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Home My WebLink AboutCOM 0496.000 2006-2008 CASEY JARMAN ~<v os KENNETH G. GOODENOW Deputy County Clerk County Clerk ~ ~ I; ~ COLLEENSCHRANDT Legislative Audi[or e Mailing Address: ,'~i~ oF•N~+~ Business Address: (Former County Building 333 Kilauea Aventfg,,Second Floor 25 Aupuni Street Ben Franktf'n Buil~g Hilo, Hawaii 96720 Hilo, Hawni'i.967 County of Hawai `i . _ Office of the County Clerk Telephone: (808) 967-8255 Facsimile: (808) 96/-8912 - June 27, 2007 TO: Council Members FROM: Colleen Schrandt~;~j Legislative Auditor RE: Financial Audit Report for Fiscal Year Ending June 30, 2006 For your review, deliberation, and acceptance, I am submitting the post-audit Financial Audit Report of the County of Hawai `i for the Fiscal Year Ended June 3Q 2006, and Management Letter dated April 27, 2007, as prepared by KPMG LLP. The Report and Management Letter satisfy the requirement of Section 10-13, Hawaii County Charter, relating to the responsibility of the County Council to conduct an annual independent audit of the accounts and other evidences of financial transactions of the County and of every county agency. KPMG LLP has issued an unqualified opinion, indicating that the financial statements present fairly in all material respects, the financial position of Hawaii County for Fiscal Year Ending June 30, 2006, in conformance with U.S. generally accepted accounting principles. This year's Management Letter contains findings and recommendations related to: • Collection of Receivables • Monitoring of Backup Media The auditors will be present at the Finance Committee meeting on July 9, 2007, to answer any questions you may have. Appropriate department head(s) or their representative(s) will also be asked to attend the meeting. In the meantime, please feel free to contact Lane Shibata should you require further information. Enclosures cc w/o enclosures: Ralph Kanetoku, KPMG LLP Department of Finance Comm. No. ~U Department of Environmental Management Ref. To: Department of Data Systems Ref. Dafe JUN 2 7 2007 (Pbte: Attached booklet is on file in the Clerk's Office.) Serving the Interests afthe People afOur Island Hawaii County is an Equal Opportunity Provider and Employer i r r.', nw _ C_ ~ h: _f ~ J COUNTY OF HAWAII ; r ' ~ ~~,~IIG r , r T =cs'M.a~ a cr~...,= ..r..~..~...... 111r v v C~ ~'~''..'7" ~l I~' ~ kw M?0~ r r a Financial Audit Report ~ for the Fiscal Year Ended June 30, 2006 a A r+ ¦ r CASEY JARMAN KENNETH G. GOODENOW ,r J+~v os p~ County Clerk tP Deputy County Clerk I~ • ~ COLLEEN SCHRANDT Legislative Auditor Mailrn Address: •?.ir~ ~°~~p~ S rf of•Nf Business Address: (Former County Butldin~ 333 Kilauea Avenue, Second Ftoar ~ 25 Aupuni Street Ben Franklin Building Hilo, Hawaii 96720 Hilo, Hawaii 96710 County of Hawai `i ~ Off ce of the County Clerk Telephone: (808) 961-8255 Fncsimi/e: (808J 961-8912 Forward 'r This financial audit report is the result of the audit of the basic financial statements of the County of Hawaii, State of Hawaii (County), for the fiscal yeaz ended June 30, 2006. The audit was conducted by KPMG LLP, certified public accountants. The audit was performed in accordance with auditing standards generally accepted in the United States of America as set forth by the American Institute of Certified Public Accountants and the standards for financial audits set forth in the U.S. General Accountability Office's Government Auditing Standards. In addition, the audit was governed by the "Specifications" as set forth in Request For Proposal No. 2194 and the "Scope of Work" as set forth in Contract No. 0756, as issued by our office for the County of Hawaii. This report is divided into two sections. Section I, "Management Letter" includes the auditors' r findings and recommendations based upon their consideration of the County's internal control and recently issued government accounting pronouncements in connection with their audit of the County's financial statements for the fiscal year ended June 30, 2006. This section also includes specific agencies' responses to the auditors' findings and recommendations that indicates what action has been or wilt be taken. Section II, "Comprehensive Annual Financial Report" for the fiscal year ended June 30, 2006, displays the basic financial statements and schedules of the County, the auditors' report as to the ,,r fairness of presentation of the basic financial statements and also includes statistical information. ~ We wish to express our sincere appreciation for the cooperation and assistance extended by the ,r management and staff of the various departments during the audit. Colleen Schrandt al Legislative Auditor County of Hawaii Serving the /nterests of the People of Our /stand Hawaii Counry is an Equa/ Oppor(uniry Provider and Employer COUNTY OF HAWAII Financial Audit Report For the Fiscal Year ended June 30, 2006 i w ~ Table of Contents ~ Page SECTION I -MANAGEMENT LETTER rr Management Letter I Current Year Findings and Recommendations 2 r Recently Issued Governmental Accounting Pronouncements 5 _ Comments by the Affected Agencies 7 SECTION II -COMPREHENSIVE ANNUAL FINANCIAL REPORT Introductory Section ] Financial Section I 1 Statistical Sections I I ] ar w ¦ a w r n~ +YY YY W W w r ~ SECTION I MANAGEMENT LETTER r r 1 ~ COUNTY OF HAWAII STATE OF HAWAII Management Letter For the Fiscal Year ended June 30, 2006 Table of Contents r Page y~ Management Letter 1 CURRENT YEAR FINDINGS AND RECOMMENDATIONS 2 Collection of Receivables 2 Monitoring of Backup Media q ~ RECENTLY ISSUED GOVERNMENTAL ACCOUNTING PRONOUNCEMENTS 5 r ¦ a w a KPMG LLP Telephone 808 531 7286 PO Box 4150 Fax 808 541 9321 Honolulu, HI 96872-4150 Internet www.us.kpmg.com uar April 27, 2007 PRIVATE & CONFIDENTIAL - To the Members of the County Council of Hawaii County of Hawaii Hilo, Hawaii: ^I+ We have audited the basic financial statements of the County of Hawaii, State of Hawaii (the County), for the year ended June 30, 2006, and have issued our report thereon dated April 27, 2007. We have also audited the County's compliance with requirements applicable to the County's federal financial assistance r programs and have issued our report thereon dated April 27, 2007. In planning and performing our audit of the basic financial statements of the County, we considered internal control as a basis for designing our auditing procedures for the purpose of expressing our opinion on the basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County's internal control. Accordingly, we do not express an opinion on the effectiveness of the County's internal control. - During our audit, we noted certain operational matters that are presented for your consideration. These comments and recommendations, all of which have been discussed with the appropriate members of T management, are intended [o result in operating efficiencies. We have also provided a brief summary of the recently issued governmental accounting pronouncements for your consideration. Our audit procedures are designed primarily to enable us to form an opinion on the basic financial statements, and therefore may not bring to light a{l weaknesses in policies or procedures that may exist. We aim, however, to use our knowledge of the County's organization gained during our work to make comments and suggestions that we hope will be useful to you. This communication is intended solely for the information and use of the County Council and the County Administration and is not intended to be and should not be used by anyone other than these specified parties. We would like to take this opportunity to express our appreciation for the courtesy and assistance extended to us by the personnel of the County of Hawaii during the course of our audit. Should you wish to discuss any of the matters contained herein, we will be pleased to meet with you at your convenience. Very truly yours, KPMG LLP, a us. hmnea LaUrIrtY Pennersnry. Is \M1e u s 1~ member tlrm of KPMG International, a Gwiaa cooperallve COUNTY OF HAWAII ~ STATE OF HAWAII Current Year Findings and Recommendations For the Fiscal Year ended June 30, 2006 COLLECTION OF RECEIVABLES r The timely collection of solid waste (landfill) and wastewater (sewer) receivables continues to be a problem for the Department of Environmental Management. To address deficiencies in landfill receivables, the County has continued in its efforts to improve collections of landfill fees and to reduce the amounts outstanding over 90 days. These continued efforts have resulted in a decrease in the amounts outstanding over 90 days as a percentage of total receivables from 28% at June 30, 2005 to 24% at June 30, 2006. For sewer receivables, a bill was passed by the County Council which makes the property owner ultimately responsible for the sewer bills. Previously, the account holder was billed, which was often a lessor or a renter. By making the owner responsible, the County will now be able to place a lien on the property for past-due sewer charges. Although this may not have immediate results, this is an important step towards improving future collections. Additionally, effective October 1, 2005, a monthly I % interest charge on past-due balances replaced the previous one time penalty of 10%. These efforts have resulted in a decrease in the amounts outstanding over 90 days as a percentage of total receivable from 63% at June 30, 2005 to 54% at June 30, 2006. Despite the progress and improvements being made, landfill and sewer receivables outstanding more than 90 days still account for a significant portion of the respective balance as follows: 2006 2005 n Amount Percentage of Amount Percentage of outstanding total outstanding total Landfill Current $ 694,107 36% $ 583,650 43% 31 - 60 days 609,719 32 360,564 26 61 - 90 days 146,579 8 42,185 3 90+days 458,802 24 390,208 28 $ 1,909,207 100% $ 1,376,607 100% r 90+days 90+days 24 28°/ Current 36% Current 43% i 61 - 90 days 61 - 90 days ~ 8% 3% ar ~ 31 - 60 days 31 - 60 days 32 % 26% a 2 (Continued) r COUNTY OF IIAWAI`I ~ STATE OF HAWAII Current Year Findings and Recommendations +r For the Fiscal Year ended June 30, 2006 s 2006 2005 Amount Percentage of Amount Percentage of ~ outstanding total outstanding total Sewer Current $ 522,847 33% $ 631,261 31% 31 - 60 days 141,078 9 25,391 1 61 - 90 days 69,400 4 107,497 5 90+ days 873,383 54 1,282,697 63 o~ $ 1,606,708 100% $ 2,046,846 100% Current +w Current 31% 33°/ 90+days 54 % 31 - 60 days 90+ days ° 63% 1 31 - 60 days 61 - 90 da s 9% y 5% A 61 - 90 days 40/ w Recommendation We recommend that the Department of Environmental Management continue to work with the Department of Finance to improve collection efforts on delinquent accounts. For landfill receivables, this means to focus on specific delinquent accounts as approximately 57% of the ]andfill receivable balance outstanding more than 90 days at June 30, 2006 relates to a few customers. For sewer receivables, the focus should be on enforcing the changes made in the bill that was recently approved and place liens on the properties of delinquent account holders. r s a 3 (Continued) r COUNTY OF IIAWAI`I STATE OF I3.AWAI`I Current Year Findings and Recommendations For the Fiscal Year ended June 30, 2006 MONITORING OF BACKUP MEDIA r The County does not perform periodic tests of the data resident on the County's backup tapes. By not periodically testing the backup tapes and disks, the County is unable to identify corrupt media, which could impact its ability to restore critical data. This lack of testing puts the County at risk that its backup tapes could unknowingly become damaged and the data on that media may become inaccessible. In addition, the County does not maintain backup tape logs to track the location of its backup tapes. Without a system in place to track the County's backup tapes, the process of retrieving information from these backup tapes could be compromised. Recommendation We recommend that the Department of Data Systems document its periodic tests of the backup tapes by performing a sample data recovery and recording the results on a quarterly basis. This will allow the County to w. maintain the integrity of its backup tapes on a regular basis. In addition, we also recommend that a log be maintained to track the location of the County's backup tapes to provide the users with a current inventory of its backup tapes and their respective locations. r s ai 4 s COUNTY OF HAWAII STATE OF HAWAII Recently Issued Governmental Accounting Pronouncements For the Fiscal Year ended June 30, 2006 The following are recently issued governmental accounting pronouncements that should be evaluated for their impact to the County upon adoption: 'r • GASB Statement No. 43: Financial Reporting jor Postemployment Benefit Plans Other Than Pension Plans. This statement establishes uniform financial reporting standazds for other postemployment benefit (OPEB) plans and supersedes the interim guidance included in GASB Statement No. 26, Financial Reporting for Postemployment Healthcare Plans Administered by Defined Benefit Pension Plans. The approach followed in this statement generally is consistent with the approach adopted in GASB a. Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, with modifications to reflect differences between pension plans and OPEB plans. The requirements of this statement are effective one year prior to the effective date of GASB Statement No. 45 (see below), for the employer (single-employer plan) or For the largest participating employer in the plan (multiple-employer plan). The requirements of this statement are effective in three phases based on a government's total annual revenues in the first fiscal year ending after June 15, 1999, either for periods beginning after December 15, 2005, December 15, 2006, or December I5, 2007. Earlier application of this statement is encouraged. v • GASB Statement No. 45: Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. In addition to pensions, many state and local governmental employers provide OPEB as part of the total compensation offered to attract and retain the services of qualified employees. OPEB includes postemployment healthcare, as well as other forms of postemployment benefits (for example, life insurance) when provided ¦ separately from a pension plan. This statement establishes standazds for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures and, if applicable, required supplementary information in the ~ financial reports of state and local governmental employers. a 5 (Continued) •r ^ COUNTY OF HAWAII STATE OF HAWAII ^ Recently Issued Governmenta{ Accounting Pronouncements For the Fiscal Year ended June 30, 2006 • GASB Statement No. 48: Sales and Pledges of Receivables and Future Revenues and ^ Infra-Entity Transfers of Assets and Future Revenues. This statement establishes accounting and financial reporting standards for transactions in which a government receives, or is entitled to, resources in exchange for future cash flows generated by collecting specific receivables or specific future revenues. It also contains provisions that apply to certain situations in which a government does not receive resources but, nevertheless, pledges or commits future cash flows generated by collecting specific future revenues. In addition, this statement establishes accounting and financial reporting standards that apply to all infra-entity transfers of assets and future revenues. This statement does not apply to a government's pledge of its "full faith and credit" as security for its own debt or the debt of a component unit. The requirements of this statement apply to the 5nancial statements of all state and local governments and are effective for periods beginning aRer December 15, 2006. • GASB Statement No. 49: Accounting and Financial Reporting for Pollution Remediation Obligations. This statement addresses accounting and financial reporting standards for pollution (including contamination) remediation m. obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups. The scope of the document excludes pollution prevention or control obligations with respect to current operations, and future pollution remediation activities that are required upon retirement of an asset, such as landfill closure and postclosure care and nuclear power plant decommissioning. Once any one of five specified obligating events as provided in the ^ statement occurs, a government is required to estimate the ~ components of expected pollution remediation outlays and determine whether outlays for those components should be accrued as a liability or, if appropriate, capitalized when goods and services are acquired. The requirements of this statement are effective for financial ~ statements for periods beginning after December 15, 2007, with measurement of pollution remediation liabilities required at the beginning of that period so that beginning net assets can be restated. a s 6 r OOJMtV OF N,w~i ~,;r Bobby Jean l.eithead-Todd ~ Harry Kim ~ Director Mayor - - Nelson Ho Deputy Director F Of MP ~Iruntg of ~ttitrttii ' DEPARTMENT OF ENVIRONMENTAL MANAGEMENT 25 Aupuni Street • Hilo, Hawaii 96720-4252 (808) 961-8083 • Fax (808) 961-8086 http://co.hawaii.hi.us/directory/dir envmng h~ MEMORANDUM DATE June 18, 2007 r w TO Colleen Schrandt, Legislative Auditor FROM Bobby Jean Leithead-Todd, Director SUBJECT: Fiscal Year 2006 Preliminary Drafr Management Letter We have reviewed the fiscal year 2006 drafr Management Letter concerning the Collection of Receivables and concur with the audit recommendations. We are continuing to work with the Department of Finance and the Office of the Corporation Counsel to improve collection efforts. As the auditors have noted, improvements have been made and we are continuing our efforts to further reduce the receivables outstanding for more than 90 days. Our collection of solid waste (landfill) receivables has shown significant improvement over the past few years. Amounts outstanding over 90 days have been reduced from 47% of the total receivables at the end of fiscal year 2002 to 24% at the end of fiscal year 2006. The sewer receivables were significantly reduced in 2006 by the collection of the largest delinquency. To aide in the collection of sewer fees, a bill was passed by the County Council which makes the property owner ultimately responsible for the sewer bills. By ,r making the property owner responsible, we can now place a lien on the property for past due sewer charges. As noted by the auditors, this is an important step for guazanteeing future collections. While we will be enforcing the changes made by this bill, it is also ¦ important to understand that collecting on a lien can often take many years. To further increase our collection efforts, a new Credit and Collection Clerk position will of be created in FY07-08. This new position will focus on the collection of past due solid waste and sewer accounts. Having one position dedicated to collections will provide more timely and consistent collection efforts and allow us to put more focus on the lazger accounts as recommended. Hawai ~i County is an equal opportunity provider and employer. a fYay L~ a • .f 3 ?7}• Oi Mr • 1 ]any g~ dayton K. Yugawa ~,f~. Di+etto~ County of Hawaii DATA SYSTEMS DEPARTMENT 25 Aupuni Sweet, Room 102 FLIo, Hawau 96720.4252 r (808) 961-8207 • Fax (808) 961-8453 MEMORANDUM DATE: JUNE 19, 2007 w TO: COLLEEN SCHRANDT, LEGISLATIVE AUDITOR r FROM: CLAYTON YUGAWA, DIRECTOR -DATA SYSTEM ~ SUBJECT: RESPONSE TO AUDITOR'S REPORT DRAFT 6/7/07/ I received a copy of the Auditor's report ending 6130/07 and offer this response to the recommendations on Page 8. Data Systems often receive requests for restoration of users files/folders from backup tapes and have not encountered any failure issues due to backup tape errors. However, I am in agreement that there should be a periodic and documented test of the restoration process, to insure data integrity and reliability on its retrieval. We will implement a quarterly process to randomly restore files and folders, and document the results. With regards to the improvement of the backup tape log, we will improve the details of the backup tape information to include the storage location. However, in your recommendation you recommended "...to provide the users with a current inventory...". As a matter of data security, we deem this information as sensitive and confidential, and not necessary for the end-user to know the backup tape location or its contents. We appreciate the suggestions for improvement and will implement the ~ recommendations immediately. ¦ w Hawaii Counry is an Equal Opportunity Provider and Employer w r w W w r rr SECTION II COMPREHENSIVE ANNUAL FINANCIAL REPORT w r r r r w i1C ¦ w ~4 i COUNTY OF HAWAII s q ~ ~~~11~~. , ti.l~y\ 1ti.1'\rIW VVV~rn V 1.~Ar tin/ L+~~•'~I_V ~-i+n Ot viY V tiwr tin-+ r ~ o~ W OF Financial Audit Report for the Fiscal Year Ended June 30, 2006 w d r CASEY JARMAN ~ u. a KENNETH G. GOODENOW ~ County Clerk ~p;'•"~'"'''~`.+, Deputy County Clerk Lle;~ ` COLLEENSCHRANDT ~ Legislative Auditor Mailing Address: ~1ir~°~.i~~~~ Business Address: Former Coun Buildin ~O°~~ ~ ty 8~ 333 Kilauea Avenue, Second Floor r 25 Aupuni Street Ben Franklin Bui/ding Hilo, Hawaii 96720 Hilo, Hawaii 96720 „ County of Hawai `i Office of the County Clerk r 9'elephone: (808) 961-8255 Facsimile: (808) 961-89l2 w Forward This financial audit report is the result of the audit of the basic financial statements of the County of Hawaii, State of Hawaii (County), for the fiscal year ended June 30, 2006. The audit was conducted by KPMG LLP, certified public accountants. r The audit was performed in accordance with auditing standards generally accepted in the United States of America as set forth by the American Institute of Certified Public Accountants and the standards for financial audits set forth in the U.S. General Accountability Office's Government Auditing Standards. In addition, the audit was governed by the "Specifications" as set forth in Request For Proposal No. 2194 and the "Scope of Work" as set forth in Contract No. 0756, as issued by our office For the County of Hawaii. s This report is divided into two sections. Section 1, "Management Letter" includes the auditors' r findings and recommendations based upon their consideration of the County's internal control and recently issued government accounting pronouncements in connection with their audit of the County's financial statements for the fiscal year ended June 30, 2006. This section also includes specific agencies' responses to the auditors' findings and recommendations that indicates what action has been or will be taken. r Section II, "Comprehensive Annual Financial Report" for the fiscal year ended June 30, 2006, displays the basic financial statements and schedules of the County, the auditors' report as to the fairness of presentation of the basic financial statements and also includes statistical information. We wish to express our sincere appreciation for the cooperation and assistance extended by the ~ management and staff of the various departments during the audit. ~ f Colleen Schrandt r1 Legislative Auditor County of Hawaii Serving the Interests of the People of Our /stand Hawaii County is an Equal Opportunity Provider and Employer COUNTY OF HAWAII Financial Audit Report ~ For the Fiscal Year ended June 30, 2006 Table of Contents ~ Page SECTION I -MANAGEMENT LETTER Management Letter 1 Current Year Findings and Recommendations 2 r Recently Issued Governmental Accounting Pronouncements 5 s Comments by the Affected Agencies 7 SECTION II -COMPREHENSIVE ANNUAL FINANCIAL REPORT Introductory Section 1 Financial Section 11 Statistical Sections I 1 I i w w S IIQ r rr rl w ~1 rr r, SECTION I MANAGEMENT LETTER r. .r +r ¦ ¦ ¦ w a 1O COUNTY OF HAWAII STATE OF HAWAII ~ Management Letter For the Fiscal Year ended June 30, 2006 Table oS Contents r Page w ~ Management Letter 1 CURRENT YEAR FINDINGS AND RECOMMENDATIONS 2 r Collection of Receivables 2 Monitoring of Backup Media 4 RECENTLY ISSUED GOVERNMENTAL ACCOUNTING PRONOUNCEMENTS 5 r s a, s w r rr KPMG LLP Telephone 808 531 7286 PO Box 4150 Fax 808 541 9321 r Honolulu, HI 96812-4150 Internet www.us.kpmg.com r April 27, 2007 PRIVATE & CONFIDENTIAL r To the Members of the County Council of Hawaii County of Hawai `i Hilo, Hawaii: We have audited the basic financial statements of the County of Hawaii, State of Hawaii (the County), for the year ended June 30, 2006, and have issued our report thereon dated April 27, 2007. We have also audited the County's compliance with requirements applicable to the County's federal financial assistance y programs and have issued our report thereon dated April 27, 2007. In planning and performing our audit of the basic financial statements of the County, we considered internal control as a basis for designing our auditing procedures for the purpose of expressing our opinion on the basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County's internal control. Accordingly, we do not express an opinion on the effectiveness of the County's internal control. During our audit, we noted certain operational matters that are presented for your consideration. These r comments and recommendations, all of which have been discussed with the appropriate members of management, are intended to result in operating efficiencies. We have also provided a brief summary of the recently issued governmental accounting pronouncements for your consideration. Our audit procedures are designed primarily to enable us to form an opinion on the basic financial statements, and therefore may not bring to light all weaknesses in policies or procedures that may exist. We aim, however, to use our knowledge of the County's organization gained during our work to make comments and suggestions that we hope will be useful to you. This communication is intended solely for the information and use of the County Council and the County Administration and is not intended to be and should not be used by anyone other than these specified parties. s We would like to take this opportunity to express our appreciation for the courtesy and assistance extended to us by the personnel of the County of Hawaii during the course of our audit. Should you wish to discuss any of the matters contained herein, we will be pleased to meet with you at your convenience. r Very truly yours, w KPMG LLP, a U.S. Lmned LebiLry partnersdlp, is tM1a U 5 Y member tlrm of KPMG International, e Swiss coppe2tive- COUNTY OF HAWAII STATE OF HAWAII Current Year Findings and Recommendations For the Fiscal Year ended June 30, 2006 COLLECTION OF RECEIVABLES The timely collection of solid waste (landfill) and wastewater (sewer) receivables continues to be a problem for the Department of Environmental Management. To address deficiencies in landfill receivables, the County has ,r,,, continued in its efforts to improve collections of landfill fees and to reduce the amounts outstanding over 90 days. These continued efforts have resulted in a decrease in the amounts outstanding over 90 days as a percentage of total receivables from 28% at June 30, 2005 to 24% at June 30, 2006. For sewer receivables, a bill was passed by the County Council which makes the property owner ultimately responsible for the sewer bills. r Previously, the account holder was billed, which was often a lessor or a renter. By making the owner responsible, the County will now be able to place a lien on the property for past-due sewer charges. Although this may not have immediate results, this is an important step towards improving future collections. Additionally, effective October 1, 2005, a monthly I %z % interest charge on past-due balances replaced the previous one time penalty of ] 0%. These efforts have resulted in a decrease in the amounts outstanding over 90 days as a percentage of total receivable from 63% at June 30, 2005 to 54% at June 30, 2006. Despite the progress and improvements being made, landfill and sewer receivables outstanding more than 90 days still account for a significant portion of the respective balance as Follows: 2006 2005 Amount Percentage of Amount Percentage of outstanding total outstanding total Landfi!! Current $ 694,107 36% $ 583,650 43% 31 -60 days 609,719 32 360,564 26 6]-90 days 146,579 8 42,185 3 90+days 458,802 24 390,208 28 $ 1,909,207 100% $ 1,376,607 100% 90+ days 90+ days 24 .r 28% Curren[ _ 36% Curtent 43% a 61 - 90 days 61 - 90 days ~ 8% 3 ~ 31 - 60 days 31 - 60 days 32% 2F% a 2 (Continued) • COUNTY OF HAWAII i STATE OF HAWAII Current Year Findings and Recommendations W. For [he Fiscal Year ended June 30, 2006 2006 2005 Amount Percentage of Amount Percentage of outstanding total outstanding total Sewer Current $ 522,847 33% $ 631,261 31% 31 -60 days 141,078 9 25,391 1 r 61 - 90 days 69,400 4 107,497 5 90+ days 873,383 54 1,282,697 63 $ 1,606,708 100% $ 2,046,846 100% m Curren[ Curtenl 31°/ 33% 90+days 54% 3 ] - 60 days 90+ days ° 63% 1 31 - 60 days 61 - 90 days 9% 5% 61 - 90 days 4% Recommendation We recommend that the Department of Environmental Management continue to work with the Department of Finance to improve collection efforts on delinquent accounts. For landfill receivables, this means to focus on specific delinquent accounts as approximately 57% of the landfill receivable balance outstanding more than - 90 days at June 30, 2006 relates to a few customers. For sewer receivables, the focus should be on enforcing the changes made in the bill that was recently approved and place liens on the properties of delinquent account holders. w r 3 (Continued) COUNTY OF HAWAII STATE OF HAWAII Current Year Findings and Recommendations For the Fiscal Year ended June 30, 2006 MONITORING OF BACKUP MEDIA The County does not perform periodic tests of the data resident on the County's backup tapes. By not periodically testing the backup tapes and disks, the County is unable to identify corrupt media, which could impact its ability to restore critical data. This lack of testing puts the County at risk that its backup tapes could unknowingly become damaged and the data on that media may become inaccessible. In addition, the County does not maintain backup tape logs to track the location of its backup tapes. Without a system in place to track the County's backup tapes, the process of retrieving information from these backup tapes could be compromised. Recommendafiou We recommend that the Department of Data Systems document its periodic tests of the backup tapes by performing a sample data recovery and recording the results on a quarterly basis. This will allow the County to maintain the integity of its backup tapes on a regulaz basis. In addition, we also recommend that a log be maintained to track the location of the County's backup tapes to provide the users with a current inventory of its backup tapes and their respective locations. a a s w 4 r w COUNTY OF HAWAII STATE OF HAWAII Recently Issued Governmental Accounting Pronouncements r For the Fiscal Year ended June 30, 2006 The following are recently issued governmental accounting pronouncements that should be evaluated for their impact to the County upon adoption: • GASB Statement No. 43: Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. This statement establishes uniform financial reporting standards for other postemployment benefit (OPEB) plans and supersedes the ^ interim guidance included in GASB Statement No. 26, Financial d. Reporting for Postemployment Healthcare Plans Administered by Defined Benefit Pension Plans. The approach followed in this statement generally is consistent with the approach adopted in GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, with modifications to reflect differences between pension plans and OPEB plans. The requirements of this statement are effective one year prior to the effective date of GASB Statement No. 45 (see below), for the employer (single-employer plan) or for the largest participating employer in the plan (multiple-employer plan). The requirements of this statement aze effective in three phases based on a government's total annual revenues in the first fiscal year ending after June I5, 1999, either for periods beginning after December 15, 2005, December 15, 2006, or December I5, 2007. Earlier application of this statement is encouraged. • GASB Statement No. 45: Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. In addition to pensions, many state and local governmental employers provide OPEB as part of the total compensation offered to ~ attract and retain the services of qualified employees. OPEB includes postemployment healthcare, as well as other forms of postemployment benefits (for example, life insurance) when provided separately from a pension plan. This statement establishes standazds for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures and, if applicable, required supplementary information in the ~ financial reports of state and local governmental employers. a 5 (Continued) r COUNTY OF HAWAII STATE OF HAWAII Recently Issued Governmental Accounting Pronouncements For the Fiscal Year ended June 30, 2006 r • GASB Statement No. 48: Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues. This statement establishes accounting and financial reporting standards for transactions in which a government receives, or is entitled to, resources in exchange for future cash flows generated by r collecting specific receivables or specific future revenues. It also contains provisions that apply to certain situations in which a government does not receive resources but, nevertheless, pledges or commits future cash flows generated by collecting specific future revenues. In addition, this statement establishes accounting and financial reporting standards that apply to all intra-entity transfers of assets and future revenues. This statement does not apply to a government's pledge of its "full faith and credit" as security for its own debt or the debt of a component unit. The requirements of this statement apply to the financial statements of all state and local governments and are effective for periods beginning after December 15, 2006. • GASB Statement No. 49: Accounting and Financial Reporting for Pollution Remediation Obligations. This statement addresses accounting and financial reporting standards for pollution (including contamination) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups. The m scope of the document excludes pollution prevention or control obligations with respect to current operations, and future pollution remediation activities that are required upon retirement of an asset, such as landfill closure and postclosure care and nuclear power plant decommissioning. Once any one of five specified obligating events as provided in the statement occurs, a government is required to estimate the ~ components of expected pollution remediation outlays and determine whether outlays for those components should be accrued as a liability or, if appropriate, capitalized when goods and services are acquired. ~ The requirements of this statement are effective for financial statements for periods beginning after December I5, 2007, with measurement of pollution remediation liabilities required at the beginning of that period so that beginning net assets can be restated. +r rr 6 a ~ O0O,~1Y Oi /,,wq' L~~~. Bobby Jean Leithead-Todd r Harry Kim Director Mayor - _ Nelson Ho ' ~i~r.-~ Deputy Director F Of ~N~' ' LLII1Ilt~~l II~ ~ttillMtT DEPARTMENT OF ENVIRONMENTAL MANAGEMENT 25 Aupuni Street • Hilo, Hawaii 96'720-4252 (808) 961-8083 • Fax (808) 961-8086 http://co.hawaii.hi.us/directory/dir envmng.htm MEMORANDUM ' DATE June 18, 2007 r. TO Colleen Schrandt, Legislative Auditor FROM Bobby Jean Leithead-Todd, Director SUBJECT: Fiscal Year 2006 Preliminary Draft Management Letter r We have reviewed the fiscal year 2006 draft Management Letter concerning the Collection of Receivables and concur with the audit recommendations. We are continuing to work with the Department of Finance and the Office of the Corporation Counsel to improve collection efforts. As the auditors have noted, improvements have been made and we are continuing our efforts to further reduce the receivables outstanding for more than 90 days. r Our collection of solid waste (landfill) receivables has shown significant improvement over the past few years. Amounts outstanding over 90 days have been reduced from 47% of the i total receivables at the end of fiscal yeaz 2002 to 24% at the end of fiscal yeaz 2006. The sewer receivables were significantly reduced in 2006 by the collection of the largest + delinquency. To aide in the collection of sewer fees, a bill was passed by the County + Council which makes the property owner ultimately responsible for the sewer bills. By making the property owner responsible, we can now place a lien on the property for past due sewer charges. As noted by the auditors, this is an important step for guazanteeing future collections. While we will be enforcing the changes made by this bill, it is also important to understand that collecting on a lien can often take many years. To further increase our collection efforts, a new Credit and Collection Clerk position will rll be created in FY07-08. This new position will focus on the collection of past due solid waste and sewer accounts. Having one position dedicated to collections will provide more timely and consistent collection efforts and allow us to put more focus on the larger r accounts as recommended. Hawai ~i County is an equal opportunity provider an emp over. a ~Y Oi~ ~L~~ ~ w, , ~ ~T•~Di~N•+ I-IanyKim Clayton K. Yugawa ~yj~- Di+e<to+ County of Hawaii DATA SYSTEMS DEPARTMENT 25 Aupuni Sveey Room 102 I-rilo, Hawaii 96720-4252 r (808) 961-8207 • Fax (808) 961-8453 MEMORANDUM DATE: JUNE 19, 2007 TO: COLLEEN SCHRANDT, LEGISLATIVE AUDITOR FROM: CLAYTON YUGAWA, DIRECTOR -DATA SYSTEM r / SUBJECT: RESPONSE TO AUDITOR'S REPORT DRAFT 6/7/0 t received a copy of the Auditor's report ending 6/30!07 and offer this response to the recommendations on Page 8. Data Systems often receive requests for restoration of users files/folders from backup tapes and have not encountered any failure issues due to backup tape errors. However, I am in agreement that there should be a periodic and documented test of the restoration process, to insure data integrity and reliability on its retrieval. We will implement a quarterly process to randomly restore files and folders, and document the results. With regards to the improvement of the backup tape log, we will improve the details of the backup tape information to include the storage location. However, in your recommendation you recommended "...to provide the users with a current inventory...". As a matter of data security, we deem this information as sensitive ' and confidential, and not necessary for the end-user to know the backup tape location or its contents. We appreciate the suggestions for improvement and will implement the ~ recommendations immediately. i ~ Hawai'i County is an Equal Opportunity Provider and Employer w s w r~ ¦ r w SECTION II COMPREHENSIVE ANNUAL FINANCIAL REPORT r r1 COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2006 . , r =~Q~= ~w v/~ V V V V Q v~V~~vvv t ...y.~... J J' ~ Nw M~~ ' F OF H P r COUNTY OF HAWAII Hilo, Hawaii Harry Kim ~ Mayor w Dixie Kaetsu Managing Director ¦ Prepared by ~ The Department of Finance William Takaba Director of Finance r rr r~ r COUNTY OF HAWAII s Comprehensive Annual Financial Report ^ For the Fiscal Year Ended June 30, 2006 r Table of Contents s Paee INTRODUCTORY SECTION Letter of Transmittal ] ~ GFOA Certificate of Achievement 7 Organization Chart 8 List of Elected Officials 9 ~ List of Principal Officials 10 FINANCIAL SECTION Independent Auditors' Report 11 Management's Discussion and Analysis 13 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 24 r Statement of Activities 26 Fund Financial Statements: Balance Sheet -Govemmental Funds 28 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 29 Statement of Revenues, Expenditures, and Changes in Fund Balances - Govemmental Funds 30 Reconciliation of the Change in Fund Balances of Govemmental Funds to the Statement of Activities 32 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) -General Fund 34 ~ Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) -Solid Waste Fund 38 ~ Statement of Net Assets -Proprietary Funds 39 Statement of Revenues, Expenditures, and Changes in Fund Net Assets - ~ Proprietary Funds 40 ~ Statement of Cash Flows -Proprietary Funds 4] Statement of Fiduciary Net Assets -Fiduciary Funds 42 Statement of Changes in Fiduciary Net Assets -Fiduciary Funds 43 ~ Notes to the Basic Financial Statements 44 a/ FINANCIAL SECTION (Continued) Paee Combining and Individual Nonmajor Fund Statements and Schedules: ~ Combining Balance Sheet -Nonmajor Govemmental Funds 82 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances -Nonmajor Governmental Funds 86 Schedules of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual (Budgetary Basis): Highway Fund 89 ~ Sewer Fund 90 Cemetery Fund 91 r" Parking Meter Fund 92 ~ Vehicle Disposal Fund 93 Bikeway Fund 94 Workforce Investment Act Fund 95 Golf Course Fund 96 Geothermal Relocation Revolving Fund 97 Beautiftcation Fund 98 ~ Hawaii County Housing Agency 99 Park Dedication Fund 100 Combining Balance Sheet -Agency Funds 102 ~ Combining Statement of Changes in Assets and Liabilities -Agency Funds 104 Combining Statement of Net Assets -Private Purpose Trusts 108 r` Combining Statement of Changes in Net Assets -Private Purpose Trusts 109 ~ STATISTICAL SECTION 41~ Table 1 -Net Assets by Component 1 I 1 ~ Table 2 -Changes in Net Assets 112 y, Table 3 -Fund Balances, Governmental Funds 113 Table 4 -Changes in Fund Balance, Governmental Funds 114 ~ Table 5 -Real Property Assessed Values by Classification and Tax Rates 115 y„ Table 6 -Principal Taxpayers 119 Table 7 -Property Tax Levies and Collections 120 AR Table 8 -Ratios of Outstanding Debt by Type 121 ~ Table 9 -Ratios of General Bonded Debt Outstanding 122 Table 10 -Legal Debt Margin Information 123 I~ Table I 1 -Demographic and Economic Statistics 124 r, Table 12 -Principal Employers, County of Hawaii 125 Table 13 -Full-Time Equivalent County Government Employees by Function 126 P Table 14 -Operating Indicators by Function 127 ~ Table 15 -Capital Asset Statistics by Functions 128 wi s r r r r r. r ~ INTRODUCTORY SECTION r~ r r ~A ¦ 1 w i it nor p Harry Kim ~ William Takaba s Mayor ~ Direcfar ,W Nancy E. Crawford Depury Director County of Hawaii Finance Department 25 Aupuni SVee[, Room 118 Hilo, Hawaii 96720 ~ (808)961-8234 Fax (808)961-8248 r April 27, 2007 r The Honorable Mayor and Members of the Council County of Hawaii r 25 Aupuni Street Hilo, Hawaii 96720 r. We transmit herewith the Comprehensive Annual Financial Report for the County of Hawaii, State of Hawaii, for the fiscal year July 1, 2005 to June 30, 2006. This report was prepazed by the County's Department of Finance. The accuracy of the financial statements and the completeness and fairness of their presentation are the responsibility of the r. County government. We believe the enclosed data are complete and accurate in all material respects and aze reported in a manner designed to present fairly the financial position and results of operations of the various funds of the County. All disclosures necessary to convey the maximum understanding of the County's financial activities have been included. Management's discussion and analysis is also included to aid users of the financial statements. This report presents the financial position of the County of Hawaii at June 30, 2006 and results of operations for the fiscal year then ended. The report is divided into three sections: The Introductory Section includes this transmittal letter, a Certificate of Achievement for Excellence in Financial Reporting, the County of Hawai`i's organization chart and lists of elected and principal officials. The Financial Section contains management's discussion and analysis, the basic financial = statements, related notes, the combining and individual fund budgetary financial statements, and the independent auditors' report. ~ The Statistical Section includes selected financial and demographic information, generally presented on a multi-year basis. ~ This report includes all funds of the County of Hawaii, including its component unit, the Departrnent of Water Supply, established by the County Charter as asemi-autonomous body of rr -1- w the County government. This component unit is included in the County's reporting entity because of its financial relationship with the County. ` The County provides the full range of municipal services. These include police and fire r protection; emergency medical caze; public prosecutor; culture and recreation; sanitation; social services; water; planning and zoning; construction and maintenance of highways, streets and w~ infrastructure; real property assessment and tax collection; and general administrative services. r,, However, the County does not provide such other traditional services as public education, hospitals and courts. These services are provided by the State government. ~ r The County of Hawaii consists of the island of Hawaii, 4,028 square miles in size. It is twice as large as the combined azea of all the other inhabited islands in the Hawaiian Archipelago. ~r Since there is no other local or municipal government within the County, there are no w overlapping taxes and no overlapping debt. The County of Hawaii has an elected mayor and a nine-member council. r. Economic Condition and Outlook The island of Hawaii, commonly known as the Big Island, is located 214 miles from Honolulu, r the state capital; 2,200 miles from the west coast of the continental United States; and 4,000 miles from Japan. The city of Hilo on the east side of the island serves as the county seat as well ~ as the transportation and financial center for the Big Island. Hilo's infrastructure includes Hilo n Harbor, adeep-water port, and Hilo International Airport, which is capable of handling fully- loadedwide-bodied aircraft. Kailua-Kona and South Kohala, major tourist destination areas on ~ the west side of the Big Island, aze served by flights from the United States mainland, 3apan and ~ Canada through the Kona International Airport. Scheduled freight services are available between the islands by air and sea transport. Communities on the island are linked by a network ~ of State and County maintained streets and highways. The Big Island is the most diversified of the neighbor island economies. As a result it is buffered ~ when any one industry lags. Currently, the Big Island is enjoying its best economic times in °i recent years. The west side growth is fueled by surging visitors numbers and record construction ~ activity, while the east side economic activity is led by the University of Hawaii at Hilo and other government construction projects. r' Continued increasing population has contributed to a growing labor force that numbered 84,350 in August 2006. The expanding economy has matched the growth in available work force and ` unemployment continues to follow a downward trend, with an average 3.3 percent for 2006. Total and per capita personal income have been steadily increasing. _ Tourism - Tourism is the major industry on the island. In addition to the mild climate and natural beauty it shares with other azeas in the state, the County features the Hawaii Volcanoes National Pazk. A popular attraction, the park is the most visited site in the state, handling over 2 million visitors annually. r -2- A Total visitors to Hawaii increased slightly compazed to the prior yeaz, with 1,487,747 arrivals in 10~ 2005. A developing source for bringing tourists to the island of Hawaii is the cruise ship industry. Over 300,000 cruise ship visitors arrived in 2005. ~ Scientific Research and Development - Due largely to its unique geographic characteristics which has attracted scientists in fields of astronomy, meteorology, volcanology, and agriculture/aquaculture, Hawaii County has benefited economically by the significant ~ investments made in scientific reseazch. The total astronomy related capital investment on Mauna Kea exceeds $600 million and combined annual budgets aze about $60 million, while direct employment is over 500. The Hawaiian Volcano Observatory in Hawaii Volcanoes National Pazk and the Natural Energy Laboratory of Hawaii Authority at Keahole, Kona are also major contributors to international research and the local economy. ¦ Agriculture - Forestry, nut and fruit orchards, and floral and vegetable farms have successfully .ir replaced lands where sugar once grew. Demand for Kona coffee is improving and macadamia ~ nut prices remain strong. Papaya remains the largest orchazd crop. Agriculture makes a substantial contribution to the County's economy and produces a variety of goods for export as well as for local consumption. r Major Initiatives For the Year During the year, the County focused on public works, planning, and other issues affecting the r quality of life in the County. Public Works -Preliminary and construction work continued on several West Hawaii road projects including Kuakini Highway and various connector roads. Construction of intersection curb cuts and facilities upgrades to meet Americans with Disabilities Act (ADA) requirements is anon-going project. Construction was completed on the Kawailani Street Bridge and the r. Kamuela Senior Housing Project. In addition, the County is investigating using Community Facility Districts to help speed up construction of roadways by developers in West Hawaii. Planning -The Planning Department initiated the Community Development Plan (CDP) process, beginning in the districts of North and South Kona, and Puna. These districts are being followed by North and South Kohala in an effort that has become the most comprehensive planning process in the State of Hawaii. Open Space -The Public Access, Open Space and Natural Resources Preservation Commission 'r was established during the yeaz. Its mission is to identify land in coastal azeas and historic or ~ culturally-important lands and sites to be earmazked for purchase by the County to preserve it for ~ recreation and conservation. In addition, the Public Access, Open Space and Natural Resources Preservation fund was created. w ~ Transit Services -During the year the Mass Transit Agency established Kokua free bus service island wide. This program, as well as, expanded bus routes are aimed at giving residents i -3- rr r• alternative transportation options. Ridership has exceeded expectations with more than 100 w percent capacity on many routes. For the Future r Public Safety -Expansion and upgrade of Fire and Police facilities azound the island are being planned and site selection is in process. ~ Public Works -The County is working on developing a West Hawaii Civic Center. This r. facility will improve access to government for the Kona residents. Additionally, the County is working on several major road projects to enhance traffic in West Hawaii. Environmental Management- As the Hilo landfill approaches full capacity, the County will be looking at solid waste technology alternatives to divert waste from the Hilo landfill to enable the County to close that facility. It is anticipated that a request for proposals will be issued in the next yeaz. The County is also working closely with the State Department of Health to extend the life of the Hilo landfill. Human Resources -With numerous Countywide vacancies, and a tight labor market, new "jobs" marketing strategies were developed to reach different segments of the population. Other Financial Information ~ Internal Control r The management of the County is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the County are protected from loss, theft or ~ misuse and to ensure that adequate accounting data are compiled to allow for preparation of r'' financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these ~ objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control ~ should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits ~ requires estimates and judgments by management. r Budgetary Control The County maintains budgetary controls to ensure that legal provisions of the annual budget are ~ complied with and that expenditures do not exceed budgeted amounts. Activities of the general fund and specia? revenue funds are included in the annual appropriated operating budget. Project-length financial plans are adopted for the capital projects fund. Budgetary control is established at the department level. Formal budgetary integration is employed as a management control device for the general fund, special revenue funds, and the capital projects fund. Budgetary control for the debt service fund is achieved through general obligation bond indenture provisions. r r -4- s r r ~ The basis of accounting used for the budgets of the general and special revenue funds differs from generally accepted accounting principles. Intergovemmentalrevenues are recognized when awarded by the granting agency, encumbrances and unexpended allotments are treated as ~ expenditures for purposes of determining legal compliance with the annual budget, all leases aze treated as operating leases, and accounts payable are not accrued. The County also maintains an encumbrance accounting system as one technique of "r accomplishing budgetary control. Encumbrances outstanding at fiscal year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because they will ~ be honored during the following year. As demonstrated by the statements and schedules included in the financial section of this report, the County continues to meet its responsibility for ~ sound financial management. Pension Plan All full-time employees of the County participate in the Employees' Retirement System of the State of Hawaii, acost-sharing, multiple-employer defined benefit public employee retirement system. s ~ Cash Management Cash temporarily idle during the yeaz was invested in demand deposits, certificates of deposit and repurchase agreements. The average yield on investment was 2.66%. The County's policy is to minimize credit and mazket risks while maintaining a competitive yield on its portfolio. Accordingly, with the exception of $255,600 held by bond paying agents and a r rental management agent, deposits were either insured by federal depository insurance, collateralized, or secured by irrevocable letters of credit. All collateral on deposit was held for safe keeping with aCounty-designated agent in the County's name. r Risk Management The County maintains insurance coverage for privately owned police vehicles as well as for other purposes. The County is substantially self-insured for its vehicles as well as for all other perils including workers' compensation and general liability. Other Information ~ IndependentAudit ~ The Hawaii County Charter requires an annual audit by independent certified public A° accountants. KPMG LLP was selected by the County Council to perform the audit. Employee Union Contracts ~ County employees are members of seven different bargaining units. All of the bargaining units have contracts that run through June 30, 2007. a t -5- Certificate of Achievement W The Government Finance Officers Association of the United States and Canada (GFOA) ~ awarded a Certificate of Achievement for Excellence in Financial Reporting to the County of Hawaii for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2005. This was the eighteenth consecutive year that the government has achieved this prestigious ~ award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgments The preparation of this report on a timely basis was made possible by the efficient and dedicated ~ services of the entire staff of the Department of Finance and fiscal personnel in other departments. I am grateful for their help in preparing this report. I also thank the Mayor and the members of the County Council for their interest and support in assuring the continuing sound ~ financial condition ofthe County of Hawaii. ~ r A WILLIAM TAKABA ` Director of Finance w l• s 0 r a R? -6- ~ v Certificate of Achievement for Excellence in Financial Reporting Presented to County of Hawaii For its Comprehensive Annual Financial Report for the Fiscal Yeaz Ended June 30, 2005 Y. A Certificate of Achievement for Excellence in Financial Reporting is presented by the Govemment Finance Officers Association of the United States and Canada to i government units and public employee retirement systems whose comprehensive annual fmancial reports (CAFRs) achieve the highest ~ standards in government accounting and financial reporting. r w ..SE OFF/ r ~ o~iFS G President Executive Director s r -7- r o* County of Hawaii r Organization Chart County Electorate ~ r County Council Mayor Prosecuting Attorney ~ County Clerk Office of Management: ~ Managing Director r Departments and agencies Agencies under Departments under ~ under direct supervision administrative supervision commissions and ~ of the Mayor and/or of the Mayor: administrative supervision Managing Director: of the Mayor: ~ ra Corporation Counsel Civil Defense Civil Service Finance Office of Aging Police ~ Planning Mass Transportation Liquor Control Environmental Management Housing & Community Fire ~ Research & Development Development Water Supply Yn Public Works (semi-autonomous) Parks & Recreation ~ Data Systems E a. r Yr 1? r -8- i County of Hawaii s Elected Officials r `r Administrative Officers (Term: 2004-2008) ~ Harry Kim Mayor +r Jay T. Kimura Prosecuting Attorney County Council (Term: 2004-2006) Stacy K. Higa Chair w ~ Virginia Isbell Vice Chair James Y. Arakaki Member Pete Hoffmann Member ~ Fred C. Holschuh, M.D. Member Donald Ikeda Member Bob Jacobson Member K. Angel Pilago Member Gary Safarik Member r r i -9- Principal Officials June 30, 2006 County Clerk Connie Kiriu Legislative Auditor Vacant ~ Managing Director Dixie Kaetsu Deputy Managing Director Peter L. Hendricks Corporation Counsel Lincoln Ashida Director of Finance William Takaba Planning Director Christopher Yuen Director of Personnel Michael R. Ben Director of Research and Development Jane Testa Chief of Police Lawrence K. Mahuna Fire Chief Darryl Oliveira ~ Director of Public Works Bruce McClure ~ Director of Environmental Management Barbara Bell ~ Director of Pazks and Recreation Patricia Engelhard Manager, Department of Water Supply Milton Pavao Civil Defense Administrator Troy M. Kindred ~ Director of Liquor Control Janice A. Pakele Transit Operations Administrator Thomas Brown ~ Executive on Aging Alan Pazker Administrator, Office of Housing and Ile Community Development Edwin S. Taira ~ r r r r I! Y -]0- s i r ~ FINANCIAL SECTION rr r ur r r r w r i 7 r KPMG LLP PO Box 4150 w Honolulu, HI 96812-4150 W r N/ Independent Auditors' Report r To the Chair and Members of the ~ County Council County of Hawaii State of Hawaii: r We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the County of Hawaii, State of Hawaii (the County) as of and for the year ended June 30, 2006, 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 auditing standards generally accepted in the United States of America 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the County's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and the 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. r In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely a presented component unit, each major fund, and the aggregate remaining fund information of the County as of June 30, 2006, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparisons for the general fund and the solid waste fund for the i year then ended in conformity with U.S. generally accepted accounting principles. r -11- ~ KPMG LLP, a U.S. Ilmited Lability partnership, is the U.S. ~ member firm of KPMG Intemanonel, a Swiss cocpeauva In accordance with Government Auditing Standards, we have also issued our report dated April 27, 2007 ~ 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 the 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. ~ The management's discussion and analysis on pages 13 through 22 is not a required part of the basic ~ financial statements but is supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of ~ management regarding the methods of measurement and presentation of the required supplementary r information. However, we did not audit the information and express no opinion on it. s Our audit was conducted for the purpose of forming opinions on the financial statements that collectively ` comprise the County's basic financial statements. The introductory section, the combining and individual nonmajor fund financial statements, and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of ` basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the R basic financial statements taken as a whole. The introductory section and the statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we express no opinion on them. '~`Plv(~ LLB ~ Honolulu, Hawaii April 27, 2007 is lr r. r wn r s i -12- r MANAGEMENT'S DISCUSSION AND ANALYSIS i This section of the County of Hawai`i's (the County) Comprehensive Annual Financial Report presents a narrative overview and analysis of the financial activities of the County for the fiscal ~ year ended June 30, 2006. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal. FINANCIAL HIGHLIGHTS • The assets of the County exceeded its liabilities at the end of the fiscal year by $441.8 million r (net assets). This amount includes $9.7 million in unrestricted net assets, an increase of $20.6 million from the prior year. • The government's total net assets increased by $45.6 million during the fiscal year. r • As of the close of the current fiscal year, the County's governmental funds reported combined ending fund balances of $207.0 million, an increase of $32.9 million from the prior year. Approximately 45 percent of this total amount, $92. ] million, is available for spending at the government's discretion (unreserved fund balance). • At the end of the current fiscal year, unreserved fund balance for the general fund was $23.4 million, or 13 percent of total general fund expenditures. • The County's total current and other assets increased by $31.1 million (IS percent) during the current fiscal year. The key factors in this increase were the increase in state and federal gran[ receivables ($5.6 million) and the net increase in cash and investments ($24.9 million). OVERVIEW OF THE 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) r Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. r Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview r of the County's finances, in a manner similar to aprivate-sector business. The statement of net assets presents information on all of the County's 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 or not the financial position of the County is improving or deteriorating. ~ The statement of activities presents information showing how the County's net assets changed during the most recent 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 expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave. wl Both of the government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from -13- r A other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-Type activities). The governmental activities of the County include r public safety, highways and streets, health, education and welfare, culture and recreation, ~ sanitation and general government. The business-type activities of the County include rental housing for senior citizens and families. The government-wide financial statements include not only the CounTy itself (known as the • primary government), but also the Department of Water Supply, a legally separate entity that the r„ County is financially accountable for. Financial information for this component unit is reported separately from the fmancial information presented for the primary government itself. nr Fund Financial Statements The fund financial statements are designed to report information about groupings of related A accounts which are used to maintain control over resources that have been segregated for specific rr activities or objectives. The County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County can be divided into the following three categories: governmental funds, r proprietary funds, and fiduciary funds. ar Governmental funds. Governmental funds are used to account for essentially the same functions reported as govemmental activities in the government-wide financial statements - i.e., most of the County's basic services are reported in governmental funds. These statements, however, focus on (I) how cash and other financial assets can readily be ~ converted to available resources and (2) the balances left at year-end that are available for ~ spending. Such information may be useful in determining what financial resources are available in the near future to finance the County's programs. flr 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 fund balance sheet and ~ the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and ~ governmental activities. The County maintains several individual governmental funds organized according to their type (general, special revenue, debt service, and capital projects). Information is presented separately in the govemmental fund balance sheet and in the governmental fund statement of pr revenues, expenditures, and changes in fund balances for the general fund, solid waste fund and capital projects fund, which are considered to 6e major funds. Data from the remaining .r governmental funds are combined into a single, aggregated presentation. Individual fund ~ data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report. The County adopts an annual appropriated budget for its general fund and special revenue ~ funds. A budgetary comparison statement has been provided for these funds to demonstrate compliance with this budget. The budgetary comparison statement for the general fund and solid waste fund is located in the basic financial statements, whereas the budgetary Iw comparison statements for the nonmajor special revenue funds are presented elsewhere in r, this report. s t -14- r r .t Proprietary funds. Proprietary funds are generally used to account for services for which ~ the County charges outside customers. Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail. The County maintains only one type of proprietary funds, enterprise funds. Enterprise funds ~ are used to report the same functions presented as business-type activities in the government- wide financial statements. The County uses enterprise funds to account for the operations of the Kulaimano Elderly Housing Project and the Ouli Ekahi Affordable Housing Project. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of „w parties outside the County. The Geothermal Asset Fund, Shippers' Wharf Trust Fund and the agency funds are reported under the fiduciary funds. Since the resources of these funds are not available to support the County's own programs, they are not reflected in the ~ government-wide financial statements. The accounting used for fiduciary funds is much like that used for proprietary funds. Notes to the Basic Financial Statements +r The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Other Supplementary Information r In addition to the basic financial statements and accompanying notes, this report also presents supplementary information, including the combining statements referred to earlier in connection ttr with nonmajor governmental funds and budget comparison statements for the nonmajor special revenue funds. This supplementary information is presented immediately following the notes to the basic financial statements. ~ GOVERNMENT-WIDE FINANCIAL ANALYSIS Condensed Schedule of Net Assets June 30, 2006 and 2005 ~ Primary Government Governmental Activities Business-type Activities Total ~ 2006 2005 2006 2005 2006 2005 Assets: ~ Current and other azsets $ 233,765,854 $ 202,715,246 $ 1,382,097 $ 1,339,425 $ 235,147,951 $ 204,054,671 ~ Capital assets, net 516,600,592 497,287,738 1,336,920 1,367,065 517,937,5 I2 498,654,823 Total azsets $ 750,366,446 $ 700,002,984 $ 2,719,017 $ 2,706,510 $ 753,085,463 $ 702,709,494 w Liabilities: ~ Long-term liabilities outstanding 292,196,562 286,831,687 1,019,386 1,041,285 293,215,948 287,872,972 ~ Other liabilities 17,685,089 18,300,401 385,869 306,296 18,070,958 18,606,697 Total liabilities $ 309,881,651 $ 305,132,088 $ 1,405,255 $ 1,347,581 $ 311,286,906 $ 306,479,669 f~ Ne[ assets: '911 Invested in capital assets, net ~ of related dell 386,861,296 364,662,377 317,534 325,800 387,178,830 364,988,177 Restricted 44,737,588 41,950,262 182,797 182,167 44,920,385 42,132,429 Unrestricted (deticiQ 8,885,911 (11,741,743) 813,431 850,962 9,699,342 (10,890,781) Total net assets $ 440,484,795 $ 394,870,896 $ 1,313,762 $ 1,358,929 $ 441,798,557 $ 396,229,825 a _15_ r Analysis of Net Assets r As noted earlier, net assets may serve over time as auseful indicator of a government's financial position. In the case of the County, assets exceeded liabilities by $441.8 million at the close of the most recent fiscal year. By far the largest portion of the County's net assets (88 percent) reflects its investment in capital ~ assets (e.g., land, buildings, infrastructure, and equipment), less any related debt used to acquire r" those assets that is still outstanding. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the County's net assets (10 percent) represents resources that are subject to external restrictions on how they may be used. r. w At the end of the current fiscal year, the County is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The government's net assets increased by $45.6 million during the current fiscal year. Approximately $22.4 million of the increase is due to increases in real property tax valuations and collections. The remaining increase represents the degree to which increases in ongoing revenues ~ have outstripped similar increases in ongoing expenses. • The government's current and other assets increased by $31.1 million during the current fiscal r year. Approximately $24.9 million of the increase is due to an increase in cash and investments, while $5.6 million is due to an increase in state and federal grant receivables. 1~ r The government's capital assets increased by $19.3 million due to the large amount of capital improvement projects done by the County during the current fiscal year. See further discussion p of the increase in capital assets on page 21. s The government's long-term liabilities outstanding increased by $5.3 million due to the new general obligation bonds issued during the current year, offset by principal payments and decreases in other long-term liabilities. See further discussion of the increase in long-term debt outstanding on page 22. r The government's other liabilities decreased by $0.5 million primarily due to a decrease in unearned revenue relating to intergovernmental grants ($1.6 million) offset by smaller increases in other accounts. r r i -16- s r s • Condensed Schedule of Changes in Net Assets ~ For the Fiscal Years Ended June 30, 2006 and 2005 Primary Government tr Governmental Activities Business-type Activities Total 2006 2005 2006 2005 2006 2005 ~ Revenues: Program revenues: r Charges for services $ 38,977,264 $ 35,377,514 $ 338,141 $ 314,971 $ 39,315,405 $ 35,692,485 Operating grants and contributions 38,252,889 36,370,993 141,019 135,829 38,393,908 36,506,822 Capital grants and contributions 14,801,828 26,221,627 - - 14,801,828 26,221,627 General rwenues: Property Lazes 152,182,806 129,775,410 - - 152,182,806 129,775,410 Other [axes 21,997,764 19,948,903 - - 21,997,764 19,948,903 ~ Grants and contributions, unrestricted 18,510,262 16,734,850 - - 16,510,262 16,734,850 ~ Investment earnings 4,976,178 2,957,188 22,674 13,580 4,999,052 2,970,768 Miscellaneous 2,110,854 3,657,794 - - 2,110,854 3,657,794 Total revenues 291,809,845 271,044,279 502,034 464,380 292,3[ 1,879 271,508,659 Expenses: General gwemmen[ 38,264,132 61,262,329 - - 38,264,!32 51,262,329 Public safety 106,067,466 94,422,057 - - 106,067,466 94,422,057 w Highways and streets 24,783,476 20,857,341 - - 24,783,476 20,857,341 Health, education and welfare 20,181,685 21,503,635 547,201 484,879 20,728,886 21,988,514 _ Culture and recreation 19,464,962 16,124,457 - - 19,464,962 16,124,457 Sanitation 27,266,615 26,669,660 - - 27,265,515 26,669,660 ~ Interest on longterm debt 10,168,710 8,718,758 - - 10,168,710 8,716,758 Total expenses 246,195,946 239,558,237 547,201 484,879 246,743,147 240,043,116 Increase (decrease)in net assets 45,613,899 31,486,042 (45,167) (20,499) 45,568,732 31,465,543 ~ Net assets at beginning of year 394,870,896 363,384,854 1,358,929 1,379,428 396,229,825 364,764,282 Net assets at end of year $440,484,795 $ 394,870,896 $ 1,313,762 $ 1,358,929 $ 441,798,557 $ 396,229,825 ~ Analysis of Changes in Net Assets Governmental activities. Governmental activities increased the County's net assets by $45.6 million or primarily all of the total growth in net assets of the County. Total revenues increased by $20.8 million (eight percent). The County's property taxes increased ,r by $22.4 million (17 percent) during the year. Most of this increase is attributable to the increase in assessed values. Grants and contributions not restricted to specific programs increased by $].8 million (I 1 percent). Total expenses increased by $6.6 million (three percent). This increase was primarily due to ~ increases in almost all of the expense categories. Part of the increase is the result of negotiated pay raises and related benefits. Much of the increase in all areas is due to the increased cost of ~ employee benefits, particularly employee retirement and health insurance costs. These increases were offset by a decrease in general government expenditures of $13.0 million (25 percent). This aw decrease is primarily due to a reduction in claims and judgments, as well as fewer general +r government capital projects. For the most part, other fluctuations in expenses closely paralleled inflation and growth in demand for services. II! w w -17- w nr Expenses and Program Revenues -Governmental Activities Year Ended June 30, 2006 t2o,oo0,000 ~ 100,OOO,o00 a ¦Expenses i - ~ Program revenues ~ ti 80000,000 ~ ~ der . g - +w,r~'~, i ~ - arw s~~r , 6o,ooc o00 ~ r u~a' ~ a~ ao,ooo,ooo _ - ; . w 20,000,000 w. - ~ General Public safety Highways and Health, Culture and Sanitation Interest on y government streets education and recreation long-tens debt welfare Revenues by Source -Governmental Activities Year Ended June 30, 2006 /II' Investment earnings i 2% -1 Miscellaneous i% Grants and contributions not 1 ~ resvicted to specrfic programs ~ / Charges for services Yi 6% 13% Other taxes 9% ~ Operating grants and contributions 13% Capital grants and contributions ~ 5% Property nixes 52% ~ i Illy -18- ~ ~ The charts above illustrate the County's govemmental expenses and revenues by function, and its revenues by source. As shown, public safety is the largest function in expense (43 percent), followed by general government (16 percent) and sanitation (11 percent). General revenues such as property and other taxes are not shown by program, but aze effectively used to support program activities countywide. For govemmental activities overall, without regard to programs, property taxes are the largest single source of funds (S2 percent), followed by charges for services w (13 percent) and operating grants and contributions (13 percent). Business-type activities. Business-Type activities decreased the County's net assets by $45,167. Expenses for health, education and welfare account for all of the $547,201 of expenses. Charges ~ for services were $338,141, operating grants and contributions were $141,019 and investment earnings were $22,874. ~ FINANCIAL ANALYSIS OF THE COUNTY'S FUNDS As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with ~ finance-related legal requirements. Governmental funds. The focus of the County's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful r in assessing the County's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. a As of the end of the current fiscal year, the County's governmental funds reported combined ending fund balances of $207.0 million, an increase of $32.9 million in comparison with prior year. Approximately 45 percent of this total amount ($92.1 million) constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of the fund balance is reserved to indicate that it is not available for new spending because it has already ~ been committed 1) to liquidate contracts and purchase orders for last fiscal year ($64.6 million), 2) to pay debt service ($16.8 million), or 3) for a variety of other restricted purposes ($33.5 million). The general fund is the chief operating fund of the County. At the end of the current fiscal year, .e unreserved fund balance of the general fund was $23.4 million ,while total fund balance reached $35.0 million. As a measure of the general fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 13 percent of total general fund expenditures, while total fund balance represents 20 percent of that same amount. r The fund balance of the County's general fund increased by I.0 million during the current " fiscal year. Key factors in this increase are as follows: • An increase of $22.1 million (17 percent) in property tax revenue due to increasing property values. i • An increase of $3.1 million (seven percent) in intergovernmental revenue due to an increase in transient accommodations talc proceeds ($1.8 million) and emergency medical services proceeds ($0.7 million) from the state and increased federal grant revenue related to many +r different programs. -19- r • An increase of $5.2 million (44 percent) in pension and retirement system contributions. The increase is due to a change in contribution methods established by State statute. During the current fiscal year, the contribution amount was changed from a fixed contribution amount ~ for the year based on the actuarial valuation of the plan to a percentage contribution based on fixed percentages of salaries and wages. r` • An increase of $5.0 million (l9 percent) in general government expenditures due primarily to ~ increases in expenditures for the legislative branch ($0.8 million), planning ($0.6 million), research and development ($0.8 million) and automotive ($0.5 million). Increases were noted in many of the grant-funded programs, coqui frog eradication, fuel costs, community ~ development plans as well as in salaries and wages due to negotiated pay increases and an increase in the number of positions. r • An increase of $6.9 million (]0 percent) in public safety expenditures due primarily to increases in expenditures for police ($3.1 million), fire ($2.9 million) and civil defense ($0.6 million). Increases were noted in many of the grant-funded programs as well as in salaries and wages due to negotiated pay increases. • An increase of$2.1 million (103 percent) in highways and streets expenditures due primarily to increases in expenditures for mass transit ($2.1 million) due to increased spending in federal grant-funded transit programs. ir. • A decrease of $1.8 million (30 percent) in capital outlay due primarily to decreases in CDBG and HOME grant programs for capital improvements ($1.8 million). ~ The fund balance of the County's capital projects fund increased by $16.2 million during the ~ current fiscal year. The increase is primarily due to the fund's main revenue sources of intergovernmental revenue ($8.3 million), transfers in ($7.3 million) and bond proceeds ($25.0 nr million) combining to exceed capital expenditures ($26.3 million) for the current fiscal year. The debt service funds, included in other governmental funds, have combined total fund balances of $16.8 million, all of which is reserved for the payment of debt service. The net increase in the ^ combined fund balances during the current year in the debt service funds was $1.7 million (12 r. percent). Proprietary funds. The County's proprietary funds provide the same Type of information found ~ in the govemment-wide financial statements, but in more detail. Unrestricted net assets of the Kulaimano Elderly Housing Project (Kulaimano) at the end of the ~ year amounted to $860,128, and the unrestricted net deficit of the Ouli Ekahi Affordable Housing ~ Project (Ouli Ekahi) amounted to $46,697. The net assets for Kulaimano decreased by $20,214 and the net deficit for Ouli Ekahi increased by $24,953. Other factors concerning the finances of ~ these two funds have already been addressed in the discussion of the County's business-Type r activities. GENERAL FUND BUDGETARY HIGHLIGHTS r.. Differences between the original budget and the final amended budget were primarily the result of a $9.3 million increase in appropriations and an $0.8 million increase in transfers out and can ^ be briefly summarized as follows: • $3.5 million in increases due to the appropriation of higher than expected fund balance to be used in the year's operations. ^ r • $6.6 million in increases due to the appropriations for capital and operating grants and contributions. r -20- ~ s Differences between the final budget and the actual (budgetary basis) resulted in $2.4 million ~.t more revenues than expected and $14.6 million less expenditures than appropriated. This is primarily due to the following factors: r • $2.3 million favorable variance in taxes and assessments revenue resulting from collections being more than expected. • $2.6 million favorable variance in interest and penalties revenue resulting from higher ~ earnings on cash and investments than expected. • $2.3 million unfavorable variance in intergovernmental revenue, including $1.6 million in ~ federal grants and $0.6 million in state grants. • $3.5 million favorable variance in general government expenditures caused by an overall "'i effort by each department to hold the line on expenditures. ~ $5.8 million favorable variance in public safety expenditures primarily created by vacant ~ • positions in the police and fire departments, as well as an increased effort to control costs during the budget year. • $2.2 million favorable variance in miscellaneous expenditures, due primarily to lower than expected costs relating to such accounts as provision for compensation adjustment. ~ CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets. The County's investment in capital assets for its governmental and business-type ~ activities as of June 30, 2006 amounts to $517.9 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, equipment, and infrastructure assets, which consists of primarily roads and bridges. The total increase in the County's investment in capital assets for the current fiscal year was four percent. i Major capital asset events during the current fiscal year included the following: • Construction began on Kuakini Highway Improvements; construction in progress as of the ~ end of the current fiscal year had reached $9.5 million. • Construction continued on Hoolulu Accessibility Improvements; construction in progress as of the end of the current fiscal year had reached $4.7 million. • Construction was completed on the Kawailani Street Bridge; construction in progress of $6.9 million was transferred to infrastructure. r • Construction was completed on the Kamuela Senior Housing Project; construction in progress of $3.7 million was transferred to buildings and improvements. ~ Capital Assets (net of depreciation) s As of June 30, 2006 and 2005 ~ Primary Government Governmental Activities Business-type Activities To[al ~ 2006 2005 2006 2005 2006 2005 ~ Land $ 22,737,854 $ 19,560,739 $ 753,877 $ 753,677 $ 23,491,731 $ 20,314,616 Infraztructure assets 155,377,804 156,145,061 - - 155,377,804 156,145,061 ~ Ground and site improvements - - 90,107 93,861 90,107 93,861 Buildings and improvements 219,887,751 216,853,443 477,419 502,034 220,365,170 217,355,477 ~ Equipment 31,854,863 28,603,325 15,517 17,313 31,870,380 28,620,638 Construction work in progress 86,742,320 76,125,170 - 86,742,320 76,125,170 Total $ 516,600,592 $ 497,287,738 $ 1,336,920 $ 1,367,085 $ 517,937,512 $ 498,654,823 7 -21- r Additional information on the County's capital assets can be found in note 6 to the basic financial statements. }R Long-term debt. At the end of the current fiscal year, the County had total bonded debt outstanding of $]96.7 million. This entire amount was comprised of general obligation bonds which are backed by the full faith and credit of the County. R r The County's total bonded debt increased by $14.5 million (eight percent) during the current fiscal year. The key factors in this increase were new debt ($25.0 million) and normal principal reduction. a. The County maintains an "A+" rating from Standard & Poor's and an "Al"rating from Moody's for general obligation debt. State statutes limit the amount of general obligation debt the County may issue to 15 percent of ~ the total assessed value of all county real property as established for tax purposes on the last tax assessment rolls. The current debt limitation for the County is $2,47 ],705,140, which is in excess of the County's outstanding general obligation debt. Currently the County's outstanding debt represents eight percent of our debt limitation. •r At the end of the current fiscal year, the County also had loans outstanding from the State Water ~ Pollution Control Revolving Fund amounting to $26.4 million and notes payable to the U.S. Department of Agriculture, Farmers Home Administration amounting to $I.0 million. Additional information on the County's long-term debt can be found in note ]0 to the basic ~ financial statements. rr ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES P' Oo • The unemployment rate for the County is 3.3 percent, which is consistent with the rate from a year ago. pr • The number of visitors to the County for the most recent calendar year was 1,487,747, up 16 ~ percent from the previous year's count of 1,281,156. Both of these factors were considered in preparing the County's budget for the 2007 fiscal year. r` At the end of the current fiscal year, unreserved fund balance in the general fund was $23.4 ~ million. The County has appropriated $7.3 million of this amount for spending in the 2007 fiscal year budget. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the County's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Director of Finance, County of Hawaii, 25 Aupuni Street, Room 118, Hilo, Hawaii 96720. ~ r r 22 r BASIC FINANCIAL STATEMENTS r a +~1 r a r w~ a rr -23- COUNTY OF HAWAII Statement of Net Assets June 30, 2006 Primary Government ~ Governmental Business-type Component ~ Activities Activities Total Unit ~ Assets ~ Current Assets: r. Cash and cash equivalents (notes 3 and 14) $ 66,680,839 $ 406,970 $ 67,087,809 $ 2,669,765 Restricted cash and cash equivalents (note 3) 92,077 30,471 122,548 - 1r Investments (notes 3 and 14) 89,746,526 700,000 90,446,526 45,690,033 rr Receivables, net (note 4) 32,321,132 49,991 32,371,123 4,441,140 Internal balances (note S) 4,050 (4,OS0) - - ~ Inventories 2,798,136 - 2,798,136 1,214,001 Prepaid expenses - 1,231 1,231 254,400 ~ Other I,OS2,352 - 1,052,352 - Total current assets 192,695,112 1,184,6]3 193,879,725 54,269,339 Investments (note 3) 37,183,249 - 37,183,249 - ~ Restricted cash and cash equivalents (note 3) - 197,484 197,484 - tr Restricted investments (note 14) - - - 14,403,033 Loans receivable, excludingcuaent portion - - - 669,246 ~ Receivable from improvement district R (notes 4 and 10) 3,887,493 - 3,887,493 - Deferred charges - - - 5,003,102 ~ Capital assets (notes 6, 8 and 14): °i Utility plant in service, net - - - 153,495,436 ~ Infrastructure assets, net 155,377,804 - 1 SS,377,804 - ~ Ground and site improvements, net - 90,107 90,107 - Buildings and improvements, net 219,887,751 477,419 220,365,170 - p Equipment, net 31,854,863 1S,S17 31,870,380 - r, Construction work in progress 86,742,320 - 86,742,320 42, ] 06,718 Land 22,737,854 753,877 23,491,731 815,962 Total capital assets, net 516,600,592 1,336,920 517,937,512 196,418,116 r Total noncurrent assets SS7,671,334 1,534,404 559,205,738 216,493,497 ~ Total assets 750,366,446 2,719,017 753,085,463 270,762,836 (Continued) w fir ra -24- r. M COUNTY OF HAWAII + ~ Statement of Net Assets June 30, 2006 (Concluded) r Primary Government + Governmental Business-type Component ~ Activities Activities Total Unit + Liabilities ~ Current Liabilities: Accounts payable and accrued liabilities $ 4,3] 1,308 $ 382,537 $ 4,693,845 $ 3,884,740 Unearned revenue (note 7) 5,548,849 3,332 5,552,181 - • Interest due on long-term debt 3,492,466 - 3,492,466 80,517 Bonds and loans payable, current portion net + (notes 10 and 14) 15,029,533 23,532 15,053,O6S ],940,000 ~ Compensated absences, current portion (note ]0) 6,062,248 - 6,062,248 1,617,384 Claims and judgments, current portion (notes 10, 12 and 14) 4,088,755 - 4,088,755 61,000 i Capital leases, current portion (notes 8 and 10) 1,060,724 - 1,060,724 - + Landfill costs payable, current portion ~ (notes 9 and ] 0) 148,699 - 148,699 - Customers' deposits for service connections - - - 704,199 Other 4,332,466 - 4,332,466 - Total current liabilities 44,075,048 409,401 44,484,449 8,287,840 Noncurrent liabilities: Bonds and loans payable, net ~ (notes 10 and 14) 210,232,741 995,854 211,228,595 39,609,919 Compensated absences (note ]0) 18,004,132 - 18,004,132 785,032 ~ Claims and judgments (notes 10, 12 and 14) 17,251,638 - 17,251,638 211,000 Capital leases (notes 8 and ]0) 1,803,791 - 1,803,791 - Landfill costs payable (notes 9 and ]0) 18,514,301 - 18,514,301 - r Customers' deposits payable from restricted assets - - - 14,403,033 Total noncurrent liabilities 265,806,603 995,854 266,802,457 55,008,984 Total liabilities 309,881,651 1,405,255 311,286,906 63,296,824 Net Assets ~ Invested in capital assets, net of ~ related debt 386,861,296 317,534 387,178,830 180,181,457 ~ Restricted for: Capital projects 27,953,881 - 27,953,881 - Debt service (note 10) ] 6,783,707 182,797 16,966,504 - i Unrestricted 8,885,911 813,43 ] 9,699,342 27,284,555 Total net assets $440,484,795 $ 1,313,762 $441,798,557 $ 207,466,012 + ~ See accompanying notes to the basic financial statements. -25- w w COUNTY OF HAWAII Statement of Activities For the Fiscal Year Ended June 30, 2006 ~ rr Program Revenues Operating Capita{ ~ Charges for Grants and Grants and r„ Functions/Proerams Expenses Services Contributions Contributions s Primary government: Governmental activities: General government $ 38,264,132 $ 4,032,542 $ 3,833,841 $ 4,758,534 ~ Public safety 106,067,466 6,975,962 17,358,506 302,612 ~ Highways and streets 24,783,476 9,079,084 331,380 9,461,535 Health, education and welfare 20,181,685 980,147 15,089,070 - ~ Culture and recreation 19,464,962 1,439,784 554,064 279,147 Sanitation 27,265,515 16,469,745 1,086,028 - ~ Interest on long-term debt 10,168,710 - - - ~ Total governmental activities 246,195,946 38,977,264 38,252,889 14,80],828 ~ Business-type activities: rr Health, education and welfare 547,201 338,141 141,019 - I+ Total primary government $ 246,743,]47 $ 39,315,405 $ 38,393,908 $ 14,801,828 w Component unit: Water (note 14) $ 39,203,973 $ 34,048,0]0 $ - $ 6,380,606 ir. General revenues: ~ Taxes: Property taxes, levied for general purposes ~ Public service company taxes Franchise taxes n? Fuel [axes ~ Grants and contributions not restricted to specific programs ~ Investment earnings Miscellaneous ~ Total general revenues Change in net assets Net assets, beginning of year Net assets, end of year ~ e See accompanying notes to [he basic financial statements. ~ W -26- r. s Net (Expense) Revenue and Changes in Net Assets Primary Government rM Governmental Business-type Component Activities Activities Total Unit $ (25,639,215) $ - $ (25,639,215) $ - (81,430,386) - (81,430,386) - (5,911,477) - (5,911,477) - ' (4,112,468) - (4,112,468) - ~ (17,191,967) - (17,191,967) - (9,709,742) - (9,709,742) - (10,168,710) - (10,168,710) - r (154,163,965) - (154,163,965) - r - (68,041) (68,041) - (154,163,965) (68,041) (154,232,006) - r - - - 1,224,643 152,182,806 - 152,182,806 - 6,811,483 - 6,811,483 - 7,328,887 - 7,328,887 - 7,857,394 - 7,857,394 - 18,510,262 - 18,510,262 - ~ 4,976,178 22,874 4,999,052 1,623,842 2,110,854 - 2,110,854 - 199,777,864 22,874 199,800,738 1,623,842 45,613,899 (45,167) 45,568,732 2,848,485 394,870,896 1,358,929 396,229,825 204,617,527 r $ 440,484,795 $ 1,313,762 $441,798,557 $207,466,012 w rl ~r _27_ r COUNTY OF HAWAII s Governmental Funds r Balance Sheet June 30, 2006 ~ r Other Total Solid Waste Capital Governmental Governmental P General Fund Projects Funds Funds w, Assets Cash and cash equivalents (note 3) $ 6,793,183 $ 4,553,851 $ 19,331,120 $ 36,002,685 $ 66,680,839 ~ Investments (note 3) 17,452,228 - 98,904,606 10,572,941 126,929,775 W" Receivables, net (note 4) 5,468,161 1,312,956 838,721 1,893,901 9,5]3,739 A Due from other governmental a funds (note 5) 346,262 - 132,231 102,133 580,626 Due from other nongovernmental w funds (note 5) - - - 4,050 4,050 ~ Receivables from other governments (note 4) 14,940,738 187,286 7,491,913 187,456 22,807,393 ~ Restricted cash with escrow (note 3) 92,077 - - - 92,077 ;r, Inventories 2,798,136 - - - 2,798,136 Other 312,622 483,025 - 256,705 1,052,352 Total assets $ 48,203,407 $ 6,537.1 ] 8 $ 126,698.591 $ 49.019.871 $ 230,458,987 Liabilities and Fund Balances /r Liabilities: r Accounts payable $ 1,538,905 $ 1,078,561 $ 1,136,353 $ 557,489 $ 4,311,308 Due to other governmental ~ funds (note 5) 80,580 35,796 - 464,250 580,626 Deferred revenue (note 7) 7,894,905 1,324,954 3,108,107 1,893,901 14,221,867 Other 3,723,810 4,9]2 250 603,494 4,332,466 ~ Total liabilities 13,238,200 2,444,223 4.244.710 3,519,134 23,446,267 ~ Fund balances: ~ Reserved for: r Encumbrances 7,850,955 2,787,687 44,282,459 9,680,126 64,60],227 Inventories 2,798,136 - - - 2,798,136 ~ Taxicab investigations 64,696 - - - 64,696 ` Liquor control 805,348 - - - 805,348 Unexpended allotments - - 29,825,584 - 29,825,584 Debt service (note 10) - - - 16,783,707 16,783,707 r? Unreserved, reported in: General fund 23,446,072 - - - 23,446,072 Special revenue funds - 1,305,208 - 19,036,904 20,342,112 Capital projects funds - - 48,345,838 - 48,345,838 ~ Total fund balances 34,965,207 4,092,895 122.453,881 45.500,737 207,012,720 Total liabilities and fund balances $ 48,203,407 $ 6,537,118 $ 126,698,591 $ 49,019,871 $230,458,987 See accompanying notes to the basic financial statements. ~ r -28- ~ r. i COUNTY OF HAWAII ~ Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2006 M Total fund balances -governmental funds $ 207,012,720 r Amounts reported for governmental activities in the statement of net assets are different because: s Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land 22,737,854 r Infrastructure assets, net 155,377,804 Buildings and improvements, net 219,887,751 Equipment, net 31,854,863 Construction work in progress 86,742,320 Total capital assets 516,600,592 Some of the County's revenues will be collected afrer year-end but are not available soon enough to pay for the current period's expenditures and therefore are deferred (unearned) in the funds. (note 7) 8,673,018 Some liabilities are not due and payable in the current period and • therefore are not reported in the funds. Those liabilities consist of: Bonds and loans payable, net of receivable from improvement district (221,374,781) Accrued interest on bonds (3,492,466) r Capital leases (2,864,515) Compensated absences (24,066,380) Claims and judgments (21,340,393) Landfill closure/postclosure costs (18,663,000) # Total long-term liabilities (291,801,535) r Net assets of governmental activities $ 440,484,795 See accompanying notes to the basic financial statements. w w it _29 w COUNTY OF HAWAII r~ Governmental Funds ~ Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2006 Other Total ~ Solid Waste Capital Governmental Governmental r"' General Fund Projects Funds Funds ~ Revenues Property tax $ 153,206,841 $ - $ - $ - $153,206,841 ar Public service company tax 6,811,483 - - - 6,811,483 ~ Fuel tax - - - 7,857,394 7,857,394 ~ Public utility franchise tax - - - 7,328,887 7,328,887 Licenses and permits 7,805,988 - - 8,737,921 16,543,909 ~ hrtergovemmental 46,876,511 1,086,028 8,300,605 ]3,373,733 69,636,877 Yr Charges for services 4,685,819 7,883,950 - 7,282,625 19,852,394 Investmenteamings 5,061,559 18,888 142,745 5,223,192 ~ Miscellaneous 2,182,582 45,455 886,202 1,266,189 4,380,428 r"' Total revenues 226,630,783 9,015,433 9,205,695 45,989,494 290,841,405 Expenditures ~ Current: General government 31,153,304 - - - 31,153,304 ~ Public safety 79,544,132 - - 4,046,898 83,591,030 r' Highways and streets 4,091,851 - - 8,515,753 12,607,604 ~ Sanitation 979,335 18,820,254 - 6,765,448 26,565,037 ~ Health, education and welfare 5,680,647 - - 13,369,530 19,050,177 Culture and recreation 13,987,544 - - 743,412 14,730,956 ~ Pension and retirement r, contributions (note 13) 17,081,687 692,061 - 2,162,793 19,936,541 Employees' health insurance 14,857,226 316,865 - 958,701 16,132,792 ~ Miscellaneous 5,083,675 145,874 - 1,550,504 6,780,053 Debt service; Principal 400,810 779,939 - 12,879,775 14,060,524 ~ Interest 53,953 83,630 - 9,776,371 9,913,954 Capital outlay 4,306,760 - 26,281,533 - 30,588,293 ~ Total expenditures 177,220,924 20,838,623 26,281,533 60,769,185 285,110,265 ~ Excess (deficiency) of revenues over expenditures 49,409,859 (11,823,190) (17,075,838) (14,779,691) 5,731,140 A' .r (Continued) R s r -30- COUNTY OF HAWAII ~ Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances ~ For the Fiscal Year Ended June 30, 2006 (Concluded) ~ Other Total Solid Waste Capital Governmental Governmental General Fund Projects Funds Funds r Other Financing Sources (Uses), including transfers Sale of assets $ 81,774 $ - $ - $ - $ 81,774 Capital leases (note 10) 114,547 280,269 - 8,689 403,505 State Revolving Fund loans (note 10) - - 25,167 - 25,167 Sale of bonds (note 10) - - 25,000,000 - 25,000,000 + Premium on bonds (note 10) - - 972,327 - 972,327 Transfers in (note 5) - 12,652,576 7,322,432 25,715,726 45,690,734 Transfers out (note 5) (39,277,734) - - (6,413,000) (45,690,734) ~ Total other financing sources (uses) (39,081,413) 12,932,845 33,319,926 19,311,415 26,482,773 Net change in fund balances 10,328,446 1,109,655 16,244,088 4,531,724 32,213,913 Fund balance at beginning of year 23,978,072 2,983,240 106,209,793 40,969,013 174,140,118 Increase in reserve for inventories 658,689 - - - 658,689 Fund balance at end of year $ 34,965,207 $ 4,092,895 $122,453,881 $ 45,500,737 $207,012,720 See accompanying notes to the basic financial statements. r r w w i Mt -31- r COUNTY OF HAWAII - Reconciliation of the Change in Fund Balances of Governmental Funds to the Statement of Activities ~ For the Fiscal Year Ended June 30, 2006 ~ r Net chan a in fund balances -total overnmental funds ~ g g $ 32,213,913 i Amounts reported for governmental activities in the statement of activities are R different because: r. Capital outlays are reported as expenditures in governmental funds. ~ However, in the statement of activities, the cost of capital assets is ~ allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: ~ r Capital outlay and dedicated property 38,023,844 Depreciation expense and loss on disposals (18,710,990) Excess of capital outlay over depreciation expense 19,312,854 Borrowings provide current financial resources to governmental funds; w however, issuing debt increases long-term liabilities in the statement of net assets. [n the current period, proceeds were received from: ~ Ir General obligation bonds (25,000,000) Premium on bond issuance (972,327) ! SRF loan obligations (25,167) w Capital lease obligations (403,505) Total debt proceeds (26,400,999) ~ rr Repayment of long-term debt is reported as an expenditure in governmental ~ funds, but the repayment reduces long-term liabilities in the statement of r net assets. In the current year, these amounts consist of: Bond principal retirement 10,506,277 SRF loan repayment 2,372,329 Capital lease payments 1,181,918 Total long-term debt repayment 14,060,524 r Because some revenues will not be collected for several months after the ~ County's fiscal year end, they are not considered "available" revenues and r_ are "deferred" in the governmental funds. Unearned revenues decreased by ~ this amount this year. (924,097) (Continued) ~ +r -32- COUNTY OF HAWAII Reconciliation of the Change in Fund Balances of Governmental Funds „W to the Statement of Activities For the Fiscal Year Ended June 30, 2006 .r (Concluded) r Some items reported in the statement of activities do not involve current financial resources and therefore are not reported as expenditures in governmental funds. These activities are: t Increase in inventory $ 658,689 Increase in compensated absences (1,493,125) ~ Decrease in claims and judgments 5,261,896 Decrease in landfill closure/postclosure care costs 3,179,000 ~ Amortization of premium from bond issuance 157,229 Amortization of deferred amount on refunding of bonds (129,400) +n Net increase in accrued interest (282,585) ¦ Net additional expenditures 7,351,704 Change in net assets of governmental activities $ 45,613,899 r See accompanying notes to the basic financial statements. r r r i w W A ¦ a w -33- r COUNTY OF HAWAII General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2006 ~ Actual Variance r Original Final (Budgetary Positive Budget Budget Basis) (Negative) IA Revenues: Taxes and assessments: Real property taxes $ 151,187,300 $ 151,]87,300 $ (53,206,841 $ 2,019,541 ~ Public service company taxes 6,500,000 6,500,000 6,811,483 311,483 ~ Total taxes and assessments 157,687,300 157,687,300 160,018,324 2,331,024 ~ Licenses and permits: ~ Nonbusiness licenses and permits 3,972,467 3,972,467 4,992,199 ],019,732 Business licenses 1,300,800 1,300,800 1,205,178 (95,622) ~ Street use 1,528,300 1,528,300 1,608,611 80,31 I Total licenses and permits 6,801,567 6,801,567 7,805,988 1,004,421 1A Intergovernmental: Federal: ~ Programs for the aged 1,932,813 1,932,8]3 1,537,664 (395,149) A Community development block grants - 2,417,268 2,417,268 - ~ HOME program grant - 1,496,173 1,496,173 - Civil defense 118,000 118,000 26,234 (91,766) ~ Law enforcement 2,358,355 2,648,079 ],846,343 (801,736) Other 3,605,313 4,854,841 4,501,229 (353,612) Total federal 8,014,481 13,467,174 11,824,911 (1,642,263) ~ State: ~ State General Fund -Act 185, ~ SLH 1990 17,667,000 17,667,000 18,187,203 520,203 ~ Emergency medical services 10,979,401 10,979,401 10,701,787 (277,614) Other 4,046,108 4,862,887 3,971,004 (891,883) ~ Child support enforcement 1,020,903 1,020,903 1,054,889 33,986 ~ Total State 33,713,412 34,530,191 33,914,883 (615,308) Total intergovernmental revenue 41,727,893 47,997,365 45,739,794 (2,257,571) Charges for current services: ~ General government 3,012,380 3,012,380 3,414,184 401,804 Culture and recreation 830,080 830,080 704,363 (120,717} r Highways and streets 541,000 309,000 295,623 (13,377) Public safety 150,284 150,284 266,649 116,365 ~ Total charges for current services 4,533,744 4,301,744 4,685,819 384,075 r Fines and forfeitures 1,374,500 ],374,500 1,069,039 (305,461) Rents 56,500 56,500 66,312 9,812 ~ (Continued) -34- r. COUNTY OF HAWAII rr General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2006 Actual Variance r Original Final (Budgetary Positive Budget Budget Basis) (Negative) 'Revenues (continued): Interest and penalties $ 2,400,000 $ 2,400,000 $ S,OOS,036 $ 2,605,036 r Miscellaneous 3,849,423 4,176,965 2,797,500 (1,379,465) Total revenues 218,430,927 224,795,941 227,187,812 2,391,871 Expenditures: Current: General government: ~ Finance 7,218,371 7,435,910 6,284,810 1,151,100 Research and development 3,350,028 4,583,487 4,228,982 354,505 Legislative 5,191,863 3,996,791 3,308,336 688,4SS General government building 3,370,579 3,394,660 3,296,405 98,255 Law 3,319,531 3,319,531 3,020,497 299,034 Automotive equipment 2,906,904 3,061,493 2,955,442 106,OS1 rn Planning and zoning 2,259,247 2,628,188 2,409,953 218,235 Personnel services 1,641,866 1,701,836 1,569,003 132,833 Engineering 1,S96,S64 1,633,411 1,S48,OS9 85,352 Mayor's office ],249,087 1,666,347 l,S 16,400 149,947 Data Systems 1,020,758 1,086,935 l,OS0,714 36,221 Chief engineer 848,834 983,903 937,340 46,563 Elections 535,038 612,667 522,158 90,509 Total general government 34,508,675 36,IOS,IS9 32,648,099 3,457,060 r Public safety: Police department 41,70],652 43,284,134 41,226,841 2,OS7,293 ~ Fire department 27,137,094 29,085,176 26,883,124 2,202,OS2 Prosecuting attorney 6,351,389 6,603,333 5,638,472 964,861 Protective inspection 1,945,302 2,066,891 1,993,399 73,492 • Liquor control 1,262,417 1,284,517 1,089,202 195,315 Flood control IS3,939 466,042 466,042 - Civil defense agency 468,793 SS 1,044 252,036 299,008 Humane Society 992,384 995,697 995,697 - „w Total public safety 80,012,970 84,336,834 78,544,813 5,792,021 ~ Highways and streets: Mass transit 4,925,321 4,948,041 4,938,416 9,625 'M ~ (Continued) -35- r COUNTY OF HAWAII ~ General Fund ~ Statement of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) i For the Fiscal Year Ended June, 30, 2006 Actual Variance ~ Original Final (Budgetary Positive Budget Budget Basis) (Negative) ~ Yr Expenditures (continued): Current (continued): Sanitation: Environmental management $ 1,074,258 $ 1,074,258 $ 976,130 $ 98,128 Health, education and welfare: Elderly Activities 2,992,387 3,093,514 2,764,765 328,749 ~ Office of Aging 2,056,578 2,056,578 1,966,287 90,291 a. Education 55,000 55,000 42,899 12,101 r Social programs 825,000 825,000 819,000 6,000 Cemeteries 273,632 362,232 318,215 44,017 ¦ Physical examination 102,942 102,942 102,942 - Total health, education and welfare 6,305,539 6,495,266 6,014,108 481,158 Culture and recreation: rr Community music 180,119 166,119 162,322 3,797 Organized recreation: ~ Maintenance 5,366,933 5,525,448 5,515,367 10,081 ~ Recreation 2,189,457 2,292,819 2,181,728 111,091 Aquatics 3,077,259 3,226,093 3,039,703 186,390 ¦ HooluluParkcomplex 823,186 940,107 928,335 11,772 Yr Administration 875,081 953,281 902,097 51,184 Children's zoo 527,943 580,443 550,588 29,855 ~ Summer/Intersession 423,365 414,865 314,273 100,592 Culture and arts 140,238 143,238 ] 33,618 9,620 Elderly activities administration 634,766 619,766 545,026 74,740 ~ r Total culture and recreation 14,238,347 ]4,862,179 14,273,057 589,122 Pension and retirement contributions 17,612,204 17,812,204 16,881,540 930,664 ~ Health fund 16,154,000 15,954,000 14,857,226 1,096,774 '0i Miscellaneous 7,837,500 6,161,738 3,992,408 2,169,330 r Total current 182,668,814 187,749,679 173,125,797 14,623,882 ~ r (Continued) ~ r -36- ~ 1 COUNTY OF HAWAII General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2006 (Concluded) Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) "'Expenditures (continued): Capital Outlay: Community Development Block grants (HUD) $ - $ 2,608,038 $ 2,608,038 $ - +r HOME Program - 1,614,946 1,614,946 - Total capital outlay - 4,222,984 4,222,984 - s Total expenditures 182,668,814 191,972,663 177,348,781 14,623,882 ~nxcess of revenues over expenditures 35,762,113 32,823,278 49,839,031 17,015,753 Other financing uses: Transfers out: r Capital Projects Fund (517,866) (909,432) (909,432) - Housing Fund (745,303) (935,303) (935,303) - Solid Waste Fund (12,652,576) (12,652,576) (12,652,576) - ~ Golf Course Fund (161,804) (161,804) (161,804) - Highway Fund - (222,000) (222,000) - Selflnsurance Fund (1,000,000) (1,000,000) (1,000,000) - Disaster/Emergency Fund (1,000,000) (1,000,000) (1,000,000) - Public Access/Open Space Pres Fund (1,000,000) (1,000,000) (1,000,000) - Debt Service Fund (27,500,608) (27,500,608) (26,065,113) 1,435,495 Total transfers out (44,578,157) (45,381,723) (43,946,228) 1,435,495 Total other financing uses (44,578,157) (45,381,723) (43,946,228) 1,435,495 ,Excess (deficiency) of revenues and other ~ sources over expenditures and other uses (8,816,044) (12,558,445) 5,892,803 18,451,248 „'Fund balance at beginning of year 23,978,072 23,978,072 23,978,072 - ~Fundbalanceatendofyear $ 15,162,028 $ 11,419,627 $ 29,870,875 $ 18,451,248 See accompanying notes to the basic financial statements. rYl -37- COUNTY OF HAWAII Solid Waste Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) ~ For the Fiscal Year Ended June 30, 2006 ~ 4 Actual Variance Original Final (Budgetary Positive p Budget Budget Basis) (Negative) y Revenues: ~ Intergovernmental $ 1,970,500 $ 1,970,500 $ 1,236,833 $ (733,667) 4 Charges for services -tipping fees 8,561,406 8,561,406 7,883,950 (677,456) Miscellaneous - - 45,455 45,455 ~ ti Total revenues 10,531,906 10,531,906 9,166,238 (1,365,668) Expenditures: Sanitation 21,872,699 23,197,699 22,033,126 1,164,573 Pension and retirement contributions 581,783 696,783 692,061 4,722 ~r Health fund 470,000 320,000 316,865 3,135 ~ Miscellaneous 320,000 170,000 145,300 24,700 Total expenditures 23,184,482 24,384,482 23,187,352 1,197,130 Deficiency of revenues over expenditures (12,652,576) (13,852,576) (]4,021,]14) (168,538) Other financing sources -transfers in - r General Fund 12,652,576 12,652,576 12,652,576 - Deficiency of revenues and other sources over expenditures - (1,20Q,000) (1,368,538) (168,538) ` Fund balance at beginning of year 2,983,240 2,983,240 2,983,240 - ~ Fund balance at end of year $ 2,983,240 $ 1,783,240 $ 1,614,702 $ (168,538) See accompanying notes to the basic financial statements. r r t -38- r COUNTY OF HAWAII Proprietary Funds ~ Statement of Net Assets June 30, 2006 Business-type Activities- r Enterprise Funds Kulaimano Ouli Ekahi ~ Elderly Affordable Housing Housing Project Project Total r+ Assets Current assets: Cash and cash equivalents (note 3) $ 161,892 $ 244,928 $ 406,820 Restricted cash and cash equivalents (note 3) 10,373 20,098 30,471 Investments (note 3) 700,000 - 700,000 Imprest fund (note 3) 50 100 150 r Receivables (note 4) 6,467 43,524 49,991 Prepaid expenses 1,231 - 1,231 m Total current assets 880,013 308,650 1,188,663 Noncurrent assets: a„ Restricted cash and cash equivalents (note 3) 182,797 14,687 197,484 Capital assets (note 6): Land and site improvements 511,000 503,877 1,014,877 Buildings and equipment 1,229,954 - 1,229,954 Less accumulated depreciation (907,9]1) - (907,911) r Total capital assets 833,043 503,877 1,336,920 Total noncurrent assets 1,015,840 518,564 1,534,404 Total assets 1,895,853 827,2]4 2,723,067 _ Liabilities Current liabilities: Accounts payable 3,467 342,275 345,742 Internal balances (note 5) 4,050 - 4,050 Due to developer - 7,729 7,729 Security deposits payable from restricted assets 10,373 18,693 29,066 Deferred revenue (note 7) 1,995 1,337 3,332 Notes payable, current portion (note 10) 23,532 - 23,532 Total current liabilities 43,417 370,034 413,451 Noncurrent liabilities: Notes payable (note 10) 995,854 - 995,854 Total 1 iabi I hies 1,039,271 3 70,034 1,409,3 OS Net Assets ~ Invested in capital assets, net of related debt (186,343) 503,877 317,534 Restricted for debt service 182,797 - 182,797 Unrestricted 860,128 (46,697) 813,431 r Total net assets $ 856,582 $ 457,180 $ 1,313,762 See accompanying notes to the basic financial statements. -39- r COUNTY OF HAWAII Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Assets ~ For the Fiscal Year Ended June 30, 2006 ~ Business-type Activities- ~ Enterprise Funds r' Kulaimano Ouli Ekahi ~ Elderly Affordable ¦ Housing Housing Project Project Total ~ Operating revenues: Rental receipts from tenants $ 100,285 $ 233,338 $ 333,623 Rental subsidy from federal government -HUD 141,019 - 141,019 A Laundry receipts 2,247 - 2,247 ~ Miscellaneous - 2,27] 2,271 Total operating revenues 243,551 235,609 479,160 r Operating expenses: Utilities 39,100 23,888 62,988 ~ General and administration 87,531 105,716 193,247 rr Maintenance and repairs 53,532 54,805 108,337 Lease expense - 76,226 76,226 ~ Depreciation (note 6) 33,828 - 33,828 Total operating expenses 213,991 260,635 474,626 ~ Operating income (loss) 29,560 (25,026) 4,534 ~ Nonoperating revenues (expenses): Investment income 22,801 73 22,874 ~ Interest expense (72,013) - (72,013) r' Loss on disposal of assets (562) - (562) ~ Totalnonoperating revenue (expenses) (49,774) 73 (49,701) rs Change in net assets (20,214) (24,953) (45,167) Total net assets -beginning 876,796 482,133 1,358,929 Total net assets -ending $ 856,582 $ 457,180 $ 1,313,762 ~ See accompanying notes to the basic financial statements. ~ s i ¦ Yr -40- ~ r COUNTY OF HAWAII Proprietary Funds Statement of Cash Flows For the Fiscal Year Ended June 30, 2006 Business-type Activities - ~ Enterprise Funds Kulaimano Ouli Ekahi Elderly Affordable +r Housing Housing Project Project Total Cash Flows from Operating Activities ~ Receipts from tenants $ 103,653 $ 233,756 $ 337,409 Receipts from federal government -HUD 141,019 - 141,019 r Payments to suppliers for goods and services (178,932) (184,409) (363,341) Net cash provided by operating activities 65,740 49,347 115,087 Cash Flows from Capital and Related Financing Activities Principal paid on notes payable (21,899) - (21,899) Interest paid on notes payable (72,013) - (72,013) Purchase of capital assets (4,225) - (4,225) Net cash used in capital and related financing activities (98,137) - (98,137) Cash Flows from Investing Activities Purchase of investments (1,400,000) - (1,400,000) Proceeds from maturities of investments 1,400,000 - 1,400,000 Interest on investments 22,756 69 22,825 Net cash provided by investing activities 22,756 69 22,825 Net increase (decrease)in cash and cash equivalents (9,641) 49,416 39,775 Cash and cash equivalents at beginning of year 364,753 230,397 S9S,1 SO r Cash and cash equivalents at end of year $ 3SS,112 $ 279,813 $ 634,925 +r Reconciliation of operating income (loss) to net cash provided by operating activities Operating income (loss) $ 29,560 $ (25,026) $ 4,534 r Adjustments to reconcile operating income (loss) to net cash provided by operating activities: r Depreciation expense 33,828 - 33,828 Change in assets and liabilities: a Receivables (490) (1,064) (I,SS4) ~ Prepaid expenses S6 - 56 Accounts and other payables 2,258 76,063 78,321 Unearned income S28 (626) (98) +r Net cash provided by operating activities $ 65,740 $ 49,347 $ 115,087 See accompanying notes to the basic financial statements. - 41 - r COUNTY OF HAWAII Fiduciary Funds Statement of Fiduciary Net Assets ~ June 30, 2006 ~ Private- ~ Purpose Agency r` Trusts Funds ~ Assets Cash and cash equivalents (note 3) $ ],714,176 $ 3,232,214 Investments (note 3) 2,739,192 896,209 ~ Receivables: Ir Due from other agency funds - 7,346 Other receivables 34,914 139,686 ~ Total receivables 34,914 147,032 r` Restricted cash and cash equivalents (note 3) - 637,000 Total assets 4,488,282 4,912,455 r, Liabilities ~ Due to other agency funds - 7,346 ~ Accrued liabilities 133,393 1,997,742 ~ Advances payable - 188,899 Assets held for benefit of improvement districts - 2,718,468 Total liabilities 133,393 4,912,455 Net Assets Held in trust for other parties 4,354,889 - ~ Total net assets $ 4,354,889 $ - See accompanying notes to the basic financial statements. ~ r` s rr r ¦a -42- s COUNTY OF HAWAII Fiduciary Funds Statement of Changes in Fiduciary Net Assets r For the Fiscal Year Ended June 30, 2006 Private- Purpose Trusts Additions r Contributions: Puna Geothermal Venture $ 50,000 Investment earnings: r Net decrease in fair value of investments (6,908) Dividends 45,758 Interest 108,047 Total additions 196,897 Deductions r Appraisal fees 7,246 Total deductions 7,246 Change in net assets 189,651 Net assets -beginning of year 4,165,238 Net assets -end of year $ 4,354,889 r ,s See accompanying notes to the basic financial statements. r r ar .w ¦ s r -43- r A COUNTY OF HAWAII Notes to the Basic Financial Statements ~r June 30, 2006 r A The accounting policies of the County of Hawaii (the County) conform to U.S. generally r' accepted accounting principles (GAAP) as applicable to local governmental units. The following notes to the basic financial statements aze an integral part of the County's ~ Comprehensive Annual Financial Report. ~ I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Financial Reporting Entity A The County has implemented Governmental Accounting Standards Board Statement No. 14, The Financial Reporting Entity (GASB Statement No. 14). All organizations, activities or functions that meet the criteria in GASB Statement No. 14 for inclusion in the reporting entity ~ are included from the County's basic financial statements. Primary Government The County operates under the Mayor-Council form of government pr under a charter that became effective on January 2, 1969, and was amended in 1979, 1982, ~ 1990 and 2000. The County's operations aze organized by the following functions: general government; public safety; highways and streets; sanitation; health, education and welfare; ~ culture and recreation; pension and retirement contributions; health fund; miscellaneous; ~ capital outlay; and debt service. The State of Hawaii (the State) assumes full responsibility for several major functions usually performed by local governments, including education, ~ welfare, health and judicial functions. There aze no sepazate city, county or township governments nor any school districts, special districts, authorities or public corporations with r overlapping authority. GASB Statement No. 14 defines component units as legally separate organizations for which the elected officials of the primary government are financially accountable. "Financial accountability" is the level of accountability that exists if a primary government appoints a ~ voting majority of an organization's governing board and is either able to impose its will on ~ that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. A primary ~ govemment has the ability to impose its will on an organization if it can significantly r influence the programs, projects, activities or level of services performed or provided by the organization. An organization has a financial benefit or burden relationship with the primary government if any one of three conditions exist: (1) The primary government is legally entitled to or can otherwise access the organization's resources; (2) The primary government is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide financial support to, the organization; or {3) The primary govemment is obligated in f some manner for the debt of the organization. As required by GAAP as set forth in GASB Statement No. 14, these basic financial ~ statements present the County of Hawaii (the primary government) and its component unit, s -44- w COUNTY OF HAWAII w ~ Notes to the Basic Financial Statements June 30, 2006 r ~ the Department of Water Supply. This component unit is included in the County's reporting entity because of its financial relationship with the County. ~ Discretely Presented Component Unit The component unit column in the basic financial statements includes the financial data of the Department of Water Supply (the Department), a a legally independent agency of the County that is accounted for as an enterprise fund. It is ~ reported in a separate column to emphasize that it is legally separate from the County. The members of the Water Commission, the governing body of the Department, are appointed by the Mayor of the County and confirmed by the County Council. The Department is granted ~ corporate powers by state statute and the County Charter. Although the County does not have the authority to approve or modify the Department's operational and capital budgets, the County has issued bonds on the Department's behalf that are general obligations of the County. Because the County is obligated to repay these bonds in the event of default by the W Department, the County is financially accountable for the debts of the Department. See Note 14 for component unit disclosures for the Department. Complete financial statements of the Department can be obtained from the Department of Water Supply, 345 Kekuanaoa Street, Suite 20, Hilo, Hawaii 96720. Basic Financial Statements r The basic financial statements include both government-wide (based on the County as a whole) and fund financial statements. Both the government-wide and fund financial +r statements (within the basic financial statements) categorize primary activities as either governmental or business-type. In the government-wide statement of net assets, both the governmental and business-type activities columns (a) are presented on a consolidated basis rr by column, (b) and are reflected, on a full accrual, economic resource basis, which incorporates long-term assets and receivables as well as long-term debt and obligations. ~ The government-wide statement of activities reflects both the gross and net costs per functional category (general government, public safety, highways and streets, etc.) which are otherwise being supported by general government revenues (property taxes, certain intergovernmental revenues, etc.). The statement of activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. The program revenues must be directly associated with the function (general government, public ~ safety, highways and streets, etc.) or a business-type activity. The operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants. The net cost (by function or business-type activity) is normally covered by general revenues. The government-wide focus is more on the sustainability of the County as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. r -45- i COUNTY OF HAWAII w Notes to the Basic Financial Statements 3une 30, 2006 r The fund financial statements' emphasis is on the major funds in either the governmental or business-type categories. Nonmajor funds (by category) are summarized into a single column. The governmental funds in the fund financial statements are presented on a current financial resource and modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. This presentation is deemed most appropriate to (a) demonstrate legal and covenant compliance, (b) demonstrate the source and use of liquid resources, and (c) demonstrate how the County's actual experience conforms to the budget fiscal plan. Since ~ the governmental fund statements are presented on a different measurement focus and basis of accounting than the government-wide statements' governmental column, a reconciliation is presented on the page following each statement, which briefly explains the adjustments rs necessary to transform the fund based financial statements into the governmental column of ~ the government-wide presentation. The County's fiduciary funds are presented in the fund financial statements by type (private ~ purpose and agency). Since by definition these assets are being held for the benefit of a third party (private parties, state government, etc.) and cannot by used to address activities or obligations of the government, these funds are not incorporated into the government wide statements. Governmen[-wide andfund financial statements-The government-wide financial ~ statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its component unit. The effect of interfund activity has been removed from these statements. Governmental ~ activities, which normally are supported by taxes and intergovernmental revenues, are ~ reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from ~ certain legally separate component units for which the primary government is financially tr accountable. The statement of activities demonstrates the degree to which the direct expenses of a given r function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (a) charges r to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particulaz function or segment. Taxes and other items not included among program revenues are reported instead as r general revenues. r Separate financial statements are provided for governmental funds, proprietary funds, and ~ fiduciary funds, even though the latter are excluded from the government-wide financial rr -46- ~ s COUNTY OF HAWAII ~ Notes to the Basic Financial Statements June 30, 2006 statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Activities in funds -The financial transactions of the County are recorded in individual funds. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues and expenditures/expenses. i The various funds are reported by generic classification within the financial statements. GASB Statement No. 34, Basic Financial Statements -and Management's Discussion and Analysis -for Stare and Local Governments, sets forth minimum criteria (percentage of the ~ assets, liabilities, revenues or expenditures/expenses of either fund category or the governmental and enterprise combined) for the determination of major funds. The nonmajor funds are combined in a column in the fund financial statements and detailed in the r combining section. The County reports the following major governmental funds: r General Fund -The general fund is the general operating fund of the County. 1[ is used to account for all activities of the general government, except those required to be r. accounted for in other funds. Solid Waste Fund -Used to accumulate moneys for the operation, maintenance, and • administration of the County's solid waste management, collection and disposal systems. Financing is provided by tipping fees at the landfills and by disposal permit fees. Capital Projects Fund -Used to account for the costs of constructing County capital improvements financed with general obligation bond proceeds, federal and state grants, and general and special revenue fund revenues. The capital projects fund is used to ,r account for financial resources to be used for the acquisition or construction of major general government capital facilities and infrastructure (other than those financed by proprietary funds and trust funds) when separate project centers are needed to control r costs. s The County reports the following major proprietary funds: r Kulaimano Elderly Housing Project -Used to account for the operation of a rental housing project for low-income senior citizens located north of Hilo. Ouli Ekahi Affordable Housing Project -Used to account for the operation of a 33-unit ~ single-family affordable rental housing project located in Waimea. ~ The County reports the following fiduciary funds: r -47- r W COUNTY OF HAWAII Notes to the Basic Financial Statements ~s June 3Q 2006 r R Private-Purpose Trust Fund -Used to account for funds received from geothermal r developers to mitigate the effects of geothermal energy development. Also used to account for investment income on funds received from import businesses at the port of ~ Hilo and the related expenditures to promote health and safety on the Island of Hawaii. Y~ Agency Funds -Used to account for assets held by the County for other governmental ~ units and individuals. The agency funds are custodial in nature and do not involve r. measurement of results of operations. The County has the following agency funds: rw • State Weight Tax Fund • Improvement District No. 17 Fund • Improvement District No. 18 Fund ~ • Improvement District Revolving Fund yr, • Performance and Refundable Deposits Fund • Payroll Clearance Fund ~ • Flexible Spending Account rr • Lapsed Warrants Fund • Non-Profit License Plates Fund ~ • Organ and Tissue Education Fund r Basis of Accounting ~ Basis of accounting refers to the period in which revenues and expenditures (or expenses) are ¦ recognized in the accounts and reported in the basic financial statements. Basis of accounting ~ relates to the timing of the measurements made, regardless of the measurement focus applied. The government-wide financial statements and the proprietary, fiduciary and component unit ~ fund financial statements are presented on an accrual basis of accounting. The governmental funds in the fund financial statements are presented on a modified accrual basis. ~ Accrua[Basis -Revenues are recognized when earned and expenses are recognized when the r related obligation is incurred. Modified Accrual Basis -Revenues are recorded when susceptible to accrual (that is, both measurable and available). "Measurable" means the amounts are determinable. "Available" means the amounts are collectible within the current period or soon enough thereafter (within b0 days) to be used to pay liabilities of the current period. Licenses and permits, charges for current services, fines and forfeitures, penalties and miscellaneous revenues are recorded as revenues when received in cash because they are re r -48- ~ r COUNTY OF HAWAII i Notes to the Basic Financial Statements s June 30, 2006 ~ generally not measurable until actually received. State Revolving Fund loan proceeds are considered available when collected. ~ In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There + are essentially two types of these revenues. In one, monies must be expended on the specific +r purpose or project before any amounts will be paid to the County; therefore, revenues are recognized based upon the expenditures recorded. Most construction grants and many ~ operating grants fall into this category. In the other, monies are virtually unrestricted as to ~ purpose of expenditure and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. ~ The County reports unearned revenue in its fund financial statements (see Note 7). Unearned revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. In subsequent periods, when both revenue " recognition criteria are met, the liability for unearned revenue is removed from the combined balance sheet and revenue is recognized. ~ Expenditures are recognized under the modified accrual basis of accounting in the accounting period in which the fund liability is incurred. Exceptions to this general rule include: (a) accumulated compensated absences and claims andjudgments which are recognized as expenditures when paid; (b) liabilities related to municipal solid waste landfill closure and postclosure care costs; and (c) principal and interest on general long-term debt which are ' recognized as expenditures when due. r In accordance with GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the County applies all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements; Financial Accounting Standards Board ~ statements and interpretations, Accounting Principles Board opinions, and Accounting Research Bulletins of the Committee on Accounting Procedures. s r Encumbrances The general, special revenue, and capital projects funds follow encumbrance accounting ~ under which purchase orders, contracts and other commitments are recorded as a reserve of fund balance and provide authority for the carryover of appropriations to the subsequent year s in order to complete these transactions. Encumbrances outstanding at year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the 'r commitments will be honored during the subsequent year. w -49- COUNTY OF HAWAII Notes to the Basic Financial Statements r~ June 30, 2006 ¦w Unexpended Allotments s Allotment accounting is employed in the genera( and capital projects funds to reserve ~ appropriations to complete capital projects that were funded during a given fiscal period. rr Unexpended allotments represent reserves of capital projects appropriations that are available to complete such projects in future fiscal periods. Cash and Investments Cash and cash equivalents include cash on hand, amounts in demand deposits and short-term investments with a maturity date of three months or less from the date acquired by the County. s Investments consist of time certificates of deposit at financial institutions and bank repurchase agreements with original maturities exceeding three months. Included are participating interest-earning investment contracts (repurchase agreements) that have remaining maturities at the time of purchase of one year or less, as well as nonparticipating interest-earning investment contracts (time certificates of deposit and repurchase agreements). Both ~ categories of investments are stated at amortized cost (see Note 3). Investments also consist of equity securities in the fiduciary fund financial statements. These investments are stated at fair value. ~ Real Property Taxes r The County's real property taxes are levied July 1 each year on assessed valuation as of ~ January I. The taxes become a lien on the property assessed as of the levy date. Taxes are due and payable in two equal annual installments on August 20 and February 20. Accordingly, real property taxes receivable as of June 30 are delinquent. Each delinquent ~ installment bears interest at 1 % per month and penalties of up to 10% of the amount due. ~ Assessments are based on 100% of estimated fair market values. Inventories r Inventories consist of materials and supplies and are reported as expenditures at the time of purchase (purchase method). Police and fire department inventories are stated using the first r„ in, first out (FIFO) method. Other inventories are stated at average cost. Liquor Control i Section 281 of the Hawaii Revised Statutes requires that liquor license revenues collected be ~ used only for costs and expenses directly relating to operational and administrative costs ~ actually incurred by the liquor commission collecting such fees. The unexpended fees at June 30, 2006 of $805,348 are reflected as a reserve of general fund balance. ra -50- ~ rr COUNTY OF HAWAII ~ Notes to the Basic Financial Statements June 30, 2006 Capital Assets ~ Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, lighting systems, and similar items), aze reported in the applicable governmental or business-type activities columns ~ in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $1,000 and an estimated useful life in +w excess of one year. Such assets are recorded at historical cost or estimated historical cost if ~ purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. 'r Capital assets of the primary government aze depreciated using the straight line method over the following estimated useful lives of the assets: Assets Years Infrastructure 20 to 100 years Buildings and improvements 50 to 100 years Equipment 5 to 40 years ,r Depreciation is recorded in one enterprise fund, the Kulaimano Elderly Housing Project. It is computed using the straight-line method over the following estimated useful lives of the ~ assets: +r Buildings 50 years Furnishings and equipment 5 to 10 years ~ Ground and site improvements 20 to 50 years Long-term Obligations ~ The County reports long-term debt of governmental funds at face value on the government- wide statement of net assets. Certain other govemmental fund obligations not expected to be ~ financed with current available resources are also reported on the government-wide statement of net assets. Long-term debt and other obligations financed by the proprietary funds are ~ reported as liabilities in those funds. -51- COUNTY OF HAWAII Notes to the Basic Financial Statements r„ June 30, 2006 ~r s Compensated Absences s Employees earn vacation credit at the rate of one and three-quarter working days for each month of service. Up to ninety days of vacation leave credits can be accumulated per employee. In addition, employees who work overtime can elect to take compensatory time off ~ instead of overtime pay. The time off is earned at the rate of one and a half hours for each hour of overtime worked. There is no statutory limit to the amount of compensatory time off an employee can accumulate. Both compensatory time off and vacation credits are converted to pay upon termination of employment. The amounts expected to be liquidated with expendable available resources are accrued in the ~ appropriate funds and the amounts payable from future resources are recorded in the r government-wide statement of net assets along with the estimated liability for FICA taxes and employers' retirement contributions on those amounts. All accumulated unpaid vacation and ~ compensatory time off at June 30, 2006 are expected to be liquidated with future expendable resources. In prior years, the following funds have been used to liquidate this liability for compensated absences: General Fund, Highway Fund, Sewer Fund, Solid Waste Fund, ~ Vehicle Disposal Fund, Golf Course Fund and the Housing Agency. r Sick leave accumulates without limit. Sick leave can be taken only in the event of illness and ~ is not convertible to pay upon termination of employment. However, a County employee who retires or leaves government service in good standing with 60 days or more of unused sick ~ leave is entitled to additional service credit in the Employees' Retirement System of the State of Hawaii. Accumulated sick leave at June 30, 2006 totaled $55,368,000 for the primary ~ government. r Leases Leases transferring substantially all of the risks and benefits of ownership are recorded as capital leases; other leases are operating leases (see Note 8). Capital (eases are recorded as ¦ capital asset additions at their estimated fair market value at the inception of the lease and the r related present value of the future minimum lease obligations is recorded as longterm debt. Operating lease expenditures and expenses are recognized when the lease obligation is paid. 1°' Retirement Plan Contributions The County's contribution to the Employees' Retirement System of the State of Hawaii includes the normal cost plus the level annual payment required to amortize the unfunded actuarial accrued liability. The County's policy is to fund its required contribution annually w (see Note 13). r s r -52- COUNTY OF HAWAII w ~ Notes to the Basic Financial Statements June 30, 2006 ~ Operating Revenues and Expenses ~ Revenues and expenses are distinguished between operating and nonoperating items for the ~ proprietary funds. Operating revenues generally result from providing services in connection with the proprietary funds' principal ongoing operations. The principal operating revenues of the proprietary funds are fees charged to residents for rent and rental subsidies received from • the federal government. Operating expenses include the costs associated with providing housing for tenants, such as ~ utilities, lease rent, and maintenance and repairs; administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting these definitions are reported as nonoperating revenues and expenses. ~ Use of Estimates The preparation of the basic financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, expenditures, and other financing sources ~ and uses during the reporting period. Actual results could differ from those estimates. Recently Adopted Governmental Accounting Pronouncements r. The County adopted GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets for Insurance Recoveries, effective July 1, 2005. This ~ Statement establishes guidance for accounting and reporting for the impairment of capital assets and for insurance proceeds. GASB Statement No. 42 did not have an impact on the County's basis financial statements for the fiscal year ended June 30, 2006. rl The County adopted GASB Statement No. 44, Economic Condition Reporting.• The Statistical Section - an Amendment of National Council on Government Accounting (NCGA) ~ Statement I, effective July 1, 2005. This statement improves the understandability and usefulness of statistical section information by addressing the comparability problems that have developed in practice and by adding information from the new financial reporting model ~ for state and local governments required by GASB Statement No. 34. GASB Statement No. 44 did not have an impact on the County's basic financial statements for the fiscal year ended June 30, 2006, but required additional disclosures in the statistical section of the Comprehensive Annual Financial Report. r The County adopted GASB Statement No. 46, Net Assets Restricted by Enabling Legislation a - an amendment of GASB Statement No. 34, effective July 1, 2005. This statement clarifies ~ that a legally enforceable enabling legislation restriction is one that a party external to the govemment-such as citizens, public interest groups, or the judiciary -can compel a a r -53- r COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2006 government to honor. GASB Statement No. 46 did not have an impact on the County's basic r financial statements for the fiscal year ended June 30, 2006. The County adopted GASB Statement No. 47, Accounting for Termination Benefits, effective July 1, 2005. This statement establishes standards for employers' accounting of benefits associated with either voluntary or involuntary terminations. GASB Statement No. 47 did not have an impact on the County's basic financial statements for the fiscal year ended June 30, 2006. 2. STEWARDSHH', COMPLIANCE AND ACCOUNTABILITY Annual Budget ~ s The County follows these procedures in establishing its operating and capital budgets: • On or before March 1, the Mayor submits to the County Council proposed operating and ~ capital projects budgets for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures for the general fund and special ~ revenue funds, and the means of financing them. Aproject-length budget is submitted to the County Council for the capital projects fund. ~ • The Mayor submits to the County Council amendments to the proposed operating and ~ capital budgets within ten working days after the close of the state legislature, but not later than May 5. ter • The County Council conducts public hearings on the proposed operating and capital r budgets after March 1 but prior to the first reading on the budget bills, which must be after May 5. ~ • On or before June 30, the County Council adopts the budgets. The legal level of budgetary control is the department level because the Mayor can transfer funds from any ~ unencumbered appropriation to another within a department or agency without Council approval. During the year, the budget may be amended by action of the Council, except for appropriations required by law and appropriations for debt service, which may not be decreased or deleted. Supplemental appropriations were made during the 2005-2006 ~ fiscal year to recognize revenue from sources not anticipated at the time of the original budget and to establish the authorization for such funds to be expended. Such supplemental appropriations totaled $10.1 million in the general fund and $5.4 million in the special revenue funds. Appropriations for the operating budget lapse at the end of the fiscal year to the extent w that they have not been expended or encumbered. Appropriations for capital w expenditures that are not encumbered lapse at the end of two fiscal years following the fiscal year that the appropriation was made. ~ rM -54- ~ COUNTY OF HAWAII ~ Notes to the Basic Financial Statements +w June 30, 2006 ¦ Formal budgetary integration is employed as a management control device during the year for the general fund, special revenue funds, and capital projects fund. Formal ~ budgetary integration is not employed for debt service funds because effective budgetary control is alternatively achieved through general obligation bond indenture provisions. . The accompanying statements of revenues, expenditures and changes in fund balances - budget and actual (budgetary basis) for the general fund and solid waste fund present a comparison of the legally adopted budget with actual data on a budgetary basis. Accounting principles applied for purposes of developing data on a budgetary basis ~ differ significantly from those used to present financial statements in conformity with GAAP. On the budgetary basis, intergovernmental revenues are recognized when awarded by the granting agency, encumbrances and unexpended allotments are treated as expenditures, accounts payable are not accrued, and all leases are treated as operating leases. In preparing the financial statements on a GAAP basis, accounts payable are accrued and treated as a reduction of encumbrances for balance sheet presentation. r Budget to GAAP Reconciliation The following is a summary of the adjustments necessary to convert fund balances of the County's general fund and solid waste fund from a GAAP basis to a budgetary basis at June 30, 2006: Solid Waste General Fund Fund Ending fund balance-GAAP basis $34,965,207 $4,092,895 ill Encumbrance adjustments: Beginning encumbrances and unexpended alotments 5,378,176 309,494 a Ending encumbrances and unexpended allotments (7,850,955) (2,787,687) ¦ Other adjustments (2,621,553) - Ending fund balance-Non-GAAP budgetary basis $29.870.875 1 614 7 ~ 3. CASH AND INVESTMENTS ~ The Director of Finance is responsible for the safekeeping of all monies paid to the County. The Director of Finance invests any monies of the County which in the Director's judgment are in excess of the amounts necessary for meeting the day-to-day operating needs of the ~ County. Legally authorized investments include obligations of or guaranteed by the U.S. government, obligations of the State, federally insured savings and checking accounts, time certificates of deposit, and repurchase agreements with federally insured financial institutions. w vrr •I -55- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2006 Cash r The County maintains approximately l8 bank accounts for various purposes at locations throughout the state. Bank deposits are under the custody of the Director of Finance. For financial statement reporting purposes, cash and short-term investments consist of cash, time certificate of deposit, and money market accounts. Cash and short-term investments also include repurchase agreements and U.S. govemment securities with original maturities of three months or less. The carrying amount of the County's unrestricted and restricted deposits (cash, time certificates of deposit, and money market accounts) as of June 30, 2006 was $67,087,809 and $320,032, respectively, for the primary government and $4,946,390 and $637,000, rw respectively, for the fiduciary funds. s Information relating to bank balance, insurance and collateral of cash deposits is determined ~ on a county-wide basis. Total bank balances of deposits for the primary government and fiduciary funds amounted to $167,271,737 at June 30, 2006. Of that amount, $167,016,137 ~ represent bank balances covered by federal deposit insurance or by collateral held by the ~ County's fiscal agents in the name of the County. The remaining bank balances of $255,600 represent deposits held by a management agent and were uncollateralized. Accordingly, these ~ deposits were exposed to custodial credit risk. Custodial credit risk is the risk that in the ~ event of a bank failure, the County's deposits may not be returned to it. For demand or checking accounts and time certificates of deposit, the County requires, in accordance with °i State statutes, that the depository banks pledge collateral based on the available bank balances to limit its exposure to custodial credit risk. All securities pledged as collateral are held by ~ the County's fiscal agents in the name of the County. The County also requires that no more ~ than 60% of the County's total funds available for deposit may be deposited in any one financial institution, in accordance with State statutes. °D Investments The County holds investments both for its own benefit and on behalf of some of the Fiduciary ~ Funds. The County's investments of funds not required for immediate payments are predominately comprised ofU.S. government securities and repurchase agreements, while ~ equity securities are held by the fiduciary fund. r, r* r r -56- ~ COUNTY OF HAWAII ~ Notes to the Basic Financial Statements June 30, 2006 r r ~ The County's investments and maturities at June 30, 2006 are as follows: Maturity_(in Years) ~ Fair Value Less than 1 11=5 Investments- Primary Government: Certificates of deposit $ 83,067,420 $62,095,093 $20,972,327 ~ U.S.governmentsecurities 41,808,827 25,597,904 16,210,923 Repurchase agreements 2,753,528 2,753,528 ~ $127.629.775 90.446.828 37.183.250 ~ Investments -Fiduciary Funds: Certificates of deposit 2 7 2 2 6 8 2 ~ Equity securities 6$ Interest Rate Risk: As a means of limiting its exposure to fair value losses arising from rising _ interest rates, the County's investment policy generally limits maturities on investments to not more than five years from the date of investment. Credit Risk: The County's investment policy limits investments in state and U.S. Treasury r securities, time certificates of deposit, U.S. government or agency obligations, repurchase agreements, commercial paper, bankers' acceptances, and money market funds, or other securities maintaining aTriple-A rating. r Custodial Risk: For an investment, custodial risk is the risk that, in the event of failure of the counterparty, the County will not be able to recover the value of its investments or collateral 'r securities that are in the possession of an outside party. The County's investments are held by its fiscal agent and the securities held by the fiduciary fund are held by the County. In addition, the County requires the institutions to set aside in safekeeping, certain types of securities to collateralize repurchase agreements. Concentration of Credit Risk: The County's investment policy contains no limitations on the r1 amount that can be invested in any one issuer beyond that stipulated by the Hawaii Revised Statutes. or r s • -57- COUNTY OF HAWAII Notes to the Basic Financial Statements i r June 30, 2006 Restricted Cash and Cash Equivalents and Investments Cash and cash equivalents and investments classified as restricted assets amounted to $957,032 at June 30, 2006 and consist of the following: Primary government $ 320,032 Fiduciary funds 637.000 95 032 The County entered into a capital lease to purchase a new financial accounting computer system. Upon execution of the lease documents, the leasing company deposited into an escrow account in the County's name the full lease proceeds. As progress billings are w received for the new system, the County will authorize withdrawals from this escrow ~ account to pay the bills. The balance in this account at June 30, 2006 was $92,077. A Tenant security deposits received by the County for the Kulaimano Elderly Housing ~ Project and the Ouli Ekahi Affordable Housing Project are recorded as restricted assets. Such funds amounted to $10,373 and $20,098, respectively, at June 30, 2006. ~ Restricted amounts set aside by the Kulaimano Elderly Housing Project under its loan agreement with the Farmers Home Administration totaled $182,797 at June 30, 2006. This ~ amount is restricted for debt service, or for other purposes with prior approval from the Farmers Home Administration. An operating reserve fund was established by the Ouli r` Ekahi Affordable Housing Project pursuant to an agreement with the developer of the project. This restricted reserve amounted to $14,687 at June 30, 2006. ~ i The Improvement District No. 17 Fund has restricted $637,000 as a bond reserve at June 30, 2006 to comply with the requirements of its Kaloko Subdivision bond issuance. ~ r r wr r r -58- ~ r ~ COUNTY OF HAWAII Notes to the Basic Financial Statements +r June 30, 2006 r r 4. RECEIVABLES Receivables as of June 30, 2006, for the County's individual major funds and nonmajor funds ~ in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Governmental activities: Solid Capital Nonmajor ~ General Waste Projects Governmental Fund Fund Fund Funds Total ~ Receivables: Real property taxes $5,468,161 $ $ $ $ 5,468,161 ~ Accounts receivable: Sewer 2,724,680 2,724,680 Solid waste 1,894,919 1,894,919 Capital projects 838,721 838,721 r. ]ntergovernmental 14,940,738 187,286 7,491,913 187,456 22,807,393 Gross receivables 20,408,899 2,082,205 8,330,634 2,912,136 33,733,874 Less: allowance for uncollectibles 581 963 8( 30,779) (1,412,742) Net total receivables $20.408.899 242 8 3 6 4 $2 8.0 1.357 $32 +r Business-type activities: Enterprise +r Funds Receivables: ~ Accounts receivable: Rent $47,657 Other 2,334 Gross receivables 49,991 Less: allowance for uncollectibles Net total receivables 4 9 1 During fiscal year 2005, the County issued $3,887,493 in general obligation bonds on behalf of lmprovement District No. 18, an agency fund. At year end, the outstanding balance of $3,887,493 is reflected in the government-wide statement of net assets as a receivable (see Note 10). -59- COUNTY OF HAWAII A Notes to the Basic Financial Statements ~ • June 30, 2006 r 5. INTERFUND RECEIVABLES AND PAYABLES Interfund receivables and payables consist of the following at June 30, 2006: ~ Receivable Fund Payable Fund Amount ~w General fund Solid waste fund $ 34,844 Other governmental funds 311,418 346,262 Capital projects fund General fund 29 _ Other governmental funds ]32,202 132,231 Other governmental funds General fund 80,551 r, Solid waste fund 952 Other governmental funds 20,630 s 102,133 ~ Total 26 Other governmental funds Enterprise funds $~5 ~ The above Interfund balances result from the time lag between the dates that Interfund goods wr and services are provided or reimbursable expenditures occur, transactions are recorded, and ~ payment between funds are made. Transfers for the fiscal year ended June 30, 2006 consisted of the following: ~ Transfers out: Nonmajor • General Governmental r, Fund Funds Total Transfers in: w Solid waste fund $12,652,576 $ $ 12,652,576 r Capital projects fund 909,432 6,413,000 7,322,432 Nonmajor governmental funds 25,715,726 25,715,726 39.277.734 6 41 $45.690.734 The Interfund transfers noted above include transfers from the general fund to provide support for various County programs and to provide resources for the payment of debt services. In addition, some of the nonmajor governmental funds have made transfers to the capital projects fund for the construction of various projects. r • r -60- i ~ COUNTY OF HAWAII ~ Notes to the Basic Financial Statements June 30, 2006 +r 6. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2006 for the County was as follows: ar Balance Balance June 3Q, Retirements/ June 30, 2005 Additions Transfers 2006 ~ Governmental activities: Capital assets not being depreciated: s Land $ 19,560,739 $ 3,177,i1S $ $ 22,737,854 Construction in progress 76.125,170 23,227,944 (]2,610,794) 86,742,320 ~ Total capital assets not being depreciated 9S,68S,909 26,40S,OS9 (12,610,794) 109,480,174 Capital assets being depreciated: Buildings and improvements 259,003,160 6,231,213 265,234,373 Machinery and .r equipment 70,396,951 8,405,534 (2,293,289) 76,509,196 Infrastructure 248,569,253 9.592,832 258,162,085 Total capital assets 'r being depreciated 577.969,364 24,229,579 (2,293,289) 599.90S.6S4 Less accumulated depreciation for: r Buildings and improvements (42,149,717) (3,196,905) (45,346,622) Machinery and ~ equipment (41,793,626) (4,822,994) 1,962,287 (44,654,333) Infrastructure (92,424,192) (10,360,089) (102,784,281) +s Total accumulated ay depreciation {176,367,S3S) (18,379.988) 1,962,287 {192,785,236) Total capital assets, ~ being depreciated, net 401,60],829 5,849.591 (331.0021 407.120,418 w Govemmental ~ activities capital assets, net $497.287.738 $32254.650 ($12.941.7961 $516.600.592 r r -61- r M COUNTY OF HAWAII r. Notes to the Basic Financial Statements r June 30, 2006 e Balance Balance June 30, Retirements/ June 30, ~ 2005 Additions Transfers 2006 ~ Business-type activities: Capital assets not being depreciated: ~ a Land $ 753,877 $ $ $ 753,877 P Capital assets being depreciated: Buildings 1,136,008 1,136,008 Ground and site improvements 261,000 261,000 Furnishings and ~ equipment 93,332 4,225 3 611 93 946 Total capital assets ~ being depreciated 1.490,340 4.225 3 611 1.490,954 r Less accumulated depreciation for: /R Buildings (633,974) (24,615) (658,589) Ground and site ~ improvements (167,139) (3,754) (170,893) Furnishings and ~ equipment 76 019 S 459 3,049 (78.4291 ~ Total accumulated depreciation 877 132 33 828 3.049 (907,911) r Total capital assets, being depreciated, r net 613 208 29 603 562 583,043 r Business-type activities capital R assets, net $1.367'085 029.603) S 2 1 0 r r. r r w -62- COUNTY OF HAWAII ~ Notes to the Basic Financial Statements June 30, 2006 rr ~ Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government $ 1,325,148 Public safety 1,679,388 Highways and streets 11,408,756 Sanitation 2,808,694 Health, education and welfare 86,880 Culture and recreation 1,071,122 ~ Total depreciation expense -governmental activities $18,379.988 Business-type activities: ~ Kulaimano Elderly Housing Project 33 828 Total depreciation expense -business-type activities 3$ 7. DEFERRED REVENUE Deferred revenue consists of the following at June 30, 2006: r Capital Other Total General Solid Waste Projects Governmental Governmental Fund Fund Fund Funds Funds Real property taxes $ 5,854,057 $ $ $ $ 5,854,057 Liquor control revenue 197,820 197,820 Sewer revenue 1,893,901 1,893,901 Solid waste revenue 1,3]2,956 1,312,956 Intergovernmental 1,843,028 11,998 3,108,107 4,963,133 ~ Total presented in fund financial statements 7,894,905 1,324,954 3,108,107 1,893,901 14,22],867 Less adjustments for ~ accrual of revenues (5,466,161) (1,3]2,956) (1,893,901) (8,673,018) Total government- wide financial ~ statements $ 2.428.744 $~29 108 107 $ $ 5.548.849 Enterprise Funds Unearned rental income a rr -63- s COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2006 r w 8. LEASES The County leases machinery and equipment under noncancellable leases expiring at various dates through February 2011 which meet the criteria for capitalization. These capital leases are financed from general fund resources. The estimated value of the leased machinery and equipment at the inception of the capital r. leases and accumulated depreciation, amounting to $8,529,090 and $3,255,062, respectively, and the related present value of the remaining obligations under the capital leases amounting to $2,864,515 at June 30, 2006 are included in capital assets and long-term debt, respectively. ..r The County also leases land, office facilities and other equipment under noncancellable operating leases expiring through July 2020. Expenditures for such operating teases were $882,065 for the fiscal year ended June 30, 2006. The future minimum obligations under capital and operating leases at June 30, 2006 are as rr follows: Governmental ~ Activities - r" Capital Operating Leases Leases ~ Year Ending June 30: r 2007 $1,154,]51 $1,011,004 2008 1,026,824 458,492 2009 528,068 421,286 r. 2010 326,226 422,921 2011 ]3,605 455,521 2012-20]6 259,802 ~ 2017 - 2021 1,470 Total minimum lease payments 3,048,874 03 96 1~ Less amount representing interest 184 359 Obligations under capital leases 2 64 51 9. SOLID WASTE LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS ~ Hilo Landfill The County owns and operates a landfill located in the city of Hilo. State and federal laws require the County to place covers on certain landfill sites and to monitor and maintain the sites for thirty years after the facility is closed. Although the closure and ~ postclosure care costs will be paid near and after the date that the landfill stops accepting r -64- ¦r +r COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2006 waste, the County recognizes a portion of the closure and postclosure care costs in each operating period. The liability for these costs is included in the government-wide statement of net assets. The amount recognized each year is based on the landfill capacity used as of the balance sheet date. At June 30, 2006, the County recognized a liability of $10,277,000, based on the use of 93% of the estimated capacity of the landfill. During the fiscal year ended June 30, 2006, $56,523 was spent on closure of the landfill. The remaining $857,268 in estimated cost of closure and postclosure care will be recognized as the remaining estimated capacity is used. The estimated remaining useful life of the landfill is approximately four years. These amounts are based on what it would cost to perform the required closure and postclosure care in 2006. Actual costs at that time may be higher due to inflation, changes in technology, or changes in regulations. The landfill is expected The County's permit to operate the landfill expired October 9, 1998. The County filed for an extension which was approved by the state until permitted capacity is reached. In accordance ® with state statute, the County is allowed to continue operations provided that the County acts consistently with the permit previously granted and the extension application, plans, specifications and all other information contained therein. ® Kea[akehe In October 1993, the County closed its Kealakehe land511 in Kona. Under state and federal requirements, the County would have to monitor and maintain this site for ten years from the closure date. However, the County anticipates monitoring and maintaining the site for thirty years because there is presently a subterranean fire which requires active management. The estimated cost of closure and postclosure is $15,250,000, based on what it would cost to perform the required closure and postclosure care in 2006. Actual costs may be higher due to inflation, changes in technology, or changes in regulations. Through June 30, 2006, $6,863,972 was spent on closure and postclosure care of the landfill. The remaining estimated liability of $8,386,000 is included in the government-wide statement of net assets. During the year ended June 30, 2006, a total of $126,285 was spent on this landfill. This amount was for the management of the subterranean fire. The County is providing financial assurance for postclosure care and remediation through self insurance as explained below. Pu'uanahu[u In May 1993, the County contracted with a private company to construct and operate a new landfill on County land at Pu'uanahulu in West Hawaii. The present contract calls for County employees to perform the daily operations•ofthe landfill, and for the private company to retain the overall management as well as perform all construction work on the landfill cells. Under the terms of the contract, the County has no responsibility for remediation, closure or postclosure care. Accordingly, no liability for this landfill is included in the County's financial statements. Financial Assurance For fiscal year 2006, the County has provided for financial resources that will be available to provide for closure, postclosure care and remediation or containment of environmental hazards at the above landfills, except Pu`uanahulu. The Environmental -65- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2006 insurance on selected structures, medical malpractice insurance for emergency medical ~ technicians, general liability insurance for water safety officers, aviation liability for helicopter operations, automobile coverage on transit buses, and no-fault insurance coverage for privately owned police vehicles. There was no reduction in insurance coverage during the year from coverage in the prior year. During the past three fiscal years, the amount of settlements in cases covered by insurance have not exceeded the insurance coverage. The ~1 County is substantially self-insured for its vehicles as well as for all other perils including ~y workers' compensation and general liability. Liabilities aze reported when it is probable that a loss has occurred and the amount of that loss ~ can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported (IBNR). Claim liabilities, including IBNR, are based on the estimated ultimate cost of settling the claims, and include incremental costs for the hiring of special counsel and expert witnesses. Claims liabilities are estimated by a case-by-case review of all claims and the application of historical experience to outstanding claims. ~ Estimates of IBNR are based on historical experience. The liability for claims and judgments is reported on the government-wide statement of net assets. At June 30, 2006, the amount of this liability was $2],340,393. This is the County's best estimate based on available information. Changes in the reported liability since June 30, 2004 are given below. General Workers' Total Liabili Compensation Liabili ~ Balance at June 30, 2004 $6,838,384 $13,190,616 $20,029,000 ~ Incurred claims (including IBNR)* 4,669,502 6,764,323 11,433,825 Claim payments (1,544,734) (3,315,802) (4,860,536) Balance at June 30, 2005 $9,463,152 $16,639,137 $26,602,289 Incurred claims (including IBNR)* (412,874) 52,510 (360,364) Claim payments (1,856,902) (3,044,630) j4,901,532) Balance at June 30, 2006 3 6 ] 3.647.017 $21340.393 *Net of new claims liability and old claims resolved at less than previous estimate. Subsequent Event In October 2006, the island of Hawaii experienced a 6.7 magnitude earthquake followed by several afrershocks. The series of earthquakes caused damage to various roads, bridges and buildings owned by the County. The total damage is estimated to be $1 S million. Some of the damage is covered by insurance. In addition, funds from the Federal Emergency Management Agency and the Federal Highway Administration are expected to help fund the repairs. The County will pay its matching share for these funds, the insurance deductible, as well as, any other costs not covered by these programs. -74- i COUNTY OF HAWAII „n Notes to the Basic Financial Statements June 30, 2006 uM .R r 13. EMPLOYEE BENEFIT PLANS Pension Plan t Plan description All full-time employees of the County participate in the Employees' Retirement System of the State of Hawaii (System), a cost sharing multiple-employer ~ defined benefit pension plan. The System was established by Chapter 88 of the Hawaii Revised Statutes (HRS) and is governed by a Board of Trustees. All contributions, benefits ~ and eligibility requirements are established by Chapter 88, HRS, and can be amended by ~ legislative action. The System regards the County, including its component unit, as one employer. Therefore, separate information for the primary government and its component unit is not available. All ~ information given below on the pension plan is for the reporting entity as a whole, including both the primary government and its component unit. 'r All of the County's full-time employees are eligible to participate in the System. The System consists of a contributory retirement plan and a noncontributory retirement plan. Eligible employees, in service and a member of the existing contributory plan on June 30, 1984, were given an option to remain in the existing plan or join the noncontributory plan, effective January 1, 1985. All new eligible employees hired after June 30, 1984 generally become members of the noncontributory plan. Both plans provide death and disability benefits and a r cost of living adjustment. In the contributory plan, employees generally may elect normal retirement at age 55 with 5 or ] 0 years of credited service or elect early retirement at any age with 25 years of credited service. Such employees are generally entitled to retirement benefits, payable monthly for life, of 2% or 2Yz % of their average final salary, as defined, for each year of credited service with certain limitations. Benefits fully vest on reaching five years of service; retirement benefits are reduced for eazly retirement. In the noncontributory ~ plan, employees may elect normal retirement at age 62 with ] 0 years of credited service or at age 55 with 30 years of credited service, or elect eazly retirement at age 55 with 20 years of credited service. Such employees are entitled to retirement benefits, payable monthly for life, ~ of 1.25% of their average final salary, as defined, for each year of credited service. Benefits fully vest on reaching ten years of service; retirement benefits are reduced for early retirement. r On July 2006, a new hybrid contributory plan will become effective pursuant to Act 179, Session Laws of Hawaii of 2004. Members in the hybrid plan will contribute 6% of their salary to the plan and will be eligible for retirement at age 62 with 5 years of credited service ~ or age 55 and 30 years of credited service. Members will receive a benefit multiplier of 2% for each year of credited service in the hybrid plan. The benefit payment options are similar to the current contributory plan. Most of the new employees hired from July 1, 2006 will be ~ required to join the hybrid plan. -75- COUNTY OF HAWAII r. Notes to the Basic Financial Statements June 30, 2006 The System issues a Comprehensive Annual Financial Report that may be obtained by writing to the Employees' Retirement System of the State of Hawaii, 201 Merchant Street, Suite 1400, Honolulu, Hawaii 96813. r Funding policy AI? funding requirements are established by Chapter 88, HRS, and can be amended by the state legislature. Covered contributory plan employees are required to Iw contribute 7.8% or 12.2% of their salary to the plan; the County is required to contribute the remaining amounts necessary to pay contributory plan benefits when due. The County is also required to contribute all amounts necessary to pay noncontributory benefits when due. The ~ County's contribution requirements are actuarially determined based on actuarial assumptions ~ established by Chapter 88, HRS. Effective July 1, 2005, employer contribution rates are a fixed percentage of compensation, including the normal cost plus amounts required to pay for ~r the unfunded actuarial accrued liability. The employer contribution rates in effect at June 30, ` 2006 were 15.75% for Police and Fire employees and 13.75% for all other employees. The County's contributions to the System for the fiscal years ended June 30, 2004, 2005 and 2006 ~ were $7,394,683, $10,487,763 and $15,452,562, respectively, equal to the required r contributions for each year. Post-Retirement Benefits ~ In addition to providing the pension benefits described above, the County is required by state ~ statute to contribute to the Hawaii Employer-Union Health Benefits Trust Fund (the EUTF), a statewide program which provides health and group life insurance for all retired and active r'' County employees, their dependents and their beneficiaries. The state and other counties also participate in the fund. For employees hired prior to July 1, 1996 who retire with at least ten ~ years of credited service, the County is required to pay 100% of the premiums of the medical, ~ adult dental, prescription drug, vision, and group life insurance plans elected by the retiree. For employees hired prior to July 1, 1996 who retire with less than ten years of credited ~ service, the County is required to pay half of the monthly premium cost of the above plans. u. For employees hired July 1, 1996 or after, the amount of the premium cost the County is required to pay varies depending on the employee's years of service at the time of retirement. l~ r Currently, the County has 1,091 former employees who have retired with at least ten years of credited service and are receiving the full benefit. Two additional employees have retired ~ with less than ten years of service and have half of their medical premiums paid by the County. For each retiree and retiree's spouse eligible for Medicare, the County also pays $88.50 per month as reimbursement of their Medicare premiums. ~ The County's contribution is recorded as an expenditure when paid. The amount of the contribution is limited by state statute to the actual cost of benefit coverage. During the fiscal year ended June 30, 2006, the County's contribution to the EUTF for retired employees totaled $6.7 million. R -76- r? rr COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2006 +r w Deferred Compensation Plan County employees are permitted to participate in a deferred compensation plan of the State of ~ Hawai`i, adopted pursuant to Internal Revenue Code (IRC) section 457. The plan permits eligible employees to defer a portion of their salary until future years by contributing to a fund managed by a plan administrator. The deferred compensation amounts are not available ~ to employees until termination, retirement, death, or unforeseeable emergency. + All plan assets are held in a trust fund to protect them from claims of general creditors and ~ from diversion to any uses other than paying benefits to participants and beneficiaries. The County has no responsibility for loss due to the investment or failure of investment of funds and assets in the plans, but does have the duty of due care that would be required of an ordinary prudent investor. Therefore, in accordance with GASB Statement No. 32, r Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, deferred compensation plan assets are not reported in the accompanying basic financial statements. r _ 14. COMPONENT UNIT DISCLOSURES Deposits and Investments At June 30, 2006, cash, time certificates of deposit, money market funds, and repurchase ~ agreements of $62,762,831, with bank balances of $65,193,554, were held by the County on behalf of the Department. These balances were fully insured or collateralized with securities ' held by the County's agent in the County's name. + The deposits and investments include investments received by the Department that are refundable or restricted as to use, and is recorded as a restricted asset. Such funds amounted i to $14,403,033 at June 30, 2006. At June 30, 2006, the Department's investment portfolio consists primarily ofrepurchase ~ agreements held by the County on behalf of the Department. .r Capital Assets • The Department began operations as of January I, 1950. At that date, the utility plant in service was transferced to the Department from the County at the cost of the utility plant assets acquired by the County for its water system from January 1, 1924 to ~ December 31, 7949, less accumulated depreciation. Acquisitions prior to 1924 and ~ acquisitions by gift or grant prior to 1950 are not included in utility plant. Additions to utility plant since January 1, 1950 are stated at original cost and include contributions by governmental agencies, private subdividers and customers at their cost or estimated cost. Construction costs include amounts for contract work, engineering supervision and other M -77- + COUNTY OF HAWAII Notes to the Basic Financial Statements wn June 30, 2006 direct and indirect costs. Construction period interest is capitalized on utility plan constructed 'r" with tax-exempt debt. Depreciation on the Department utility plant assets in service is computed using the straight- line method over the estimated useful lives of the assets as follows: fr Structures and improvements 40 to 50 years Machinery and equipment 5 to 20 years s Water systems 10 to 40 years The capital assets of the Department at June 30, 2006 were as follows: ~ r Utility plant in service $286,168,480 Less: accumulated depreciation (132,673,044) Ar 153,495,436 r Land and rights 815,962 Construction in progress 42,106,718 w Net capital assets ~1 6~ r Long-term Debt The County has issued general obligation bonds on behalf of the Department. The ` Department is responsible for the payment of the debt service on these bonds, but the County ~ remains liable because they are general obligations of the County. The Department has recorded a liability for these general obligation bonds, which amounted to $38,374,312 at June 30, 2006. ¦r General obligation bonds payable issued on behalf of the Department and other long-term ~ debt at June 30, 2006 are comprised of the following: Public improvement bonds: ~ 1993 Series A at 5.05% to 5.6%, due through 2013 $ 5,000,000 1998 Series A at 4.5%, due through 2033 686,300 2001 Series A at 4.0% to 5.5%, due through 2021 7,080,000 2004 Series D at 4.5%, due through 2039 259,200 i. 2006 Series A at 4.0% to 5.0%, due through 2026 25,000,000 Total public improvement bonds 38,025,500 Public improvement refunding bonds: a. 2004 Series at 5.0%, due through 2015 348,812 State revolving fund loan, interest at 1.01% to 1.37%, due through 2022 3,175,607 r, Total $41.549.919 rr a -78- ~ COUNTY OF HAWAII ru Notes to the Basic Financial Statements ~ June 30, 2006 r At June 30, 2006, future principal payments for long-term debt are scheduled as follows: ar Fiscal year ending June 30: 2007 $ 1,940,000 2008 2,031,000 ,r 2009 2,121,000 2010 2,226,000 2011 2,333,000 ~ 2012 - 2016 10,578,000 2017 - 2021 10,980,000 2022 - 2026 8,925,000 ~ 2027 - 2031 223,000 2032 - 2036 139,000 2037 - 2039 53.919 .y, Total $41.549.919 Contributions in Aid of Construction w Effective July 1, 2000, the Department adopted GASB Statement No. 33, Accounting and ^ Financial ReportingJor Nonexchange Transactions, which requires the Department to recognize contributions in aid of construction as nonoperating revenues. Contributions in aid of construction were previously recognized as contributed capital. The Department ^ recognized $6,380,606 of contributions in aid of construction as nonoperating revenues for ~ the fiscal year ended June 30, 2006. Commitments and Contingent Liabilities r Claims and judgments -The Department is self-insured for workers' compensation and other perils. The liability at June 30, 2006 for workers' compensation claims of $272,000 was estimated based on a combination of case-by-case review and the application of historical ~ experience to outstanding claims. Construction contracts -The Department is obligated under construction contracts for the • utility plant and other projects. Such commitments approximated $16,584,000 at June 30, 2006. s r r - 79 - A r 'a. w wr This page intentionally left blank. ~ w s OI ¦ r. ~r s r IK r -80- ~ ~r NONMAJOR GOVERNMENTAL FUNDS ~ SPECIAL REVENUE FUNDS HIGHWAY FUND -Used to account for the costs of maintaining the County's highways an streets. it Financing is provided primarily by fuel, motor vehicle weight and public utility franchise taxes. SEWER FUND -Used to account for costs of operating the County's vazious sewerage systems. Financing w is provided by chazges to users for sewer services CEMETERY FUND -Used to accumulate moneys to guazantee the future maintenance of County cemetery sites. Financing is provided from the sale of burial lots in County cemeteries. wt PARKING METER FUND -Used to account for the costs of maintaining County orrstreet and off-street ~ parking areas. Financing is provided by the proceeds from pazking meters. IM VEH/CLE DISPOSAL FUND -Used to accumulate moneys for the [owing, removal, disposal and recycling of abandoned or discarded automobiles and automobile parts. Financing is provided by anmal fees collected with motor vehicle registrations. ~ BIKEWAY FUND -Used to accumulate moneys for the construction of bikeways within the County. Financing is provided by bicycle license fees. R WORKFORCE /NVESTMENT ACT FUND -Used to account for employmer[ and training services provided to economically disadvantaged adults, dislocated workers and youth. Financing is provided by ~ federal grants. ~ GOLF COURSE FUND -Used [o account for the cost of operating the Hilo Municipal Golf Course. Funding is provided from green fees and payments from restaurant and pro shop concessionaires. ~ GEOTHERMAL RELOCATION REVOLVING FUND -Used to account for the County's shaze of geothermal resource royalties received from the operator of a geothermal power plant located inthe County. The funds are earmarked for a geothermal relocation program. w BEAUT/FICATION FUND -Used to accumulate moneys for the beautification of highways and disposal of abandoned vehicles within the County. Financing is provided by assessments on ve6cle registrations. HAWAII COUNTYHOUS/NG AGENCY- Used to account for Federal and County moneys used to provide public housing assistance within the County. PARK DEDICAT/ON FUND -Used to account for moneys deposited with the County by subdividers to provide land for parks and playgrounds in subdivisions. DEBT SERVICE FUNDS INTEREST FUND -Used to accumulate moneys for payment of interest on general obligation bonds. Moneys required to service interest maturities are transferzed annually from the Genaal Fund. BOND REDEMPTION FUND -Used to accumulate moneys for the payment of general obligation bonds. Moneys required [o retire the bonds are transferred from the General Fund one year in advance of maturity. COUNTY OF HAWAII Nonmajor Governmental Funds Combining Balance Sheet June 30, 2006 Special Revenue Funds Parking Vehicle Highway Sewer Cemetery Meter Disposal Fund Fund Fund Fund Fund Assets Cash and cash equivalents $10,286,057 $7,763,112 $ 38,659 $99,239 $1,898,456 Investments - - - - - Imprest fund - 200 - - - Receivables: Due from federal government - - - - - Due from other governmental funds 952 26,897 - - - Due from other nongovernmental funds - 4,050 - - - Trade, net of allowance for doubtful accounts - 1,893,901 - - - Other - - - - - 952 1,924,848 - - - Total assets $10,287,009 $9,688,160 $ 38,659 $99,239 $1,898,456 Liabilities and Fund Balances Liabilities: Accounts payable $ 309,234 $ 90,088 $ - $ - $ 102,554 Due to other governmental funds 205,858 9,799 - - 817 Unearned revenue - 1,893,901 - - - Accrued liabilities 435 215,704 - - - Totalliabilities 515,527 2,209,492 - - 103,371 Fund balances: Reserved for: Encumbrances 2,823,610 1,201,218 - - 209,363 Debt service - - - - - Unreserved: 6,947,872 6,277,450 38,659 99,239 1,585,722 ' Total fund balances (deficit) 9,771,482 7,478,668 38,659 99,239 1,795,085 Total liabilities and fund balances $10,287,009 $9,688,160 $ 38,659 $99,239 $1,898,456 ' i f r _82_ i i Special Revenue Funds - Workforce Golf Geothermal Beauti- Park Bikeway Investment Course Relocation fication Housing Dedication Fund Act Fund Fund Rev. Fund Fund Agency Fund +M $ 366,028 $ - $ - $ 1,865,236 $ 672,742 $ 3,209,528 $ - _ _ _ _ - 3,195,170 77,771 - - 2,000 - - 200 - r - 187,456 - - - - - _ _ _ _ - 74,284 - r - - - - - - - - 38,994 1,619 133,393 - 82,699 - - 226,450 1,6]9 133,393 - 156,983 - $ 366,028 $ 226,450 $ 3,619 $ 1,998,629 $ 672,742 $ 6,561,881 $ 77,771 $ - $ - $ 845 $ - $ - $ 54,768 $ - - 226,450 19,070 - - 2,256 - _ _ _ _ - 69,834 - - 226,450 19,915 - - ]26,858 - r 9,000 - 42,755 1,490,416 477 3,903,287 - ' 357,028 - (59,051) 508,213 672,265 2,531,736 77,771 ~ 366,028 - (16,296) 1,998,629 672,742 6,435,023 77,771 $ 366,028 $ 226,450 $ 3,619 $ 1,998,629 $ 672,742 $ 6,561,881 $ 77,771 ~ (Continued) rr w -83- a COUNTY OF HAWAII Nonmajor Governmental Funds Combining Balance Sheet June 30, 2006 (Concluded) ¦r r. Debt Service Funds Tota} Bond Nonmajor ~ Interest Redemption Governmental ~ Fund Fund Funds Assets ~ Cash and cash equivalents $ 358,674 $ 9,442,554 $ 36,000,285 ? Investments - 7,300,000 10,572,941 Imprest fund - - 2,400 ~ Receivables: w. Due from federal government - - 187,456 Due from other governmental funds - - 102,133 ~ Due from other nongovernmental funds - - 4,050 Trade, net of allowance for doubtful accounts - - 1,893,901 Other - - 256,705 ~ - - 2,444,245 ~ Total assets $ 358,674 $ 16,742,554 $ 49,019,871 ~ Liabilities and Fund Balances ~ Liabilities: Accounts payable $ - $ - $ 557,489 ~r Due to other governmental funds - - 464,250 ~ Deferred revenue - - 1,893,901 Accrued liabilities 72,521 245,000 603,494 Total liabilities 72,521 245,000 3,519,134 Fund balances: Reserved for: Encumbrances - - 9,680,126 ~ Debt service 286,153 16,497,554 16,783,707 Unreserved: - - 19,036,904 ~ To[al fund balances (deficit) 286,153 16,497,554 45,500,737 Total liabilities and fund balances $ 358,674 $ 16,742,554 $ 49,019,871 ~ See accompanying independent auditors' report. R r ~R r ¦ r -84- w This page intentionally left blank. r r r r w 9r a '7 r _85 i COUNTY OF HAWAII s Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficit) For the Fiscal Year Ended June 30, 2006 A' r Special Revenue Funds ~ Parking Vehicle r Highway Sewer Cemetery Meter Disposal Fund Fund Fund Fund Fund Revenues Fuel tax $ 7,857,394 $ - $ - $ - $ - ~ Public utility franchise tax 7,328,887 - - - - Licenses and permits 6,564,674 - - - 1,987,136 Intergovernmental 331,380 - - - - Charges for services - 6,541,202 - 13,048 83 r Investment earnings - - - - - Miscellaneous 411,016 10,167 11,750 - - ¦r Total revenues 22,493,351 6,551,369 11,750 13,048 ],987,219 Ir Expenditures ~ Current: a Public safety 4,046,898 - - - - Highways and streets 8,425,334 - - 1 ],621 - IAr Sanitation - 5,058,844 - - 1,706,604 Health, education and welfare - - 23,422 - - Culture and recreation - - - - - Pension and retirement contributions 1,256,940 384,431 - - 10,672 ~ Employees' health insurance 579,022 177,423 - - 6,148 Miscellaneous 512,053 1,035,343 - - - ~ Debt service: ~ Principal - - - - - I~ Interest - - - - - r Total expenditures 14,820,247 6,656,041 23,422 11,621 1,723,424 Excess (deficiency) of revenues A over expenditures 7,673,]04 (104,672) (11,672) ],427 263,795 r Other Financing Sources (Uses) ww Transfers in 222,000 - - - - r Increase in capital leases - - - - - Transfers out (6,413,000) - - - - r Total other financing sources (uses) (6,]91,000) - - - - r Net change in fund balances 1,482,104 (104,672) (11,672) 1,427 263,795 Fund balances at beginning of year 8,289,378 7,583,340 50,331 97,812 1,531,290 ~ Fund balances (deficit) at end of year $ 9,771,482 $ 7,478,668 $ 38,659 $ 99,239 $1,795,085 ~ ¦ r -86- r i w " Special Revenue Funds a Workforce Golf Geothermal Beauti- Park Bikeway Investment Course Relocation fication Housing Dedication " Fund Act Fund Fund Rev. Fund Fund Agency Fund a 20,512 - - - 165,599 - - _ - 1,893,651 - - - 11,148,702 - - - 728,292 - - - - ~ - - - - - 140,616 2,129 - - - 476,951 - 356,305 - ,r 20,512 1,893,651 728,292 476,951 165,599 1],645,623 2,129 660 - - - 78,138 - - _ _ _ _ _ _ _ - 1,893,651 - - - 11,452,457 - ' - - 743,412 - - - - r - - 127,603 - - 383,147 - - - 68,164 - - 127,944 - - - 3,108 - - - - - - - - - 1,170 - - - - - - 306 - 660 1,893,651 942,287 - 78,138 11,965,024 - r 19,852 - (213,995) 476,951 87,461 (319,401) 2,129 s w - - 161,804 - - 935,303 - - - - - - 8,689 - ~ - - - - - - - ~ - - 161,804 - - 943,992 - 19,852 - (52,191) 476,951 87,461 624,591 2,129 346,176 - 35,895 1,521,678 585,281 5,810,432 75,642 $ 366,028 $ - $ (16'296) $ 1,998,629 $ 672,742 $ 6,435,023 $ 77,771 (Continued) r -87- r s COUNTY OF HAWAII n. Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficit) For the Fiscal Year Ended June 30, 2006 ~ (Concluded) ~ Debt Service Funds Total Bond Nonmajor Interest Redemption Governmental Fund Fund Funds I? Revenues w Fuel tax $ - $ - $ 7,857,394 Public utility franchise tax - - 7,328,887 ~ Licenses and permits - - 8,737,921 r" Intergovernmental - - 13,373,733 r Charges for services - - 7,282,625 Investment earnings - - 142,745 Miscellaneous - - 1,266,189 ~ Total revenues - - 45,989,494 Expenditures Current: r Public safety - - 4,046,898 Highways and streets - - 8,515,753 ~ Sanitation - - 6,765,448 Health, education and welfare - - 13,369,530 Culture and recreation - - 743,4]2 Pension and retirement contributions - - 2,162,793 r Employees' health insurance - - 958,701 Miscellaneous - - 1,550,504 ~ r e t service: Principal - 12,878,605 12,879,775 Interest 9,776,065 - 9,776,371 ~ R Total expenditures 9,776,065 12,878,605 60,769,185 Excess (deficiency) of revenues I~ over expenditures 9,776,065 (12,878,605) (14,779,691) r. Other Financing Sources (Uses) ~ Transfers in 9,450,054 ]4,946,565 25,715,726 W Increase in capital leases - - 8,689 Transfers out - - (6,413,000) w Total other financing sources (uses) 9,450,054 14,946,565 19,31 1,415 Net change in fund balances (326,011) 2,067,960 4,531,724 Fund balances at beginning ofyear 612,164 14,429,594 40,969,013 ~ Fund balances (deficit) at end ofyear $ 286,153 $ 16,497,554 $45,500,737 ~ See accompanying independent auditors' report. ! Ya -88- COUNTY OF HAWAII Highway Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 Actual Variance r Original Final (Budgetary Positive Budget Budget Basis) (Negative) r Revenues: Taxes: Fuel tax $ 7,580,000 $ 7,580,000 $ 7,857,394 $ 277,394 Public utility franchise tax 6,000,000 6,000,000 7,328,887 1,328,887 Total taxes 13,580,000 13,580,000 15,] 86,281 1,606,281 Licenses and permits -motor vehicle weight taxes 5,195,341 5,195,341 6,564,674 1,369,333 Intergovernmental 300,058 324,058 331,380 7,322 Charges for current services 175,000 175,000 253,878 78,878 Miscellaneous 91,579 91,579 157,138 65,559 Total revenues 19,341,978 19,365,978 22,493,351 3,127,373 Expenditures: Public safety -traffic engineering 4,016,098 4,901,760 4,246,653 655,107 Highways and streets 8,267,806 9,712,394 8,374,366 1,338,028 Highways and streets -mass transit 694,000 694,000 412,066 281,934 Pension and retirement contributions 1,305,000 1,345,000 1,256,940 88,060 Health fund 800,000 800,000 579,022 220,978 Miscellaneous 1,413,000 1,124,412 481,936 642,476 Total expenditures 16,495,904 18,577,566 15,350,983 3,226,583 Excess of revenues over expenditures 2,846,074 788,412 7,142,368 6,353,956 Other financing uses -transfers in (out) - r General Fund - 222,000 222,000 - Capital Projects Fund (4,773,000) (6,413,000) (6,413,000) - Total other financing uses (4,773,000) (6,191,000) (6,191,000) - Excess (deficiency) of revenues over expenditures and other uses (1,926,926) (5,402,588) 951,368 6,353,956 Fund balance at beginning of year 8,289,378 8,289,378 8,289,378 - Fund balance at end of year $ 6,362,452 $ 2,886,790 $ 9,240,746 $ 6,353,956 ~ See accompanying independent auditors' report. a i -89- r COUNTY OF HAWAII Sewer Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 Actual Variance ~ Original Final (Budgetary Positive Budget Budget Basis) (Negative) ~ Revenues: ~ Charges for current services -sewer fees $ 6,350,647 $ 6,350,647 $ 6,541,202 $ 190,555 Ir Miscellaneous ] 00 100 10,167 10,067 Total revenues 6,350,747 6,350,747 6,551,369 200,622 ~ Expenditures: ~ Sanitation 5,479,437 5,479,437 5,014,079 465,358 W Pension and retirement contributions 452,208 452,208 384,431 67,777 Health fund 191,187 191,187 177,423 13,764 Miscellaneous 2,311,230 2,311,230 217,116 2,094,114 ~ Total expenditures 8,434,062 8,434,062 5,793,049 2,641,013 Excess (deficiency) of revenues over expenditures (2,083,315) (2,083,315) 758,320 2,841,635 ~ Fund balance at beginning of year 7,583,340 7,583,340 7,583,340 - ~ Fund balance at end of year $ 5,500,025 $ 5,500,025 $ 8,341,660 $ 2,841,635 ~ See accompanying independent auditors' report. ~ Yr il[r ¦r 11~ r -90- s ¦ COUNTY OF HAWAII ~ Cemetery Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) r~ For the Fiscal Year Ended June 30, 2006 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) r Revenues -miscellaneous -sale of cemetery plots $ 16,000 $ 16,000 $ 11,750 $ (4,250) Expenditures -health, education and welfare 16,000 32,000 23,422 8,578 Deficiency of revenues over expenditures - (16,000) (11,672) 4,328 r Fund balance at beginning of year 50,331 50,331 50,33 ] - Fund balance at end of year $ 50,331 $ 34,331 $ 38,659 $ 4,328 r See accompanying independent auditors' report. r r al/ s r +w i a i i -91- COUNTY OF HAWAII Parking Meter Fund r Schedule of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 Actual Variance ~ Original Final (Budgetary Positive ~ Budget Budget Basis) (Negative) ~ Revenues- ~ Charges for current services -highways and streets $ - $ 9,000 $ 13,048 $ 4,048 Yr Expenditures - Highways and streets - 20,000 i 1,621 8,379 ~ Excess (deficiency) of revenues over expenditures - (11,000) 1,427 12,427 Fund balance at beginning of year 97,812 97,812 97,812 - Fund balance at end of year $ 97,812 $ 86,812 $ 99,239 $ 12,427 See accompanying independent auditors' report. V Ir Yr A• r i r -92- COUNTY OF HAWAII Vehicle Disposal Fund • Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 r Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues: Licenses and permits -vehicle disposal fee $1,872,000 $ 1,872,000 $ 1,987,136 $ 115,136 Charges for services -towing charges - - 83 83 Total revenues 1,872,000 1,872,000 1,987,219 115,219 y Expenditures: y Sanitation 2,214,606 2,214,256 1,672,521 541,735 Pension and retirement contributions 10,500 10,850 10,672 178 Health fund 6,600 6,600 6,148 452 Total expenditures 2,231,706 2,231,706 1,689,341 542,365 Excess(deficiency)ofrevenues over expenditures (359,706) (359,706) 297,878 657,584 ~Y+ Fund balance at beginning of year 1,531,290 1,531,290 1,531,290 - Fund balance at end of year $1,171,584 $ 1,171,584 $ 1,829,168 $ 657,584 ~r See accompanying independent auditors' report. .r w Alr all a w rl -93- W COUNTY OF HAWAII Bikeway Fund r Schedule of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 Original Actual Variance and Final (Budgetary Positive Bud et Bans e attve g L Ir Revenues -licenses and permits - 'I bicycle tax $ 25,000 $ 20,512 ($4,488) r, Expenditures -highways and streets 171,000 660 170,340 ~ Excess (deficiency) of revenues over expenditures (146,000) 19,852 165,852 Fund balance at beginning of year 346,176 346,176 - ~ Fund balance at end of year $200,176 $366,028 $165,852 See accompanying independent auditors' report. Irt ¦ rr Yr r /R s w r r -94- W COUNTY OF HAWAII Workforce Investment Act Fund w~ Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) i Revenues - intergovernmental -federal grants $ - $ 20,1 ] 5 $ 20,] 15 $ - ~ Expenditures -health, education & welfare - 20,115 20,115 - Excess of revenues over expenditures - - - - r Fund balance at beginning ofyear - - - - Fund balance at end ofyear $ - $ - $ - $ - r See accompanying independent auditors' report. r r r +111 rr1 111 1 i a -95- i w COUNTY OF HAWAII Golf Course Fund r Schedule of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 Actual Variance Original Final (Budgetary Positive ~ Budget Budget Basis) (Negative) Revenues: ~ Charges for services $ 844,500 $ 844,500 $728,292 $ 16,208) rr Miscellaneous - - - - Total revenues 844,500 844,500 728,292 (116,208) W Expenditures: s Culture and recreation 764,182 801,182 787,271 13,91 I Pension and retirement contributions 121,]22 129,472 127,603 1,869 Health fund 90,000 69,000 68,164 836 Miscellaneous 31,000 6,650 3,350 3,300 ~ Total expenditures 1,006,304 1,006,304 986,388 19,916 1~' Deficiency of revenues over expenditures (161,804) (]61,804) (258,096) (96,292) ~ Other financing sources: ~ Transfers in -General Fund 161,804 161,804 161,804 - r Deficiency of revenues and other sources over expenditures - - (96,292) (96,292) ~ Fund balance at beginning of year 35,895 35,895 3S,89S - Fund balance (deFicit) at end of year $ 35,895 $ 35,895 $ (60,397) $ (96,292) ~ W See accompanying independent auditors' report. r A r Y -96- r COUNTY OF HAWAII Geothermal Relocation Revolving Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2006 Original Actual Variance and Final (Budgetary Positive Budget Basis) (Negative) r Revenues -miscellaneous -geothermal royalties $ 150,000 $ 476,951 $ 326,951 Expenditures -general government 150,000 150,000 - Excess of revenues over expenditures - 326,951 326,951 • Fund balance at beginning of year 1,521,678 1,521,678 - Fund balance at end of year $ 1,521,678 $ 1,848,629 $ 326,951 r See accompanying independent auditors' report. r r r rY -97- r COUNTY OF HAWAII Beautification Fund ~ Schedule of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 Actual Variance Original Final (Budgetary Positive Budget Budget Basis (Negative) ~ Revenues -licenses and permits -highway AI beautification $150,000 $150,000 $ 165,599 $ 15,599 ~ Expenditures -highways and streets 225,000 225,000 77,075 147,925 ~ Excess (deficiency) of revenues over expenditures (75,000) (75,000) 88,524 163,524 ~ Fund balance at beginning of year 585,281 585,281 585,281 - ~ Fund balance at end of year $510,281 $510,281 $ 673,805 $ 163,524 See accompanying independent auditors' report. ¦ /n r I r.+ ti r R r -98- s r COUNTY OF HAWAII Hawaii County Housing Agency r Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 Actual Variance Original Final (Budgetary Positive Budget Budget Basis) (Negative) Revenues: Intergovernmental - Federal -HUD -Voucher program $10,980,800 $11,130,800 $11,145,752 $ 14,952 State -Native Hawaiian Housing - 50,000 2,950 (47,050) Interest earned 2,290 2,290 140,616 ]38,326 Resale of property - - 356,154 356,154 Other - - 151 151 Total revenues 10,983,090 11,183,090 11,645,623 462,533 Expenditures: Health, education & welfare 1 ],301,760 11,69],760 11,224,743 467,017 Pension and retirement contributions 429,000 429,000 383,147 45,853 Health Fund 143,100 143,]00 127,944 15,156 Miscellaneous 2,290 2,290 - 2,290 r Total expenditures 11,876,150 12,266,150 11,735,834 530,316 y Deficiency of revenues over expenditures (893,060) (1,083,060) (90,211) 992,849 s Other financing sources: Transfers in -General Fund 745,303 935,303 935,303 - Excess (deficiency) of revenues and other sources over expenditures (147,757) (147,757) 845,092 992,849 r Fund balance at beginning of year 5,8]0,432 5,8]0,432 5,810,432 - Fund balance at end of year $ 5,662,675 $ 5,662,675 $ 6,655,524 $ 992,849 r See accompanying independent auditors' report. riM r -99- r COUNTY OF HAWAII Park Dedication Fund r Schedule of Revenues, Expenditures and Changes in Fund Balance - ~ Budget and Actual (Budgetary Basis) r For the Fiscal Year Ended June 30, 2006 Actual Variance Original Final (Budgetary Positive ~ Budget Budget Basis) (Negative) Revenues-interest $ - $ - $ 2,129 $ 2,129 ~ Expenditures -culture and recreation - - - - Excess of revenues over expenditures - - 2,129 2,129 ~ Fund balance at beginning of year 75,642 75,642 75,642 - Fund balance at end of year $75,642 $75,642 $77,771 $2,129 ~ W See accompanying independent auditors' report. Y` Y? Yt M w r r - 100 - This page intentionally left blank. as r rr • .r -101- r COUNTY OF HAWAII r Agency Funds Combining Balance Sheet June 30, 2006 rr Performance ~ State Improvement Improvement Improvement and r Weight District District District Refundable Tax No. 17 No. 18 Revolving Deposits Assets ~ Cash and cash equivalents $ - $ 844,320 $ 355,144 $ - $ 178,059 ~ Investments - - 540,000 356,209 - ~ Due from other agency funds - - - - _ Other receivables - 81,536 7,182 - 12,320 r Restricted assets - cash and cash equivalents - 637,000 - - - ~ Total assets $ - $ 1,562,856 $ 902,326 $ 356,209 $ 190,379 • Liabilities ~ Due to other agency funds $ - $ - $ - $ - $ 1,480 ~ Accrued liabilities - 92,332 10,591 - - ~ Customer advances and deposits - - - - 188,899 Assets held for the benefit of ~ improvement districts - 1,470,524 891,735 356,209 - ~ Total liabilities $ - $ 1,562,856 $ 902,326 $ 356,209 $ 190,379 A See accompanying independent auditors' report. ~ r 11R r. r. r e r - 102 - ~r r r Non-Profit Flexible Lapsed License Organ & Payroll Spending Warrants Plates Tissue Educ. _ Clearance Account Fund Fund Fund Total $1,458,857 $ 324,898 $ 70,936 $ - $ - $ 3,232,214 _ _ _ _ - 896,209 - - 7,346 - - 7,346 1,468 - 37,180 - - 139,686 _ _ _ _ - 637,000 $1,460,325 $ 324,898 $ 115,462 $ - $ - $ 4,912,455 .+n $ 5,866 $ - $ - $ - $ - $ 7,346 1,454,459 324,898 115,462 - - 1,997,742 _ _ _ _ - 188,899 _ _ _ _ - 2,718,468 r $1,460,325 $ 324,898 $ 115,462 $ - $ - $ 4,912,455 r r a rw ~ -103- w Ir COUNTY OF HAWAII Agency Funds r Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2006 r Balance Balance ~ July 1, June 30, s 2005 Additions Deductions 2006 State Weight Tax Fund ~ w Assets Cash and cash equivalents $ - $ 10,871,883 $ 10,871,883 $ - ~ ~r Liabilities Vouchers payable $ - $ ]0,563,825 $ 10,563,825 $ - ~ Accrued liabilities -due to State of Hawaii - 9,842,996 9,842,996 $ - Total liabilities $ - $ 20,406,821 $ 20,406,821 $ - ~ Improvement District No. 17 Assets • Cash and cash equivalents $ 740,446 $ 1,058,534 $ 951,660 $ 844,320 rr Restricted assets -cash and cash equiv. 637,000 - - 637,000 Other receivables - 1,080,903 999,367 81,536 ~ Total assets $ 1,377,446 $ 2,136,437 $ 1,951,027 $ 1,562,856 ~ Liabilities IR' Vouchers payable $ - $ 1,415 $ 1,415 $ - Accrued liabilities - 1,068,184 975,822 92,332 ~ Assets held for the benefit of improvement districts ],377,446 1,048,344 955,266 1,470,524 Total liabilities $ 1,377,446 $ 2,117,913 $ 1,932,503 $ 1,562,856 Improvement District No. 18 Assets ~ Cash and cash equivalents $ 313,884 $ 104,690 $ 63,430 $ 355,144 Investments - 540,000 - 540,000 Other receivables - 545,094 537,912 7,182 Tota! assets $ 313,884 $ 1,189,784 $ 601,342 $ 402,326 r Liabilities ~ Vouchers payable $ - $ 5,266 $ 5,266 $ - Accrued liabilities - 848,803 537,912 10,591 Assets held for the benefit of improvement districts 313,884 644,640 66,839 891,735 ~ Total liabilities $ 313,884 $ 1,198,459 $ 610,017 $ 902,326 ~ - 104 - ~ COUNTY OF HAWAII Agency Funds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2006 Balance Balance ~ July 1, June 30, 2005 Additions Deductions 2006 Improvement District Revolving Fund Assets Cash and cash equivalents $ 351,319 $ 9,890 $ 361,209 $ - AII Investments - 356,209 - 356,209 ~ Total assets $ 351,319 $ 366,099 $ 361,209 $ 356,209 ~ Liabilities Assets held for the benefit of improvement districts $ 351,319 $ 9,890 $ 5,000 $ 356,209 ~ Performance and Refundable ~ Deposits Fund r Assets Cash and cash equivalents $ 205,692 $ 283,398 $ 311,031 $ 178,059 Other receivables - 12,320 - 12,320 Total assets $ 205,692 $ 295,718 $ 311,031 $ 190,379 Liabilities ~ Vouchers payable $ - $ 298,969 $ 298,969 $ - Due to other funds 2,672 1,480 2,672 1,480 Accrued liabilities 9,790 - 9,790 - Customer advances and deposits 193,230 291,858 296,189 188,899 Total liabilities $ 205,692 $ 592,307 $ 607,620 $ 190,379 r Payroll Clearance Fund Assets ~ Cash and cash equivalents $ 1,307,077 $ 162,182,973 $ 162,031,193 $ 1,458,857 Due from other funds - 160,966,947 160,966,947 - Other receivables 2,918 5,737 7,187 1,468 ~ Total assets $ 1,309,995 $ 323,155,657 $ 323,005,327 $ 1,460,325 a Liabilities ~ Vouchers payable $ - $ 64,105,156 $ 64,105,156 $ Payroll refunds payable - 12,606 8,162 4,444 Due to other funds 444 8,629 3,207 5,866 ~ Accrued liabilities 1,309,551 61,434,037 61,293,573 1,450,015 Total liabilities $ 1,309,995 $ 125,560,428 $ 125,410,098 $ 1,460,325 r -105- w COUNTY OF HAWAII ~ Agency Funds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2006 Balance Balance ~ July I, June 30, 2005 Additions Deductions 2006 Flexible Spending Account Assets 1iw Cash and cash equivalents $ 293,208 $ 445,351 $ 413,661 $ 324,898 Liabilities Accrued liabilities $ 293,208 $ 445,351 $ 413,661 $ 324,898 Lapsed Warrants Fund Assets r Cash and cash equivalents $ 41,813 $ 30,794 $ 1,671 $ 70,936 Due from other funds 3,116 7,346 3,116 7,346 Other receivables 27,120 37,180 27,120 37,180 r Total assets $ 72,049 $ 75,320 $ 31,907 $ 115,462 ~ Liabilities Vouchers payable $ - $ 1,253 $ 1,253 $ - ~ Accrued liabilities 72,049 48,980 5,567 115,462 Ir Total liabilities $ 72,049 $ 50,233 $ 6,820 $ 115,462 Non-Profit License Plates Fund t? Assets Cash and cash equivalents $ (25) $ 4,250 $ 4,225 $ - Due from other funds 25 - 25 - $ - $ 4,250 $ 4,250 $ - ~ Liabilities Vouchers payable $ - $ 4,225 $ 4,225 $ - _ Due to non-profit agency - 4,250 4,250 - Totalliabilities $ - $ 8,475 $ 8,475 $ - r s r tr - 106 - iO COUNTY OF HAWAII Agency Funds rr Combining Statement of Changes in Assets and Liabilities w For the Fiscal Year Ended June 30, 2006 r Balance Balance ~ July 1, June 30, 2005 Additions Deductions 2006 Organ and Tissue Education Fund ~r Assets Cash and cash equivalents $ 25 $ 29,339 $ 29,364 $ - r~ Total assets 25 $ 29,339 $ 29,364 $ - ~ Liabilities Vouchers payable $ - $ 1,570 $ 1,570 $ - +R Due to other funds 25 - 25 - ~ Accrued liabilities -due to State of Hawaii - 29,364 29,364 - Totalliabilities $ 25 $ 30,934 $ 30,959 $ - r Total -All Agency Funds Assets ~ Cash and cash equivalents $ 3,253,439 $ 174,717,772 $ 174,738,997 $ 3,232,214 ]nvestments - 896,209 - 896,209 Due from other funds 3,141 160,974,293 160,970,088 7,346 ~ Other receivables 30,038 1,681,234 1,57],586 139,686 Restricted assets -cash and cash equiv. 637,000 - - 637,000 Total assets $ 3,923,618 $ 338,269,508 $ 337,280,671 $ 4,912,455 r _ Liabilities r Vouchers payable $ - $ 74,981,679 $ 74,981,679 $ - Payrollrefunds payable - ]2,606 8,162 4,444 Due to other funds 3,141 10,109 5,904 7,346 ~ Due to non-profit agency - 4,250 4,250 - Accrued liabilities 1,684,598 63,545,025 63,236,325 1,993,298 Accrued liabilities -due to State of Hawaii - 9,872,360 9,872,360 - ~ Customer advances and deposits 193,230 291,858 296,189 188,899 Assets held for the benefit ~ of improvement districts 2,042,649 1,702,924 1,027,105 2,718,468 Total liabilities $ 3,923,618 $ 150,420,811 $ 149,431,974 $ 4,912,455 See accompanying independent auditors' report. i -]07- COUNTY OF HAWAII Private Purpose Trusts Combining Statement of Private Purpose Trust Net Assets June 30, 2006 Shippers' Total ~ Geothermal Wharf Private- Asset Trust Purpose Assets Fund Fund Trusts ~ Cash and cash equivalents $ - $ 1,714,176 $ 1,714,176 ~ Investments 1,771,683 967,509 2,739,192 ~r Receivables - 34,914 34,914 r Total assets 1,77],683 2,716,599 4,488,282 wa Liabilities Accrued liabilities 133,393 - 133,393 r. Total liabilities 133,393 - 133,393 r Net Assets ~ Held in trust for other parties 1,638,290 2,716,599 4,354,889 • Total net assets $ 1,638,290 $ 2,71b,599 $ 4,354,889 See accompanying independent auditors' report. A tr /r r s r r R lia -]08- s COUNTY OF HAWAII Private Purpose Trusts Combining Statement of Changes in Private Purpose Trust Net Assets ~ For the Fiscal Year Ended June 30, 2006 Shippers' Total Geothermal Wharf Private- Asset Trust Purpose Fund Fund Trusts Additions Contributions: Puna Geothermal Venture $ 50,000 $ - $ 50,000 'r Investment earnings: Net decrease in fair value of investments - (6,908) (6,908) Dividends - 45,758 45,758 Interest 45,451 62,596 108,047 Total additions 95,451 101,446 196,897 Deductions Claims paid 7,246 - 7,246 Total deductions 7,246 - 7,246 Change in net assets 88,205 101,446 189,651 Net assets -beginning of year 1,550,085 2,6]5,153 4,165,238 Net assets -end of year $ 1,638,290 $ 2,716,599 $ 4,354,889 See accompanying independent auditors' report. r r r a s r - 109 - r w r A r A r Ir ¦ This page intentionally left blank. r a.. r Y? s r r r Is r s r - 110 - b STATISTICAL SECTION rr ~ (UNAUDITED) r r r r~ rr r ~ ~ b o0 V'i V r N O V'1 N r O\ W O\ M O1 M b M 00 V Vt N vt rn r vl r <r r oo M M Vt O b M o0 00 0o r N O~ O~ O ~ r 00 d' M 00 M O~ b r r N ~ V oo O V O~ ~ V V 00 7 d' M C{ M V 69 Y3 69 69 69 V3 i i-. r N M b O r N O~ r Qi vi r b 7 Q~ O b ~D N r N o0 N M N r 00 00 T O~ ~ r 00 A ~ N O O Vi N O W oO N 0~ O ~O Vi 7 N 00 Vl Vl oo M O~ N i O b Qn r 00 M oo M Ow W N N ~ 7 ~ ~ ~ V ~ T M M M M 69 69 69 69 69 69 ~ 00 O 'V V N N V o0 O~ O N w ~ ~ ~ ~ W Q~i r ~ 7 r vl ~ ry '7 Y1 M ~Y V' V O M O~ O V O 7 O M M o0 00 N o0 r r b ~O ~y O ~ M M M M OO M r V1 Vl r N M M O~ b M M~ ~O 69 b9 b9 b9 69 69 ~ C oo 'ct Val r O N r O~ a0 \D W b Q ~ y ~ Vl h v1 b o0 O d' M V O C h r O~ M 00 r~ r V h 00 .3 ry N M ^r r N \D M O N O h W ~D O r r~ M oo r~ O vl vl O E o o M oo M rn r N a x O Rt N M r s oo M r cro rn ~ Ct. U ti M N~ M M N M ~ 69 69 69 4f3 69 64 ~ F ~ ' h w ~ O~ O N r O oo N O O~ 00 O r O Q ~ N~ vt b oO N M I O N O N ~ N O O O~ Q\ b b t0 O O O N M O V r 7 r vl O o0 r O O ~ ~ N M oo M N M Q` ~ N N ~ N Q~ O~ N W O ~ M N v M ~ M N M ~ i 69 FA b9 FA £H V3 ~ O r ~ N ~ ~ Yr N N d C O 'LJ b -O C V G ~ L b m y ou N y N i H cd tom. tC v N 'II V y y ~ O ~ O N O ~ G v ~ N -p a G N C N ~ ~ E .S d C N oq ~ vi 0. C a ti N m N N N E A ~ yy yy y ~ 7 ~ y ~ a aCi «a ~ 3 0 U ~ ~ ~ ~ ~ ~ ~ ~ ~ M ~ yy ° .d E a ~ v~ a~i ° v Z ~ C7 F W c4 ~ ~ ~ ° c4 ~ H z 7 i - 111 - Table 2 ~ COUNTY OF HAWAII Changes in Net Assets Last Five Fiscal Years 4aF Fiscal Year 2002 2003 2004 2005 2006 ~ Program Revenues Govemmental activities r Charges for services'. General govemment $ 2,173,770 S 1,911 070 $ 1,947,554 S 3 227,420 $ 4,032,542 ~ Public safety 3,927,495 A744,355 5p61,174 6,2fi2,259 6,975,962 Highways and stteets 4,422,416 5,324,908 6,052,544 7,629,139 9,079,084 ~ Health, education and welfare 865,365 991,725 884,075 1,272,091 980,147 Cu1Nre and recreation 1 766,370 1,593,620 1,588,945 1,521,127 1,439,784 Sanitation 10,969,909 10,596,469 13,653,722 15,465,478 16,469,745 Operating kranls and conMbutions 27,198,314 31544,494 33,327,191 36,370,993 38,252,889 r Capital grants and contributions 27,877,495 19,064,821 9,668,981 26,221,627 14,801,828 Total governmental activiies program revenues 78,795,134 75,376,462 72,184,186 97,970,{34 92031,98{ Business-type activities: - Charges for services: Ir Health, education and welfare E 279,369 E 304,671 I 303,047 E 314,971 $ 378,141 Operating grants and contributions 147,582 147,997 143,769 135,629 141,019 ~ Total business-type activities program revenues 426,951 452,668 446,816 450,800 479,160 Total primary grovemmem program revenues § 79,222,085 S 75,829,130 S 72,631 002 E 98,420,934 $ 92,51),14) aa. Expenses Govemmental activities: ~ General govemment S 37,796,311 $ 36,461,949 $ 40,085,357 § SI,262 329 S 36,264,732 Public Safety 75,709,394 77,131774 90,434,696 94,422,057 106,067,466 aW Highways and Streets 22,627,472 15,512,957 17,563 606 20,857,341 24,783,476 Heal16, education and welfare I7 854,112 20,205,386 23,041 963 21,503,635 20,181 685 ~ Culture and recreation 14,903,986 76,470,590 15,979,854 16,124,457 19,464 962 Sanitation 18,641,654 19,022 213 20,084,654 26,669,660 27,265,515 y, Interest on long-term debt 8,769,167 8,680,499 9,553,966 8,718,758 10,168,7 t0 Total govemmemal acivities expenses 196,302,096 193,445,468 216,744,098 239,558,237 246,195,946 Business-type activities: Health, education and welfare 455,936 450,343 466,143 484,879 547,201 ~ Total business-type activities expenses 455,936 450,343 466,143 484,879 547,201 Total primary govemment expenses E 196,758,032 S 193,895 811 $ 217,210,241 $ 240,043,116 E 246,743,147 Net Revenue (Expense) ~ Govemmental activities 8(117,506,962) $(118,069,006) 5(144,559,912) 8(141,588,103) 5(154,163,965) Business-type activities (28,985) 2,325 (19,327) (34,079) (68,041) Total primarygovemment net expense 5(117,535,947) §(118,066,681) 8(144,579,239) §(141,622,182) 8(154232,006) s General Revenues anJ Other Changes in Net Assets Govemmental activities- General revenues: Property taxes S 94,197 060 E 109,151,524 5 119,864,237 E 129,775,410 $ 152,182 806 Public service company tax 5,108,291 5,067,897 5,332,478 6,351,273 6,811,483 ~ Franchise taxes 4,992,959 4,816,565 5,373,144 6,076,890 7,328,887 Fuel tax 6,421,837 7,343 088 ],532,317 7,580,740 ],857,394 Grants and contributions not restricted to specific programs 13,507 966 13,977,403 15 251,443 16,734,850 18,510,262 ya Investment comings 3,568,210 1,936,635 1 t29,S31 2,95],188 4,976,178 Miscellaneous 1,582,980 4,641,884 4,825,259 3,657,794 2,170,854 Transfers not (838 445) ~ Total governmental activities 128,534,858 146,864,996 159,928,409 173,074,145 199,777,864 Business-type activities: General revenues: ~ Investment comings 19,064 12,084 8,006 13,580 22,874 Total business-type activities 19,064 12,084 8,006 13,580 22,874 r Total primary govemmem $ 128,883 922 b 146 897 080 $ 159,936,415 $ 173 087,725 $ 199 800 738 Changes In Net Assets S Govemmental activities 5 11,027,896 E 28815,990 E 15,368,497 S 31,486,042 S 45,613,899 Business-type activities (9,921) 14,409 (11,321) (20,499) (45,167) Total primary govemment changes in net assets S l 1,017,975 E 28,830,399 S 15,357,176 $ 31,465,543 S 45,568,732 NOTE: GASB 34 was implemented in fiscal year 2002. Unaudited -see accompanying independent auditors' report. -1)2- Yr w a v virvr m= o ~n r o e N D O N vl r, I-' O ~ V b ran ran n~ N O < P O O N ~ N m O N O r O ~ ~ ^ ~ r r ran N M < N O r V O~ ^ ~ r~ ~ m ~ N b V O r~ b~ P r N T ~ ~ N W vi ry ~ m b~ r_ ~ ~ W O r~ M w vl ~ n r O ~ P en W N t' vl r r O< ` O O ON r a ~ N V_ vPi r N P ~O `n N V V ~O e+l n w ~ W r vl V v~ N b b W ~ O e~ b O~ v~l~ O 0 0~ r_ r~ P O r ~ N r P b N V w~ N_ ~ m ^ ~ O O~ O N T N N P r r ~D h _ N O ~O~ b h n O r, O r W O T T o M h r r~ o N h~ T K N r W n ~ } ~ ~ C C U w ] rh P N r V y V ~O W b V~ N~ Q C ro ~ O o 0 K ~p w vbi ^ N 3 ea r ~ = oar 4 V A y M M i ~ ~ O N u N a N T ~ b M ~ F -m o ~a wr ~ r f+i O V N V N O ~ a ~ O y O vii O ~O O~ n ~ O C1 N m~ N V ~ N 1~ ~ G p ~ w ~ ~ " vl O O O T O~ O T N h b `O ~D m v~ K O_ O w 1 P n~ O O N r K~ O~ P_ b O~ h O w O. V1~ ~ m N_ N rPi ~ ~ h r ~ ~ NO O N V N r~ O r b V1 ~ V CO d~ N P ~ vt vl r O N r P_ Vl T V Q V Vl r N ~ ~ N R ~ N ~D P ~ ~ ^ ~ O P vl O m P C i b V O r O rPi N n u P b r P ~ W N O V O~ m b N O~ W ~ E N O O b 0~ O ~ ~ - VJ C 1~ n z ~ a E a a r w E c ~ w w E p o a E o ~ ~ i ~ v v ~ m w u v `v v m.`-° 5 w O v s ~ v ~ 00 sa u ~ u n° F v v~~ o ~ K~ N U o c r O H Q H ~ - 113 - r pR Table 4 ar COUNTY OF HAWAII a Changes in Fund Balances, Governmental Funds (Modified acemal basis of accounting) ~ Last Ten Fiscal Years (Amounts in thousands) r Fiscal Year ~ 7997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Revenues: Property tax $86,490 587,420 $ 84,792 587,271 E 84,240 $93,712 1109,991 $127 868 $131,087 5153,207 Public service company tax - - - - - 5,108 5,064 5,332 6,351 6,812 ! Fuel lax 5,783 5,832 5,900 6,103 6,450 6,422 7,343 7,552 7,581 7,857 Public utility franchix lax 3,851 4,080 3,953 3,950 4,777 4,993 4,617 5,373 6,01] 7,329 Licenses and permits 6,124 6,351 6,952 7,261 7,412 7,781 9,261 II 840 14,442 16,544 ~ lntergovemmental 43,708 42 775 43,057 38,783 55,034 68,916 65,203 58,559 73 372 69 637 Charges for services 7,796 8,885 10,148 II 275 I2,OS6 17,689 13,481 14,467 IS,I49 19,852 Invesment earnings 5,870 5,868 5,552 5,284 6,409 3,801 2,066 1806 3,104 5,223 Miscellaneous 2,219 2,224 3,476 2,416 2,529 3,035 6,179 4,718 4,450 4,380 .1~ Total Revenues 161,841 163,085 163,830 157,883 176,907 205,459 223,405 231,515 264,553 290,841 aar Expenditures: Curent ~ General government 19,618 20,512 20,797 21,442 22,073 20,192 22,317 23 070 26,183 31,153 Public safety 54,390 55,673 56,035 58,395 59,397 61,870 64,667 69,177 76,404 83,591 ~ Highways and streets 6,983 6,621 8,148 8,006 9,996 8,376 8,675 9,542 9,787 12,608 Sanitation II,717 12,082 12,287 12,856 13,481 14,769 Ib,b29 77,602 21,683 26,565 ~ Health, education and welfare 5,007 5,011 5,310 5,079 6,344 16,726 18,867 19,047 19,870 19,050 Culture and recreation 11,462 11,800 12,321 11,526 12,085 12,127 13,086 13,169 13,982 14,731 ~ Pension and retirement contributions 14,295 14,044 9,785 5,641 3 679 11 019 7,926 II 081 14,204 19,937 Employees'health insurance 8,688 9,438 9,264 9,544 10,773 12,198 12,758 14,256 16,768 16,133 Miscellaneous 2 947 7 764 3 617 4,224 4,040 5,330 5,629 7,128 b,lJ3 6,780 ~ Debt scrvicc Principal 6,225 6,473 7,914 8,862 9,394 10 025 11,800 12 826 13,150 14,060 ~ Interest 7,630 7,755 7,508 7,759 8,416 8,461 8,469 9,283 9,874 9,914 Capital outlay 34,917 17,700 28,708 21 909 37,648 41 580 J2 952 23,474 32,816 30,588 Total Expenddures I8J 879 170,473 181,754 175,243 199,327 222,699 223,775 229,595 260,114 285,110 r Revenues over (under) Ezpendirures (22,038) (7,478) (17 924) (17360) (20,420) (17,240) (370) 1,920 4,439 5,731 Other Financing fources(Uses): Sale o(assets IS 17 54 28 16 IS 9 1,593 1,486 82 ~ Capital leases 469 - - 2,677 23 970 1,353 1,474 7,369 404 Stain Revolving Fund loans 12,093 1 405 1 725 5,530 3,422 578 853 - 1,504 25 Sale of bonds IS - - 29,878 - 15,1]5 37,262 1725 30,000 25,000 Refunding bonds - - - 18,7]6 - - - - 24,595 - Premium on bonds - - - - - - - - 3,025 972 ~ Refunding bonds issuance costs - - - - - - - - (129) - Payment mrefunded bond escrow agent - - - (18,776) - - - - (25,885) - Refund to lot owners - - (212) - - - - - - - Transfersin 25 078 27,068 30,385 25,647 28,625 29,529 29,943 39,440 42,1 I9 45,691 ~ Transfers out (25 069) 2( 7.068) (30,385) (25,634 (28,568 (30,367 (29,943 (39,44U) (42,179) (45.691) Total other financing sources (uses) 12,601 1,422 1,167 38,126 3,518 15,860 39,477 4,792 35,965 26,483 Air Net change in fund balances $ (9,437) 5(5,996) 5(16,757 $20,766 8(16,902) 5 (1,380) S 39,107 f 6,712 S 40,404 f 72,214 r Debt service az a percentage of R noncapital expenditures 10.3% 9.3% 10.1% 10.8% IL0% 10.2% 10.6% 10.7% 10.0% 94% r Unaudimd -see accompanying mdependem aadnors'repan. i - 114 - ~ r ~ P V O N N .r-~ l0 ~ O Vl M T O ~O 00 V M U W .U. N O V ~D 00 V o0 O l~ h b M V M O O .n a> V ^ '7 O. oo rt N O 7 N ~o M t~ M oo t~ vl O ~ T ~ F N~ O oo vi Q~ V h N M ~O T V O o0 O N ~O Oi l~ b ~O ~ ttl F M M Vl O\ ~ 00 l~ T Vl h D1 N ^ W 00 M 01 N Vl ~ F, ry, op M N~ t~ M ~n N O~ N 1~ M N~ 00 M M N O^ ~ , ~ ~ ~ ^ N ^ O~ ^ N N O .Z ~ ~ 6A wl~ ~ °'O 00000000 ~n 00000000 ~n ~nooooo0o v v~ooooo0o v ~v3 000000000 v 000000000 v F a. i11 K t ~ F ~ b v o0 m 0 o N vi rn~ ~ M ~n t~ oo t~ a N oo M ~n rn [ W~ vi T V M a0 Q N h ~D O h O ~O E N O D\ V O ~ O ~y ,d N r T M M 1~ oo r N O N^ r M N n P C T h V vi M M ~O O N Q d' N N t~ 7 D\ C C~ iy N O~ V h 0 iD l~ N r ~ O~ W ~O O+ O N t~ N M ~ O ~ M M V M N o0 N^ O ~ O N M M N ~O N 00 M ti Q W Y U ~ y ~ 'p h O ^ ~ ~ cC N~ _q ~aN O O O O O O O O O h y 0 0 0 0 0 0 0 0 vi ~ N _y O vl v) vl V1 vl vl v1 vl d' 4. ~/1 vt Vl Ul vl vt vl vl V i b W 4'i o0 op W o0 00 00 00 ~ 7 %p ~ 00 w W W o0 00 00 V 'O o $ ~ ~ S a~ r •w H ~ F ~ rn ~ ~ ~ N iD O N~ r o0 0 7 l~ U O b^ m N ~D M^ N V U ~ ~ ~ W ~ ~ 00 V1 W N N M T M 01 ^ M^ 1~ M 7 ~O T T U h O T C M N~ N r a0' r 7 ~ Q~ O c't ~D O N t~ 00 D\ ~ it h U~ 'p T D` 7 l~ D\ N b O N N U M o0 1~ ~ W V D\ b U 7> _7., O N ~ ~ ~ O N M O y " N M a\ 00 O ^ N N E"' 'a ~ 00 7 M 00 N fL r 00 V V 1~ O~ M ~y ~ 7 N ~Q ~ ~ ~ ~ z o ^ L C a N v ro U YIY p C . 0S W v C ~ Y h d 'O N 0 'O y N U 0. 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N N 7 ~n V ~D O O N N 7 O~ ~D M O~ 1~ h b N ~ 0 ~ N M O ~D ~O o0 'd' 1~ O T w M N~ N t~ O^ V m T b O~ V M M 7 00 b T tC C 01 N CD h M 01 ~ W ~D M ~ N ~D T ~O O OO M Vl M ~ Vl l~ vl 00 ~O N Vl 7 CD N ~ 'd O r O O iD 7 Oi O 1~ ~ U N h N^ 00 ~ N O b V U ~ `D ~ M ~Y iD M Q~ O v ^ N V 7~ O~ ^ 7 1~ ~ 00 N O O+ N l~ r b b ~ r N N^ N~ O O m it} r oo h V ~O O~ M ~y ~O O~ Vl V ^ ~O O~ V ~y^ ~D O~ ~D V ^ f~ O v1 ~y^ 7 N W ~ 7 ~ 'Q ~ ^ V z ~9 69 Vi Rf i0 td ro ~ ~ ~ N O ~ ~ ~ ~ G ~ ~ y U ~ N ~ 'UO N ~ b d Q OJ d C ~ N N ? ~ N N C ~ U a W a~ fx m m .0 v CL v FL ~a is v R' v 0.~ ~ ro .a v ~ G o v ~O Y. m~ i° 3 a~i o aCi c~ a~ ttl 3 v o v ~ ro~ m 3 o c. ~ ~ a ~ ~ > a A a v °v o a. ~ b a y d m r` E~QxU °dU x ~~'7¢x'USQUx ~.`7. 2xU ~¢U".C x ~ N C a r C [4 ^ N N C ~ O U i • - 116 b w~ w ~ l~ O N N a\ O N M b 'V 7 d' '/1 V ~ M o0 ~ ~ w1 vl O M O ~ M ~ O t` M a\ Q\ N 7 O vi N ~ h b~ b W M O 1~ ~ h t` D\ M N 7 p y 00 Vl \p ~ Vl 7 h M O^ N 00 V M M I~ M T N N ti V N h M M ~ N O ~ ~ V a\ h l~ V 00 Vi O T D\ oo t` O O M O h vt N 00 F 7~ 0~ M O h M a\ W O~ vi l~ N N O~ 7 N 4` N T ~ M e0 M T M ~O 7 M T ~ F a b M l~ M op M N N N O l~ M T 7 W M N N d' ~D oo M N ~O o0 O rt M t~ 00 z ~ 4'3 69 69 N O O O 0 0 0 0 0 0 0 0 vl O h ~n vi vl 'n 'n vi vi O ul 1n v1 h h h h b itl O h O O O O O O O 7 00 00 00 Op 00 00 00 Vt 00 OO 00 Op 00 00 00 Vt ~ ~ ~ Y3 00 O O O O O O O ~ a\ a\ O~ T a\ U a\ Q~ vi O~ T D\ 0\ 0` O~ Q` T vi E.. 0.. r ¦l O N O o0 oO N M ~n O M B oo v~ T T N T ~n O+ vt U M D\ O h O N 00 M .D W o0 b O~ op O N H O a\ W a\ W h N b O M iD l~ h O~ ~D N N O 1y ,b O ~ M \O ~O ~D vi O N ~ O N N M N `n N O ~ rl O~ O vt vt o0 v~ N 1~ b ~ ~ N b O r O ~ b W N ~D o0 Q\ Oi ~ ~ ~O a0 O M O 1~ v~ ~ N N N w ~ ~ E"" .-J ~ N b b~ N ~n N C O N ~ N ~D 1~ a N N A M M O M 1~ 00 7 N M M N 1~ ~ 69 p~ N N wr ~ tC. N O i0 O O O O O O O O O h O O vt vi vi vt vl ul vi vi O vi vi vi vi vi vi vt ~n N ~ ;a ~ ~ h h h V1 vl h vl h 7 ~ 00 00 00 00 00 00 00 V1 ~ 00 00 00 00 00 00 00 vl ti 69 00 00 00 00 00 00 00 00 V •p O+ ~ 4\ Q\ a` Q` D\ D\ h b O~ O. D\ T O~ O+ O~ ~ h t] '3 ~ 69 d~3 ~y Vi i0 ~ F a o 0 0 M O r p O O N N ~ d ~n O M V O ~O vi N O vi N ~O ~ vl O~~ W T ~O N M~ N h~~ O O M W ~ W p D\ M iD T N h V N T vi ~O iD N N 1~ O M b T t` N b r~ h a` T O 1y C l~ a T o0 D\ ~ O M R T o0 O. v1 00 h O~ O N 1~ b b ~ N ~ r r O M O~ m r N M O y 7 N Q~ O+ ~O ^ M o0 h N N O W r O V~~ M iy F^ 'a t` b 7 h O '1y" N `O ~ h N M ~ oo vi r 7 N oo V p.. J v 0.l vj vi vi r. v1 ~ ~o z 69 69 69 11111 ~ N iC id id ~ N C N d 11~ w0 b C ~ N (n t' N d G ~ N N G N N N~ C o a~i o aoi ~O " ~a ~ td 3 m o aoi is ~ `tl 3 a~i o v A ~ m 3 p a~ ~ k v v v o ~i E b ~ v v o~ ~j `3 E p ~ v uoi ~ °''c a o oa `en o o °''c ~`33a o o b n`b o o °'c c o o 'd°fi o o a G x U 5 G U x ~ a Q x U°¢ U x £ a Q x U S Q U x d C i v y d O O O E ~ ~ O O ~ CO ~ U i V -11~- r R ~ O M O 'cf D\ r O b O 0` O v~ ~p N N ~D M V r N ~ O D\ b a\ O W h 1~ r b N O b N N V M ~D v1 M ~ p~ N `D N V N ~O N M ~D M 0\ M o b vt W N O O 00 O F x ~+1 l~ 00 N N vi ~ O O~ M h O 1~ O O iD ri N h o0 3 N ~ M O~ 7 1~ ~O 1~ M O 7 N 7 M v~ ~O O~ ~ F P. N M h r~~~ M N h O h N O\ O vl O M h V ~ z ~ N~ N N M V~ ~M M M N ~D 69 ~ O O vl vl vl vt v1 vl ~ vl b ~ O O ~n h vi vi vi in vi ~n ~ 00 OO 00 00 00 00 00 Vl 00 00 00 OO 00 00 00 h a X 69 ~ D, D\ D\ D\ ~ D\ O~ vi U~ T O~ T U O~ ~ 4\ h E-' OU. ~ ~ W A O vt O 00 V N^ ~O M vt Op O 00 M O 00 M 00 M WO p O 00 M ~D ~D N 00 N Q\ W M h OO M h M l~ ~ r ttl ^ 00 V1 N ~O O 00 Vl O h D\ V O\ 00 V1 O x G ~ ~O ul r vl T h ~D V ~O vi O 1~ N N O N O V l~ > N N c~Dn r w O N b M~~ ~ QMi V OOi ~ v°j N O~ b O ~ A z ~ ~ 69 ~ N 69 ~ O r U U r'n ~ i m > 3 c ~ ° o ~ h ~ vi vi vi ~n v-, ~ o ~n vi v~ v-, ~n v, ~n vi ~ Ca x :D ~ ° - o0 00 00 00 00 00 0o vi ~ o0 00 00 00 00 00 oa vi m o r Xsa o; o; Q;rn o;rn o~rn~n ~ o~o;rn a;rnrnrnrnvi F 0. 0 L 7 O U p a o a' s ~ N N T G O W U O W O ~O vi vl M vt vi h N V N~ m T N o0 0o v1 4~i ~ N ~ y O p 5 ~ V~ O~ N N V v'^i M T N~ vi vMi M N~ 7 V o~0 T N 7 5 iy b Q~ O N vi ~O ~O 7~~ V N U O oo vi O O v U > L 'N' ~O M h V N N v. 00 N V o0 M Vl l~ N T u ~ y~ O > N W 69 ~ W vl N O~ ~ O IL O M 0\ ~ N D, ~ O ~y 5 N ~ z f9 69 N 69 W ~ x~ ~ A \ ~ ~ d ~ ~ N y id C 0. ~ b ~ ~G. 'O vi N b y ~ ,d N ~ Q ,N y? y ~ r y R: ~ O ~N U p ~ Q. ~ C y 'b ~ ~ O ~ .'O. Cv C ~ ,i0 ~ j O O ~ ~ m ~ ~ `tl E N U~~ O Q' y N~ v~i U LN N ~ N N V N U ~a¢xv~¢~x ~~¢x~5¢~x ~ aa~~ ~ b U. N N ~ Fro7 ~ z C ~ - 118 - r w w ~ Table 6 COUNTY OF HAWAII Principal Taxpayers ~ June 30, 2006 w 'F Fiscal Year 2006 Fiscal Year 1997 Percentage Percentage 2005 of Total ] 996 of Total IA Assessed Assessed Assessed Assessed Taxoaver Business Valuation Rank Valuation Valuation Rank Valuation r Kamehameha Schools (a) Land trust $487,026,400 1 2.4% $154,238,200 1 1.2% _ Liliuokalani Trust Estate Land trust 238,300,600 2 1.2% - - Mauna Kea Development Corp. Developer/Hotels 201,862,600 3 1.0% - - ~ Global Resort Partners Hotel 171,043,600 4 0.8% 125,000,000 4 1.0% Kaupulehu Makai Venture Developer/Hotel 159,249,800 5 0.8% - - WB Manini'owali LLC Developer ]28,253,000 6 0.6% - - FMR (ML) Hotel Holdings LLC Hotel ]20,000,000 7 0.6% - - WB Kukio Resorts LLC Developer 113,874,600 8 0.6% - - r Mauna Lani Resort Inc. Developer/Hotel 99,337,000 9 0.5% 136,401,400 2 l.l% BRE/Waikoloa LLC Hotel 59,804,200 10 0.3% - - South Kohala Resort Corp. Developer - - 131,631,200 3 l.l% ~ Mauna Kea Beach Hotel Corp. Hotel - - 97,098,300 5 0.8% Kona Village Associates Developer - - 91,667,700 6 0.7% Mauna Lani Bay Hotel, Inc. Hotel - - 75,566,400 7 0.6% ONKD Inc. (Orchid) Hotel - - 65,543,100 8 0.5% Waikoloa Land & Cattle Co. Developer - - 61,216,400 9 0.5% Kona Coast Resort Ltd. Time Share - - 47,930,900 10 0.4% r $1,778,751,800 8.8% $986,293,600 7.9% r Note: Gross valuation at January 1, 2005: $20,267,274,800 illl Gross valuation at January 1, 1996: 12,361,649,557 NOTES: r (a) Formerly know as BP Bishop Estate Trustees. ~ Source: County of Hawaii, Department of Finance, Real Property Tax Division Unaudited -see accompanying independent auditors' report. - 119 - R r r r ~ S ~ ti o ~ r a s o 0 0 0 0 0 o v o e ~ 5 ~ ~ ~ ~ ~ rn e ~ h v m F m C ~ La a. V r oo r o N r~~ r G ~p 00 T T N 00 O~ ~D ~ y M OO 00 M ~ M OO ~ C N ~ Y~~ O 1~ b~~ W~ O~ b y F+ 0 0 ~D O~ rn 1~ W 7 V ~ Q ~ ~ O O ~ W ~O f~ b vi O ~ row I!~ o m ~ .o c `a v o 0 0 0 0 o v o o ~ 0 " v 0 0 0 0 o o~ o ~ = ~ k _ UP.U C O ~ iD ~ io ~ oo h n H V O C ~ M~ b N M~ T 0 ~D y % p M Vt 00 00 vl O O O N 7 0 ~p op 1~ O N O V ~ F-' F p ~ W W o~0 0~0 OMi ~ N M vNi ~ ~ ~ v ~ ~ r R A /F~~I ~ ./~~J~' F~ W M M M Vl M 7 Q~ ~ l~ C-' i-.~ ~ U ~ b Vl V M 7 b W W W O O ~ ~ ~ O G ~ ~ y a V A N O O O O O D O O O O w N i r. 7 vi ~O h l~ r r W~ n d i.. L Cam. p O T T p~ O~ O~ O~ O~ p~ O~ p~ C O U C 'O 4a. ~ 0 o`TO v ~ v °O o ono `T w ~ [ T oo M y r t~ a r h r p b ~ ~O 7 M l~ b b V V O T ~ G p f d h~ V N M Om h m OOi ~ ~ a. ~ f" ^ O~ O 01 M ~ M M ~ b - U p W W 1~ W o0 00 O ~ ~ .rJ. U r, v~ Ll m A ~ a~~~ o~ N M rn v ~3 p, r ~ X O N N ~/1 7 Op Q O M ~ N y M O B O~ M O~ f~ O N .T. p ~ E" .a h O r M ~O ~p 1~ N r O w ~ V W m m m m o, o~ N V O ~ ~ N r~ O U ~ ~ N ~I ~ T O~ O O O O O O O ry O~ O~ O~ O N O O N N O i 3 ~ k r ~ ~ r r - 120 - r ~ ~ :~I ~~o~~a~~~ ~ N r N V N~ Q ~ ~ ~ ~ W ~ Vf %i Vi Vi Vi A Ni V3 49 'Z > e U 0 ~ ~ o e e o 0 o e o 0 E O~ L N m N N O M h r ni ~ V~ N V oO V m Q V D\ ~ ~O Vl Vl vl vt vl Vt Vl _Q Q b r m~ U a o z 2 N ° 0.. o S YM ~ a o h ° o rn~ ~ ~ O O ^ N N Q m > v vs Fn v+v3 nF»zs ds sv 0 ~ ~ v `y o 0 o e e o o e E m c A rn M rn v o o. a ~ 'E H h h a r h v h v Q Q ~~ao zz v u C F°, a o a oo a. a r ~ ~ w o a h o y m N a h h ~ j v r w o rn ~ ~ C O C N M N M 01 R c ~ W ~ a ~ i. N p, C F ° C4 ~ F 0 0 0 0 0 0 0 0 00 N A ~ O O O h h 0 0 0 0 0 0_ L y h M o0 N 00 T ~D r r r1 Q 0. U N ro C r h O T N a\ a r" r" v H 3 d ~ P. C m N~ O a N b T ~n h r v v m d~ ° h r n ~o r r r M c ~ c U~ O ~ m u y 9 u. O e k. y ~N C ~ vi o0 ^ N O ~D V v~ N ,ro F ~ F O O N M N O r O N ° ~ ~ O ~ d N ~n r P N~ ~O O V O j d~ ^ N^ N N O O 69 ^ p ~ C ~ O o d r~ ~n h r ~o 00 00 .y N r 00 a Q\ r b 'cT N f~l C y O T 0 0 0 0 , ¢ bq ^ 9 ~ > 7 i m ro w r1 00 r oD 00 N vl oo h a> 9 ~ ~ O a y O T .r-. b W N a O P in ~ N 0.~ N T T N O\ h m r N V ~y v N N O? ~D r o. a U 0 0 ~D DIY U .J ~ h cn o0 M b N h ~O o0 C 6 v ~ U N N N M m m N y O 9 ~p ~ 0. ~ A Nl b h 00 v1 t+1 V N 'O C ' m~ m 'cf N r N o0 P r 0 0 'O a G N r~ O a~ V 0\ O r O M ~ a 0 0 0o r m v. ~c o r v _ O ~ d ~ d ? O. T o0 fV 'S N O\ 00 ~D ~ O b E fG ~ N~ N N M m to M N N N 5 ~ E ~ N m u C C C > 0 0 0 0 0 O O O Vl 00 ~ y C 'j~ O C 0 0 0 0 0 0 0 0 00 O CC - O O h h O h h 0 en N O C y U N N~ b V o0 ~O b~ U h 00 00 N O d ° 6 y .m O d' M O b h b b a h b C O .'C. O CO in O r O o0 00 r N ~D d w M U O N N .en. y b .h. W O~ O C m Vi 00 ° ~ H N ~ H ~ ~ N r o0 P O N rl a h b In y w ~ v P U Obi °o °o o °o °o °o °o fW. C y '~y ~ jy N N N N N N N O ll G ~ z ~ ~ O a - 121 - Table 9 COUNTY OF HAWAII ~ r Ratios of General Bonded Debt Outstanding R Last Ten Fiscal Years Mr ¦ Debt Percent of rn" Applicable to Net Taxable ~ Fiscal Legal Debt Property Per Year Margin (a) Value (b) Capita (c) 1997 $ 141,144,771 1.4% $ 995 r 1998 133,641,322 ].3% 934 1999 129,633,204 ].3% 910 ~ 2000 162,716,490 1.6% 1,094 ~ 2001 156,636,220 1.6% 1,032 2002 161,310,657 1.5% 1,042 2003 187,316,839 1.6% 1,180 ~ 2004 176,693,195 ].4% 1,082 2005 195,198,142 1.3% 1,167 ~ 2006 205,219,940 1.2% N/A ~ NOTES: (a) See Table 10 for debt applicable to legal debt margin. ~ (b) See Table 5 for net taxable property values. ~ (c) See Table 11 for population data. Details regarding the County's outstanding debt can be found in the rr notes to the basic financial statements. A' Unaudited -see accompanying independent auditors' report. A~ r~ ~i ~r rt ~r r~ - 122 - ¦ r. o o .OD b n N a e r~i O N W O r N V ~ C N N O O V O N N 1 N N ~ `r~ N ~O N N Vi vi GO` } 69 69 6`f v oo .O a ~ c rn ~ w H o m a m rn a w N m v ~ zNS vi ~o ~ o c o is > " t .r m vi o v v o rn o ~ ~ r M M ~ O M ~ vri ~ C ~ O ~ N T r ~ w Fn " a ~`d c .E ~ ~ 7 0 o c r r r M F a D ~ ~ a~ M h m N o y y U E o ri r e ro ~ i N r ~ ~ O ~ L a vUi ~ 9 ~ Vi Vf ~ = N N d d O U Z ~ D`1 a oo a p s N b M ~ i 0~ O O D\ a) O ~O ~O T r ~ ~ a~ N b Q D` ~ N > 'p r Vf fff 'p _N C vUi N ~ O U y U r ~o E y w ~ .MO oro^ e ~ 3 ~ o ~ ~ o ~ vC O O ~ y ~ fA 4Y O N ~ ~ .ry C wza F-+ o o v~ r r ~ p, c~ d O O N T r Q ~ Q ~N Vl ~ M O C U ~ w ~ ~ sv w s m .7 ~ .o vi O `v 7 ~ V N ti e E G ~ P ~ ~ b b y0 Z' _ CO fA 69 N s b ~ ~ m vi -J a M v`^i_ ~ m C = 00 0 ~ 3 a. h ~ M r W C ^ w e o 0 w sv v> 5 ~ d ova v C o 3 r m r c ~ ~ P h~• Q O~ 7 C 'O ~ ~ of V O ~ u U E u z o v ~rw, c ~ a ~ _E a c r E c3 y ~ E D M y n ~ o c o ~ E y o N A N ~ U 9 0 ~ u E ~ ~ ~ m 'C V n v a u v 'E ~ b ~ n W ,dc IW Q Q .o] Q~ ',Z .id. P m a - 123 - r Table ] 1 COUNTY OF HAWAII ~r Demographic and Economic Statistics 'w !w Last Ten Fiscal Years it Iw Fiscal Personal Per Year Resident Income Capita i~ Ended Population (thousands Personal School Unemployment June 30, as of July 1 of dollars) Income Enrollment Rate iw 1996 139,726 $ 2,632,717 $ 18,842 30,497 9.9% 1997 141,848 2,645,465 18,650 30,544 10.2°l0 1998 143,135 2,812,316 19,648 30,715 9.6% 1999 142,390 2,893,934 20,324 30,926 8.7% 2000 148,677 3,195,000 21,404 30,193 6.7% 2001 151,779 3,317,2]6 22,217 29,792 6.8% 2002 IS4,854 3,563,723 23,020 29,785 S.7% Y~ 2003 158,735 3,768,621 23,771 29,483 4.6% ~ 2004 162,975 4,080,SS4 25,096 29,675 3.8% ` 2005 167,293 N/A N/A 30,262 3.4% r NOTES: Public school enrollment only. ~ a Source: County of Hawaii, Department of Research and Development w Unaudited -see accompanying independent auditors' report. r A or r ~r I - 124 - ~ r A Table 12 .w COUNTY OF HAWAII A Principal Employers, County of Hawaii r June 30, 2006 t! 2006 1997 Percentage Percentage of Total County of Total County r Emalover Employees Rank Employment Employees Rank Employment State of Hawaii 7,696 1 ] 1.6% 7, I50 1 11.7% County of Hawaii 2,335 2 3.5% 2,200 2 3.6% United States Government 1,231 3 1.9% - - Hilton Waikoloa Village 1,100 4 1.7% 1,100 3 1.8% t KTA Super Stores 785 5 12% 750 6 1.2% Fairmont Orchid Hawaii 600 6 0.9% 474 7 0.8% Mauna Lani Bay Hotel & Bungalows 580 7 0.9% 450 8 0.7% ~ Four Seasons Resort Hualalai 557 8 0.8% - - Mauna Kea Beach Hotel 556 9 0.8% 448 9 0.7% Hapuna Beach Prince Hotel 542 10 0.8% - - ,r C. Brewer & Co. - - 861 4 1.4% Mauna Lani Resort - - 750 5 1.2% Sure Save - - 372 10 0.7% W Total 15,982 24.1% 14,555 23.8% ~ Total employee count 66,519 61,150 r Source: County of Hawaii, Department of Research and Development Unaudited -see accompanying independent auditors' report. i w i w a W it r - 125 - r r V M r NI P O N P P V O m O N b~ O b i b~ P~ O b m• O~ lay O P~ N V mro -O ~ ~ o~ O O O O S~ O 00 O O a O~ lO~ rY NI P N~ P~ p~ 0 0 0 N 0 0~ O O O O O r~ ~ pO q lO~ r ^ N'Iy1nII o NI v P 0 w N ~ ~ \O O vmrvi 0 O- O p O b V p O N P O P INII " O O O v~ 0 0 0 0 0 0 0 O w O O O O O O O vl O v~ ~ rvo 0 o r o 0 0 0 0 0 o a o 0 0 0~ o o r a o- ~o ~ p ~ 1~ M P N ry P vl - ~ O N b of O O N II r~ O r p N M O T ~ O O vl 0 0 0 0 0 0 0 O W O O O O O O O O vt O N a o o r o 0 0 0 0 0 0 o e o 0 0 0 0 0 0 o r e o e w W p P~ v~ L P N N O_ V wl L P N `O ^ h W~ - r r ~ r vl °P Y _ N N N h 'O vl ~ OYe11 3¢ ~ _ ~ ~ x E A O O m O O O O W O O O M O O O O O O O vl cO O r O y. y O O O rn O O O vl W O v~ O 'V O v~ O O O O r V O r~ V y~ U = O V~ n m N N P v~ b ~ b N vi n 1~ ~ A P O V1 n ~ N 1- V O ~ ~ Ilr y q Pa~~o~~~oa ~o~~~ e~, .~~N o~~ ~Pq ` poppppoo p ~wppp pp pp~ wOpI~Q ~ o ~noo 00 0 o N o 00 ~n o0 0o r v oo e E P Pr vi~ri-ro o v rM~o e bm ~-N owe v V N P N N- N O O r F N r 6 ~ O O O O O O O O O O O O O O O O O w ° PPN OPNN°` ~ T~O\Or OO V OO Nwp lPN - - a IAnI _ O CEV m N q E 2 4 a d Q ~ G N G ~ tG C E 3 3 T u E- o ~ v 6 ° b t y c ~ o E v> ~ o > 'o ° V ° ~ E x'- ~ c c m a T u ° N A ~ ~ ~ 0 o v cl' g o 0 o W E~ W a~ N o mVV ~ x~r;,3 ~ ~°5r Imo- v3v~m ~ " 9 ' I @ c c o` o u~ 'E `d ti E N d o C] N m F o c c cp E u ~ °e c o o~ o~~ m y a p = o'> o .3c ~ m'~. .`5 E a t° ~ S d w 9 o u u o n o .o' m m a o 0 o m a i`. k. C7U V U0. xa. cL A a a' 0.u.v V a`,5 ["4 N6m> tiZx<U F c° j ~ A - 126 - _ r b m T CM. V oo ~ r ~n O m r r O ^ R W O+ Q~ W b O~ b W T v1 h N b ~ ^ W O vi f.. N N r TIC b~ 00 r a ~/l ~ O ~O O~ O O 00 m rn m m w o a r ~n ~n w b ~ o h = V o~ ri Q m r o0 a ~ ~ r~o z ~~M O N r m O Ni U r V ~p ~p r b ~ ~ dm' N ~ N O r b O ~ ~ ~ ~ < O v~ f. ~ O ~ W v~ Z V m ^ s ~ o a a a o n vi a w vo e m vi rn h~ O O~ r O~ V N vi h op O N O~ Q. O ^ M b O~ O ~ .m. r2 V m N r ^ vl m m W h W GO m N O r T b O O N O O N a m b O O b 00 r b O vi ~O T N W O V m b O N N ~n b V r" r Q N y~ .p pp ^ ry m m N ~ f O r m b ~ N N vi m= O M O b r N r r ~O o0 r O O O m N r `p O N O vi tai V C Q N O ~O O vi ~O O~ 00 z m m N O ~ v m b v~ r r N O O m O p N O O h m O T O. r 00 U o ~D m 00 ~O F4 ~ O O~ O N O+ .r M rl O Q T T O ~ ~ L ~ O m > O W z m N N Q W O b N vi o0 r b V O O b O u V+ b h O~ V N O O m O W O b Q~ } O vi vi V V r b M O ~ b b ~ z o U is d ~ O O O vbi N Val W a r oo r m vl ~ d m ~O Vl N v1 00 O+ vt vl r b O r 0 a Q P O~ vi R V~ m ~D ¢ N N N _ a Z m v o r z N O P N .M. p (+rj .P+ N m a 4 N ~ Q m Q Q~~ Q oo V1 N r a 'z O z ~ z z P r z N N N W C C o ~ n b N ~ - ~ W ~ 3 v ~ v ~ Q m ~ y v ~ v o ° v' °c HL' ~ 'E c v y ~ ~ m v c ~ 'i 0. a U a. v m~ v~ y~ y m c U V O y a C y y N~~ 9 x 6 H V v N ~ 'N' h C y Q •O U•' tUi ~ rn ~ N w_ O V yt~ O U C 0.~ y d U 6 W 9 C v P. ~ 6~ O vui C aWtl A V d. 0~0 O O~ T y 9 C G ~n Y `i' O CO itl C~ U u ~ 5 ~ F ~ a~~ 3 s qa ~ o a ~ v~ E c c°S v a ~ 0.~gFwi='. W SNC~Lx~~a Ux°N ~ Wo?0.~ Wa. 'v, ~ i - 127 - it r .~-i oo Mi P r r N o0 m P O ~ t'1 vl b m O ~ F N W 0o m o. n ~ oo m O ~ M h o. o r 0 0: N w m Q\ M D\ U m M ~ ~ M V1 ~ O o0 O N GO M O\ M (+1 O'J W f1 O N m v1 M P W O ~ O N W R P N 0\ co w m O _ M v~ N ~ r ~ O ~ N C o0 V D` N C CO W nl O OC m v) P b V Q ~ ~ N Q [z' C O 3 ~ ~ ~ V jy L4 y_ vJi CO V W N W W r ~ ~ 4. 00 V ~ m V Vl ~ O ~ ~-n N y ` o a" c0 0o v o0 o rn m m o ~ 'y r n n e ~y ~ GO N U U W U C c0 00 00 O vl 00 00 O ~ 1~} ~D N to ~O W of O ~ d ~ ~ O D Q O ~ C A GO V~ r ~p ~ M O L C ~ M _ m ~ J O ~ P ~ d n N fx O u. v O ~ fi c ~ 4 n s m v q c v c A c A' c !R a> G v A J O C ~i 6 ~ ~ E ~ N ~ O O V] ~ N ~ ~ ~ ~ a, c v u ~ 3 9 ~ c J ~ u ° Q y s~ v y U c O Vl v .O u N ~y ~ CD C ~ .a ~ a o o 3 a v N Y E "OO~~ u :o C .D O h y 00 O~ Y N T ,y a C fi aw ~,.~Uvi0.aC7 mrn n -128- i