Comprehensive annual financial report for the fiscal year ended ...

186 Pages·1999·5.6 MB·English

by  Montana. Dept. of Administration. Accounting Division

353.0072
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1999
STATE DOCUMENTS COLLECTION
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FEB 2 2000
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HELENA, MMOONNTTAANNAA 559620
ontana
Comprehensive Annual
Financial Report
June 30, 1999
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MONTANASTATELIBRARY
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Montana
By
Katie Cordingley
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MONTANA
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
for tke fiscal year ended June 30, 1999
Prepared. By:
Department of Administration
Lois Menzies, Director
Accounting and Management Support Division
Catny Muri, CPA, Administrator
Accounting Principles/Financial Reporting Section
CGFM
Staci Litscnauer, CPA,
CGFM
D. Wkitaker, CPA,
J.
CPA
Carol Swick,
Pat McNamee, CPA
CPA
Joanne Fisher,
Operations Section
Linda Gaugnan
Mark Curtis
Penny C. Killnam
STATE OF MONTANA
SELECTED STATE OFFICIALS
EXECUTIVE
Marc Racicot
Governor
Judy Martz
Lieutenant Governor
JUDICIAL
A. Turnag'e
J.
Chief Justice
LEGISLATIVE
Bruce Crippen
President of the Senate
John Mercer
Speaker of tne House
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STATE OF MONTANA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 1999
TABLE OF CONTENTS
3m
INTRODUCTORY SECTION ^ -
Title Page
Selected State Officials
Organization Chart \\
Table ofContents
v
LetterofTransmittal i
Graphic Presentations:
Revenues By Source -All Governmental Fund Types 8
GFEOxpAenCdeirttiufriecsatBeyofFAuncchtiieovne-meAlnltGovernmental Fund Types ' '-\9q
FINANCIAL SECTION
IndependentAuditor's Report 14
General Purpose Financial Statements (Combined Statements - Primary Government
and Combining Statements -Component Units):
Combined Balance Sheet - All Fund Types, Account Groups and
Discretely Presented Component Units 16
Combined Statement ofRevenues, Expenditures and Changes in Fund Balances -
All Governmental Fund Types and ExpendableTrust Funds 20
Combined Statement ofRevenues, Expenditures, Other Financing Sources (Uses) and Reconciliation
ofBudget and Actual (Budgetary Basis) to GAAP Basis - Unreserved Fund Balance
General and Special Revenue Fund Types 21
Statement ofChanges in Plan NetAssets - InvestmentTrust Fund 22
Combined Statement ofRevenues, Expenses and Changes in Retained Earnings/
Fund Balances- All Proprietary Fund Types, SimilarTrust Funds and
Discretely Presented Component Units 23
Combined Statement ofCash Flows -All Proprietary Fund Types, Nonexpendable
Trust Funds and Discretely Presented Component Units 24
Combining Balance Sheet- Component Units - Proprietary Fund Types 26
Combining Statement ofRevenues, Expenses and Changes in Retained Earnings -
Component Units - Proprietary Fund Types .27
Combining Statement ofCash Flows - Component Units - Proprietary Fund Types 28
Combining Statement ofPlan NetAssets- Component Units - Pension Trust Funds 30
Combining Statement ofChanges in Plan NetAssets - Component Units -
Pension Trust Funds 32
Combining Balance Sheet - Component Units -All Higher Education Funds 34
Statement ofChanges in Fund Balance - Component Units -All Higher Education Funds 36
Statement ofCurrent Funds Revenues, Expenditures, Transfers and Other Changes -
Component Units - Higher Education Fund Type 38
Notesto the Financial Statements
1 Summary ofSignificantAccounting Policies 39
2. Budgetary Reporting ' 44
3. OtherAccounting Issues 45
4. Cash/Cash Equivalents and Investments 45
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5. Fixed Assets £9
6. Retirement Systems 50
7. Other Postemployment Benefits 57
8. Deferred Compensation Plan 57
9. Risk Management 58
10. Commitments °3
11 Leases/Installment Purchases Payable 63
12. State Debt °4
13. Interfund Transactions ' '
14. Fund Deficits 7,4
15. Reserved Fund Balances forTrusts '5
16. Segment Information 75
76
17. Contributed Capital
18. Related PartyTransactions 7,~
19. Contingencies 77
20. Subsequent Events 7°
Required Supplementary Information 79
Combining, Individual Fund and Account Group Statements/Schedules - Primary Government:
Governmental Funds
Special Revenue Funds
Combining Balance Sheet 84
Combining StatementofRevenues, Expenditures and Changes in Fund Balances 85
Schedule ofRevenues, Expenditures and Other Financing Sources (Uses)
Budget and Actual with Reconciliation ofUnreserved Fund Balance
perthe Statewide Budgeting and Accounting System (SBAS) to Budget
Basis Statement in the GPFS - Special Revenue Funds 86
Debt Service Funds
Combining Balance Sheet 88
Combining Statement ofRevenues, Expenditures and Changes in Fund Balances 90
Capital Projects Funds
Combining Balance Sheet =4
Combining Statementof Revenues, Expenditures and Changes in Fund Balances 95
Proprietary Funds
Enterprise Funds
Combining Balance Sheet 98
Combining Statement ofRevenues, Expenses and Changes in Retained Earnings 102
Combining Statement ofCash Flows 1°6
Internal Service Funds
Combining Balance Sheet 114
Combining Statement ofRevenues, Expenses and Changes in Retained Earnings 118
Combining Statement ofCash Flows 122
Trustand Agency Funds
Combining Balance Sheet - All Trust and Agency Fund Types 131
Expendable Trust Funds
Combining Balance Sheet 134
Combining Statement ofRevenues, Expenditures and Changes in Fund Balances 136
NonexpendableTrust Funds
Combining Balance Sheet 14
Combining Statement ofRevenues, Expenses and Changes in Fund Balances 142
Combining Statement ofCash Flows 144
Investment Trust Fund
Statement ofPlan Net Assets 147
Agency Funds
Combining Balance Sheet 150
Combining Statement ofChanges in Assets and Liabilities 152
STATE OF MONTANA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 1999
TABLE OF CONTENTS (Continued)
General Fixed Assets Account Group
Schedule ofGeneral Fixed Assets by Source 159
Schedule ofGeneral Fixed Assets by Function and Activity 160
Schedule ofChanges in General Fixed Assets by Function and Activity 161
STATISTICAL SECTION
Revenues by Source - All Governmental Fund Types 165
Expenditures by Function - All Governmental Fund Types 165
PropertyTax Levies and Collections 166
Taxable and Market (Assessed) Value ofProperty 166
PropertyTax Rates - Direct and Over Lapping Governments 167
PropertyTax Mill Levyfor State Purposes 167
Ratio ofDirect State Debt to Assessed Value and Direct State Debt per Capita 168
Ratio ofAnnual Debt Service toTotal General Expenditures 168
Revenue Bond Coverage - Higher Education 169
Revenue Bond Coverage - Montana Board ofHousing 169
Revenue Bond Coverage - Economic Development Bonds 170
PropertyValue, Construction and Bank Deposits 171
Income Data ]~[2
Public Education Institutions Enrollment 173
DEemmpolgoryampehnitcinStMatoinsttiacnsa Industries 11^744
MajorPrivate Employers in Montana *75
Miscellaneous Statistics 1'5
-VI-
DEPARTMENT OF ADMINISTRATION
DIRECTOR'S OFFICE
MARCRACICOT,GOVERNOR MITCHELLBUILDING
OF MONTANA
STATE
[phone] POBOX200101
FAX [phone] HELENA,MONTANA 59620-0101
November 18, 1999
To the Citizens, Governor and Members ofthe Legislature ofthe State ofMontana:
In accordancewith Section 17-2-110, Montana CodeAnnotated (MCA), I am pleased to submitthe Comprehensive
Annual Financial Report (CAFR) ofthe State ofMontana forthe fiscal yearended June 30, 1999. Responsibility
for the accuracy of the data presented and the completeness and fairness of the presentation rests with the
Department of Administration. To the best of our knowledge and belief, the enclosed data are accurate in all
material respects and are reported in a manner designed to present fairly the financial position and results of
operations ofthevarious funds and account groups ofthe State ofMontana. All disclosures necessary to enable
the readerto gain an understanding ofthe State's financial activities are included.
Description ofthe CAFR
This report and the accompanying financial statements and statistical tables were prepared in accordance with
standards setforth bythe Governmental Accounting Standards Board (GASB).
This CAFR is divided into three main sections: introductory, financial and statistical. The introductory section
includes an organization chart forthe State, a table ofcontents and this transmittal letter. The financial section
contains the independent auditor's report, the general purpose financial statements, notes to the financial
statements, combining statements by fund type, and other schedules. The statistical section includes financial,
economic and demographicdata.
This report includes allfunds and accountgroups ofthose entitiesthat comprisethe State ofMontana (the primary
government) and itscomponentunits. Thecomponent unitsareentitiesthatare legallyseparatefrom the State but
for which the State is financially accountable, or whose relationship with the State is such that exclusion would
cause the State's financial statements to be misleading or incomplete. The GASB has set forth criteria to be
considered in determining financial accountability. These criteria include appointing a voting majority of an
organization's governing body and (1) the State is able to impose its will on that organization or (2) there is the
potential forthe organization to provide specificfinancial benefits to, or impose specificfinancial burdens on, the
State Thefollowingcomponentunitsare included inthe State'sfinancial reportingentity: HousingAuthority, Health
Facilities Authority, State Compensation Insurance Fund (Old and New), Public Employees' Retirement Board,
Teachers' RetirementSystem and the Colleges, Universitiesand Colleges ofTechnology. These component units
are discretely presented in the State'sfinancial statements.
Economic Condition and Outlook
Tfrhoemfo1r9e9c8a'sst igsrofowrthM,onbtuatnaw'elslnaobnofvaermtlhaebo2ripenrccoemnetgarvoewrtahgteogarvoewrtahgepraebdoiuctte3dpfeorrcetnhteffrirosmt 1d9e9c9adteo 2o0f0t1h,edonwenw
millennium. Montana's nonfarm laborincome rose4.8 percentin 1998, with about0.5 percent due to a $65 million
wage settlement (after legal fees) atthe Columbia Falls Aluminum Company. Excluding this one-time influence,
the remaining 4.3 percent increase is still the state's largest since the early 1990's. Stable employment in most
basicindustries, strongconstruction, andcontinued growth in serviceswill bethe majorcontributorstofuturegrowth.
The Montana Department ofLabor and Industry's Office of Research and Analysis estimates there will be about
196,600 wageand salaryand self-employmentjobsopening up in Montanafrom 1996through 2006. About94,000
will be generated by industrygrowth, and the restwill resultfrom replacing workers who leave already existingjobs
forvarious reasons. Theoccupational groupprojectedtoaddthe mostnewwage and salaryand self-employedjobs
to Montana's economyisthe servicegroup. The onlygroup projected to showjob decline is the agriculture group
Montana's population has been stable at about 880,000 persons during 1997 and 1998. Net outmigration has
replaced the sizable influx ofpersonsduringthefirsthalfofthe 1990's. The population forecastfor 2000 has been
trimmed to 900,000 (from 920,000) and to 984,000 (from 1,015,000) in 2010 Preliminary reports suggest that
Montana will still regain its second Congressional seat in 2000.
Agriculture continuesto be Montana's largest basic industrywith about 80 percent of the state's agricultural cash
receipts coming from cattle, wheat and barley. Montana's agriculture is land extensive, ranking Montana second
among all states in the numberofacres in farmsand ranches, but 31st in the numberoffarms and ranches During
the past year, agricultural prices have been particularly volatile. In 1998 beef prices declined for a number of
reasons, twoofthe most important being a softening export marketfor beefand large competitive supplies ofpork
•ANEQUALOPPORTUNITYEMPLOYERS
-1-
and poultry. Wheat pricesalsodeclined in 1998, primarilydueto increased worldwide production. However, higher
governmentpaymentsfordecliningwheat prices morethanoffsetthe lowermarketprices. Beefprices are projected
to be similar to 1997 levels, which were about $12 per hundred weight higher for feeder calves, in 1999. In the
longerterm, the majorconcerns arethe continued competition from pork and poultry, particularly the lower cost of
pork production and theaging U.S. population Wheat prices should be higher in 1999 unlessthere is anotheryear
ofunusually high worldwide production.
Much ofMontana's manufacturing industry istied tothestate's natural resources. The State's manufacturing sector
produces morethan $5 billion in outputannuallyand employsnearly 30,000workersearning morethan $900million
in annual labor income in 1998 The largest component, wood, paper and furniture products manufacturing, is
based primarilyon Montana'stimberresourceand contributesapproximately37 percentofthestate's manufacturing
laborincomeand38 percentofemployment. In 1998 Montana'sforest productsindustryperformed somewhat better
than expected given theexpanding Asian financial crisis. In 1998 lumberand plywood production slightlyexceeded
1997 levels, but much ofthe increasewasdue to mild weatherwhich allowed higherthan normal levels oflogging
and temporarily increased log supplies. However, due to theAsian crisiswhich created reduced global demands
lumber prices fell 10 to 25 percent below levels in the first half of 1997. In the last half of 1998, Montana's
manufacturing industryexperienced curtailments and layoffs, most prominentlyinthewood and paper products and
high technology sectors.
Global economies aregradually improving, and wood prices should begin to increase, although timber availability
remains a key long-term concern. Onthe brightside, there are newplants and expansions underway, and a return
to increased manufacturing activity is expected when global economic conditions improve.
MajorInitiatives
In fiscal year 1999, the General Fund unreserved fund balance rose $38.5 million over projections due primarilyto
increased personal incometax and corporation tax revenues.
The Fifty-sixth Legislature enacted a numberoftax policy initiatives thatwill have a significant impact on taxes paid
by residential and commercial property owners. Property taxes for businesses, homeowners and light vehicle
ownerswere substantially reduced, and production taxes foroil, natural gas and coal producers for tax year 1999
and beyond were also reduced. In addition, two new taxes, the telecommunications excise tax and electrical
energy tax, were enacted by the 1999 Legislature. The State also expects to receive $66.8 million in tobacco
settlementfunds during the 2001 biennium.
The legislature approved state school support increasesof$20.4 million in the general fund forthe 2001 biennium
with funding for an increase in the BASE aid schedule payments, special education and school facility
reimbursements andto continue the improving Montana schools project. An increase in BASE aid scheduleswill
raisethe maximum budgetforeach school district. Totalfundsto support K-12 education increase by $46.7forthe
2001 biennium. The additional funds are primarily additional federal grants for existing programs, additional
teachersto reduce class sizes, school to work initiatives and comprehensive school reform
The Department of Public Health and Human Services' funding was increased $176.9 million from the 1999
biennium, $18.2 million ofwhich is general fund. This increase is due primarily to Medicaid caseload and cost
increases, expansion of child care under TANF, increased services for Montanans with disabilities waiting for
servicesand implementation ofthe Children's Health Insurance Program (CHIP). The Department also terminated
its contract for managed mental health care services and is in the process of developing a new plan with the
assistance ofan oversight advisory council.
The legislature provided $23.7 million in new general funds above the 1999 biennium funding levels to the
DepartmentofCorrectionstoaddress a projected increase in adult male and female populations overthe nexttwo
years. This was accomplished by the increase in the number ofpre-release beds available, the addition of 15
probation and parole officers, the addition ofmore contractbedsthrough regional and privately owned prisons, and
expansion of Pine Hills Youth Correctional Facility.
A(sSAoBfHJRuSl)y 1wi,l1l9r9e9p,latcheetfhienacnucriraelntmfoidnaunlceialofstyhseteSmtaktneowwindeaAscSctoautnetwiindge,BBuuddggeettiinnggaannddAcHcuomunatninRgeSsyosutrecme(SSyBsAtSe)m.
OMannSaegpetmeemnbterSy1s,t1e9m98(,PtAhMeSa)sswetenmtainnatogelimveenprtodpuocrttiioonn,ofanSdAiBnHARprSilw1h9i9c9h,rethpelahcuedmathnerPersoopuerrcteypAocrctoiuonntoafbiSlAitByHaRnSd
which replaced the Personnel/Payroll/Position Control (P/P/P) Systemwent into live production. In addition, during
August 1998, the State prepared its 2001 biennium budgetthrough the newMontana Budgetand Revenue System
(MBARS). The 1997 legislature approved the sale of $16.5 million in bonds to pay the initial equipment and
planning costs forthe project.
Technology Issues forthe Year 2000
aEvnedrsyoofrtgwaanriezacthiaonngiesffarcoemdtwhiethyeaarpot1e9n9t9ialtoptrhoeblyeemaron20J0a0nuaanrdyo1n, 2c0e0r0t,aiwnhoetnhetrhdeactaelsen(fdoarresxoanmpcloem,pubtuetrnohtarldimwiatreed
to, leapyear) (the "Y2K Problem"). The Y2K Problem occurswhen computer hardware and software that usetwo-
digit years misinterpretthe year2000 to be "00", zero, 1900 orsome othererroneous date. The actions