Cochise County June 30, 2008 Single Audit Reporting Package

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A REPORT
TO THE
ARIZONA LEGISLATURE
Financial Audit Division
Single Audit
Cochise County
Year Ended June 30, 2008
Debra K. Davenport
Auditor GeneralThe Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five
senators and five representatives. Her mission is to provide independent and impartial information and specific
recommendations to improve the operations of state and local government entities. To this end, she provides financial
audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and
conducts performance audits of school districts, state agencies, and the programs they administer.
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.azauditor.govCochise County
Single Audit Reporting Package
Year Ended June 30, 2008

Table of Contents Page

Financial Section

Independent Auditors’ Report

Required Supplementary Information—Management’s Discussion and Analysis i

Government-wide Statements
Statement of Net Assets 1
Activities 2

Fund Statements
Governmental Funds
Balance Sheet 3
Reconciliation of the Balance Sheet to the Statement of Net Assets 4
Statement of Revenues, Expenditures, and Changes in Fund Balances 5
Reconciliation of the Statement of Revenues, Expenditures, and
Changes in Fund Balances to the Statement of Activities 6

Proprietary Funds
Statement of Net Assets 7
Revenues, Expenses, and Changes in Fund Net Assets 9
Statement of Cash Flows 10

Fiduciary Funds
Statement of Fiduciary Net Assets 12
Statement of Changes in Fiduciary Net Assets 13

Component Unit Statements
Combining Statement of Net Assets 14
Activities 15

Notes to Financial Statements 17

Other Required Supplementary Information
Budgetary Comparison Schedule—General Fund 43
chedule—Highway and Streets Fund 44
Budgetary Comparison Schedule—Ft. Huachuca Accommodation School District Fund 45
Notes to Budgetary Comparison Schedules 46
Schedule of Agent Retirement Plan’s Funding Progress 47

Supplementary Information
Schedule of Expenditures of Federal Awards 51 Cochise County
Single Audit Reporting Package
Year Ended June 30, 2008

Table of Contents Page

Single Audit Section

Report on Internal Control over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Basic Financial Statements Performed
in Accordance with Government Auditing Standards 57

Report on Compliance with Requirements Applicable to Each Major Program
and on Internal Control over Compliance in Accordance with OMB Circular A-133 59

Schedule of Findings and Questioned Costs
Summary of Auditors’ Results 61
Financial Statement Findings 63
Federal Award Findings and Questioned Costs 69

County Responses

Corrective Action Plan 73

Summary Schedule of Prior Audit Findings 75

STATE OF ARIZONA
OFFICE OF THE DEBRA K. DAVENPORT, CPA WILLIAM THOMSON
AUDITOR GENERAL DEPUTY AUDITOR GENERAL
AUDITOR GENERAL
Independent Auditors’ Report

Members of the Arizona State Legislature

The Board of Supervisors of
Cochise County, Arizona

We have audited the accompanying financial statements of the governmental activities, business-type
activities, aggregate discretely presented component units, each major fund, and aggregate remaining
fund information of Cochise County as of and for the year ended June 30, 2008, 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 did not audit the financial statements of the Ft.
Huachuca Accommodation School District Fund, which is a major governmental fund and represents 19
percent of the assets and 15 percent of the revenues of the County’s governmental activities on the
government-wide financial statements. In addition, we did not audit the Cochise Health Systems Fund,
which is a major enterprise fund and represents 51 percent of the assets and 90 percent of the revenues
of the County’s business-type activities on the government-wide financial statements. We also did not
audit the financial statements of the discretely presented component units of Cochise County. Those
financial statements were audited by other auditors whose reports thereon have been furnished to us, and
our opinions, insofar as they relate to the amounts included for the Ft. Huachuca Accommodation School
District Fund, Cochise Health Systems Fund, Housing Authority of Cochise County, and Cochise Private
Industry Council, Inc., are based solely on the reports of the other auditors.

Except as discussed in the following paragraph, 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. The financial statements of the Cochise Health Systems Fund were not
audited by the other auditors in accordance with Government Auditing Standards. 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
and the reports of the other auditors provide a reasonable basis for our opinions.

The Ft. Huachuca Accommodation School District Fund had unreconcilable differences of approximately
$525,000 between its cash and investments held by County Treasurer and the records of the County
Treasurer. Accordingly, the other auditors were unable to perform procedures sufficient to achieve the
audit objectives for the cash and investment balances presented for the Ft. Huachuca Accommodation
School District Fund, a major governmental fund.
th2910 NORTH 44 STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051

In our opinion, based on the report of the other auditors, except for the effects, if any, of the unreconciled
differences for cash and investments held by County Treasurer as described in the preceding paragraph,
the financial statements referred to above present fairly, in all material respects, the financial position of
the Ft. Huachuca Accommodation School District Fund as of June 30, 2008, and the changes in its
financial position for the year then ended in conformity with U.S. generally accepted accounting principles.

In addition, in our opinion, based on our audit and the reports of the other auditors, the financial
statements referred to above present fairly, in all material respects, the respective financial position of the
governmental activities, business-type activities, aggregate discretely presented component units, General
Fund, Capital Projects Fund, Highway and Streets Fund, Cochise Health Systems Fund, Solid Waste
Operations Fund, and aggregate remaining fund information of Cochise County as of June 30, 2008, and
the respective changes in financial position and, where applicable, cash flows thereof for the year then
ended in conformity with U.S. generally accepted accounting principles.

As described in Note 1, the County implemented the provisions of the Governmental Accounting Standards
Board (GASB) Statement Nos. 45, Accounting and Financial Reporting by Employers for Postemployment
Benefits Other Than Pensions and 50, Pension Disclosures (an amendment of GASB Statements No. 25 and
No. 27), for the year ended June 30, 2008, which represent changes in accounting principles.

The Management’s Discussion and Analysis on pages i through xii, the Budgetary Comparison Schedules
on pages 43 through 45, and the Schedule of Agent Retirement Plan’s Funding Progress on page 47 are
not required parts of the basic financial statements, but are supplementary information required by the
Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted
principally of inquiries of management regarding the methods of measurement and presentation of the
required supplementary information. However, we did not audit the information and express no opinion on
it.

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