Apache County, Arizona

78 Pages·2014·0.84 MB·English

Apache County, Arizona

Annual Financial Report

Basic Financial Statements,
Independent Auditors’ Report, and
Single Audit Reporting Package
June 30, 2012
Apache County, Arizona
Table of Contents
Page
Independent Auditors’ Report 1-2
Management’s Discussion and Analysis 3-9
Basic Financial Statements
Government-Wide Financial Statements
Statement of Net Assets 10
Statement of Activities 11
Fund Financial Statements
Governmental Funds
Balance Sheet – Governmental Funds 12
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets 13
Statement of Revenues, Expenditures and Changes in
Fund Balances – Governmental Funds 14
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities 15
Fiduciary Funds
Statement of Net Assets – Fiduciary Funds 16
Statement of Changes in Fiduciary Net Assets – Fiduciary Funds 17
Notes to the Financial Statements 18-40
Apache County, Arizona
Table of Contents — continued
Page
Required Supplementary Information
Schedule of Revenues, Expenditures, and Changes in Fund
Balance – Budget to Actual – General Fund 41-42
Schedule of Revenues, Expenditures, and Changes in Fund
Balance – Budget to Actual – Road Fund 43
Notes to Required Supplementary Information 44
Schedule of Agent Retirement Plans’ Funding Progress 45
Supplementary Information
Schedule of Expenditures of Federal Awards 46-47
Notes to Schedule of Expenditures of Federal Awards 48
Single Audit Section
Independent Auditors’ Reports on
Internal Control Over Financial Reporting and on Compliance
and Other Matters Based on an Audit of Financial Statements
Performed in Accordance With Government Auditing Standards 49-50
Compliance With Requirements That Could Have A Direct and
Material Effect on Each Major Program and on Internal Control
Over Compliance in Accordance With OMB Circular A-133 51-53
Schedule of Findings and Questioned Costs 54-65
Corrective Action Plan 66
Summary Schedule of Prior Audit Findings 67
Independent Auditors’ Report
The Auditor General of the State of Arizona and
The Board of Supervisors of
Apache County, Arizona

We have audited the accompanying financial statements of the governmental activities, each
major fund, and aggregate remaining fund information of Apache County, Arizona (the
“County”) as of and for the year ended June 30, 2012, which collectively comprise the County’s
basic financial statements as listed in the table of contents. These financial statements are the
responsibility of the County’s management. Our responsibility is to express opinions on these
financial statements based on our audit.
We conducted our audit in accordance with U.S. generally accepted auditing standards and the
standards applicable to financial audits contained in Government Auditing Standards, issued by
the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides a reasonable basis
for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, each major fund, and aggregate
remaining fund information of Apache County, Arizona as of June 30, 2012, and the respective
changes in financial position thereof for the year then ended in conformity with U.S. generally
accepted accounting principles.
U.S. generally accepted accounting principles require that the Management’s Discussion and
Analysis on pages 3 through 9, the Budgetary Comparison Schedules on pages 41 through 44,
and the Schedule of Agent Retirement Plans’ Funding Progress on page 45 be presented to
supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board who
considers it to be an essential part of financial reporting for placing the basic financial statements
in an appropriate operational, economic, or historical context. We have applied certain limited
procedures to the required supplementary information in accordance with U.S. generally
accepted auditing standards, which consisted of inquiries of management about the methods of
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preparing the information and comparing the information for consistency with management’s
responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audit of the basic financial statements. We do not express an opinion or provide any
assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the County’s basic financial statements. The accompanying Schedule of
Expenditures of Federal Awards listed in the table of contents is presented for purposes of
additional analysis as required by the U.S. Office of Management and Budget Circular A-133,
Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of
the basic financial statements. Such information is the responsibility of the County’s
management and was derived from and relates directly to the underlying accounting and other
records used to prepare the basic financial statements. The information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and certain additional
procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with U.S.
generally accepted auditing standards. In our opinion, the Schedule of Expenditures of Federal
Awards is fairly stated in all material respects in relation to the basic financial statements as a
whole.
In connection with our audit, nothing came to our attention that caused us to believe that the
County failed to use highway user revenue fund monies received by the County pursuant to
Arizona Revised Statutes Title 28, Chapter 18, Article 2, and any other dedicated state
transportation revenues received by the County solely for the authorized transportation purposes.
However, our audit was not directed primarily toward obtaining knowledge of such
noncompliance.
In accordance with Government Auditing Standards, we have also issued our report dated
March 17, 2014, on our consideration of the County’s internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts and
grant agreements, and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing,
and not to provide an opinion on internal control over financial reporting or on compliance. That
report is an integral part of an audit performed in accordance with Government Auditing
Standards and should be considered in assessing the results of our audit.
This report is intended solely for the information and use of the members of the Arizona State
Legislature, the Auditor General of the State of Arizona, the Board of Supervisors, management,
and others within the County, and is not intended to be and should not be used by anyone other
than these specified parties. However, this report is a matter of public record, and its distribution
is not limited.

Phoenix, Arizona
March 17, 2014
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Apache County, Arizona
Management’s Discussion and Analysis
For the Year Ended June 30, 2012

As management of the County of Apache (the “County”), we offer readers of the County’s
financial statements this narrative overview and analysis of the financial activities of the County
for fiscal year ended June 30, 2012. We encourage readers to consider the information presented
here in conjunction with additional information that we have furnished herein.
Financial Highlights
 The assets of Apache County exceeded its liabilities at the close of the fiscal year by
$38,402,718 (net assets). Of this amount, $7,862,792 (unrestricted net assets) may be
used to meet the government’s ongoing obligations to citizens and creditors.
 The County’s total net assets as reported in the statement of activities increased by
$1,265,857. This is a change from the prior year when net assets had increased by
$768,192.
 At the end of the fiscal year, unassigned fund balance for the general fund was
$8,663,279 or 44% of the total governmental funds’ fund balances.
 Apache County’s total long-term liabilities, excluding compensated absences payable,
decreased by $468,028 during the fiscal year.
Overview of 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 comprise three components:
1) government-wide financial statements, 2) fund financial statements, and notes to the financial
statements. Required supplementary information is included in addition to the basic financial
statements.
Government -Wide Statements
The government-wide financial statements are designed to provide readers with a broad
overview of the County finances in a manner similar to private-sector businesses.
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
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
expenditures 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 leave).
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Apache County, Arizona
Management’s Discussion and Analysis
For the Year Ended June 30, 2012

Component units are included in the County’s basic financial statements and consist of legally
separate entities for which the County is financially accountable and that have substantially the
same board as the County or provide services entirely to the County. The blended component
units included in the County’s basic financial statements are the Apache County Library District,
Apache County Flood Control District, Apache County Jail District, Apache County Juvenile Jail
District, Apache County Health Services District, and Greer Acres – Little Colorado Special
Improvement District.
The government-wide financial statements can be found on pages 10 and 11 of this report.
Fund Financial Statements
A fund is a grouping of related accounts that is 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.
All of the funds of the County can be divided into two categories: governmental funds and
fiduciary funds.
Governmental 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 fund financial statements focus
on near-term inflows and outflows of spendable resources, as well as on balances of spendable
resources available at the end of the fiscal year. Such information may be useful in evaluating a
County’s near-term financing requirements. Governmental funds include the general, special
revenue, debt service and capital projects funds.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements.
By doing so, readers may better understand the long-term impact of the government’s near-term
financing decisions. Both the governmental funds balance sheet and the governmental funds
statement of revenues, expenditures, and changes in fund balances provide a reconciliation to
facilitate this comparison between governmental funds and governmental activities.
The County reports two major governmental funds. Information is presented separately in the
governmental funds balance sheet and in the governmental funds statement of revenues,
expenditures, and changes in fund balances for the general and road funds. Data from the other
governmental funds are combined into a single, aggregated presentation.
The governmental fund financial statements can be found on pages 12–15 of this report.
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Apache County, Arizona
Management’s Discussion and Analysis
For the Year Ended June 30, 2012

Fiduciary funds—The fiduciary funds are used account for resources held for the benefit of
parties outside the government. Fiduciary funds are not reflected in the government-wide
financial statements because the resources of those funds are not available to support the
County’s own programs.
The fiduciary funds financial statements can be found on pages 16–17 of this report.
Notes to the Financial Statements
The notes provide additional information that is essential to a full understanding of the data
provided in the government-wide and fund financial statements. The notes to the financial
statements can be found on pages 18–40 of this report.
Other Required Supplementary Information
In addition to the basic financial statements and accompanying notes, the report presents certain
required supplementary information concerning the County’s progress in funding its obligations
to provide pension benefits for employees. Also presented are budgetary comparison schedules
for the County’s general and road funds. Required supplementary information can be found on
pages 41–45 of this report.
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Apache County, Arizona
Management’s Discussion and Analysis
For the Year Ended June 30, 2012

Government-Wide Financial Analysis
Net Assets
As noted earlier, net assets may serve over time as a useful indicator of a government’s financial
position. In the case of the County, at June 30, 2012, assets exceeded liabilities by $38,402,718.
Condensed Statement of Net Assets
As of June 30,
Governmental Activities

2012 2011
The largest portion ($19,909,606, or 52%) of the County’s net assets reflects the investment in
Assets
capital assets (e.g., land, improvements other than buildings, buildings, machinery and
Current and other assets $ 22,687,330 $ 20,805,444
equipment, infrastructure, and construction in progress) less accumulated depreciation and
Capital assets 29,750,239 30,089,056
related debt outstanding used to acquire those assets. The County uses these assets to provide
Total assetsservices to its citizens; consequently, these a s s e t s5 2a,r4e3 n7o,5t 6a9vail a b l e 5fo0r,8 f9u4tu,5re0 0spending. Although
the County’s investment in its capital assets is reported net of related debt, it should be noted that
Liabilities
the resources needed to repay this debt must be provided from other sources, since the capital
Current and other liabilities 2,465,702 2,112,207
assets themselves cannot be used to liquidate these liabilities.
Long-term liabilities outstanding 11,569,149 11,645,432
Restricted net assets ($10,630,320, or 28%) represents resources that are subject to external
Total liabilitrieesstrictions on how they may be used. The r e m a i1n4in,0g3 b4a,8la5n1ce o f n e 1t 3a,s7s5e7ts,6 (3$97,862,792 or 20%)
is unrestricted and may be used to meet the government’s ongoing obligations to citizens and
Net Assets
creditors. Total net assets increased in the current year due to conservative budgeting. Restricted
Invested in capital assets, net of related debt 19,909,606 19,780,395
net assets increased due to additional reserves for debt service.
Restricted 10,630,320 7,668,146
Unrestricted 6 7,862,792 9,688,320
Total net assets $ 38,402,718 $ 37,136,861
Apache County, Arizona
Management’s Discussion and Analysis
For the Year Ended June 30, 2012

Statement of Activities
The following table illustrates the changes in net assets resulting from governmental activities
compared to the prior year.
Condensed Statement of Activities
For the Years Ended June 30,
Governmental Activities
2012 2011
Revenues
Program revenues
Charges for services $ 2,954,902 $ 2,978,150
Operating grants and contributions 13,694,638 14,899,335
Capital grants 13,879 14,201
General revenues
Property taxes 12,251,763 12,220,741
Share of state sales taxes 5,338,625 5,187,861
Payments in lieu of taxes 5,952,070 4,250,525
Grants and contributions not restricted to specific programs 4,700 5,994
Investment income (207,133) (571,295)
Miscellaneous 316,553 361,391
Total revenues 40,319,997 39,346,903
Expenses
General government 10,708,146 10,334,854
Public safety 9,777,869 9,856,346
Highways and streets 9,142,099 9,218,358
Sanitation 80,331 101,697
Health 3,015,549 2,806,569
Culture and recreation 1,675,381 1,526,054
Education 4,091,107 4,227,423
Welfare 4,158 231,308
Interest on long-term debt 559,500 276,250
Total expenses 39,054,140 38,578,859

Change in net assets 1,265,857 768,044
Net assets, beginning 37,136,861 36,368,817
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Net assets, end of year $ 38,402,718 $ 37,136,861