Financial Statements Audit Report

Washington Counties Risk

Pool

For the period October 1, 2021 through September 30, 2022

Published May 11, 2023

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Report No. 1032543

Office of the Washington State Auditor

Pat McCarthy

May 11, 2023

Board of Directors

Washington Counties Risk Pool

Tumwater, Washington

Report on Financial Statements

Please find attached our report on the Washington Counties Risk Pool’s financial statements.

We are issuing this report in order to provide information on the Pool’s financial activities and

condition.

Sincerely,

Pat McCarthy, State Auditor

Olympia, WA

Americans with Disabilities

In accordance with the Americans with Disabilities Act, we will make this document available in

alternative formats. For more information, please contact our Office at (564) 999-0950, TDD

Relay at (800) 833-6388, or email our webmaster at webmaster@sao.wa.gov .

Insurance Building, P.O. Box 40021  Olympia, Washington 98504-0021  (564) 999-0950  Pat.McCarthy@sao.wa.gov

TABLE OF CONTENTS

Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance

and Other Matters Based on an Audit of Financial Statements Performed in Accordance with

Government Auditing Standards ..................................................................................................... 4

Independent Auditor's Report on the Financial Statements............................................................ 6

Financial Section........................................................................................................................... 10

About the State Auditor's Office................................................................................................... 44

Office of the Washington State Auditor

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Page 3

INDEPENDENT AUDITOR’S REPORT

Report on Internal Control over Financial Reporting and on Compliance and Other

Matters Based on an Audit of Financial Statements Performed in Accordance with

Government Auditing Standards

Washington Counties Risk Pool

October 1, 2021 through September 30, 2022

Board of Directors

Washington Counties Risk Pool

Tumwater, Washington

We have audited, 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, the financial statements of the

Washington Counties Risk Pool, as of and for the year ended September 30, 2022, and the related

notes to the financial statements, which collectively comprise the Pool’s basic financial statements,

and have issued our report thereon dated May 4, 2023.

REPORT ON INTERNAL CONTROL OVER FINANCIAL

REPORTING

In planning and performing our audit of the financial statements, we considered the Pool’s internal

control over financial reporting (internal control) as a basis for designing audit procedures that are

appropriate in the circumstances for the purpose of expressing our opinion on the financial

statements, but not for the purpose of expressing an opinion on the effectiveness of the Pool’s

internal control. Accordingly, we do not express an opinion on the effectiveness of the Pool’s

internal control.

A deficiency in internal control exists when the design or operation of a control does not allow

management or employees, in the normal course of performing their assigned functions, to prevent,

or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a

combination of deficiencies, in internal control such that there is a reasonable possibility that a

material misstatement of the Pool’s financial statements will not be prevented, or detected and

corrected on a timely basis. A significant deficiency is a deficiency, or a combination of

deficiencies, in internal control that is less severe than a material weakness, yet important enough

to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described above and was not

designed to identify all deficiencies in internal control that might be material weaknesses or

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Page 4

significant deficiencies and therefore, material weaknesses or significant deficiencies may exist

that were not identified.

Given these limitations, during our audit we did not identify any deficiencies in internal control

that we consider to be material weaknesses.

REPORT ON COMPLIANCE AND OTHER MATTERS

As part of obtaining reasonable assurance about whether the Pool’s financial statements are free

from material misstatement, we performed tests of its compliance with certain provisions of laws,

regulations, contracts and grant agreements, noncompliance with which could have a direct and

material effect on the financial statements. However, providing an opinion on compliance with

those provisions was not an objective of our audit, and accordingly, we do not express such an

opinion.

The results of our tests disclosed no instances of noncompliance or other matters that are required

to be reported under Government Auditing Standards.

PURPOSE OF THIS REPORT

The purpose of this report is solely to describe the scope of our testing of internal control and

compliance and the results of that testing, and not to provide an opinion on the effectiveness of the

Pool’s internal control or on compliance. This report is an integral part of an audit performed in

accordance with Government Auditing Standards in considering the Pool’s internal control and

compliance. Accordingly, this communication is not suitable for any other purpose. However, this

report is a matter of public record and its distribution is not limited. It also serves to disseminate

information to the public as a reporting tool to help citizens assess government operations.

Pat McCarthy, State Auditor

Olympia, WA

May 4, 2023

Office of the Washington State Auditor

sao.wa.gov

Page 5

INDEPENDENT AUDITOR’S REPORT

Report on the Audit of the Financial Statements

Washington Counties Risk Pool

October 1, 2021 through September 30, 2022

Board of Directors

Washington Counties Risk Pool

Tumwater, Washington

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the accompanying financial statements of the Washington Counties Risk Pool,

as of and for the year ended September 30, 2022, and the related notes to the financial statements,

which collectively comprise the Pool’s basic financial statements as listed in the financial section

of our report.

In our opinion, the accompanying financial statements referred to above present fairly, in all

material respects, the financial position of the Washington Counties Risk Pool, as of September 30,

2022, and the changes in financial position and cash flows thereof for the year then ended in

accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United

States of America (GAAS) and the standards applicable to financial audits contained in

Government Auditing Standards, issued by the Comptroller General of the United States. Our

responsibilities under those standards are further described in the Auditor’s Responsibilities for

the Audit of the Financial Statements section of our report. We are required to be independent of

the Pool and to meet our other ethical responsibilities, in accordance with the relevant ethical

requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements

in accordance with accounting principles generally accepted in the United States of America, and

for the design, implementation, and maintenance of internal control relevant to the preparation and

fair presentation of financial statements that are free from material misstatement, whether due to

fraud or error.

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In preparing the financial statements, management is required to evaluate whether there are

conditions or events, considered in the aggregate, that raise substantial doubt about the Pool’s

ability to continue as a going concern for twelve months beyond the financial statement date,

including any currently known information that may raise substantial doubt shortly thereafter.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole

are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report

that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute

assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and

Government Auditing Standards will always detect a material misstatement when it exists. The

risk of not detecting a material misstatement resulting from fraud is higher than for one resulting

from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or

the override of internal control. Misstatements are considered material if there is a substantial

likelihood that, individually or in the aggregate, they would influence the judgment made by a

reasonable user based on the financial statements.

Performing an audit in accordance with GAAS and Government Auditing Standards includes the

following responsibilities:

•

Exercise professional judgment and maintain professional skepticism throughout the audit;

Identify and assess the risks of material misstatement of the financial statements, whether

due to fraud or error, and design and perform audit procedures responsive to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and

disclosures in the financial statements;

•

Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the Pool’s internal control. Accordingly, no such opinion

is expressed;

•

Evaluate the appropriateness of accounting policies used and the reasonableness of

significant accounting estimates made by management, as well as evaluate the overall

presentation of the financial statements;

Conclude whether, in our judgment, there are conditions or events, considered in the

aggregate, that raise substantial doubt about the Pool’s ability to continue as a going

concern for a reasonable period of time; and

Communicate with those charged with governance regarding, among other matters, the

planned scope and timing of the audit, significant audit findings, and certain internal

control-related matters that we identified during the audit.

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Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the

management’s discussion and analysis and required supplementary information listed in the

financial section of our report be presented to supplement the basic financial statements. Such

information is the responsibility of management and, although not a part of the basic financial

statements, is required by the Governmental Accounting Standards Board who considers it to be

an essential part of financial reporting for placing the basic financial statements in an appropriate

operational, economic or historical context. We have applied certain limited procedures to the

required supplementary information in accordance with auditing standards generally accepted in

the United States of America, which consisted of inquiries of management about the methods of

preparing the information and comparing the information for consistency with management’s

responses to our inquiries, the basic financial statements, and other knowledge we obtained during

our audit of the basic financial statements. We do not express an opinion or provide any assurance

on the information because the limited procedures do not provide us with sufficient evidence to

express an opinion or provide any assurance.

Other Information

The other information comprises of DES Schedule of Expenses and List of Participating Members

but does not include the basic financial statements and our auditor’s report thereon. Management

is responsible for the other information included with the financial statements. Our opinion on the

basic financial statements do not cover this other information, and, we do not express an opinion

or provide any assurance thereon.

In connection with the audit of the basic financial statements, our responsibility is to read the other

information and consider whether a material inconsistency exists between the other information

and the basic financial statements, or the other information otherwise appears to be materially

misstated. If, based on the work performed, we conclude that an uncorrected material misstatement

of the other information exists, we are required to describe it in our report.

OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING

STANDARDS

In accordance with Government Auditing Standards, we have also issued our report dated May 4,

2023 on our consideration of the Pool’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 effectiveness of the Pool’s internal control over financial reporting or on

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compliance. That report is an integral part of an audit performed in accordance with Government

Auditing Standards in considering the Pool’s internal control over financial reporting and

compliance.

Pat McCarthy, State Auditor

Olympia, WA

May 4, 2023

Office of the Washington State Auditor

sao.wa.gov

Page 9

FINANCIAL SECTION

Washington Counties Risk Pool

October 1, 2021 through September 30, 2022

REQUIRED SUPPLEMENTARY INFORMATION

Management’s Discussion and Analysis – 2022

BASIC FINANCIAL STATEMENTS

Statement of Net Position – 2022

Statement of Revenue, Expenses and Change in Net Position – 2022

Statement of Cash Flows – 2022

Notes to Financials – 2022

REQUIRED SUPPLEMENTARY INFORMATION

Schedule of Proportionate Share of the Net Pension Liability – PERS 1, PERS 2/3 – 2022

Schedule of Employer Contributions – PERS 1, PERS 2/3 – 2022

MLC Claims Development – 2022

Notes to the Required Supplementary Information – 2022

SUPPLEMENTARY AND OTHER INFORMATION

DES Schedule of Expenses – 2022

List of Participating Members – 2022

Office of the Washington State Auditor

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WASHINGTON COUNTIES RISK POOL

2558 R.W. Johnson Road SW, Suite 106

Tumwater, WA 98512-6103

Created by Counties for Counties

Management’s Discussion &Analysis

The Washington Counties Risk Pool (WCRP) management provides this discussion and analysis for the Pool’s

financial activities following the conclusion of its 32^ndFiscal Year (FY), ending September 30, 2022. The information

in this discussion and analysis should be considered in conjunction with that in the financial statements and

accompanying notes to understand WCRP’s financial position.

WCRP has no other component units for which it is financially accountable. It operates as an enterprise fund and uses

the accrual accounting basis in accordance with the U.S. generally accepted accounting principles. This fund type is

used for ‘business type activities’ that are intended to recover all or a significant portion of their costs through user

fees and charges. Revenues are recognized when earned and expenses are recognized when incurred.

WCRP’s operating revenues consist mostly of assessments paid by its member counties. Its operating expenses consist

primarily of payments made to resolve claims, including allocated loss adjustment expenses, and for premiums for

reinsurances and excess liability, property and cyber risk/security insurance policies acquired from superior-rated

commercial carriers.

Discussion of the Financial Statements: The basic financial statements are comprised of two components:

the financial statements and the notes to those financial statements. WCRP’s three financial statements in a condensed

format are presented hereafter with two-year comparative data.

The Statement of Net Position presents information on an entity’s assets, liabilities, deferred outflows, and deferred

inflows at fiscal year-end with the difference between them reported as Net Position.

COMPARATIVE STATEMENT OF

Fiscal Years Ending

NET POSITION

09/30/2021

$53,351,913

09/30/2022

$57,846,491

Current Assets

Total Current Assets

$53,351,913

$57,846,491

Capital Assets (Net)

$740,839

653,880

$742,502

258,354

Net Pension Asset (Non-current)

Total Non-Current Assets

$1,394,719

$1,000,856

Deferred Outflows of Resources

$70,317

$245,553

Total Deferred Outflows

$70,317

$245,553

Current Liabilities

Non-Current Liabilities

Total Liabilities

$6,390,577

21,119,338

$27,509,915

$7,858,640

28,018,881

$35,877,521

Deferred Inflows of Resources

$704,462

$288,351

Total Deferred Inflows of

Resources

$704,462

$288,351

Investment in Capital Assets

$806,790

$742,502

Unrestricted Net Position

Restricted Net Position

Total Net Position

25,141,901

653,880

21,926,172

258,354

$26,602,571

22,927,028

Page 11

Analysis:

While the WCRP’s total assets increased between year-end 2021 and year-end 2022, the WCRP’s liabilities were

also increased by an even greater amount. The result is the WCRP’s ending Net Position seeing a year-over-year

decrease of $3.7M. The changes in the WCRP’s liabilities were the result of actuarial adjustments to current and

prior year loss projections, meaning the projections have been increased by approximately $8.2M. Adjustments have

been made in both the prior and current years, based on unfavorable loss trends, claim settlements, and trial

outcomes.

The Statement of Revenues, Expenses and Changes in Net Position presents details of an entity’s revenues and

expenses during a fiscal year that resulted in the reported Change in Net Position — an increase in net position is the

result of revenues exceeding expenses, while a decrease in net position results when revenues are less than expenses.

COMPARATIVE STATEMENT OF REVENUES,

EXPENSES AND CHANGES IN NET POSITION

FY-2021

FY-2022

Operating Revenues

Member Liability Assessments

Member Cyber Assessments

Member Property Assessments

Operating Revenues – Miscellaneous

Total Operating Revenues

Non-Operating Revenues

Interest Income

$18,507,257

259,969

5,077,293

421,771

$24,266,290

$19,818,077

643,828

5,727,146

0

$26,189,051

$653,232

17,500

$658,993

$13,750

Rental Income

Gain on Capital Asset Disposition

Fair Value Adjustment of Investments

Total Non-Operating Revenues

Total Revenues

0

(526,894)

$143,838

$24,410,128

(2,272,934)

(1,600,191)

$24,588,860

Operating Expenses

Liability, Property, ULAE Reserve & Prior Year Adj

Premiums for Liability Insurance Policies

Premium for Cyber Insurance Policy

Premiums for Property Insurance Policies

Premium for Terrorism Insurance Policy

Premium for Crime Insurance Policy

$10,355,651

4,802,450

162,954

4,693,447

38,926

$13,389,085

6,160,352

195,885

5,109,568

37,851

0

40,057

Depreciation, Bad Debt & Administrative Expenses

2,482,052

3,347,784

Total Operating Expenses

Non-Operating Expenses

Rental Expense

Total Non-Operating Expenses

Total Expenses

$22,535,479

28,280,582

2,221

$2,221

$22,537,700

2,451

$2,451

$28,283,033

Changes in Net Position

$1,872,428

$24,708,123

22,022

($3,694,173)

$26,602,571

18,631

Beginning Net Position (October 1^st)

Prior Period Adjustment

Ending Net Position (September 30^th)

$26,602,571

$22,927,028

Analysis: Between year-end 2021 and year-end 2022, Member Liability Assessments increased by $1,310,820,

Member Property Assessments increased by $383,859, and Member Cyber/Terrorism/Crime Assessments increased

by $649,853. These increases are largely the result of increases in premiums paid to insurers. The Member Liability

increase includes the Board’s decision to budget an additional $1,000,000 to further improve the Pool’s Net Position.

These increases in revenue were offset by expenses that saw a year-over-year increase of $5,746,962, with the result

being a reduction in the Pool’s Net Position. Seeing the unfavorable trends early, it should be noted that for FY2023

the Board voted to add an additional $5,000,000 to the budget, in furtherance of increasing our Net Position.

Page 12

Overall Analysis of Financial Position and Result of Operations:

The WCRP’s Self-Insured Retention (SIR) had increased in the 2018-19 Fiscal Year to $1M. This was followed

immediately by another increase to $2M in the 2019-20 and 2020-2021 year and remaining at $2M in the 2021-22

year. This increased SIR over several years increased the Pool’s exposure and uncertainty, requiring a continued

aggressive funding approach to build our Net Position. While FY2022 saw a decrease in the Net Position, it is

anticipated that the larger increase in direct capital funding we made for the 2023 Fiscal Year, along with doing so in

future years, will see our Net Position returning to the upward trajectory it had previously been on.

The Pool continues to remain confident in its financial position, financial practices, claim handling, and in its

investment strategy and performance. The growth of our Net Position over several years has significantly helped

during years of unfavorable loss projections. Appropriate reserve estimates were included within the Pool’s FY2022

financials for any such matter stemming from liability claim against a member county. The WCRP anticipates

continued success and favorable outcomes of cases currently pending.

The WCRP continues to focus on its ongoing goal of stable rates and maintaining an unrestricted Net Position that

continues to meet the solvency requirements established by the State under Washington Administrative Code (WAC)

200-100, and continues to fall within the funding target established by the WCRP Board of Directors.

Budget Variance Analysis:

There were no amendments “to” or significant variations “from” the budget adopted then supplemented by the Pool’s

Board of Directors during the fiscal year ending September 30, 2022.

Request for Information:

This MD&A is provided for those interested in a general overview of the financial operations of the Washington

Counties Risk Pool. Questions concerning the information provided and WCRP’s financial report, or requests for

additional information, should be addressed to: WASHINGTON COUNTIES RISK POOL, Attn: Executive Director,

2558 R W Johnson Rd SW, Suite 106, Tumwater, WA, 98512-6103; or by telephone at (360) 292-4500.

Page 13

Washington Counties Risk Pool

Statement of Net Position

MCAG NO. 0774

For the Fiscal Year Ended September 30, 2022

ASSETS:

As of

9/30/2022

CURRENT ASSETS:

Cash and Cash Equivalents

Investments

Members' MLC Deductible Receivable

Excess/Reinsurance Recoverable

Property Assessment Receivable

Accrued Interest

$

1,221,816

50,601,127

1,403,875

4,452,118

(12,040)

159,259

17,277

Prepaid Expenses

Other Accounts Receivables

3,059

TOTAL CURRENT ASSETS

$

57,846,491

NONCURRENT ASSETS:

Capital Assets (Net of Accumulated Depreciation)

Net Pension Asset_Non-Current

$

742,502

258,354

TOTAL NONCURRENT ASSETS

TOTAL ASSETS

$

1,000,856

58,847,347

245,553

TOTAL DEFFERED OUTFLOWS RELATED TO PENSIONS

LIABILITIES:

CURRENT LIABILITIES:

"SIR" Claims Reserves

Open Claims - SIR Reserves

Open Claims - Corridor Reserves

Property Reserves

Cyber Reserves

Accounts Payable

Payroll Liabilities

$

5,821,443

844,149

911,626

125,851

102,137

53,434

TOTAL CURRENT LIABILITIES

$

7,858,640

NON CURRENT LIABILITIES

"SIR" Claims Reserves

Open Claims-SIR Reserves

IBNR Reserves - IBNR

Open Claims - Corridor Reserves

IBNR Reserves - IBNR

$

3,481,313

21,923,304

997,585

376,422

Reserve for ULAE

967,001

Compensated Absences

Net Pension Liability -- GASB 68

124,932

148,324

TOTAL NON CURRENT LIABILITIES

TOTAL LIABILITIES

$

28,018,881

35,877,521

288,351

TOTAL DEFERRED INFLOWS RELATED TO PENSIONS

NET POSITION:

Unrestricted Net Position

Restricted Net Position

$

21,907,542

258,354

18,631

Prior Year Adjustment

Net Investment in Capital Assets

742,502

TOTAL NET POSITION

$

22,927,028

The accompanying notes are an integral part of these financial statements

Page 14

Washington Counties Risk Pool

Statements of Revenue, Expenses and Change in Net Position

For Fiscal Year Ended September 30, 2022

MCAG NO. 0774

As of

OPERATING REVENUES:

9/30/2022

Members' Assessments -- MLC

Members' Assessments -- WCPP

Cyber/Terrorism/Crime Coverage

Other Operating Income

$

19,818,077

5,727,146

643,828

-

Total Operating Revenues

26,189,051

OPERATING EXPENSES:

Current Year Liability SIR

Current Year Property SIR

Current Year Cyber SIR 70.3

$10,700,000

940,000

100,000

992,805

701,940

123,537

(101,240)

(101,480)

33,523

6,160,352

5,109,568

195,885

40,057

Adjustment in Prior Years' Liability SIR

Adjustment in Prior Years' Liability Corridor

Adjustment in Prior Years' Property SIR

Adjustment in Prior Years' Cyber SIR

Adjustment in Prior Years' True up to Actuary

Adjustment in Reserve for ULAE

MLC Reinsurance Premiums/Excess

WCPP Insurance Premiums

Cyber Liability - Premium (70.9)

Crime Liability

Terrorism Liability Premiums

Depreciation Expense

37,851

69,767

Operating Expenditures

3,278,017

28,280,582

Total Operating Expenses

$

OPERATING INCOME (LOSS)

(2,091,531)

NON OPERATING REVENUES (EXPENSES)

Interest Income

Rental Income

$

658,993

13,750

Rental Expense

(2,451)

Gain (Losses) on Capital Assets Disposition

Adjustment to Investments

-

(2,272,934)

(1,602,642)

Total Nonoperating Revenues (Expenses)

CHANGES IN NET ASSETS

TOTAL NET POSITION, Beginning of Year

$

(3,694,173)

$

26,602,571

18,631

PRIOR YEAR ADJUSTMENT

TOTAL NET POSTION, as of June 30th

$

22,927,028

The accompanying notes are an integral part of these financial statements

Page 15

MCAG NO. 0774

WASHINGTON COUNTIES RISK POOL

STATEMENT OF CASH FLOWS

For the Fiscal Year Ended September 30, 2022

Year Ended

9/30/2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from Members & Insurers

31,671,322

Cash payments for goods and services

Cash payments to employees for services

Rounding Adjustment

(19,089,094)

(1,026,336)

(2)

Net Cash Provided (Used) by Operating Activities

11,555,891

CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

8300000 · PROPERTY & EQUIPMENT:8300001 · Property - Buildings

8300000 · PROPERTY & EQUIPMENT:8300002 · Equipment

8300000 · PROPERTY & EQUIPMENT:8300003 · Accumulated Depreciation

8300004 · Net Pension Asset_Non-Cur Asset

(7,995)

(63,434)

69,767

395,526

(175,236)

8400000 · DEFERRED OUTFLOW GASB 68

Net cash provided by Investing Activities

218,627

CASH FLOW FROM INVESTING ACTIVITIES:

8600600 · ULAE

33,523

15,052

21,156

8600700 · Compensated Absenses:8600701 · Annual Leave Accruals

8600700 · Compensated Absenses:8600702 · Sick Leave Accruals

8600800 · Net Pension Liability -GASB 68

8700000 · Deferred Inflow - GASB 68

3088900 · Unrestricted Net Position

3088900 · Unrestricted Net Position:3088902 · Restricted Net Position

3088901 · Net Investment in Capital Asset

32000 · Retained Earnings

85,869

(416,111)

1,700,383

258,354

(64,288)

(1,872,428)

(3,390)

3881000 · Prior Year Adj

Interest Income

Rental Income

658,878

13,750

Rental Expense

(2,451)

FMV Adjustment to Investments

Net cash provided by Financing Activities

(2,272,934)

(1,844,638)

$

Increase (Decrease) in Cash and Cash Equivalents

$

9,929,880

Cash and Cash Equivalents - Beginning of the Year

$

41,893,062

Cash and Cash Equivalents (including restricted) - End of the Year

$

51,822,943

Page 16

MCAG NO. 0774

WASHINGTON COUNTIES RISK POOL

STATEMENT OF CASH FLOWS

For the Fiscal Year Ended September 30, 2022

Year Ended

9/30/2022

RECONCILIATION OF OPERATING INCOME TO NET CASH

PROVIDED (USED) BY OPERATING ACTIVITIES

OPERATING INCOME

$

(2,091,531)

Reconciliation Adjustment/Prior Year

Cash provided (used) by Operating Activities:

Depreciation Expense

(29,431)

69,767

Changes in Assets and Liabilities

(Increase) Decrease in Accounts Receivable

(Increase) Decrease in Accrued Interest

(Increase) Decrease in Prepaid Expenses

Increase (Decrease) in "SIR" Reserves

Increase (Decrease) in "1st/2nd Layers' Corridor" Reserves

Increase (Decrease) in "SIR" Reserves Cyber/Property

Increase (Decrease) in Payroll Liabilities

Increase (Decrease) in Compensated Absences

Increase (Decrease) in Accounts Payable

(Increase) Decrease in Deferred Outflow

Increase (Decrease) in Reserve for ULAE

Increase (Decrease) in Deferred Inflow

5,482,271

(43,683)

(3,286)

9,338,267

(1,371,768)

270,987

1,590

36,208

(27,071)

(175,236)

33,523

(416,111)

395,526

85,869

(Increase) Decrease in Pension Asset

Increase (Decrease) in Pension Liability

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

$

11,555,891

The accompanying notes are an integral part of these financial statements

Page 17

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

These notes are an integral part of the accompanying financial statements.

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Washington Counties Risk Pool (WCRP) have been prepared in conformity with

generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is the

accepted standard setting body for establishing governmental accounting and financial principles. The significant

accounting policies are described below.

A.

Reporting Entity

The WCRP was formed by Interlocal Agreement in August 1988 pursuant to Chapters 48.62 and 39.94

Revised Code of Washington (“RCW”).

The WCRP is governed by its 25-member Board of Directors with a President, Vice-President, and

Secretary/Treasurer serving as its annually elected officers. The WCRP Board meets three times each year

at its Spring Conference & Board Meeting, Fall Conference & Board Meeting, and its Summer Annual

Conference & Board Meeting. The WCRP’s Executive Committee, consisting of 11 members of the Board

of Directors, meets four to six times each year for general Pool administration and oversight.

Through the Executive Director, the Pool’s 12-member staff carries out the mission and directives of the

Board of Directors. The Finance & Operations Department handles day-to-day operations and

administration of the Pool, the Risk & Claims Department provides risk management support to the Pool

and to its member counties, and manages all liability claims brought against member counties, while the

Member Services Department provide the various training, scholarships, conference and event planning,

and other educational resources to participating members.

Annual deposit assessments are adjusted to incorporate actuarial projections and operational needs, and

then approved by the (WCRP) Board of Directors at their Annual Meeting. If the Pool’s assets were

depleted, members would be responsible for outstanding liabilities of the WCRP.

B.

Basis of Accounting and Presentation

The accounting records of the WCRP are maintained in accordance with methods prescribed by the State

Auditor’s Office under the authority of Chapter 43.09, RCW. The WCRP also follows the accounting

standards established by the Governmental Accounting Standards Board (GASB) Statement 10, Accounting

and Financial Reporting for Risk Financing and Related Insurance Issues, as amended by GASB

Statement 30, Risk Financing Omnibus, and GASB Statement 31, Accounting and Financial Reporting for

Certain Investments and for External Investment Funds.

The WCRP uses the full-accrual basis of accounting where revenues are recognized when earned and

expenses are recognized when incurred. Capital asset purchases are capitalized, and long-term liabilities

are accounted for within the financial statements.

The principal operating revenues of the WCRP are member assessments, while its operating expenses

include both claims paid from current year’s allowances and adjustments to prior year’s reserves, premiums

for reinsurances and excess, property, terrorism and cyber risk insurances, and the Pool’s administrative

expenses.

Page 18

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

C.

Assets, Liabilities and Net Position

1.

Cash and Cash Equivalents

For the purposes of the Statement of Cash Flows, the WCRP considers all highly liquid

investments with maturities of three months or less when purchased to be cash equivalent.

2.

3.

Capital Assets and Depreciation

See Note 6, Capital Assets

Receivables

Amount owing from members and reinsurers for deductibles are identified on the Statement of Net

Position.

Accrued Interest Receivable is the amount earned on investment at the end of the fiscal year.

The WCRP Board of Directors, acting through its Executive Committee, decides if any accounts

are deemed uncollectible. Uncollectible accounts are charged to expense in the period they are

deemed uncollectible.

4.

5.

Investments

See Note 2, Deposits and Investments.

Compensated Absences

Compensated absences are absences for which the employees will be paid, such as annual and sick

leave. The WCRP records accrued leave for compensated absences as an expense and liability

when incurred.

Annual Leave may be accumulated up to 30 days and is payable upon resignation, retirement, or

death. An employee with more than sixty days sick leave accrued may convert the days earned in

the previous year (less any sick leave days used in that year) to annual leave days at the rate of

four days of sick leave for one day of annual leave. Sick leave may accumulate up to 130 days.

Sick leave does not vest until death or retirement, and the accrued liability is booked at one-half of

the amount earned.

6.

Unpaid Claim Liabilities

The WCRP establishes claims liabilities based upon independent actuarial estimates of the

ultimate losses (costs of claims), including future claims adjustment expenses for claims/lawsuits

that have been reported but are not settled, and for claims that have been incurred but are not yet

reported. The length of time for which such costs must be estimated varies depending on the

coverage type involved. Estimated amounts of salvage and subrogation and reinsurance

recoverable on unpaid claims are deducted from the liability for unpaid claims. Because actual

claims costs depend on such complex factors as inflation and changes in doctrines of legal liability

and in damage awards, the process used in computing claims liabilities does not necessarily result

in an exact amount, particularly general liability coverage.

Page 19

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

Claims liabilities are actuarially recomputed and incorporate the current case reserves on files,

which incorporates the Jury Verdict Value processes. The actuary uses a variety of techniques and

formulas that reflect recent settlements, claims frequencies, and other economic and social factors

to produce current estimates. A provision for inflation in the calculation of estimated future

claims costs is implicit in the calculation because reliance is placed both on actual historical data

that reflects past inflation and on other factors that are appropriate modifiers of experience.

Adjustments to claims liabilities are charged or credited to expense in the periods in which they

are made.

7.

Reinsurance

The WCRP acquires reinsurance (agreements) to directly reduce its exposure to large third-party

liability losses and to indirectly reduce its (present and past) member counties’ exposures to

contingent liabilities. Reinsurance permits recovery of substantial portions of the losses from

commercial reinsurers, although it does not discharge the primary liability of the WCRP (and its

member counties by contingent liabilities) as the direct insurer of the risks reinsured. The WCRP

does not report reinsured risks as liabilities unless it is probable that those risks will not be covered

by reinsurers.

The cumulative to-date incurred loss amount deducted from claims liabilities as of September 30,

2022, and 2021 as being reinsured were $171,791,545 and $157,218,042 respectively. Premiums

paid to reinsurers during 2022 and 2021 were $6,160,352 and $4,802,450 respectively. The

independent actuary’s estimate for the ceded reinsured amount of gross loss reserves as of

September 30, 2022, was $31,793,116.

8.

Member Assessments and Unearned Member Assessments

Member assessments are collected in advance and recognized as revenue in the period for which

the coverage is to be provided. On the balance sheet, member assessments receivables were billed

on or about October 1^stwith up to the amount equivalent to 100% of the prior year’s assessment

being due by October 31^st, and any remaining assessments balance(s) due by the following May

1st. The assessments calculated for liability coverage were based in substantial part upon the

members’ prior year’s worker hours.

The assessments for FY 2021-22 property coverage were calculated based upon the values of the

real and personal properties scheduled by the participating counties. Member counties are billed

on or about October 1^stwith up to 50% of the assessment due by October 31^st, and the remaining

balance due before May 1^st.

The cyber costs, which include the premium paid to the insurer and the projected losses to be paid

within the Pool’s Self-Insured Retention of $500,000 per claim, are assessed using members’

annual operating budgets. The terrorism coverage assessment is divided evenly among the

members. Investment income is not presently considered for the determination of member

assessments.

9.

Unpaid Claims

Liability claims/lawsuits are charged to expenses as incurred. Claims reserves represent the

accumulation of estimates for reported, unpaid liability claims plus a provision for liability claims

incurred but not reported (IBNR). These estimates are continually reviewed using the Jury

Verdict Value process and updated by WCRP’s consulting actuary. Any resulting adjustments are

reflected in current earnings.

Page 20

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

10.

Reserve for Unallocated Loss Adjustment Expense

The reserve for unallocated loss adjustment expenses (ULAE) represents the estimated cost to be

incurred with respect to the settlement of both liability claims in process and those liability claims

recognized as incurred but not reported (IBNR). WCRP’s independent actuary estimates these

liabilities at the end of each fiscal year. The changes in these liabilities each year are reflected in

current earnings.

11.

12.

Exemption from Federal and State Taxes

Pursuant to revenue ruling number 90-74, income of Municipal Risk Pools is excluded from gross

income under IRC Section 115(1). RCW 48.62.151 exempts the WCRP from state insurance

premium taxes and from business and occupation taxes imposed pursuant to Chapter 82.04 RCW.

Pensions

For purposes of measuring the net pension liability or asset, deferred outflows of resources and

deferred inflows of resources related to pensions, and pension expense, information about the

fiduciary net position of all state sponsored pension plans and additions to/deductions from those

plans’ fiduciary net position have been determined on the same basis as they are reported by the

Washington State Department of Retirement Systems. For this purpose, benefit payments

(including refunds of employee contributions) are recognized when due and payable in accordance

with the benefit terms. Investments are reported at fair value. Restricted net position, related to net

pension asset, was calculated using the GASB preferred method.

13.

Lease Commitments Operating Leases

The Pool is committed under operating leases for office machines. These leases are considered

operating leases for accounting purposes. Total costs for operating leases were $9,174 for the year

ended September 30, 2022. The future minimum lease payments through the end of the lease terms

are as follows:

Fiscal Year Ending September 30th:

2023

2024

2025

Total

$6,225

$4,331

$1,805

$12,361

NOTE 2 – DEPOSITS AND INVESTMENTS

Deposits

A

In accordance with RCW 39.58, WCRP deposits its funds into a public depository with collateral held in a

multiple financial institution collateral pool administered by the Washington Public Deposit Protection

Commission (PDPC). Funds are transferred between the WCRP’s public depository (depositories) and

either the State Treasurer’s Local Government Investment Pool (LGIP); a US Bank custodial account; or

the Spokane County Treasurer’s Spokane County Investment Pool (SCIP). There are no credit ratings for

positions in external investment pools.

Page 21

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

WCRP funds deposited as of September 30, 2022, and September 30, 2021 were as follows:

9/30/2022

9/30/2021

Wells Fargo (checking)

$1,221,816

$1,444,635

$4,363,363

$44,793,130

$51,822,944

$2,126,392

$1,933,285

$1,268,059

$36,564,807

$41,892,543

Washington State Investment Pool (LGIP)

Spokane County Investment Pool (SCIP)

US Bank Custodial Account

Total deposits and investments

B.

Investments:

2022 Concentration of Credit:

Average

Duration

Average

Maturity

Rating

Moody/Sp

Percent of

Portfolio

Issuer:

Cost

Market Value

$35,586,874

$3,049,484

$3,005,286

$2,093,608

$975,301

Government of the

United States

Federal Home Loan

Bank

Federal Home Loan

Mortgage Corp

Federal National

Mortgage Assoc

Federal Farm

$ 37,364,374

$3,164,265

$3,225,914

$2,208,148

$1,003,079

$82,576

1.73

1.81

1.03

1.77

1.47

1.63

0

Aaa AA+

Aaaa AAA

79.44%

6.81%

6.71%

4.67%

2.18%

0.18%

.99

1.72

1.42

1.56

0

Credit Bank

First American

Govt Oblig Fund

82,576

2021 Concentration of Credit:

Average

Duratio

n

Market

Value

Average

Maturity

Rating

Moody/SP/Fitch

Percent of

Portfolio

Issuer:

Cost

Government of the

United States

$ 25,564,780

$ 3,743,534

$3,340,648

$3,265,093

$661,281

$ 25,504,994

$3,716,688

$3,377,935

$3,303,906

$661,284

1.80

2.42

1.79

1.10

0.00

1.83

2.45

1.82

1.12

0.00

Aaa AA+

Aaaa AAA

69.75%

10.16%

9.24%

9.04%

1.81%

Federal National

Mortgage Assoc.

Federal Home

Loan Bank

Federal Home Loan

Mortgage Corp

First American Govt

Oblig. Fund

Investments Measured at Fair Value

WCRP’s measures and reports investments at fair value using the valuation input hierarchy established by generally

accepted accounting principles, as follows:

•

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: These are quoted market prices for similar assets or liabilities, quoted prices for identical or

similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not

active, or other than quoted prices that are not observable;

•

Level 3: Unobservable inputs for an asset or liability.

Page 22

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

At September 30, 2022 and 2021 WCRP had the following investments measured at fair value:

Investments by Fair Value Level

Spokane County Investment Pool

U.S. Agencies

09/30/2022

$4,363,363

$9,123,679

$35,586,874

Level 1

Level 2

Level 3

$4,363,363

$9,123,679

$35,586,874

U.S. Treasuries

Total Investments measured at

Fair Value

$49,073,916

Investments at Amortized Cost

LGIP

Money Market Fund

$1,444,635

$82,576

Total Investments at Amortized Cost

$1,527,211

Total Investments in Statement of Net Position

$50,601,127

Investments by Fair Value Level

Spokane County Investment Pool

U.S. Agencies

09/30/2021

$1,268,059

$10,398,530

$25,504,994

Level 1

Level 2

Level 3

$1,268,059

$10,398,530

$25,504,994

U.S. Treasuries

Total Investments measured at Fair Value

$37,171,583

Investments at Amortized Cost

LGIP

Money Market Fund

$1,933,285

$661,284

Total Investments measured at Amortized Cost

Total Investments in Statement of Net Position

$2,594,569

$39,766,152

Disclosure of Custodial Credit Risk

WCRP’s investment policy states that all security transactions shall be conducted on a delivery-versus-payment

(DVP) basis. Securities purchased by the Pool will be delivered against payment and held in a custodial safekeeping

account with the trust department of a bank. A third-party custodian will be designated by the Executive Director

and all transactions will be evidenced by safekeeping receipts.

Concentration of Credit Risk

Concentration Risk disclosure is required for all investments in any one issuer that represents 5% or more of the

Pool’s total investments, excluding investment pools and investments issued by the U.S. government. No disclosure

of concentration risk currently meets this requirement.

Interest Rate Risk

Interest rate risk is the risk that the portfolio value will fluctuate due to changes in the general level of interest rates.

The Pool recognizes that, over time, longer-term portfolios have higher volatility of return. The Pool mitigates

interest rate risk by providing adequate liquidity for short-term cash needs, and by making longer-term investments

only with funds that are not needed for current cash flow purposes. The Pool has deposits of $4,363,363 with the

Spokane County Investment Pool and $1,444,635 with the Washington State Investment Pool that are available

immediately. The Pool further recognizes that certain types of securities will affect the interest rate risk profile of

the portfolio differently in different interest rate environments. The Pool restricts callable securities to a maximum

of 20% of the portfolio, restricts maximum maturity to 5 years, and constrains duration to plus or minus 20% of a

market benchmark index selected by the Investment Committee based on the Pool’s investment objectives,

constrains and risk tolerances.

Page 23

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

Investment in Local Government Investment Pool (LGIP)

The Washington Counties Risk Pool is a participant in the Local Government Investment Pool (LGIP). The LGIP

was authorized by Chapter 294, Laws of 1986 and is managed and operated by the Washington State Treasurer. The

State Finance Committee is the administrator of the statue that created the pool and adopts rules. The State

Treasurer is responsible for establishing the investment policy for the pool and reviews the policies annually and

proposed changes are reviewed by the LGIP advisory Committee.

Investments in the LGIP, a qualified external investment pool, are reported at an amortized cost which approximates

fair value. The LGIP is an unrated external investment pool. The pool’s portfolio is invested in a manner that meets

the maturity, quality, diversification, and liquidity requirements set forth by the GASBS 79 for external investment

pools that elect to measure, for financial reporting purposes, investments at amortized cost. The LGIP does not have

any legally binding guarantees of share values. The LGIP does not impose liquidity fess or redemption gates on

participant withdrawals.

The Office of the State Treasurer prepares a stand-alone LGIP financial report. A copy of the report is available

from the Office of the State Treasurer, PO Box 40200, Olympia, WA 98504-0200, online at http://www.tre.wa.gov.

NOTE 3 – JOINT SELF-INSURED RETENTION

WCRP retains complete responsibility for the payment of covered liability claims, both within its specified self-

insured retention limits and that provided under its reinsurance contracts. For 2022, the Pool’s SIR for liability

claims was $2,000,000. Each member’s selected and applicable deductible is a part of, and not in addition to, the

Pool’s SIR. Through pre-funded member liability assessments (deposit assessments) collected at the beginning of

the Pool’s fiscal year, WCRP committed assets of $14,805,392, specifically for funding its liability SIR for the 2022

year.

For 2022, the WCRP group-purchased first-party property coverage through various insurers. The WCRP carried a

Pool deductible of $100,000 for all first-party property claims. The Pool’s deductible is fully funded by the

membership at amounts using actuarial projections. Each member’s selected and applicable deductible is a part of,

and not in addition to, the Pool’s deductible. Through pre-funded member property assessments (deposit

assessments) collected at the beginning of the Pool’s fiscal year, WCRP committed assets of $4,942,437,

specifically for funding its property deductible for the 2022 year.

The WCRP also secures cyber coverage for all participating member counties. For 2022, the WCRP’s Self-Insured

Retention was $250,000 with zero member deductibles. This SIR is fully funded by the membership at amounts

using actuarial projections. Through pre-funded member cyber assessments (deposit assessments) collected at the

beginning of the Pool’s fiscal year, WCRP committed assets of $195,885, specifically for funding its cyber SIR for

the 2022 year.

During the past three fiscal years, the Pool has not approved a settlement that exceeded the insurance coverage noted

herein that is more specifically outlined in Note 4.

NOTE 4 – REINSURANCE/EXCESS INSURANCE CONTRACTS

Through Gallagher Risk Management Services, Inc., the Producer (Broker-of Record) retained by the Pool’s Board

of Directors, WCRP partners with multiple superior-rated commercial insurers by acquiring reinsurance agreements

and “following form” excess, property, and cyber risk insurances. The limits provided by these insuring agreements,

contracts, and policies for FY2022 follow:

A. Memorandum of Liability Coverage (“MLC”): Since October 1, 1988, the Pool has provided its

member counties with risk-shared (jointly purchased and/or self-insured), occurrence-based coverage under a

Page 24

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

MLC Coverage Form for 3^rd-party liability claims against members due to bodily injury, personal injury,

property damage, errors and omissions, and advertising injury.

For 2022, the total “occurrence” coverage remained at $20,000,000 with an additional “occurrence” limit of

$5,000,000 available for member counties to acquire as an individual (county-by-county) option. For the first

$10,000,000 of coverage, the Pool acquires reinsurance from reinsurers that follow the WCRP’s MLC

coverage form. The reinsurance is acquired from multiple higher-rated carriers as protection for the Pool

from unexpected losses and for the membership from contingent liabilities that might result otherwise.

Reinsurance agreements respond up to the applicable policy limits and the agreements contain aggregate

limits for the maximum annual reimbursements to the Pool of $30,000,000 (lowest reinsured layer), $50

million, (second layer). The Pool purchases following form excess coverage for the additional $10,000,000

with an aggregate limit of $100,000,000. Since the Pool is a cooperative program, there is a joint liability

among the participating members. Fourteen of the Pool’s member counties group purchase an additional

$5,000,000 policy in excess of the pooled $20,000,000.

Each member annually selected a deductible amount of $10,000, $25,000, $50,000, $100,000, $250,000, or

$500,000, which is applied to each of the member’s occurrences from that year. There were/are no aggregate

limits for the payments the Pool makes for any individual member county’s losses.

Reinsurance and excess premiums ceded for liability coverage during the year totaled $6,405,392.

B. Washington Counties Property Program (“WCPP”): For FY2022, WCRP offered jointly-purchased

(1^st-party) property coverage as an individual (county-by-county) option. This coverage was acquired from a

consortium of higher-rated commercial carriers. The coverage offered follows the commercial property

policies issued by the various participating insurers. All 24 WCRP counties participated in the FY2022 WCPP,

with covered properties (in composite) exceeding $3.4 billion.

The WCPP limits include $500 million for typical (All Other Perils or AOP) losses, $200 million for catastrophe

(earthquake or flood), and many sub-limited coverages including Equipment Breakdown / Boiler & Machinery

($100 million) and Special Flood Hazard Areas ($25 million). Other coverages included Green Construction

Upgrades, and Reproduction for Historic Structures,

All Other Perils (AOP) occurrence deductibles between $5,000 and $50,000 were/are selected by the

participating counties which they are solely responsible for paying. Higher deductibles apply to catastrophe

losses.

C. Cyber Risk and Other Coverage: For FY2022, the Pool group purchased cyber risk and security coverage

which includes (1st party) business interruption, data recovery, cyber extortion, breach response and

management (regulatory compliance) protections associated with date breaches. The coverage offered follows

the Cyber and Technology Liability Policy issued by the AXA XL, the single insurer providing the coverage.

For FY2022, the WCRP group purchased first and third-party terrorism coverage, with the liability coverage

having per occurrence limits of $25 million, no WCRP retentions and no member deductibles, and the property

coverage having a per occurrence limit of $100 million, with a $10,000 WCRP retention and no member

deductibles.

Beginning FY2022, the WCRP group purchased crime coverage having per occurrence limits of $2,000,000,

which includes employee theft, forgery or alteration, theft of money and securities, and funds transfer fraud.

Twenty-two member counties participate with a $25,000 deductible per claim.

Page 25

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

NOTE 5 – MEMBER'S SUPPLEMENTAL ASSESSMENTS AND CREDITS

RCW 48.62.141 and the WCRP Interlocal Agreement provide for the contingent liability of participants in the

program if assets of the program are insufficient to cover the program's liabilities. Deficits of the WCRP are

financed through supplemental (retroactive) assessments against those counties that were WCRP members for the

deficient period(s). During fiscal year 2022, there was no deficiency, and no additional retroactive assessments were

levied or collected.

NOTE 6 – CAPITAL ASSETS

Capital assets are defined by WCRP policy as having an initial, individual cost of at least $2,500 and an estimated

useful life in excess of one year. Capital assets are recorded at historical cost.

Capital assets activities for the fiscal year ended September 30, 2022, were as follows:

Beginning

Balance

Ending

Balance

10/01/2021

Increase

(Decrease)

09/30/2022

Capital Assets being

Depreciated

Building & Improvements

Furniture/Equipment/Vehicles

Total Capital Assets being

depreciated

1,330,358

218,670

7,995

63,434

1,338,353

282,105

$1,549,028

$71,429

$1,620,458

Less Accumulated

Depreciation:

Building & Improvements

Furniture/Equipment/Vehicles

Total Accumulated

Depreciation

583,686

158,854

48,572

21,194

680,060

197,896

$808,189

$877,956

TOTAL CAPITAL ASSET

NET

$69,766

$740,839

$742,502

Capital assets activities for the fiscal year ended September 30, 2021, were as follows:

Beginning

Balance

Ending

Balance

10/01/2020

Increase

(Decrease)

09/30/2021

Capital Assets being Depreciated

Building & Improvements

1,330,358

218,670

1,330,358

218,670

Furniture/Equipment/Vehicles

Total Capital Assets being

depreciated

$1,549,028

Less Accumulated Depreciation:

48,102

Building & Improvements

Furniture/Equipment/Vehicles

Total Accumulated

583,686

158,854

631,487

176,702

17,849

Depreciation

$742,239

$808,189

TOTAL CAPITAL ASSET

NET

$65,951

$806,790

$740,839

Page 26

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

When equipment is retired or otherwise disposed of, the original cost is removed from WCRP’s capital assets

accounts, and the net gain or loss on disposition is credited to or charged against income.

Capital assets are depreciated using the straight-line method over the following estimated useful lives:

Asset

Building

Building Improvements

Vehicles

Years

30

5

Equipment

5

NOTE 7 – SOLVENCY

Washington Administrative Code (WAC) 200-100 requires the Washington Counties Risk Pool to maintain certain

levels of primary and secondary assets to meet solvency standards. As defined in WAC 200-100-03001 total

primary assets, i.e. cash and cash equivalents less non-claims liabilities, must at least equal the independent

actuary’s expected estimate of unpaid claims. Furthermore, a pool’s total primary and secondary assets must at least

equal the independent actuary’s 80% confidence level estimate of unpaid claims (70% before 2015). Secondary

assets include insurance receivables, real estate or other assets less any non-claim liabilities, the values for which

can be independently verified by the state risk manager.

Primary Asset Test 1

2022

2021

Cash and cash equivalents

Investments

Total

Non-claims Liabilities

Unearned Revenues

$1,221,816

50,601,127

$51,822,943

430,572

$2,126,392

39,766,150

$41,892,543

332,231

0.00

Total Primary Assets

Claims Liability – Expected Level

Test 1 Result – Primary Asset Test

$51,392,371

$35,448,694

PASS

$41,560,312

$27,177,684

PASS

Secondary Asset Test

Cash and cash equivalents

Investments

Receivables

Prepaid Expenses

Accrued Interest

$1,221,816

50,601,127

5,847,011

17,277

$2,126,392

39,766,150

1,053,679

13,991

159,259

115,577

Capital Assets

742,502

740,839

Net Pension Asset

Less:

258,354

653,880

Non-Claims Liabilities

Unearned Revenues

Total Secondary Assets

Total Primary plus Secondary Assets

430,572

0.00

$6,593,831

$57,986,202

332,231

0.00

$2,245,732

$44,138,274

Claims Liabilities at 80%

$28,358,955

$27,177,684

Test 2 Results – Secondary Asset Test

PASS

Page 27

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

NOTE 8 – PENSION PLANS

The following table represents the aggregate pension amounts for all plans for the year 2022 and 2021:

Aggregate Pension Amounts – All Plans

2022

2021

$ 62,455

Pension liabilities

Pension assets

$148,324

258,354

653,880

Deferred outflows of resources

Deferred inflows of resources

Pension expense/expenditures

245,553

288,351

70,317

704,462

(109,952)

(162,335)

State Sponsored Pension Plans

Substantially all Washington Counties Risk Pool full-time and qualifying part-time employees participate

in one of the following statewide retirement systems administered by the Washington State Department of

Retirement Systems, under cost-sharing, multiple-employer public employee defined benefit and defined

contribution retirement plans.

The state Legislature establishes, and amends, laws pertaining to the creation and administration of all

public retirement systems.

The Department of Retirement Systems, a department within the primary government of the State of

Washington, issues a publicly available Annual Comprehensive Financial Report (ACFR) that includes

financial statements and required supplementary information for each plan. The DRS ACFR may be

obtained by writing to:

Department of Retirement Systems

Communications Unit

P.O. Box 48380

Olympia, WA 98540-8380

Also, the DRS ACFR may be downloaded from the DRS website at www.drs.wa.gov.

Public Employees’ Retirement System (PERS)

PERS members include elected officials; state employees; employees of the Supreme, Appeals and Superior

Courts; employees of the legislature; employees of district and municipal courts; employees of local

governments; and higher education employees not participating in higher education retirement programs.

PERS is comprised of three separate pension plans for membership purposes. PERS plans 1 and 2 are

defined benefit plans, and PERS plan 3 is a defined benefit plan with a defined contribution component.

PERS Plan 1 provides retirement, disability and death benefits. Retirement benefits are determined as two

percent of the member’s average final compensation (AFC) times the member’s years of service. The AFC

is the average of the member’s 24 highest consecutive service months. Members are eligible for retirement

from active status at any age with at least 30 years of service, at age 55 with at least 25 years of service, or

at age 60 with at least five years of service. Members retiring from active status prior to the age of 65 may

receive actuarially reduced benefits. Retirement benefits are actuarially reduced to reflect the choice of a

survivor benefit. Other benefits include duty and non-duty disability payments, an optional cost-of-living

Page 28

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

adjustment (COLA), and a one-time duty-related death benefit, if found eligible by the Department of Labor

and Industries. PERS 1 members were vested after the completion of five years of eligible service. The plan

was closed to new entrants on September 30, 1977.

Contributions

The PERS Plan 1 member contribution rate is established by State statute at 6 percent. The employer

contribution rate is developed by the Office of the State Actuary and includes an administrative expense

component that is currently set at 0.18 percent. Each biennium, the state Pension Funding Council adopts

Plan 1 employer contribution rates. The PERS Plan 1 required contribution rates (expressed as a percentage

of covered payroll) for 2022 were as follows:

PERS Plan 1

Actual Contribution Rates

January 2022 – August 2022

PERS Plan 1

PERS Plan 1 UAAL

Administrative Fee

Employer

Employee*

6.36%

3.71%

0.18%

6.00%

Total 10.25%

September 2022 – December

2022

6.00%

PERS Plan 1

PERS Plan 1 UAAL

Administrative Fee

6.36%

3.85%

0.18%

Total 10.39%

The WCRP’s actual contributions to the plan for fiscal years ended September 30, 2022 and 2021 were $36,080 and

$36,003 respectively.

PERS Plan 2/3 provides retirement, disability, and death benefits. Retirement benefits are determined as

two percent of the member’s average final compensation (AFC) times the member’s years of service for

Plan 2 and 1 percent of AFC for Plan 3. The AFC is the average of the member’s 60 highest-paid

consecutive service months. There is no cap on years of service credit. Members are eligible for retirement

with a full benefit at 65 with at least five years of service credit. Retirement before age 65 is considered an

early retirement. PERS Plan 2/3 members who have at least 20 years of service credit and are 55 years of

age or older, are eligible for early retirement with a benefit that is reduced by a factor that varies according

to age for each year before age 65. PERS Plan 2/3 members who have 30 or more years of service credit

and are at least 55 years old can retire under one of two provisions:

•

With a benefit that is reduced by three percent for each year before age 65; or

With a benefit that has a smaller (or no) reduction (depending on age) that imposes stricter return-

to-work rules.

PERS Plan 2/3 members hired on or after May 1, 2013, have the option to retire early by accepting a

reduction of five percent for each year of retirement before age 65. This option is available only to those

who are age 55 or older and have at least 30 years of service credit. PERS Plan 2/3 retirement benefits are

also actuarially reduced to reflect the choice of a survivor benefit. Other PERS Plan 2/3 benefits include

Page 29

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

duty and non-duty disability payments, a cost-of-living allowance (based on the CPI), capped at three

percent annually and a one-time duty related death benefit, if found eligible by the Department of Labor

and Industries. PERS 2 members are vested after completing five years of eligible service. Plan 3 members

are vested in the defined benefit portion of their plan after ten years of service; or after five years of service

if 12 months of that service are earned after age 44.

PERS Plan 3 defined contribution benefits are totally dependent on employee contributions and investment

earnings on those contributions. PERS Plan 3 members choose their contribution rate upon joining

membership and have a chance to change rates upon changing employers. As established by statute, Plan

3 required defined contribution rates are set at a minimum of 5 percent and escalate to 15 percent with a

choice of six options. Employers do not contribute to the defined contribution benefits. PERS Plan 3

members are immediately vested in the defined contribution portion of their plan.

Contributions

The PERS Plan 2/3 employer and employee contribution rates are developed by the Office of the State

Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. The Plan 2/3 employer rates include

a component to address the PERS Plan 1 UAAL and an administrative expense that is currently set at 0.18

percent. Each biennium, the state Pension Funding Council adopts Plan 2 employer and employee

contribution rates and Plan 3 contribution rates. The PERS Plan 2/3 required contribution rates (expressed

as a percentage of covered payroll) for 2022 were as follows:

PERS Plan 2/3

Actual Contribution Rates

Employer

2/3

Employee 2*

January 2022 – August 2022

PERS Plan 2/3

PERS Plan 1 UAAL

Administrative Fee

6.36%

3.71%

0.18%

6.36%

Employee PERS Plan 3

Varies

Total 10.25%

6.36%

Sept 2022 – December 2022

PERS Plan 2/3

PERS Plan 1 UAAL

Administrative Fee

6.36%

3.85%

0.18%

6.36%

Employee PERS Plan 3

Varies

Total 10.39%

6.36%

The WCRP’s actual contributions to the plan for years ended September 30, 2022, and 2021 were $61,652 and $59,194,

respectively.

Actuarial Assumptions

The total pension liability (TPL) for each of the DRS plans was determined using the most recent actuarial

valuation completed in 2022 with a valuation date of June 30, 2021. The actuarial assumptions used in the

valuation were based on the results of the Office of the State Actuary’s (OSA) 2013-2018 Demographic

Experience Study and the 2021 Economic Experience Study.

Page 30

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

Additional assumptions for subsequent events and law changes are current as of the 2021 actuarial valuation

report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June

30, 2022. Plan liabilities were rolled forward from June 30, 2021, to June 30, 2022, reflecting each plan’s

normal cost (using the entry-age cost method), assumed interest and actual benefit payments.

•

Inflation: 2.75% total economic inflation; 3.25% salary inflation

Salary increases: In addition to the base 3.25% salary inflation assumption, salaries are also

expected to grow by promotions and longevity.

•

Investment rate of return: 7.0%

Mortality rates were developed using the Society of Actuaries’ Pub. H-2010 mortality rates, which vary

by member status, as the base table. The OSA applied age offsets for each system, as appropriate, to

better tailor the mortality rates to the demographics of each plan. OSA applied the long-term MP-2017

generational improvement scale, also developed by the Society of Actuaries, to project mortality rates for

every year after the 2010 base table. Mortality rates are applied on a generational basis; meaning, each

member is assumed to receive additional mortality improvements in each future year throughout their

lifetime.

Methods did not change from the prior contribution rate setting June 30, 2019 Actuarial Valuation Report

(AVR), however OSA introduced a temporary method change to produce asset and liability measures for

the June 30, 2020 AVR. There were also the following assumption changes:

•

OSA updated the Joint-and-Survivor Factors and Early Retirement Factors in the model. Those

factors are used to value benefits for early retirement and survivors of members that are deceased

prior to retirement. These factors match the administrative factors provided to DRS for future

implementation that reflect current demographic and economic assumptions.

OSA updated the economic assumptions based on the 2021 action of the PFC and the LEOFF Plan

2 Retirement Board. The investment return assumption was reduced from 7.5% (7.4% for LEOFF

2) to 7.0%, and the salary growth assumption was lowered from 3.5% to 3.25%. This action is a

result of recommendations from OSA’s biennial economic experience study.

Discount Rate

The discount rate used to measure the total pension liability for all DRS plans was 7.0 percent.

To determine that rate, an asset sufficiency test was completed to test whether each pension plan’s fiduciary

net position was sufficient to make all projected future benefit payments for current plan members. Based

on OSA’s assumptions, the pension plans’ fiduciary net position was projected to be available to make all

projected future benefit payments of current plan members. Therefore, the long-term expected rate of return

of 7.0 percent was used to determine the total liability.

Long-Term Expected Rate of Return

The long-term expected rate of return on the DRS pension plan investments of 7.0 percent was determined

using a building-block-method. In selecting this assumption, the OSA reviewed the historical experience

data, considered the historical conditions that produced past annual investment returns, and considered

Capital Market Assumptions (CMA’s) and simulated expected investment returns provided by the

Page 31

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

Washington State Investment Board (WSIB). The WSIB uses the CMA’s and their target asset allocation

to simulate future investment returns at various future times.

Estimated Rates of Return by Asset Class

The table below summarizes the best estimates of arithmetic real rates of return for each major asset class

included in the pension plan’s target asset allocation as of June 30, 2022. The inflation component used to

create the table is 2.2% and represents the WSIB’s most recent long-term estimate of broad economic

inflation.

% Long-Term

Asset Class

Target

Expected Real Rate of

Allocation

Return Arithmetic

Fixed Income

Tangible Assets

Real Estate

Global Equity

Private Equity

20%

1.5%

4.7%

5.4%

5.9%

8.9%

7%

18%

32%

23%

100%

Sensitivity of the Net Pension Liability/(Asset)

The table below presents Washington Counties Risk Pool’s proportionate share of the net pension liability

calculated using the discount rate of 7%, as well as what Washington Counties Risk Pool proportionate

share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage

point lower (6%) or 1-percentage point higher (8%) than the current rate.

1% Decrease

(6%)

Current Rate

(7%)

1% Increase

(8%)

2022

PERS 1

PERS 2/3

$198,158

304,245

$148,323

(258,354)

$104,829

(720,564)

Pension Plan Fiduciary Net Position

Detailed information about the State’s pension plans’ fiduciary net position is available in the separately

issued DRS financial report.

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred

Inflows of Resources Related to Pensions

At June 30, 2022 and 2021, the Washington Counties Risk Pool reported its proportionate share of the net

pension liabilities as follows:

Liability (or Asset)

2022

2021

PERS 1

$148,323

$62,455

PERS 2/3

($258,354)

($653,880)

Page 32

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

At June 30, 2022 the Washington Counties Risk Pool proportionate share of the collective net pension

liabilities was as follows.

Proportionate

Share 6/30/20

Proportionate

Share 6/30/21

Change in Proportion

PERS 1

PERS 2/3

.005327%

.006966%

.005114%

.006564%

.000213%

0000402%

Employer contribution transmittals received and processed by the DRS for the fiscal year ended June 30,

2022 are used as the basis for determining each employer’s proportionate share of the collective pension

amounts reported by the DRS in the Schedules of Employer and Nonemployer Allocations for all plans

except LEOFF 1.

Pension Expense

For the year ended September 30, 2022 and 2021, the Washington Counties Risk Pool recognized pension

expense as follows:

Pension Expense

2022

2021

PERS 1

$ 75,074

$ 10,324

PERS 2/3

TOTAL

(87,294)

$151,995

$ 162,318

($12,220)

Deferred Outflows of Resources and Deferred Inflows of Resources

At September 30, 2022, the Washington Counties Risk Pool reported deferred outflows of resources and deferred inflows

of resources related to pensions from the following sources:

PERS 1

Deferred Outflows of

Resources

Deferred Inflows of

Resources

Differences between expected and

actual experience

Net difference between projected

and actual investment earnings on

pension plan investments

($24,582)

Changes of assumptions

Changes in proportion and

differences between contributions

and proportionate share of

contributions

Contributions subsequent to the

measurement date

$9,455

Page 33

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

TOTAL

$9,455

($24,582)

PERS 2/3

Deferred Outflows of

Resources

Deferred Inflows of

Resources

Differences between expected and

actual experience

$64,014

$(5,848)

Net difference between projected

and actual investment earnings on

pension plan investments

(191,003)

(37,703)

(29,182)

143,997

Changes of assumptions

Changes in proportion and

differences between contributions

and proportionate share of

contributions

11,982

16,461

Contributions subsequent to the

measurement date

Total

$236,453

$(263,736)

Deferred outflows of resources related to pensions resulting from the Washington Counties Risk Pool’s contributions after

the measurement date will be recognized as a reduction of the net pension liability in the year ended September 30, 2022.

Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in

pension expense as follows:

Year ended

September:

PERS 1

($10,402)

PERS 2/3

($63,295)

2023

2024

2025

2026

2027

(9,448)

(11,852)

7,121

(59,859)

(67,957)

87,729

30,120

Thereafter

29,488

TOTAL

($24,582)

($43,774)

Deferred outflows of resources related to pensions resulting from the Washington Counties Risk Pool’s contributions after

the measurement date will be recognized as a reduction of the net pension liability in the year ended September 30, 2021.

Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in

pension expense as follows:

Year ended

September:

PERS 1

$ (18,358)

$ (16,823)

$ (15,907)

$ (18,215)

PERS 2/3

2022

2023

2024

2025

2026

$ (153,159)

$ (143,341)

$(140,276)

$(147,725)

$(761)

Thereafter

$607

TOTAL

$ (69,303)

$ (584,656)

Page 34

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

NOTE 9 – QUALIFIED PENSION PLAN

The WCRP also participates in a defined contribution pension plan created in accordance with Internal Revenue Code

Section 401(a). This plan is with MissionSquare Retirement (formerly known as The International City/County

Management Association). Employer contributions to the Qualified Pension Plan for the years ended September 30, 2022

and 2021 were $63,631 and $52,662, respectively. There are no employee contributions to this plan.

NOTE 10 – DEFERRED COMPENSATION PLANS

The WCRP offers its employees a choice of two deferred compensation plans created in accordance with Section

457 of the Internal Revenue Code. The plans are with MissionSquare Retirement (formerly known as The International

City/County Management Association) and the Washington State Department of Retirement. The plans, available to

all eligible employees, permit them to defer a portion of their wages until future years. The deferred compensation

is not available to contributing employees until their termination, retirement, death, or unforeseeable emergency.

In 1998, the ICMA Deferred Compensation Program plans’ assets were placed into trust for the exclusive benefit of

participants and their beneficiaries. Pursuant to Governmental Accounting Standards Board

(GASB) Statement 32, and since the WCRP is not the owner of these assets, these plans’ assets and liabilities are not

reported in the WCRP financial statements.

The WCRP offers its employees a choice of two deferred compensation plans created in accordance with Section

457 of the Internal Revenue Code that are strictly employee contributions only.

NOTE 11 – LONG TERM LIABILITIES

During the year ended September 30, 2022, the following changes occurred in long-term liabilities:

Beginning

Balance

9/30/2021

Ending

Balance

9/30/2022

Due Within

One Year

Changes in Long -Term Liabilities

Additions

Reductions

Claims Reserves

Corridor Reserves

$21,887,792

3,589,924

$9,338,268

$31,226,060

2,218,156

$5,821,443

844,149

(1,371,768)

Property

ULAE Reserve

Compensated Absences

Net Pension Liability – GASB 68

Total Long-Term Liabilities

633,512

933,478

88,724

62,455

278,114

33,523

36,207

85,869

911,626

967,001

124,931

148,324

911,626

$27,195,885

$9,771,981 ($1,371,768)

$35,596,098

$7,577,218

Page 35

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

During the year ended September 30, 2021, the following changes occurred in long-term liabilities:

Beginning

Balance

9/30/2020

Ending

Balance

9/30/2021

Due Within

One Year

Changes in Long -Term Liabilities

Additions

Reductions

Claims Reserves

Corridor Reserves

Property

$14,337,154

6,775,559

183,012

$7,550,637

450,500.27

$21,887,792

3,589,924

633,512

$3,745,001

1,698,034

633,512

(3,185,635)

Quota Share

ULAE Reserve

883,622

49,856

933,478

Compensated Absences

Net Pension Liability – GASB 68

72,796

15,928

88,724

263,791

(201,336)

62,455

Total Long-Term Liabilities

$22,515,935

$8,066,922

$(3,386,971

$27,195,885

$6,076,547

NOTE 12 – UNPAID CLAIMS LIABILITIES

As discussed somewhat in Notes C.6 and C.9, WCRP establishes a liability for both reported and unreported insured

events that include estimates of both future payments of losses and related claims adjustment expenses. The following

represents comparative changes in those aggregate liabilities for WCRP’s SIR Reserves, reinsurance’ Corridor

Deductibles, and Quota Share during the past two years:

2022

2021

$21,882,792

$14,337,153

SIR - Unpaid claims and claim adjustment expense/claims reserve at beginning of the year

SIR - Incurred Claims & Claims Adjustment Expenses:

10,700,000

992,806

8,400,000

720,329

Provisions for Insured Events of the Current Year

Increase (Decrease) in Provision for Insured Events Prior Years

SIR - Total Incurred Claims & Claims Adjustment Expense

$32,218,866

$23,457,482

SIR - Payments:

(1,908)

2,351,446

$2,351,446

14,638

1,560,052

$1,574,689

Claims & Claims Adjustment Expenses Attributable to Insured Events of the Current Year

Claims & Claims Adjustment Expenses Attributable to Insured Events of Prior Years

SIR -Total Payments

$31,226,060

$21,882,792

SIR - Total Unpaid Claims & Claims Expense Reserves at End of Year

3,589,924

6,775,558

Corridor - Unpaid claims and claim adjustment expense/claims reserve at beginning of the year

Corridor – Incurred Claims & Claims Adjustment Expenses:

Provisions for Insured Events of the Current Year

701,940

193,810

Increase (Decrease) in Provision for Insured Events Prior Years

Page 36

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

$4,291,864

$6,969,368

Corridor - Total Incurred Claims & Claims Adjustment Expense

Corridor – Payments:

Claims & Claims Adjustment Expenses Attributable to Insured Events of the Current Year

Claims & Claims Adjustment Expenses Attributable to Insured Events of Prior Years

$2,073,972

$3,379,444

Corridor – Payments

$2,218,156

$3,589,924

Corridor - Total Unpaid Claims & Claims Expense Reserves at End of Year

Quota Share 10% – Unpaid claims and claim adjustment expense/claims reserve at beginning of the year

Quota Share 10% – Incurred Claims & Claims Adjustment Expenses:

Provisions for Insured Events of the Current Year

Increase (Decrease) in Provision for Insured Events Prior Years

Quota Share - Total Incurred Claims & Claims Adjustment Expense

Quota Share - Payments:

Quota Share - Total Unpaid Claims & Claims Expense Reserves at End of Year

Property Program Balance at beginning of year

633,512

940,000

123,536

785,423

183,012

700,000

(25,000)

224,499

Provisions for Insured Events of the Current Year

Increase (Decrease) in provision for Property Program

Property– Payments

Claims & Claims Adjustment Expenses Attributable to Insured Events of the Current Year

Property - Total Unpaid Claims & Claims Expense Reserves at End of Year

Cyber Program Balance at beginning of year

$911,626

132,978

0

$633,512

0

132,978

36,656

29,540

Provisions for Insured Events of the Current Year

101,240

5,886

Increase (Decrease) in provision for Cyber Program

Claims & Claims Adjustment Expenses Attributable to Insured Events of the Current Year

$34,481,693

9367,001

$26,244,206

933,478

Grand Total all Coverages (SIR, Corridor, Quota Share 10%) at year end

Unallocated Loss Adjustment expense (ULAE) at year end

$35,448,694

$27,177,684

Total Claims Reserve at Year End

The actuary estimated the current portion of total net reserves at the end of FY22 and FY21 to be $7,703,069 and

$6,209,525, respectively.

NOTE 13 – Prior Year Adjustments

The Washington Counties Insurance Fund bills in advance of a months insurance. The payment of $18,631 for October

2021 expenses was paid in September of 2021 and not coded to a “pre-paid” account. The actual expense incurred was for

FY2021-22.

Page 37

REQUIRED SUPPLEMENTARY INFORMATION

Washington Counties Risk Pool

Schedule of Proportionate Share of the Net Pension Liability

PERS 1

As of June 30

Last 7 Fiscal Years

2016

2017

2018

2019

2020

2021

2022

Employer's proportion of the net pension liability

(asset)

0.008828% 0.006216% 0.005474% 0.004806% 0.005075% 0.005114% 0.005327%

Employer's proportionate share of the net pension

liability

$474,105

$807,402

$294,954

$760,179

$244,471

$762,046

$184,808

$668,344

$179,175

$745,304

$62,454

$148,323

$754,300

TOTAL

Covered Payroll

$751,653

Employer's proportionate share of the net pension

liability as a percentage of covered employee payroll

Plan fiduciary net position as a percentage of the total

pension liability

58.72%

57.03%

38.80%

61.24%

32.08%

63.22%

27.65%

67.12%

24.04%

68.67%

8.31%

19.66%

76.56%

88.74%

Washington Counties Risk Pool

Schedule of Proportionate Share of the Net Pension Liability

PERS 2/3

As of June 30

Last 7 Fiscal Years

2016

2017

2018

2019

2020

2021

2022

Employer's proportion of the net pension liability

(asset)

0.007261% 0.007993% 0.007028% 0.006208% 0.006616% 0.006564% 0.006966%

Employer's proportionate share of the net pension

liability

$365,586

$644,146

$277,719

$760,179

$119,997

$762,046

$60,301

$84,615 ($653,880) ($258,354)

TOTAL

Covered Payroll

$668,344

$745,304

$751,653

$754,300

Employer's proportionate share of the net pension

liability as a percentage of covered employee payroll

Plan fiduciary net position as a percentage of the total

pension liability

56.76%

85.82%

36.53%

90.97%

15.75%

95.77%

9.02%

11.35%

97.22%

-86.99%

120.29%

-34.25%

106.73%

97.77%

Page 38

REQUIRED SUPPLEMENTARY INFORMATION

Washington Counties Risk Pool

Schedule of Employer Contributions

PERS 1

As of September 30

Last 7 Fiscal Years

2016

2017

2018

2019

2020

2021

2022

Statutorily or contractually required contributions

47,705 38,082 38,083 33,845

35,961

36,003

36,080

Contributions in relation to the statutorily or

contractually required contributions

Contribution deficiency (excess)

35,961

0

36,003

0

36,080

0

Covered Payroll

803,177 775,769 756,032 673,242

745,304

4.83%

751,653

4.79%

969,356

3.72%

Contributions as a percentage of covered employee

payroll

5.94%

4.91%

5.04%

5.03%

Washington Counties Risk Pool

Schedule of Employer Contributions

PERS 2/3

As of September 30

Last 7 Fiscal Years

2016

2017

2018

2019

2020

2021

2022

Statutorily or contractually required contributions

Contributions in relation to the statutorily or

contractually required contributions

Contribution deficiency (excess)

44,017 51,177 56,644 51,376

59,717

59,194

61,652

59,717

0

59,194

0

61,652

0

Covered Payroll

675,866 775,766 756,033 673,242

6.51% 6.60% 7.49% 7.63%

745,304

8.01%

751,653

7.88%

969,356

6.36%

Contributions as a percentage of covered employee

payroll

Page 39

Page 40

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2021 Thru September 30, 2022

REQUIRED SUPPLEMENTARY INFORMATION

This required supplementary information is an integral part of the accompanying financial statements.

1.

Ten-Year Claims Development Information

The following table illustrates how the WCRP earned revenues (net of reinsurance) and investment income

compare to related costs of loss (net of loss assumed by reinsurers) and other expenses assumed by the

WCRP as of the end of each of the last ten years. The rows of the table are defined as follows:

a. This line shows the total of each fiscal year gross earned contribution revenue and investment revenue,

contribution revenue ceded to reinsurers, and net earned contribution revenue and reported investment revenue.

b. This line shows each fiscal year's other operating costs of the WCRP including overhead and claims expense

not allocable to individual claims.

c. This line shows the WCRP gross incurred claims and allocated claims adjustment expenses, claims assumed by

reinsurers, and net incurred claims and allocated adjustment expenses (both paid and accrued) as originally

reported at the end of the first year in which the event that triggered coverage under the contract occurred

(called policy year).

d. This section of ten rows shows the cumulative net amounts paid as of the end of successive years for each

policy year.

e. This line shows the latest estimated amount of claims assumed by reinsurers as of the end of the current year for

each accident year.

f.

This section of ten rows show how each year’s net incurred claims increased or decreased as of the end of

successive years. (This annual estimation results from new information received on known claims, reevaluation

of existing information on known claims, as well as emergence of new claims not previously known.)

g. This line compares the latest estimated net incurred claims amount to the amount originally established (line 3)

and shows whether this latest estimate of net claims cost is greater or less than originally thought. As data for

individual policy years mature, the correlation between original estimates and estimated amounts is commonly

used to evaluate the accuracy of net incurred claims currently recognized in less mature policy years. The

columns of the table show data for successive policy years.

2.

Reconciliation of Claims Liabilities by Type of Contract

The schedule presented in Note 12 presents the changes in claims liabilities for the past two years for the

WCRP’s one type of contract, liability insurance.

Page 41

WASHINGTON COUNTIES RISK POOL

DES Schedule of Expenses

MCAG NO. 0774

Schedule T-2

For Fiscal Year Ended September 30, 2022

09/30/2022

Insurance Premiums/Reserve Expense

ULAE Expense

$23,283,713

33,523

Adjustment to Prior Years' "1st/2nd Layers' Corridor" Reserves

Adjustment to Prior Years' "SIR" Reserves

Adjustment to Prior Year' Property/Cyber

701,940

992,805

(79,183)

Contracted Services:

Actuarial

State Audit Expense

State Risk Manager Expenses

Legal Fees

IT Consultants

120,000

21,576

109,472

444,922

33,987

0

Property Appraiser

Temporary Staffing Agency

Independent Adjusting Expense

Investment Advisor

0

5,130

33,627

36,364

Other Consulting/Contracted Service & Fees

General Administrative Expenses

Employee Salaries and Benefits

Communication

Supplies

Dues and Memberships

Travel - Employee

Committee and Board Meetings

Depreciation

Building and Auto Insurance

Operating Leases

1,330,820

17,770

17,566

8,526

71,943

106,709

69,767

21,890

9,174

Utilities/Building Maint.

Member Services - Training

Member Services - Scholarships

Miscellaneous Expenses

60,390

521,660

122,580

183,911

Total Operating Expenses

$28,280,582

Page 42

Washington Counties Risk Pool – MCAG NO. 0774

October 1, 2021 Thru September 30, 2022

LIST OF PARTICIPATING MEMBERS

The following is a list of WCRP membership during the fiscal year 2021-22

Adams County

Benton County

Chelan County

Clallam County

Cowlitz County

Douglas County

Franklin County

Grays Harbor County

Island County

Mason County

Okanogan County

Pacific County

Pend Oreille County

San Juan County

Skagit County

Skamania County

Spokane County

Thurston County

Walla Walla County

Whatcom County

Yakima County

Jefferson County

Kittitas County

Lewis County

Page 43

ABOUT THE STATE AUDITOR’S OFFICE

The State Auditor’s Office is established in the Washington State Constitution and is part of the

executive branch of state government. The State Auditor is elected by the people of Washington

and serves four-year terms.

We work with state agencies, local governments and the public to achieve our vision of increasing

trust in government by helping governments work better and deliver higher value.

In fulfilling our mission to provide citizens with independent and transparent examinations of how

state and local governments use public funds, we hold ourselves to those same standards by

continually improving our audit quality and operational efficiency, and by developing highly

engaged and committed employees.

As an agency, the State Auditor’s Office has the independence necessary to objectively perform

audits, attestation engagements and investigations. Our work is designed to comply with

professional standards as well as to satisfy the requirements of federal, state and local laws. The

Office also has an extensive quality control program and undergoes regular external peer review

to ensure our work meets the highest possible standards of accuracy, objectivity and clarity.

Our audits look at financial information and compliance with federal, state and local laws for all

local governments, including schools, and all state agencies, including institutions of higher

education. In addition, we conduct performance audits and cybersecurity audits of state agencies

and local governments, as well as state whistleblower, fraud and citizen hotline investigations.

The results of our work are available to everyone through the more than 2,000 reports we publish

each year on our website, www.sao.wa.gov . Additionally, we share regular news and other

information via an email subscription service and social media channels.

We take our role as partners in accountability seriously. The Office provides training and technical

assistance to governments both directly and through partnerships with other governmental support

organizations.

Stay connected at sao.wa.gov

Other ways to stay in touch

• Find your audit team

• Main telephone:

(564) 999-0950

• Request public records

• Search BARS Manuals (GAAP and

cash ), and find reporting templates

• Learn about our training workshops

and on-demand videos

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Office of the Washington State Auditor

sao.wa.gov

Page 44