FC oo rm t hp er e Fh ise cn as l iv Ye e aA rn En nu da el dF in J ua nn ec ia 3 l 0 R , e 2 p 0 o 1 r 7t Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2017 176150.indd 1 9/19/17 2:53 PM STATE OF MISSOURI COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2017 ERIC R. GREITENS Governor SARAH H. STEELMAN Commissioner Office of Administration STACY NEAL Director Division of Accounting Prepared by Office of Administration, Division of Accounting On the Cover: State Capitol, Jefferson City, Missouri, 1990s; Department of Economic Development, Division of Tourism, Record Group 104; Missouri State Archives. Lake of The Ozarks, Lake Ozark, Missouri; Department of Economic Development, Division of Tourism, Record Group 104; Missouri State Archives. Dogwood, 2005; Department of Economic Development, Division of Tourism, Record Group 104; Missouri State Archives. This report can be viewed on the Internet at http://oa.mo.gov/accounting/reports STATE OF MISSOURI COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal .................................................................................................................................... I Organizational Chart.................................................................................................................................... VI Principal State Officials............................................................................................................................... VII FINANCIAL SECTION Auditor's Opinion ........................................................................................................................................ i Management's Discussion and Analysis ...................................................................................................... 1 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position ................................................................................................................... 14 Statement of Activities........................................................................................................................ 15 Fund Financial Statements Governmental Funds Balance Sheet ................................................................................................................................. 18 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position.... 19 Statement of Revenues, Expenditures, and Changes in Fund Balances......................................... 20 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances in Governmental Funds to the Statement of Activities....................................................................... 21 Proprietary Funds Statement of Net Position ............................................................................................................... 23 Statement of Revenues, Expenses, and Changes in Fund Net Position ......................................... 24 Statement of Cash Flows ................................................................................................................ 25 Fiduciary Funds Statement of Fiduciary Net Position............................................................................................... 27 Statement of Changes in Fiduciary Net Position............................................................................ 28 Component Units Statement of Net Position ............................................................................................................... 30 Statement of Revenues, Expenses, and Changes in Net Position/Statements of Activities ........... 31 Notes to the Financial Statements ............................................................................................................ 34 Required Supplementary Information Budgetary Comparison Schedule General Fund, Major Special Revenue Funds................................... 142 Notes to Required Supplementary Information Budgetary Reporting.................................................... 144 Schedule of Changes in Net Pension Liability and Related Ratios......................................................... 145 Schedule of Proportionate Share of the Net Pension Liability................................................................ 147 Schedule of State Contributions.............................................................................................................. 148 Supplementary Information Budgetary Comparison Schedule Major Capital Projects Fund.............................................................. 150 Combining Fund Statement - General Fund Balance Sheet ................................................................................................................................. 152 Statement of Revenues, Expenditures, and Changes in Fund Balance .......................................... 153 Combining and Individual Fund Statements and Schedules - Non-major Funds Governmental Funds Combining Balance Sheet Non-Major Governmental Funds - by Fund Type.................................... 154 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds - by Fund Type.................................................................................................. 155 Special Revenue Funds Combining Balance Sheet .............................................................................................................. 158 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances...................... 159 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (Non-GAAP Budgetary Basis) and Actual..................................................................................... 160 Debt Service Funds Combining Balance Sheet .............................................................................................................. 166 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances...................... 167 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (Non-GAAP Budgetary Basis) and Actual..................................................................................... 168 Capital Projects Funds Combining Balance Sheet .............................................................................................................. 173 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances...................... 174 Permanent Funds Combining Balance Sheet .............................................................................................................. 177 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances...................... 178 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget (Non-GAAP Budgetary Basis) and Actual..................................................................................... 179 Proprietary Funds Enterprise Funds Combining Statement of Net Position............................................................................................ 184 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position ...................... 186 Combining Statement of Cash Flows ............................................................................................. 188 Internal Service Funds Combining Statement of Net Position............................................................................................ 192 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position ...................... 194 Combining Statement of Cash Flows ............................................................................................. 196 Fiduciary Funds Pension (and Other Employee Benefit) Trust Funds Combining Statement of Fiduciary Net Position............................................................................ 200 Combining Statement of Changes in Fiduciary Net Position......................................................... 201 Private-Purpose Trust Funds Combining Statement of Fiduciary Net Position............................................................................ 202 Combining Statement of Changes in Fiduciary Net Position......................................................... 203 Agency Funds Combining Balance Sheet .............................................................................................................. 204 Combining Statement of Changes in Assets and Liabilities........................................................... 205 Component Units Combining Statement of Net Position............................................................................................ 208 Combining Statement of Revenues, Expenses, and Changes in Net Position................................ 209 Combining Statement of Cash Flows ............................................................................................. 210 STATISTICAL SECTION Financial Trends Net Position by Component .................................................................................................................... 213 Changes in Net Position .......................................................................................................................... 214 Fund Balances - Governmental Funds .................................................................................................... 216 Changes in Fund Balances - Governmental Funds ................................................................................. 217 Revenue Capacity Revenue Base - Taxable Sales by Industry............................................................................................. 219 Revenue Base -Personal Income by Industry.......................................................................................... 220 Personal Income Tax Revenue ................................................................................................................ 221 Personal Income Tax Rates ..................................................................................................................... 222 Revenue Payers by Industry.................................................................................................................... 223 Personal Income Tax Filers/Liability ...................................................................................................... 224 Debt Capacity Ratios of Outstanding Debt ..................................................................................................................... 225 Pledged Revenue Coverage..................................................................................................................... 227 Demographic and Economic Information Demographic Indicators .......................................................................................................................... 228 Economic Indicators................................................................................................................................ 229 Principal Employers ................................................................................................................................ 230 Operating Information State Employees by Function.................................................................................................................. 231 Operating Indicators by Function............................................................................................................ 232 Capital Asset Statistics by Function ........................................................................................................ 234 Acknowledgements.......................................................................................................................................... 236 The Introductory Section includes material to familiarize the reader with the organizational structure of the State, the nature and scope of services the State provides, and a summary of the financial activities of the State and the factors that influence these activities. Eric R. Greitens Governor State of Missouri Sarah Steelman OFFICE OF ADMINISTRATION Stacy Neal Commissioner Division of Accounting Director 570 Truman Building, 301 West High Street Post Office Box 809 Jefferson City, Missouri 65102 573 751-2971 INTERNET: http://www.oa.mo.gov/acct E-MAIL: [email protected] January 25, 2018 The Honorable Eric R. Greitens The Honorable Members of the Legislature Citizens of the State of Missouri In accordance with generally accepted accounting principles, I submit to you the Comprehensive Annual Financial Report (CAFR) of the State of Missouri for the fiscal year ended June 30, 2017. This report was prepared by the Office of Administration, Division of Accounting, whose management is responsible for its contents. The report is prepared to show the financial position and operating results of the State. The State’s internal accounting controls provide reasonable assurance regarding the safeguarding of assets against loss from unauthorized use or disposal and the reliability of financial records for preparing financial statements. The concept of reasonable assurance recognizes that the cost of a control should not exceed the resulting benefit. We believe the data presented is accurate in all material respects and that all disclosures necessary to enable the reader to gain a reasonable understanding of the State’s financial activities have been included. An annual audit of the basic financial statements is completed each year by the State Auditor’s Office. The State Auditor conducts the audit in accordance with generally accepted government auditing standards, and her opinion has been included in this report. The State Auditor conducts a "Single Audit" of all federal funds in accordance with the Federal Single Audit Act Amendments of 1996 and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform guidance). A narrative introduction, overview, and analysis of the basic financial statements is presented in the Management’s Discussion and Analysis (MD&A) section of this report. This letter of transmittal is intended to complement MD&A and should be read in conjunction with it. The MD&A can be found immediately following the Independent Auditor’s Report. PROFILE OF THE GOVERNMENT Missouri was organized as a territory in 1812 and was the second state (after Louisiana) of the Louisiana Purchase to be admitted to the Union. Statehood was granted on August 10, 1821, making Missouri the 24th state. The State encompasses 68,945 square miles. I The State operates under three branches of government: executive, legislative, and judicial. The executive branch consists of the Governor, Lieutenant Governor, Secretary of State, State Auditor, State Treasurer, and Attorney General. The legislative branch consists of 34 members of the Senate and 163 members of the House of Representatives. The judicial branch is a three-tier court system: the Supreme Court, the State’s highest court, has statewide jurisdiction; a court of appeals that consists of districts established by the General Assembly; and a system of circuit courts that has original jurisdiction over all cases and matters, civil and criminal. The State provides a range of services in the areas of agriculture, education, health and social services, transportation systems, public safety, judicial systems, economic development, conservation and natural resources, labor relations, and general administration. The State operates on a legally adopted budget in order to ensure compliance with legal provisions embodied in the annual appropriated budget passed by the General Assembly and approved by the Governor prior to the beginning of the fiscal year. If appropriations are not sufficient for a fiscal year, supplemental amounts are requested during the next legislative session by the same process that original appropriations are requested. Budgets are established at the program level. Expenditures cannot exceed the individual appropriation amount. The Governor has the authority to reduce the allotments of appropriations in any fund if it appears that the revenue estimate will not be met. Article IV, Section 27 of the Missouri Constitution, amended in 2014, requires the Governor to notify the General Assembly if the Governor reduces allotments when it appears revenues will be less than estimated. This Section then gives the General Assembly the authority to overturn any of the Governor’s restrictions with a two-thirds vote, similar to the procedure to overturn a veto. Unexpended appropriations lapse at the end of each fiscal year, unless reappropriated to the following budget fiscal year. The financial reporting entity of the State includes all of the funds of the primary government as well as component units for which the State is financially accountable. The transmittal letter, MD&A, and the financial statements focus on the primary government and its activities. Although information pertaining to the component units is provided, their separately issued financial statements should be read to obtain a complete overview of their financial position. ECONOMIC CONDITION AND OUTLOOK State Economy Missouri's annual growth rate maintains an upward trend nearly 7 years after the recession. The expansion after the recession that ended in the summer of 2009 has continued despite European fiscal and geopolitical troubles, volatile stock markets, and national policy uncertainty. Between June 2016 and June 2017 Missouri added over 46,600 jobs, a 1.6% employment growth. The healthcare and social services industry, alone, added 8,146 jobs during 2016. As of June 2017, Missouri's unemployment rate was 3.8%, the lowest it has been since September 2000 and also lower than the U.S. unemployment rate of 4.5% as shown in the following graph. Source: MERIC 2017 Missouri Economic Report II