
06

FY
05

FY
04

FY
03

FY
02

FY
01

FY
00

FY
99

FY
98

FY
97

0%

Avg of 10 Benchmark Counties

SOURCE: Maricopa County CAFRs

General Fund Liquidity Ratio
(excluding "Due To/From" other funds)
14.3

The liquidity ratio is a measure of the
County’s ability to pay current
obligations, and is measured by
dividing fund assets by fund liabilities.

14.0

Maricopa continues to significantly
outperform the national benchmark
average with a liquidity ratio of over
14-to-1. This means that there are
ample funds ($14.30) available in cash
or equivalents to pay every $1 in
current liabilities.

8.0

12.0
10.0

6.0
4.0

4.2
3.0

2.3
2.0

Maricopa

FY
06

FY
05

FY
04

FY
03

FY
02

FY
01

0.0

Benchmarks

SOURCE: Maricopa County CAFRs

Maricopa County Internal Audit

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FY06 Financial Condition Report—April 2008

General Fund

General Fund Key Financial Indicators ‐ cont’d

General Fund

General Fund Revenue Sources
Intergovernmental revenues accounted for 61% of General Fund revenues, while taxes
accounted for 33%. Intergovernmental revenues are funds received from federal, state
and other local government sources in the form of grants, shared revenues, and payments
in lieu of taxes. (For a breakdown of the composition of Intergovernmental and Tax
Revenue sources, please refer to the Governmental Funds section, page 8.)
In FY06, General Fund revenues
increased by $114 million, or
11%, to $1.148 billion.

General Fund Revenue Sources for FY05 & FY06
(in millions)
$695

Long‐Term Debt

This increase was attributable to
an increase in the sales tax
apportionment of $60.1 million
and the vehicle license tax
apportionment of $15.4 million. In
addition, property tax revenues
increased by $34.4 million (due to
an increase in assessed values
and new housing). These
increases can be attributed to the
County’s continued strong
economy throughout FY 2006,
increasing population, and higher
property values.

$615

$700
$600
$500

$360

$379

$400
$300
$200
$58

$74

$100
$0
Intergovernmental

FY05

Taxes

Charges for Service
and Other Misc.

FY06

SOURCE: FY05 and FY06 CAFRs

Long‐Term Debt
Maricopa County’s long-term debt per person
has decreased 59% since FY02. The County
has extremely low debt levels compared to the
national benchmark average. The County’s low
debt level has resulted from a conservative “pay
as you go” policy.

Long‐Term Debt Per Person
Comparison to National Benchmarks
(adjusted for inflation)
$800
$700

$671

$634

$609

$588

$600

$595

$500
$400

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

$300
$200 $157

$98

$100

$80

$75

$64

$0
FY02

Maricopa

FY03

FY04

FY05

FY06

Avg of 10 Benchmark Counties

SOURCE: Maricopa County CAFRs

Maricopa County Internal Audit

4

FY06 Financial Condition Report—April 2008

Governmental Funds

Governmental Funds

The focus of the preceding pages was on the County’s
primary operating fund, the General Fund. The following
pages provide a more comprehensive look at County
financial trends, by focusing on all Governmental Funds,
which include the:
General Fund
Special Revenue Funds
Debt Service Funds
Capital Projects Funds
Governmental funds are used to account for activities
that are principally supported by taxes and
intergovernmental revenues (governmental activities), as
opposed to other business‐type activities that are
supported primarily by user fees, such as fee‐based
departments like the County’s Health Plans.

Maricopa County Internal Audit

5

FY06 Financial Condition Report—April 2008

Governmental Funds

Governmental Funds ‐ Revenues & Expenditures
Revenue by Source for Governmental Funds
(in millions)

Revenues
Total Governmental Funds
revenues increased 12% in
FY06 to $1.853 billion. This
is attributed to the increases
to General Fund revenues
discussed on page 4.

$1,200

$1,026
$904

$1,000

$800

$601

Intergovernmental revenues
comprised 55% of total
revenues, taxes comprised
33%, and other revenues
comprised 12%.

$557

$600

$400

$226

$192
$200

$0
Intergovernmental

Taxes
FY05

Other

FY06

SOURCE: FY05 and FY06 CAFRs

Expenditures by Function for Governmental Funds
(in millions)
$800

Expenditures
FY06 expenditures totaled
$1.646 billion, an 8%
increase from FY05.

$733
$637

$600

A total of 71% of
expenditures were for
Public Safety (45%) and
Health, Welfare and
Sanitation (26%).

$438 $431
$400

$206

$233

$200

$130

$131

$113 $119

$0
Public Safety

Health, Welfare
and Sanitation

Capital Outlay

FY05

General
Government

Other

FY06

SOURCE: FY05 and FY06 CAFRs

Maricopa County Internal Audit

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FY06 Financial Condition Report—April 2008

Revenues Per Person

Revenues Per Person
Governmental Funds
(adjusted for inflation)
$489

$500

$460
$450

This includes all
Governmental Funds
revenues (including taxes,
intergovernmental revenues,
and other sources).

$433

$400

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

FY06

FY05

FY04

FY03

FY02

FY01

FY00

FY99

FY98

FY97

$350

SOURCE: Maricopa County CAFRs

Expenditures Per Person

Expenditures Per Person
Governmental Funds
(adjusted for inflation)

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

$500

$471

$454
$434

$450

The downward trend reversed
with a 4% increase in FY05.
$416

$400

$421

FY06

FY05

FY04

FY03

FY02

FY01

FY00

FY99

FY98

FY97

$350

SOURCE: Maricopa County CAFRs

Maricopa County Internal Audit

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FY06 Financial Condition Report—April 2008

Governmental Funds

Revenues & Expenditures Per Person

Governmental Funds

Governmental Funds ‐ Revenue by Source
FY06 Intergovernmental Revenues by Source
Governmental Funds (in millions)

FY06 Tax Revenues by Source
(excluding Intergovernmental Revenues)
Governmental Funds (in millions)

Sales Tax
$458 (46%)

General
Property
Tax
$457
(76%)

Other
$187 (18%)

Highway
User Fund
$97 (9%)

Grants
$136 (13%)

Jail Excise
Tax
$138
(23%)

Vehicle
License Tax
$147 (14%)

Other
$6
(1%)

SOURCE: Intergovernmental Revenue report, Department of Finance

SOURCE: FY06 CAFR

Intergovernmental revenues accounted for 55% of all governmental funds revenue. Stateshared sales tax is the County’s largest source of intergovernmental revenue, as shown on the
top 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 these
revenues is shown on the top right. For the first time since FY02, state-shared sales tax is the
County’s largest source of tax revenue. The composition of all taxes revenues is shown below.

FY06 Total Tax Revenues by Source
Governmental Funds
State‐Shared
(in millions)

Total Tax Revenues - Governmental Funds
State-shared sales tax and general property
tax are the two largest sources of tax
revenue, accounting for 70% of all tax
revenue.

General
Property Tax
$457
(35%)

Sales Tax
$458
(35%)

Vehicle
License Tax
$147
(11%)

Tax revenues increased by $128 million from
$1.179 billion in FY05 to $1.307 billion in
FY06. Tax revenues increased primarily due
to increases in State-shared sales tax
revenue of $60 million and property tax
revenue of $25 million between FY05 and
FY06.

Other
$10
(1%)

Highway User
Fuel Tax
$97
(7%)

Jail Excise
Tax
$138
(11%)

SOURCE: FY06 CAFR

Maricopa County Internal Audit

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FY06 Financial Condition Report—April 2008

Governmental Funds

Governmental Funds ‐ Tax Revenues

Sales Tax and Property Tax as
a Percent of Total Revenues

State‐Shared Sales Tax and Property Tax
as a % of Total Tax Revenues

In FY06, property tax revenues
accounted for 35% of all tax
revenues, or $456.9 million.

40%

Sales tax revenues of $457.8
million account for an increasing
proportion of all tax revenues, at
35%.

34%

37%

31%
28%
25%
FY97

FY98

FY99

FY00

FY01

Property Tax

FY02

FY03

FY04

FY05

FY06

Sales Tax

SOURCE: Maricopa County CAFRs

Tax Revenues Per Person
While total revenues per person
have increased 12% from FY97 to
FY06 (as discussed on page 7), tax
revenues per person increased at a
slower rate of 5% during the same
period (adjusted for inflation). The
10-year average for tax revenues
per person was $327.

Tax Revenues Per Person
Governmental Funds
(adjusted for inflation)
$345

$350

$327

$330
$310
$290
$270
$250

FY
06

FY
05

FY
04

FY
03

FY
02

FY
01

FY
00

FY
99

FY
98

FY
97

$230

SOURCE: Maricopa County CAFRs

Maricopa County Internal Audit

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FY06 Financial Condition Report—April 2008

State-Shared Sales Tax
Sales tax revenues can be
difficult to predict, as they are
subject to economic forces.
In FY06, actual sales tax
revenues exceeded the original
budget by $50.5 million, or 12%.

State‐Shared Sales Tax
Variance Between Original Budget and Actual
(in millions)
$58

$50.5

$48
$38
$28

$22.5

$22.4

$18

$22.8

$5.6

$8
‐$2
‐$12

($5.2)
FY
06

FY
05

FY
04

FY
03

FY
01

FY
00

FY
02

($15.8)

‐$22

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

Vehicle License Tax
Vehicle license tax revenues can
be difficult to predict, as citizens
can prepay for one or two years.
In FY06, actual vehicle license
tax revenues exceeded the
original budget by $12.7 million,
or 9.5%.

$20

Vehicle License Tax
Variance Between Original Budget and Actual
(in millions)
$17.4

$15

$12.7

$10

$6.0

$7.4

$6.0

$5

$4.9
$1.9

FY
06

FY
05

FY
04

FY
03

FY
02

FY
00

FY
01

$0

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

Property Tax
$10
$8
$6
$4

$2.4

$2

$3.3
$1.6

$0.1

$0

($0.3)

FY
06

FY
01

FY
05

($2.4)

‐$4

FY
04

‐$2

FY
03

In FY06, actual property tax
revenues exceeded the original
budget by $8.9 million or less than
2%.

$12

FY
02

Property tax revenues are more
predictable and are therefore
easier to budget.

Property Tax
Variance Between Original Budget and Actual
(in millions)
$8.9

FY
00

Governmental Funds

Tax Revenue Budget‐to‐Actual Variance

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

Maricopa County Internal Audit

10

FY06 Financial Condition Report—April 2008

Net Assets

Net Assets

Maricopa County Internal Audit

11

FY06 Financial Condition Report—April 2008

Net Assets

Net Assets
The County’s assets for governmental and business-type activities exceeded liabilities at
year 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 the
County is improving or deteriorating. Total net assets increased 64% from FY02 to FY06.
The total increase from FY05 to FY06 was $344.8 million.
Total Net Assets
(in millions)

$4,000

$3,347

$3,500
$3,000
$2,500

$2,042

$2,942

$3,002

FY04

FY05

$2,302

$2,000
$1,500
$1,000
$500
$0
FY02

FY03

FY06

SOURCE: Maricopa County CAFRs

Net assets are divided into three components: (1) Investments in capital assets, net of
related 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 be
used).
Just under 75% of net assets are invested in capital assets (net of related debt), 10% are
restricted (primarily for public safety and highways and streets functions), and 17% are
unrestricted (these assets can be used to meet the County’s ongoing obligations).
FY06 Compositio n of Net Assets
(in millions)
Restricted
$345.2 (10%)

Invested In
Capital Assets
$2,445.2 (7 3%)

Unrestricted
$556.8 (17%)

SOURCE: FY06 CAFR

Maricopa County Internal Audit

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FY06 Financial Condition Report—April 2008

Treasurer

County Treasurer

The County Treasurer pools deposits of the County,
school districts, and special districts. Cash not required
for liquidity is invested in accordance with State law and
under a strategy that gives highest priority to:
Safety of principal
Sufficient liquidity to meet the needs of the County
and its subdivisions
Return on investment
For the first time, this year we have included a benchmark
comparison of investment portfolios between the County
Treasurer and the Arizona State Treasurer, including a
comparative analysis of investment yields and the
composition of the investment pools by asset type.

Maricopa County Internal Audit

13

FY06 Financial Condition Report—April 2008

Treasurer

$3.1 Billion Managed by County Treasurer
Arizona Revised Statutes require
community colleges, school
districts, and other local
governments to deposit certain
public monies with the County
Treasurer.

$3.5

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

$1.0

Cash and Investments Held by the County Treasurer
(in billions)
$3.1

$3.0

$2.7

$2.5
$2.0

$1.9

$2.0

FY02

FY03

$2.2

$1.5

$0.5
$‐
FY04

FY05

FY06

SOURCE: Maricopa County CAFRs

Who The Money Belongs To
(in millions)
County
General Fund
$457 (15%)

Non‐County
Funds
$2,158 (70%)

Other County
Funds
$464 (15%)

SOURCE: FY06 CAFR

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

Average Weighted Yield to Maturity (YTM) for the Treasurer's Investments
by investment type (as of 9/30/06)
6.00%

The yield to maturity for
each of the Treasurer’s
investments as of 9/30/06 is
shown to the right.

5.20%

5.20%

5.18%

5.12%

5.07%

5.00%
4.34%
4.14%
3.84%

4.00%

The average weighted yield
to maturity across all
investments is 4.6%.
SOURCE: Maricopa County
Internal Audit of County Treasurer ( FY07)
Maricopa County Internal Audit

3.76%

3.00%
Federal
National
Discount
Note

Federal
Home
Discount
Note

14

Federal Farm Credit
Discount
Mortgage
Note
Center
Discount
Note

Warrants

Federal
Federal
Federal
Federal
Home Loan National Home Loan Farm Credit
Banks
Banks
Mortgage Mortgage
Center Corporation

FY06 Financial Condition Report—April 2008

The Arizona State
Treasurer’s Office
manages $12 billion
total, $3.1 billion of
which is invested in a
Local Government
Investment Pool
(LGIP). The LGIP
provides professional
short-term investment
services for a wide
array of public entities.

8%

Treasurer

Treasurer’s Investment Pool
Comparative Investment Yields
State Treasurer Local Government Investment Pool vs.
Maricopa County

7%
6%
5%
4%
3%
2%
1%
0%
FY99

FY00

FY01

FY02

FY03

FY04

FY05

The County Treasurer
State Treasurer Local Government Investment Pool
operates an investment
Maricopa County Treasurer
pool of $3.1 billion,
comparable in function SOURCES: State Treasurer historical yield reports; County Treasurer Investment Officer
to the LGIP fund. Annual
yields for both funds have improved over the last three years, as shown above.

FY06

FY07

As of 12/31/07, State LGIP funds were held primarily in money market investments issued by
government 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-owned
corporations authorized to make loans and loan guarantees, but are not backed or funded by
U.S. government, nor do the securities they issue benefit from any explicit government
guarantee or protection. As of 12/31/07, County Treasurer’s funds were invested in GSEs, with
97% held in Federal Mortgage investments, as shown on the right below.
Arizona State Treasurer
LGIP Pool Composition (in millions)

Cash Deposits
$45.0 (1%)

Federal
Agricultural
Mortgage
Corporation
$20.6 (1%)

Federal Home
Loan Banks
$993.9 (30%)

Federal Farm
Credit Banks
$177.8 (5%)
Commercial
Paper
$195.1 (6%)
Federal Home
Loan Mortgage
Center
$435.8 (13%)

SOURCE: State Treasurer Market Report, 12/31/2007

Maricopa County Internal Audit

Maricopa County Treasurer
Investment Pool Composition (in millions)

Corporate
Notes
$942.0 (28%)

Federal Home
Loan Banks
$1,101.0 (33%)

Farm Credit
Discount Note
$30.0 (1%)
Federal Farm
Credit Banks
$70.0 (2%)

Federal
National
Mortgage
Corporation
$554.4 (17%)

Federal Home
Discount Note
$212.2 (6%)

Federal
Mortgage
Center
Discount Note
$270.4 (8%)

Federal
National
Mortgage
Corporation
$648.1 (19%)

Federal
National
Discount Note
$638.4 (19%)
Federal Home
Loan Mortgage
Center
$369.5 (11%)

SOURCE: County Treasurer Summary Report, 12/31/07

15

FY06 Financial Condition Report—April 2008

Maricopa County Internal Audit

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FY06 Financial Condition Report—April 2008

Arizona Benchmarks

Arizona County
Benchmarks

To provide local context for Maricopa County’s
performance, the Financial Condition Report includes
comparisons to six Arizona County benchmarks. This
information is presented on the following three pages.
(National benchmark comparisons were presented
earlier in this report.)

Maricopa County Internal Audit

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FY06 Financial Condition Report—April 2008

This year, Maricopa County was again benchmarked against the following six Arizona
counties:
Arizona Benchmarks - Population (in thousands)
Cochise

135

Mohave

198

Pima

981

Pinal

300

Yavapai

213

Yuma

196

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

Unreserved Fund Balance
Unreserved fund balances represent the monies available to meet the County’s current and
future needs. Maricopa County continued to significantly outperform the Arizona benchmark average for this financial measure from FY03 - FY06 (bottom left), as well as each of
the benchmark counties individually in FY06 (bottom right).

Unreserved General Fund Balance
as a % of Revenues
Four‐Year Comparison to Arizona Benchmark
Average
36.7%

41.4%

40%

36.8%

34.1%

35%

35%

29.7%

30%

30%

26.9%

25%
20%
15%

15%

10%

10%

0%

Maricopa

FY06

Benchmark Avgs

SOURCE: Maricopa and benchmark county CAFRs

Maricopa County Internal Audit

Yavapai

0%
FY05

5%

FY04

5%

14.7%
10.2% 10.8%

Maricopa

17.1%

Pinal

16.8%

Cochise

16.9%

18.7%

Yuma

25%
20%

47.0%

45%

Mohave

40%

50%

Pima

45%

Unreserved General Fund Balance
as a % of Revenues
FY06 Comparison to Arizona Benchmarks

47.0%

50%

FY03

Arizona Benchmarks

Comparison to Arizona County Benchmarks

SOURCE: FY06 Maricopa and benchmark county CAFRs

18

FY06 Financial Condition Report—April 2008

In FY06, Maricopa County’s liquidity
ratio was very strong at 14.3-to-1,
meaning that there were ample funds
($14.30) in cash and equivalents for
every $1.00 in current liabilities.
Maricopa’s liquidity ratio continues to
surpass the benchmark average.

General Fund Liquidity Ratio
(excluding "Due To/From" other funds)
Four Year Comparison to Arizona Benchmark
Averages

16

13.4

14
12
10
8

Individual liquidity ratios for Maricopa
County and the Arizona benchmark
counties are reflected below for FY06.

14.3

6.6

6.6

2.8

3.0

6
4

3.1

3.0

FY05

FY06

2
0
FY03

FY04

Maricopa

AZ County Benchmark Average

SOURCE: Maricopa and benchmark county CAFRs

General Fund Liquidity Ratio
(excluding "Due To/From" other funds)
FY06 Comparison to Arizona Benchmark Counties
16.0

14.3

14.0
12.0
10.0

7.6

8.0

5.4

6.0
4.0

4.0
2.4

2.9

Ya va pa i

Pi ma

4.7

2.0
0.0
Moha ve

Yuma

Cochi s e

Pi na l

Ma ri copa

SOURCE: FY06 Maricopa and benchmark county CAFRs

Maricopa County Internal Audit

19

FY06 Financial Condition Report—April 2008

Arizona Benchmarks

Comparison to Arizona Benchmarks ‐ cont’d

Arizona Benchmarks

Comparison to Arizona Benchmarks ‐ cont’d
Long‐Term Debt Per Person
Maricopa County vs. Arizona Benchmarks
(adjusted for inflation)

Maricopa County has a very low level
of debt per person.
Maricopa County’s long-term debt per
person has decreased 35% during
the four years shown, while the
benchmark average increased 12%.

$285

$300
$249

$278

$246

$250
$200
$150
$98

$100

$80

$75

$64

$50
$0
FY03
FY04
AZ County Benchmark Average

FY05
FY06
Maricopa County

SOURCE: Maricopa and benchmark county CAFRs

FY06 Long‐Term Debt Per Person
Comparison to Arizona Benchmarks
$700

$618
$600
$500

$455

$400
$300

$244

$200
$100

Maricopa County has
the lowest level of
long-term debt per
person when
compared to the
Arizona benchmark
counties.

$168
$64

$93

$94

Cochi s e

Ya va pa i

$0
Ma ri copa

Moha ve

Yuma

Pi ma

Pi na l

SOURCE: FY06 Maricopa and benchmark county CAFRs

Maricopa County Internal Audit

20

FY06 Financial Condition Report—April 2008

Retirement Plans

Maricopa County
Retirement Plans

County pension plan information was first included in the
Financial Condition report last year due to deteriorating
financial trends experienced locally and nationally.
Updated information is provided in the following section,
based on the FY06 Maricopa County CAFR, and the FY07
CAFRs issued by the Arizona State Retirement System
(ASRS) and the Public Safety Personnel Retirement System
(PSPRS). Information for FY08 was obtained from other
sources and is also included herein.

Maricopa County Internal Audit

21

FY06 Financial Condition Report—April 2008

Funded Status Defined
Perhaps the most recognized measure of a public retirement plan’s health is its funding ratio,
derived by dividing the actuarial value of plan net assets by the present value of accrued
liabilities (projected future retirement payments). A pension plan whose assets equal its
liabilities is 100% funded, or fully funded. A plan with assets that are less than its liabilities is
considered to be underfunded.
The dollar difference between plan assets and accrued liabilities is the unfunded actuarial
accrued liability (UAAL), which is a common measure of a pension plan’s 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 the
funding 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 in
nature and are outside the scope of this report. It is noted, however, that ASRS discounts
future benefits at 8.0% per year, while PSPRS discounts future benefits at 8.5%, which
precludes 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 on
page 26, and was named a top performer in a nationwide pension plan study performed by
an 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 the
delayed recognition of losses that have occurred in earlier years (see lower right
graph). Investment losses are recognized in actuarial assets over a 10-year period. The
funded status of the total plan decreased from 83.7% for FY06 to 82.8% for FY07.
ASRS Unfunded Liabilities
(in millions)

ASRS Funding Ratio
130%
$6,000

120%
120%

SURPLUS

FULLY FUNDED

$4,000

SURPLUS

110%
$2,000

($6,000)

SOURCE: ASRS CAFRs and annual actuarial reports

Maricopa County Internal Audit

FY07

FY06

FY05

FY04

FY03

($4,000)

FY02

70%

FY01

($2,000)

FY00

80%

FY99

$0

82.8%

FY98

90%

UNDERFUNDED
(below the line)

FY97

100%

FY
97
FY
98
FY
99
FY
00
FY
01
FY
02
FY
03
FY
04
FY
05
FY
06
FY
07

Retirement Plans

ASRS Funding Status

DEFICIT
DEFICIT

SOURCE: ASRS CAFRs and annual actuarial reports

22

FY06 Financial Condition Report—April 2008

Retirement Plans

PSPRS Funding Status
Public Safety Personnel Retirement System
(includes PSPRS, CORP, and EORP)
PSPRS ‐ Historical Funding Ratios
150%

PSPRS Funding Status
The funding ratios of the three
PSPRS plans have declined
significantly since FY01.
Funding ratios as of 6/30/07
were:
66.4% - Public Safety
84.6% - Corrections Officers
74.6% - Elected Officials

FULLY FUNDED
(above the line)

140%
130%
120%

UNDERFUNDED
(below the line)

110%
100%
90%
80%
70%
60%
FY98

FY99

FY00

Public Safety

FY01

FY02

FY03

Corrections Officers

FY04

FY05

FY06

FY07

Elected Officials

SOURCE: FY07 PSPRS CAFR

PSPRS Actuarial Assets vs. Liabilities
(in millions)
$1,400

SURPLUS

$1,000
$600
$200

$600
$1,000
$1,400

DEFICIT

$1,800
$2,200

Public Safety

Corrections Officers

07
FY

06
FY

04
FY

03
FY

02
FY

01
FY

00
FY

99
FY

98
FY

97

$2,600

FY

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

05

(in millions)

$200

FY

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

Elected Officials

SOURCE: PSPRS CAFRs

Maricopa County Internal Audit

23

FY06 Financial Condition Report—April 2008

Retirement Plans

Plan Participation and Contribution Rates
Plan Participation
Maricopa County employees and elected
officials participate in two State retirement
plans:

FY07 County Retirement Plan
Participation
PSPRS
Membership
2,997 (24%)

About 9,500 County employees participate
in the Arizona State Retirement System
(ASRS)
About 3,000 County employees participate
in the Public Safety Personnel Retirement
System (PSPRS), which includes:
•
•
•

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

SOURCE: Maricopa County Human Resources

About 76% of County retirement plan
participants are ASRS members.

PSPRS Contribution Rates
Employee contribution rates are
fixed by State statute based upon
a set percentage of employee
compensation. Any changes
require legislation. Thus,
employee contribution rates for the
three plans remain relatively
stable. Employer contribution
rates, however, have increased
significantly since 2003. The
combined contribution rates
(employee + employer) are shown
in the graph on the right.
FY07 contribution rates for the
PSPRS plans are shown below:
Plan
Public Safety Personnel
Elected Officials
Corrections Officers

ASRS
Membership
9,499 (76%)

PSPRS Combined Contribution Rates
for Maricopa County Members
30%
25%
20%
15%
10%
5%
FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

Public Safety (Weighted Avg)
Elected Officials
Corrections Officers
SOURCE: Maricopa County Human Resources; PSPRS staff

Employee %
7.65%
7.00%
7.96%

Employer %
26.06%*
11.00%
5.00%

*Weighted average
Maricopa County Internal Audit

24

FY06 Financial Condition Report—April 2008

Since FY00, total County
pension plan contributions to
ASRS and PSPRS have
increased 289%, from $15.7
million in FY00 to $61.1
million in FY07, as shown on
the graph to the right.

Retirement Plans

County Pension Contributions
Maricopa County Total Pension Plan Contributions (FY00 ‐ FY07)
$70,000,000

$61,115,738

$60,000,000
$50,000,000

$36,791,353
$40,000,000
$30,000,000

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

$20,000,000
$10,000,000

$16,767,539
$15,713,277

$‐
FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

SOURCE: Maricopa County CAFRs and unaudited FY07 CAFR Notes

Maricopa County ASRS Plan Contributions (FY00‐FY07)
$50,000,000

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

$45,806,290

$40,000,000

$29,855,413
$30,000,000

$20,000,000

From FY06 to FY07, County
contributions to ASRS increased
43% overall, or about $13.7 million.

$12,352,160

$10,000,000

$9,916,689
$‐
FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

SOURCE: Maricopa County CAFRs and unaudited FY07 CAFR Notes

Maricopa County PSPRS Plan Contributions (FY00 ‐ FY07)

Since FY00, County contributions
into PSPRS have increased 164%,
from $5.8 million in FY00 to $15.3
million in FY07. Total County
contributions for the three PSPRS
plans are shown on the graph to the
left.

$7,500,000
$6,000,000
$4,500,000
$3,000,000
$1,500,000
$‐
FY00

FY01

FY02

Elected Officials

FY03

FY04

FY05

Corrections Officers

FY06

FY07

Public Safety

From FY06 to FY07, County
contributions to PSPRS increased
13% overall, or about $1.7 million.

SOURCE: Maricopa County CAFRs and unaudited FY07 CAFR Notes

Maricopa County Internal Audit

25

FY06 Financial Condition Report—April 2008

Retirement Plans

Investment Returns
ASRS Investment Returns
For FY07, ASRS reported a strong
17.8% rate of return on the total ASRS
fund in FY07; however, overall fund
performance declined. This is
because the recognized rate of return
is based on the smoothed market
value of assets, as discussed below,
which was less than the assumed rate
of 8%.

ASRS Investment Return
Actual vs. Assumed
30%

20%

10%

0%

The smoothed market value spreads
the difference between the actual and
assumed return over 10 years.
Although the actual return exceeded
the assumed rate during FY07, this is
offset by negative experience carried
forward from prior years.

FY99

FY00

The smoothed market value spreads
the difference between the actual and
assumed return over seven years.
Like ASRS, although the actual return
exceeded the assumed rate during
FY07, this is offset by negative
experience carried forward from prior
years.
Maricopa County Internal Audit

FY02

FY03

FY04

FY05

FY06

FY07

‐10%

‐20%

Actual Rate of Return

Assumed Rate of Return

SOURCE: ASRS historical yields report

PSPRS Investment Returns
For FY07, the three PSPRS funds
experienced rates of return between
16% - 17%, which exceeded the
assumed rate of 8.5%. However,
overall fund performance declined
because the recognized rate of return
(based on the smoothed market value
of assets discussed below) was less
than the assumed rate.

FY01

PSPRS Investment Return
Actual vs. Assumed

30%

20%

10%

0%

‐10%

‐20%
FY99

FY00

FY01

FY02

FY03

Public Safety
Elected Officials

FY04

FY05

FY06

FY07

Corrections Officers
Assumed Rate

SOURCE: FY07 PSPRS CAFRs and PSPRS staff

26

FY06 Financial Condition Report—April 2008

Maricopa County Internal Audit

27

FY06 Financial Condition Report—April 2008

Population and Employment

Population Growth
and
Employment Rates

Population and Employment

Population Growth and Employment
Top Five U.S. Counties by Total Population
July 2006

In 2006, Maricopa
County was ranked the
fourth most populous of
all 3,141 counties in the
nation.

12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0

9,948,081
5,288,655

Los Angeles
County, CA

3,886,207

Cook County, IL Harris County,
TX

3,768,123

3,002,048

Maricopa
County

Orange
County, CA

SOURCE: 2006 U.S. Census Bureau reports

140,000

Maricopa County’s
population increased in
number more than any
other county in the
nation from July 2005 to
July 2006.

Top Five Counties with Largest Numerical Increase in Population
July 2005 to July 2006
129,642
123,363

120,000
100,000

81,411

80,000

68,175
51,629

60,000
40,000
20,000
0
Maricopa
County

Harris County,
TX

Riverside
County, CA

Clark County,
NV

Tarrant
County, TX

SOURCE: 2006 U.S. Census Bureau reports

Unemployment Rate History

7.0%

Maricopa County
continues to enjoy
unemployment rates
below national and
State averages.

6.0%
4.6%

5.0%

4.2%

4.0%

3.6%

3.0%
2.0%
1.0%
0.0%
1997

1998

1999

County

2000

2001

2002

State

2003

2004

2005

2006

United States

SOURCE: Maricopa County CAFRs

Maricopa County Internal Audit

28

FY06 Financial Condition Report—April 2008

Methodology

Report Methodology

Maricopa County Internal Audit

29

FY06 Financial Condition Report—April 2008

Methodology

Report Methodology
Definition
Financial Condition is defined as a local government’s ability to finance services on a
continuing basis. A county in good financial condition can sustain existing services to the
public, withstand economic slumps, and meet the demands of changing service needs.
Objectives, Scope, and Methodology
The objective of this report is to evaluate Maricopa County’s financial condition using key
financial indicators. Indicators were selected from authoritative sources on evaluating
governmental entity financial condition, and were judged to be the most indicative of a
county’s overall financial health.
Our primary information sources were the audited Comprehensive Annual Financial
Reports (CAFR) issued by the Arizona State Retirement System, Public Safety Personnel
Retirement System, ten national benchmark counties, six Arizona counties, and Maricopa
County. The benchmark counties are:

County
Clark
Harris
King
Los Angeles
Multnomah
Orange
Pima
Salt Lake
San Diego
Santa Clara

National Benchmarks
Population Major Metro Area
1.9 million Las Vegas, NV
3.7
Houston, TX
1.8
Seattle, WA
10.2
Los Angeles, CA
0.7
Portland, OR
3.1
Santa Ana/Anaheim, CA
0.9
Tucson, AZ
1.0
Salt Lake City, UT
3.1
San Diego, CA
1.8
San Jose, CA

Arizona Benchmarks
County Population
Cochise
Mohave
Pima
Pinal
Yavapai
Yuma

135 thousand
198
981
300
213
196

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

SOURCE: Respective Counties’ FY06 CAFRs

Other sources include actuarial reports, the U.S. Census Bureau, Governmental
Accounting Standards Board, the International City/County Managers Association,
Arizona Department of Economic Security Research Administration, Maricopa County’s
Strategic Plans (budgetary documents), Auditor General Reports, and correspondence
with 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 Index—All
Items.”
Maricopa County Internal Audit

30

FY06 Financial Condition Report—April 2008

A picture of the Security building in the 1940s, taken from the corner of Van Buren and
Central Ave. Built in 1928, the building was purchased by the County in 2001 and is
currently undergoing historical renovations.

Maricopa County Internal Audit
301 W. Jefferson, Suite 660
Phoenix, AZ 85003
Telephone: (602) 506-1585
Facsimile: (602) 506-8957
E-Mail: Thielew@mail.maricopa.gov
Maricopa County Internal Audit

FY06 Financial Condition Report—April 2008