Washington State Auditor’s Office  
Financial Statements Audit Report  
Washington Counties Risk Pool  
Thurston County  
Audit Period  
October 1, 2009 through September 30, 2010  
Report No. 1005148  
Issue Date  
February 28, 2011  
Washington State Auditor  
Brian Sonntag  
February 28, 2011  
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 condition.  
Sincerely,  
BRIAN SONNTAG, CGFM  
STATE AUDITOR  
Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388  
FAX (360) 753-0646 http://www.sao.wa.gov  
Table of Contents  
Washington Counties Risk Pool  
Thurston County  
October 1, 2009 through September 30, 2010  
Independent Auditor’s Report on Internal Control over Financial Reporting and on  
Compliance and Other Matters in Accordance with Government Auditing Standards................. 1  
Independent Auditor’s Report on Financial Statements.............................................................. 3  
Financial Section........................................................................................................................ 5  
Independent Auditor’s Report on Internal  
Control over Financial Reporting and on  
Compliance and Other Matters in Accordance  
with Government Auditing Standards  
Washington Counties Risk Pool  
Thurston County  
October 1, 2009 through September 30, 2010  
Board of Directors  
Washington Counties Risk Pool  
Tumwater, Washington  
We have audited the basic financial statements of the Washington Counties Risk Pool, Thurston  
County, Washington, as of and for the years ended September 30, 2010 and 2009, and have  
issued our report thereon dated February 9, 2011. The Pool has not presented all of the  
management’s discussion and analysis information that accounting principles generally  
accepted in the United States of America has determined is necessary to supplement, although  
not required to be part of, the basic financial statements.  
We conducted our audits in accordance with auditing standards generally accepted in the  
United States of America and the standards applicable to the financial audits contained in  
Government Auditing Standards, issued by the Comptroller General of the United States.  
INTERNAL CONTROL OVER FINANCIAL REPORTING  
In planning and performing our audits, we considered the Pool’s internal control over financial  
reporting as a basis for designing our auditing procedures 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 over financial reporting. Accordingly, we do not  
express an opinion on the effectiveness of the Pool’s internal control over financial reporting.  
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.  
Our consideration of internal control over financial reporting was for the limited purpose  
described in the first paragraph of this section and would not necessarily identify all deficiencies  
in internal control that might be deficiencies, significant deficiencies or material weaknesses.  
We did not identify any deficiencies in internal control over financial reporting that we consider  
to be material weaknesses, as defined above.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
1
COMPLIANCE AND OTHER MATTERS  
As part of obtaining reasonable assurance about whether the Pool’s financial statements are  
free of material misstatement, we performed tests of the Pool’s compliance with certain  
provisions of laws, regulations, contracts and grant agreements, noncompliance with which  
could have a direct and material effect on the determination of financial statement amounts.  
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.  
This report is intended for the information and use of management and the Board of Directors.  
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.  
BRIAN SONNTAG, CGFM  
STATE AUDITOR  
February 9, 2011  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
2
Independent Auditor’s Report on Financial  
Statements  
Washington Counties Risk Pool  
Thurston County  
October 1, 2009 through September 30, 2010  
Board of Directors  
Washington Counties Risk Pool  
Tumwater, Washington  
We have audited the accompanying basic financial statements of the Washington Counties Risk  
Pool, Thurston County, Washington, as of and for the years ended September 30, 2010 and  
2009, as listed on page 5. These financial statements are the responsibility of the Pool’s  
management. Our responsibility is to express an opinion on these financial statements based  
on our audits.  
We conducted our audits in accordance with auditing standards generally accepted in the  
United States of America and the standards applicable to financial audits contained in  
Government Auditing Standards, issued by the Comptroller General of the United States.  
Those standards require that we plan and perform the audit to obtain reasonable assurance  
about whether the financial statements are free of material misstatement. An audit includes  
examining, on a test basis, evidence supporting the amounts and disclosures in the financial  
statements. An audit also includes assessing the accounting principles used and significant  
estimates made by management, as well as evaluating the overall financial statement  
presentation. We believe that our audits provide a reasonable basis for our opinion.  
In our opinion, the financial statements referred to above present fairly, in all material respects,  
the financial position of the Washington Counties Risk Pool, as of September 30, 2010 and  
2009, and the changes in financial position and cash flows thereof for the years then ended in  
conformity with accounting principles generally accepted in the United States of America.  
In accordance with Government Auditing Standards, we have also issued our report 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 internal control over financial reporting or on compliance. That report is an  
integral part of an audit performed in accordance with Government Auditing Standards and  
should be considered in assessing the results of our audits.  
The management’s discussion and analysis on pages 6 through 11, claims development  
information on pages 26 through 27 and reconciliation of claims liabilities on page 28, are not a  
required part of the basic financial statements but are supplementary information required by  
the Governmental Accounting Standards Board.  
The Pool has not presented all of the  
management’s discussion and analysis information that accounting principles generally  
accepted in the United State of America has determined is necessary to supplement, although  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
3
not required to be part of, the basic financial statements. We have applied certain limited  
procedures, which consisted principally of inquiries of management regarding the methods of  
measurement and presentation of the required supplementary information. However, we did not  
audit the information and express no opinion on it.  
The List of Participating Members and OFM Schedule of Expenses are not a required part of the  
basic financial statements but are supplementary information presented for purposes of  
additional analysis. Such information has not been subjected to the auditing procedures applied  
in the audit of the basic financial statements and, accordingly, we express no opinion on it.  
BRIAN SONNTAG, CGFM  
STATE AUDITOR  
February 9, 2011  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
4
Financial Section  
Washington Counties Risk Pool  
Thurston County  
October 1, 2009 through September 30, 2010  
REQUIRED SUPPLEMENTAL INFORMATION  
Management’s Discussion and Analysis – 2010 and 2009  
BASIC FINANCIAL STATEMENTS  
Comparative Statement of Net Assets – 2010 and 2009  
Comparative Statement of Revenues, Expenses and Fund Net Assets – 2010 and 2009  
Comparative Statement of Cash Flow – 2010 and 2009  
Notes to Financial Statements – 2010 and 2009  
REQUIRED SUPPLEMENTAL INFORMATION  
Ten Year Claims Development Information – 2010  
Reconciliation of Claims Liabilities – 2010  
OTHER SUPPLEMENTAL INFORMATION  
List of Participating Members – 2010  
OFM Schedule of Expenses – 2010  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
5
WCRP… Management’s Discussion and Analysis  
The management of the Washington Counties Risk Pool (“WCRP” or “Risk Pool”) offers this  
narrative overview and analysis of the financial activities of the WCRP for the fiscal year that  
ended September 30, 2010. We encourage readers to consider the information presented here  
in conjunction with the financial statements for Fiscal Year (“FY”) 2010 and the notes to those  
financial statements to enhance their understanding of the WCRP financial performance.  
Overview of the Financial Statements  
This discussion and analysis is intended to serve as an introduction to the basic financial  
statements for the Washington Counties Risk Pool. The financial statements pertain solely to  
the WCRP, which has no other component units for which it is financially accountable. The Risk  
Pool operates as a single proprietary fund in accounting for the members’ participation in the  
public entity. This type of fund is used for “business type activities” that are intended to recover  
all or a significant portion of their costs through user fees and charges.  
The primary function for the WCRP is administering a jointly funded, (third-party liability) self-  
insurance program for the Risk Pool’s member counties from within the state of Washington. Its  
primary source of revenue is the fees/assessments paid by its present and former member  
counties.  
And its major expenses are payments of claims and judgments, including their  
associated fees and charges, and payments for selected insurance coverage options purchased  
from superior-rated reinsurance and excess insurance carriers. The following are some of the  
recent Risk Pool financial highlights:  
•
Operating Income was experienced during FY-2010 of more than $1.8 million, a 59%  
increase from FY-2009. Substantially contributing to this improvement was the nearly  
million dollar (13.4%) reduction in the independent actuary’s estimate for the Pool-only  
layer’s claims reserves. And during the past five years, nearly $6.8 million has been  
realized in Operating Income.  
•
•
•
Interest Income slipped further to a measly $0.1 million (-69%) due once again to the nearly  
non-existent rates available to municipal investors under Washington State’s regulations as  
well as the lowering of interest rates to address the national and worldwide recession.  
Total Assets grew by $3.2 million (9%) during FY-2010 and $17.8 million (85%) in the past  
five years to nearly $38.9 million. Specifically, current assets increased $3.1 million (9%)  
during FY-2010, while non-current assets increased $0.1 million (12%).  
769 claims (and lawsuits) were added to the Pool’s claims-related database during FY-2010,  
a 20% decline in submissions from FY-2009 yet raising the to-date total (Oct 1988 – Sep  
2010) of third-party liability claims submitted by WCRP member counties to 17,238. With  
16,800 of the claims designated as closed, only 438 claims remained classified as open at  
year’s end. Still, the Pool’s independent actuary estimated another 440 claims could be filed  
for covered occurrences from all WCRP years through September 2010, bringing the  
estimated ultimate claims total to 17,678.  
Total claims reserves for the Pool’s direct exposures increased to $14.0 million, up 7% from  
FY-2009 and 35% during the past five years. That total includes $6.1 million (down 13%  
from one year ago and 37% in the past five years) for losses in the Pool-only layer; $7.0  
million (up 37% from one year ago) for losses within the (automobile liability / general  
liability) “corridor” program’s aggregated stop losses; and $0.9 million (down 2% from one  
year ago but up 22% from five years ago) for unallocated loss adjustment expenses.  
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Washington State Auditor's Office  
6
NOTE: The corridor program only began four years ago. Its occurrence coverage maximum  
increased to one million dollars in FY-2010, up from the half million level that existed during  
the program’s first three years. The program’s occurrence coverage minimum remained the  
greater of the applicable member’s deductible or $100,000.  
•
Net Assets (also referred to as “Members’ Equity”) increased $2.0 million during FY-2010  
and $9.4 million during the past five years to in excess of $10.2 million at September 30,  
2010. Of that total, $5.8 million is classified as ‘Restricted’ - $1.0 million to satisfy the newer  
solvency provisions of WAC 82.60.03001 and the remaining $4.8 million to address the 98%  
confidence factor requirements in Section D of the WCRP Underwriting Policy. Another $0.2  
million is invested in a real property recovery and $1.0 million in Capital Assets (net of debt).  
The remaining $3.2 million is ‘Non-Restricted’ and available for use. The WCRP Board of  
Directors is the authority that must decide if, how much, and when distributions of any (Non-  
Restricted) Net Assets are to be made.  
The WCRP basic financial statements are comprised of two components, the financial  
statements and the notes to the financial statements. To more fully understand the financial  
position of the Risk Pool, this narrative must be viewed in context with information contained in  
the companion financial statements and their accompanying notes.  
Financial Statements  
The financial statements are designed to provide readers with a broad overview of the finances  
of the Washington Counties Risk Pool. They are prepared using the accrual accounting basis in  
accordance with the U.S. generally accepted accounting principles applicable to governmental  
enterprise funds.  
The Comparative Statement of Net Assets presents the financial position of the WCRP at  
September 30th of the most recent fiscal year(s). Information is displayed on assets and  
liabilities, with the difference between the two reported as Net Assets. Over time, the changes  
in Net Assets may provide a useful indicator regarding how the WCRP is meeting the financial  
needs and expectations of its member counties.  
The Comparative Statement of (Revenues, Expenses and) Fund Net Assets presents  
information detailing the revenues and expenses that resulted in the change (i.e. revenues in  
excess of expenses) to Net Assets during the fiscal year(s). All revenues and expenses are  
reported on an accrual basis, which means that all changes in net assets are reported when the  
underlying event giving rise to the change actually occurs, regardless of the timing of related  
cash flows. Revenues and expenses are reported in this statement for some items that will (or  
did) result in cash flows in future or past periods (e.g. accrued investment income, incurred  
claims costs).  
The Comparative Statement of Cash Flow presents the cash provided for and used by WCRP  
operations categorized by operating, capital and investing activities. The effects of accrual  
accounting have been adjusted out, and non-cash activities such as depreciation have been  
removed. This statement reconciles the beginning and ending cash balances for the year(s)  
reflected in the balance sheet.  
Notes to the Financial Statements  
The Notes to the Financial Statements follow the basic financial statements and provide  
additional information essential to fully understanding the data provided in the financial  
statements of the Washington Counties Risk Pool.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
7
COMPARATIVE FINANCIAL INFORMATION – Washington Counties Risk Pool  
NET ASSETS  
09/30/2010  
$37,703,144  
09/30/2009  
$34,650,706  
1,058,202  
Change $  
$3,052,438  
(24,692)  
Chg %  
8.8  
Current Assets  
Non-current (Capital) Assets  
-2.3  
1,033,510  
150,000  
Investment Held for Resale  
150,000  
100.0  
Total Assets  
$38,886,654  
$35,708,908  
$3,177,746  
8.8  
Current Liabilities  
$28,827,285  
5,847,409  
150,000  
$27,546,545  
6,345,958  
0
$1,280,740  
(498,549)  
150,000  
4.6  
-7.8  
100.0  
Restricted Equity – UW Policy, § D  
Restricted Net Assets – Investment of  
Franjo Beach  
Unrestricted Net Assets  
Invested in Capital Assets, Net of Debt  
Total Liabilities and Net Assets  
3,178,450  
1,033,510  
$38,886,654  
758,203  
1,058,202  
$35,708,908  
2,270,247  
(24,692)  
$3,177,746  
279.6  
-4.7  
8.9  
REVENUES, EXPENSES and CHANGES IN NET ASSETS  
FY-2010  
FY-2009  
Change $  
Chg %  
Operating Revenues  
Member JSLIP Assessments  
Member WCPP Assessments  
Operating Revenues – Miscellaneous  
Total Operating Revenues  
$11,508,205  
2,890,723  
110,964  
$9,139,429  
2,546,189  
70,566  
$2,368,776  
344,534  
40,398  
$2,753,708  
25.9  
13.5  
57.2  
23.4  
$14,509,892 $11,756,184  
Non Operating Revenues (and Expenses)  
Interest Income  
Recovery of Franjo Beach Property  
Rental Income (net)  
Total Non-Operating Revenues  
$67,537  
150,000  
4,794  
$221,392  
0
15,985  
$ 237,377  
($153,855)  
150,000  
-69.5  
100.0  
-70.0  
-6.3  
(11,191)  
$ 222,331  
($15,046)  
Total Revenues  
$14,732,223 $11,993,562  
$2,738,661  
22.8  
Operating Expenses  
Current Year’s Claims Reserve  
Current Year’s Aggregate Stop Loss  
Prior Years’ Claim Reserve Adjustment  
Reserve for ULAE  
Reinsurance Premiums (JSILP)  
Excess (Liability) Insurance Premiums  
WCPP (Property) Premiums  
Depreciation Expenses  
$1,502,751  
2,475,000  
(1,652,831)  
(14,850)  
5,480,000  
579,758  
2,787,059  
53,666  
1,474,664  
$1,437,299  
1,825,000  
(878,038)  
43,585  
3,697,000  
369,661  
2,460,925  
45,564  
1,608,706  
$65,452  
650,000  
(774,793)  
(58,435)  
1,783,000  
210,097  
4.6  
35.6  
88.2  
-134.1  
48.2  
56.8  
13.3  
17.8  
-8.3  
326,134  
8,102  
(134,042)  
$2,075,514  
Administrative Expenses  
Total Operating Expenses  
$12,685,217 $10,609,703  
19.6  
CHANGES IN NET ASSETS  
$2,047,006  
$1,383,859  
$663,147  
47.9  
Beginning Net Assets (October 1st)  
Ending Net Assets (September 30th)  
$8,162,363  
$10,209,369  
$6,778,505  
$8,162,363  
$1,383,858  
$2,047,006  
20.4  
25.1  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
8
CASH FLOWS  
09/30/2010  
$10,364,173  
(172,650)  
67,536  
$10,259,059  
09/30/2009  
$3,212,402  
15,985  
221,392  
$3,449,780  
Change $  
$7,151,771  
(188,635) -1180.1  
(153,856)  
Chg %  
222.6  
Net Cash Provided (Used) For Op. Activities  
Net Cash Provided (Used) For Cap. Activities  
Net Cash Provided (Used) For Investing Act.  
Increase (Decrease) in Cash & Cash Equiv.  
-69.5  
197.4  
$6,809,280  
Cash & Cash Equivalents (Beg. of Year)  
Cash & Cash Equivalents (End of Year)  
$22,767,431  
$33,026,490  
$19,317,651  
$22,767,431  
$3,449,780  
$10,259,059  
17.9  
45.1  
BUDGETARY VARIATIONS:  
Costs for administering the Risk Pool were reduced 6.0% (more than $95,200) from the prior  
fiscal year. The following summarizes the administrative budget variations during FY-2010.  
1. Staffing remained near the level established prior to FY-2005. Further implementation of the  
board-approved salary schedule (2006), but without any cost-of-living-adjustments, coupled  
with increased costs for established employee benefits only slightly elevated the Payroll and  
Benefits costs (+0.4%).  
2. Supply purchases were reduced 23.0%.  
3. Other Services and Charges costs were reduced 15.4%. More specifically,  
a. Professional Services acquisitions were down 24.0% with funds actually used for:  
i. Phase 2 property appraisals (-28.7%) for the Washington Counties Property  
Program (“WCPP”);  
ii. Actuarial services (-37.4%) even with a supplemental study of the Risk Pool’s  
self-insured retention levels to assist the Business Model Task Force;  
iii. Information Technology (hardware and software) system maintenance (-  
47.8%). This includes servers/workstations, webpage, RiskMaster™ and the  
WCPP Property Inventory Management System;  
iv. SAO auditing and SRM oversight fees (+1.3%);  
v. Administrative support of Member Services operations (-3.0%);  
vi. Legal services (-21.2%) for complex public records requests presented to the  
Risk Pool, coverage questions, pre-defense reviews, and a minor amount for  
the fraudulent actions of a former WCRP employee; and  
vii. Reporting support and assistance for MMSEA compliance (+531.6%);  
b. Travel costs were up 7.1%; and  
c. Combined costs for Communications, Operating Rentals/Leases, (Business)  
Insurance, Utility Services, Office Maintenance, and Miscellaneous categories were  
down 16.3%.  
4. Training costs declined further (-15.9%) even with still another installment from ACE Public  
Entities, one of the Pool’s coverage reinsurers, for training program enhancements aimed at  
lessening severities and/or frequencies of member counties’ tortuous occurrences,  
especially those stemming from employment activities.  
5. Capital Outlays acquired during FY-2010 included a new automobile ($21,704) for use by  
the claims staff and a replacement exchange server ($7,269).  
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Washington State Auditor's Office  
9
6. Operating Adjustments – Leave Expense decreased some from the prior fiscal year due to  
an extended absence, but still reflects employee leave accruals exceeding usage. Still, the  
account seems to be stabilizing in relation with the Risk Pool’s employment base.  
ADMINISTRATIVE BUDGET  
Comparative  
Actual FY-  
10  
Actual FY-  
09  
Diff $  
$3,184  
(4,767)  
(88,477)  
179  
Diff %  
0.4  
Payroll & Benefits  
$784,783  
16,000  
280,570  
17,732  
154,707  
446  
$781,599  
20,767  
369,047  
17,553  
143,779  
908  
Supplies  
-23.0  
-24.0  
1.0  
7.6  
-50.9  
6.7  
Professional Services  
Communications  
Travel, Conference & Meeting Expenses  
Repairs & Maintenance  
Other Expenditures (including Capital  
Outlays)  
10,928  
(462)  
7,555  
120,739  
113,184  
Training  
123,404  
146,745  
(23,341)  
-15.9  
TOTAL BUDGET EXPENDITURES  
Operating Adjustments:  
Capitalized & Depreciated Outlays  
Annual/Sick Leave Expense  
TOTAL ADMIN. EXPENDITURES  
$1,498,381  
$1,593,582  
($95,201)  
-6.0  
(28,973)  
5,256  
$1,474,664  
0
15,124  
$1,608,706  
(28,973)  
(9,868)  
($134,042)  
-100.0  
-65.2  
-8.3  
Fiscal Year 2010  
Payroll & Benefits  
Supplies  
Professional Services  
Communications  
Actual  
$784,783  
16,000  
280,570  
17,732  
Budget  
$801,593  
18,600  
285,150  
19,000  
Diff $  
($16,810)  
(2,600)  
Diff %  
-2.1  
-14.0  
-1.6  
-6.7  
(4,580)  
(1,268)  
Travel, Conference & Meeting Expenses  
Repairs & Maintenance  
Other Expenditures (incl. Capital Outlays)  
Training  
TOTAL BUDGET EXPENDITURES  
Operating Adjustments:  
154,707  
446  
120,739  
123,404  
$1,498,381  
181,000  
2,600  
139,050  
286,600  
$1,733,593  
(26,293)  
(2,154)  
(18,311)  
(163,196)  
($235,212)  
-14.5  
-82.8  
-13.2  
-56.9  
-13.6  
Capitalized & Depreciated Outlays  
Annual/Sick Leave Expense  
TOTAL ADMIN. EXPENDITURES  
(28,973)  
5,256  
$1,474,664  
Fiscal Year 2009  
Payroll & Benefits  
Supplies  
Actual  
$781,599  
20,767  
Budget  
$807,826  
17,600  
Diff $  
($26,227)  
3,167  
Diff %  
-3.2  
18.0  
Professional Services  
Communications  
369,047  
17,553  
293,475  
18,700  
75,572  
(1,147)  
25.8  
-6.1  
Travel, Conference & Meeting Expenses  
Repairs & Maintenance  
Other Expenditures (incl. Capital Outlays)  
Training  
TOTAL BUDGET EXPENDITURES  
Operating Adjustments:  
143,779  
908  
113,184  
146,745  
$1,593,582  
209,200  
3,900  
143,450  
283,350  
$1,777,501  
(65,421)  
(2,992)  
(30,266)  
(136,605)  
($183,919)  
-31.3  
-76.7  
-21.1  
-48.2  
-10.3  
Capitalized & Depreciated Outlays  
Annual/Sick Leave Expense  
TOTAL ADMIN. EXPENDITURES  
0
15,124  
$1,608,706  
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Washington State Auditor's Office  
10  
CAPITAL ASSET AND DEBT ACTIVITIES:  
Capital Assets  
As earlier noted, the Risk Pool made Capital Asset purchases in FY-2010 of a new fleet  
automobile being used by the claims division staff ($21,704) and a replacement exchange  
network server ($7,269).  
Long-Term Debt  
The Risk Pool also had no long-term debt as of September 30, 2010.  
REQUEST FOR INFORMATION:  
Once again, this Management’s Discussion and Analysis is provided as a general overview of  
the Washington Counties Risk Pool for all those with an interest in the Pool’s finances.  
Questions concerning the information provided and the Risk Pool’s financial report, or requests  
for additional information, should be addressed to: WASHINGTON COUNTIES RISK POOL,  
Attn: Executive Director Vyrle Hill, 2558 R.W. Johnson Road SW, Suite 106, Tumwater, WA  
98512-6103, or telephone 360/292-4495.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
11  
MCAG NO. 0774  
Page 1 of 1  
WASHINGTON COUNTIES RISK POOL  
COMPARATIVE STATEMENT OF NET ASSETS  
For the Fiscal Years Ended September 30, 2010 and 2009  
ASSETS:  
Year Ended  
9/30/2010  
Year Ended  
9/30/2009  
CURRENT ASSETS:  
Cash and Cash Equivalents  
Member Deductible  
Excess/Reinsurance Recoverable  
Member Liability Assessment Receivable  
Property Insurance Assessment Receivable  
Prepaid Expenses  
$
33,026,490  
1,243,646  
861,355  
1,917,055  
535,517  
2,850  
$
22,767,431  
787,861  
8,193,385  
2,086,033  
706,987  
0
Other Accounts Receivables  
116,230  
109,009  
TOTAL CURRENT ASSETS  
$
37,703,144  
$
34,650,705  
NONCURRENT ASSETS:  
Capital Assets (Net of Accumulated Depreciation)  
Investment held for Resale (Franjo Beach)  
TOTAL NON CURRENT ASSETS  
$
$
1,033,510  
150,000  
1,183,510  
$
$
1,058,202  
1,058,202  
35,708,908  
TOTAL ASSETS  
LIABILITIES:  
$
38,886,654  
$
CURRENT LIABILITIES:  
Claim Reserves  
Reserves for Open Claims  
IBNR Claims Reserve  
$
3,861,864  
2,283,272  
$
3,354,196  
3,738,490  
xs $100M AL/GL Corridor Reserves  
Reserves for Open Claims  
IBNR Claims Reserve  
3,829,925  
3,180,914  
889,299  
3,476,000  
1,659,214  
904,149  
Reserve for ULAE  
Accounts Payable  
636,229  
81,019  
Accrued Liabilities  
77,370  
72,808  
Unearned Revenue - Members Assessments  
13,918,411  
14,260,668  
TOTAL CURRENT LIABILITIES  
$
28,677,284  
$
$
27,546,544  
6,345,958  
NET ASSETS:  
Restricted Net Assets - Underwriting Policy Section D  
Restricted Net Assets - Investment of Franjo Beach  
Non-Restricted Net Assets  
$
$
5,847,409  
150,000  
3,178,450  
1,033,511  
758,203  
1,058,202  
Capital Assets Net of Debt  
TOTAL NET ASSETS  
$
10,209,370  
$
8,162,363  
TOTAL NET ASSETS AND LIABILITIES  
$
38,886,654  
$
35,708,908  
The accompanying notes are an integral part of this financial statements  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
12  
WASHINGTON COUNTIES RISK POOL  
COMPARATIVE STATEMENT OF REVENUES, EXPENSES  
AND FUND NET ASSETS  
MCAG NO 0774  
Page 1 of 1  
For the Fiscal Years Ended September 30, 2010 and 2009  
Year Ended  
Year Ended  
9/30/2009  
OPERATING REVENUES:  
9/30/2010  
Member Assessments -- Liability Insurance  
$
$
11,508,205  
2,890,723  
110,964  
$
$
9,139,429  
Member Assessments -- Property Insurance  
Member Services - Revenues  
2,546,189  
70,566  
Total Operating Revenues  
14,509,892  
11,756,184  
OPERATING EXPENSES:  
Current Year's "Claims" Reserve  
Current Year's "Corridor" Reserve  
Adjustment of Prior Years' Claims Reserves  
Reserve for ULAE  
$
1,502,751  
2,475,000  
(1,652,831)  
(14,850)  
$
1,437,299  
1,825,000  
(878,038)  
43,585  
Reinsurance Premiums  
5,480,000  
579,758  
3,697,000  
369,661  
Excess Insurance Premiums  
Property Insurance Premiums  
Depreciation Expense  
2,787,059  
53,666  
2,460,925  
45,564  
Operating Expenditures  
1,474,664  
12,685,217  
1,608,706  
10,609,703  
Total Operating Expenses  
$
$
OPERATING INCOME  
$
1,824,675  
$
1,146,481  
NON OPERATING REVENUES (EXPENSES)  
Interest Income  
$
67,537  
5,322  
(527)  
$
221,392  
20,518  
(4,533)  
Rental Income  
Rental Expense  
Recovery of Franjo Beach Property  
Miscellaneous Income  
Total Nonoperating Revenues (Expenses)  
150,000  
0
0
$
222,332  
$
237,378  
CHANGES IN NET ASSETS  
TOTAL NET ASSETS, Beginning of Year  
TOTAL NET ASSETS, End of Year  
$
$
$
2,047,007  
8,162,363  
10,209,370  
$
$
$
1,383,859  
6,778,504  
8,162,363  
The accompanying notes are an integral part of this financial statements  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
13  
WASHINGTON COUNTIES RISK POOL  
Page 1 of 1  
MCAG NO. 0774  
COMPARATIVE STATEMENT OF CASH FLOW  
For the Fiscal Years Ended September 30, 2010 and 2009  
Year Ended  
Year Ended  
9/30/2010  
9/30/2009  
CASH FLOWS FROM OPERATING ACTIVITIES:  
Cash received from members & insurers  
Cash payments for goods and services  
Cash payments to employees for services  
$
$
21,377,105  
(10,371,363)  
(790,039)  
$
$
6,448,979  
(2,439,853)  
(796,724)  
Net Cash Provided (Used) by Operating Activities  
10,215,703  
3,212,402  
CASH FROM CAPITAL ACTIVITIES:  
Purchase of Equipment & Building  
Cash from Rental of Office (net)  
$
(28,974) $  
4,793  
-
15,985  
Net Cash Provided (Used) by Capital Activities  
$
(24,181) $  
15,985  
CASH FLOW FROM INVESTING ACTIVITIES:  
Interest received  
$
67,536  
67,536  
$
$
221,392  
221,392  
Net Cash Provided (Used) by Investing Activities  
$
Increase (Decrease) in Cash and Cash Equivalents  
Cash and Cash Equivalents - Beginning of the Year  
Cash and Cash Equivalents - End of the Year  
$
$
$
10,259,058  
22,767,431  
33,026,490  
$
$
$
3,449,780  
19,317,651  
22,767,431  
The accompanying notes are an integral part of this financial statements  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
14  
WASHINGTON COUNTIES RISK POOL  
Page 1 of 1  
MCAG NO. 0774  
COMPARATIVE STATEMENT OF CASH FLOW  
For the Fiscal Years Ended September 30, 2010 and 2009  
Year Ended  
Year Ended  
9/30/2010  
9/30/2009  
RECONCILIATION OF OPERATING INCOME TO NET CASH  
PROVIDED (USED) BY OPERATING ACTIVITIES  
OPERATING INCOME  
$
1,824,675  
$
1,146,481  
Adjustments to Reconcile Net Operating Income to Net  
Cash provided (used) by Operating Activities:  
Depreciation Expense  
53,666  
7,209,471  
(947,550)  
1,875,626  
(14,850)  
(342,257)  
555,210  
45,564  
(7,887,318)  
1,131,801  
Decrease (Increase) in Accounts Receivable  
Increase (Decrease) in Claims Reserves  
Increase (Decrease) in AL/GL Corridors Reserves  
Increase (Decrease) in Reserve for ULAE  
Increase (Decrease) in Unearned Revenue  
Increase (Decrease) in Accounts Payable  
Increase (Decrease) in Accrued Liabilities  
Increase (Decrease) in Prepaid Expenses  
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES  
43,585  
2,580,113  
(510,444)  
15,125  
4,562  
(2,850)  
6,647,495  
3,212,402  
$
10,215,703  
$
NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES  
Investment Held for Resale - Franjo Beach Property  
Recovery of Franjo Beach Property  
$
150,000  
(150,000)  
The accompanying notes are an integral part of this financial statements  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
15  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
The notes are an integral part of the accompanying financial statements.  
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
The accounting policies of the Washington Counties Risk Pool conform to generally accepted accounting  
principles (“GAAP”). The following is a summary of the more significant policies:  
a.  
Reporting Entity  
The Washington Counties Risk Pool (“WCRP”) was organized August 18, 1988 to provide its  
members with joint programs including self-insurance, purchase of insurance, and contracting for  
or hiring personnel to provide administrative, claims handling and risk management services  
pursuant to Chapter 48.62, RCW. It was established via agreement amongst Washington’s  
counties under the Interlocal Cooperation Act (Chapter 39.34, RCW).  
A new member county makes a 60 month commitment when joining the WCRP. A member may  
withdraw after that time at the end of any WCRP fiscal year provided the county has given the  
WCRP at least a twelve-month written notice of its intent to withdraw. New members must be  
approved by a majority vote of the (WCRP) Board, provided that a majority of the (WCRP)  
Executive Committee may approve the admission, fees and premiums of any new member  
counties of less than 125,000 populations. The membership of the WCRP presently includes 27  
counties with populations ranging from 2,300 to 470,300.  
WCRP members are subject to supplemental assessment(s) in the event of deficiencies.  
Underwriting and rate-setting policies are modified after consultation with the insurance  
producer and/or independent actuary. Annual deposit assessments are adjusted to incorporate  
actuarial projections and operational needs, and then approved by the (WCRP) Board. If its  
assets were depleted, members would be responsible for outstanding liabilities of the WCRP.  
Twenty or twenty five million dollars (member option) in third-party “per occurrence” liability  
coverage was provided via the WCRP to its member counties during policy year 2010 for bodily  
injury, personal injury, property damage, errors and omissions, and advertising injury. That  
included joint self-insurance coverage from the WCRP of ten million dollars, subject to each  
member's individual deductible, along with “following form” excess insurance coverage of ten or  
fifteen million dollars. The WCRP is reinsured for losses within its layers of coverage exceeding  
the greater of one hundred thousand dollars or the member’s deductible. Members annually  
select a “per occurrence” deductible amount of ten, twenty five, fifty, one hundred, two hundred  
fifty or five hundred thousand dollars. There are no annual aggregate limits to the payments the  
WCRP might make for any one member county or all members combined.  
The WCRP also offers counties a joint-purchase program for insuring their properties with  
extraordinary limits. This includes five hundred million dollars “all other perils” coverage with  
two hundred million dollars per occurrence/annual aggregate catastrophe limits each for  
earthquake and flood coverage. During the 2010 policy year, there were twenty-seven counties  
participating.  
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  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
16  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
Issues, as amended by GASB Statement 30, Risk Financing Omnibus, GASB Statement 31,  
Accounting and Financial Reporting for Certain Investments and for External Investment Funds,  
and GASB Statement 33, Accounting and Financial Reporting for Nonexchange Transactions.  
In 1999 GASB issued Statement 34, Basic Financial Statements – and Management’s Discussion  
and Analysis – for State and Local Governments. The presented financial statements (including  
notes) reflect this and consecutive statements.  
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 (sometimes referred to  
as premiums or contributions), while operating expenses include claims paid from current year  
allowances and adjustments to prior year’s reserves, insurance (reinsurance, excess and property)  
premiums, and administrative expenses.  
c.  
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.  
d.  
e.  
Capital Assets and Depreciation  
See Note 7  
Receivables  
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.  
f.  
Investments  
See Note 2.  
g.  
Compensated Absences  
Compensated absences are absences for which the employees will be paid such as vacation and  
sick leave. The WCRP records unpaid 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 ½ the  
amounts earned.  
h.  
Unpaid Claim Liabilities  
The WCRP establishes claim liabilities based on independent actuarial estimates of the ultimate  
cost of claims, including future claims adjustment expenses for claims/lawsuits that have been  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
17  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
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, changes in doctrines of legal liability, and damage awards, the  
process used in computing claim liabilities does not necessarily result in an exact amount,  
particularly for coverage such as general liability.  
Claims liabilities are actuarially recomputed periodically using the Jury Verdict Value process  
and a variety of techniques and formulas to produce current estimates that reflect recent  
settlements, claims frequencies, and other economic and social factors. 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  
considered to be appropriate modifiers of past experience. Adjustments to claims liabilities are  
charged or credited to expense in the periods in which they are made.  
i.  
Reinsurance  
The WCRP uses reinsurance agreements to reduce its exposure to large third-party liability  
losses. Reinsurance permits recovery of substantial portions of the losses from reinsurers,  
although it does not discharge the primary liability of the WCRP (and its member counties) 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, 2010 and 2009 for  
reinsurance were $16,762,665 and $10,443,682 respectively. Premiums ceded to reinsurers  
during 2010 and 2009 were $5,480,000 and $3,697,000 respectively. The cumulative to-date  
total loss reserves amount deducted from claims liabilities as of September 30, 2010 for  
reinsurance was $48,251,995.  
j.  
Member Assessments and Unearned Member Assessments  
Member assessments are collected in advance and recognized as revenue in the period for which  
insurance protection is provided. On the balance sheet, member assessments receivables were  
billed September 1st with up to the amount equivalent to 105% of the prior year’s assessment  
being due by September 30th, and any remaining assessments due by the following January 31st.  
The assessments calculated were based on the members’ prior year’s worker hours and licensed  
vehicle counts. Investment income is not considered for the determination of member  
assessments.  
k.  
l.  
Unpaid Claims  
Claims/Lawsuits are charged to revenues as incurred. Claim reserves represent the accumulation  
of estimates for reported, unpaid claims plus a provision for claims incurred but not reported  
(IBNR). These estimates are continually reviewed and updated by applying the Jury Verdict  
Value process, and any resulting adjustments are reflected in current earnings.  
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 claims in process and those claims recognized as  
incurred but not reported (IBNR). The independent actuary estimates this liability at the end of  
each year. The change in this liability each year is reflected in current earnings.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
18  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
m.  
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). Chapter 48.62 RCW exempts the WCRP from state  
insurance premium taxes and from business and occupation taxes imposed pursuant to Chapter  
82.04 RCW.  
NOTE 2 – STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY  
This shall serve as a follow up to a fraud involving the Washington Counties Risk Pool and committed by  
a former Risk Pool employee. This matter was investigated by the SAO and initially reported upon as  
Report No. 1001789 issued July 20, 2009, wherein it was disclosed the Mason County Prosecuting  
Attorney had pursued the former employee with criminal charges of First Degree Theft. The former  
employee pled guilty and was sentenced by Superior Court Judge Toni A. Sheldon to 60 months  
confinement in the custody of the state Department of Corrections and is currently serving out that  
sentence.  
Immediately following the sentencing hearing, the Pool commenced civil legal actions to obtain  
reconveyance of the real property. A Quit Claim Deed and related papers, signed by the family members  
to whom the property was fraudulently conveyed, were obtained by the Pool’s legal counsel and filed in  
Mason County, Washington. The court later issued a Quiet Title order in favor of the Risk Pool.  
In the early part of fiscal year 2010, all requirements of the Quit Claim and Quiet Title were met and the  
property was deeded to the Pool. The transfer of ownership is recorded on the Pool’s balance sheet at the  
court’s appraised value of $150,000. It is also recognized in the Cash Flow Statement as Noncash  
Investing Capital.  
NOTE 3 - DEPOSITS AND INVESTMENTS  
a.  
Deposit  
The WCRP deposits and certificates of deposit are entirely covered by federal depository  
insurance (FDIC) or by collateral held in a multiple financial institution collateral pool  
administered by the Washington Public Deposit Protection Commission (PDPC).  
b.  
Investments  
The WCRP had invested with the Local Government Investment Pool and administered by the  
State Treasurer funds on September 30, 2010 and 2009, of $29,274,116 and $21,696,579  
respectively.  
NOTE 4 - JOINT SELF-INSURED RETENTION  
The WCRP retains responsibility for the payment of claims within specified self-insured retention limits  
prior to the application of coverage provided by its reinsurance and excess insurance contracts.  
For fiscal years 2010 and 2009 the Pool’s per-occurrence retention limit was $100,000 for liability  
claims. For liability claims greater than $100,000 but less than $500,000, the Pool’s aggregate  
reinsurance retention pertaining only to Public Officials Liability, Employment Practices Liability and  
Employee Benefits Liability is $20,000,000.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
19  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
Through pre-funded member assessments (deposit assessments) collected at the beginning of each policy  
year, the WCRP committed assets for the years ended September 30, 2010 and 2009 of $1,502,751 and  
$1,437,299 respectively, and is committing $1,570,125 for PY-2011, specifically for the purpose of  
funding its self-insured retentions for those years.  
NOTE 5 – REINSURANCE/EXCESS INSURANCE CONTRACTS  
The WCRP, on behalf of and in conjunction with its members, maintains both reinsurance and  
“following form” excess insurance contracts with several superior-rated insurance carriers which provide  
various limits of coverage over the WCRP third-party liability self-insured retention limits. The limits  
provided by these reinsurance/excess insurance contracts for both PY-2010 and PY-2009 are as follows:  
I.  
An “occurrence-based” Comprehensive Joint Self-Insurance Liability Policy with no aggregates  
that includes auto, employment, general, professional, and public officials’ coverage.  
WCRP/Member  
SIR (*)  
Excess  
Insurance (***)  
$10,000,000  
Reinsurance (**)  
$9,900,000  
Total (***)  
$20,000,000  
$100,000  
*
Counties annually select individual deductible amounts of $10,000, $25,000, $50,000, $100,000,  
$250,000 or $500,000.  
**  
The WCRP provides joint, self-insurance for the balance between the member deductibles and  
$10,000,000 with reinsurance purchased to address losses that exceed the greater of the member’s  
deductible or $100,000.  
***  
An additional $5,000,000 “following form” excess insurance policy is available as a county-by-  
county option that was purchased by the majority of the member counties.  
II. The Washington Counties Property Program (WCPP) was established October 1, 2005. The  
coverage was initially purchased by seventeen counties. Five counties were added during the first  
policy year that ended September 30, 2006; three more counties joined in the 2006-07 policy year;  
another county joined at the beginning of Py2008; a 27th participated March through September  
2008; and one more county joined and one withdrew in Py2010 keeping the total participating  
counties at 27. WCPP general coverage specifications and limits are as follows:  
LIMITS OF INSURANCE:  
PERILS:  
$500,000,000; All Indicated Limits are per Occurrence; Subject  
to Sub-Limits [below].  
All Risks of Direct Physical Loss or Damage Including  
Equipment Breakdown, Earthquake and Flood.  
PROPERTY COVERED:  
Real & Personal Property, Business Interruption, Extra Expense,  
Rental Value, Demolition and Increased Cost of Construction,  
Valuable Papers, Accounts Receivable, Transit, EDP  
(Equipment,/Media /Extra Expense), Newly Acquired Property,  
Course of Construction, Contractors Equipment, Errors and  
Omissions, Offsite Storage and Personal Property of the  
Insured’s officers and employees while on the premises of the  
Insured.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
20  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
SUBLIMITS: Are within, and do not increase, the limits stated in the Limits of Insurance.  
$200,000,000 Earthquake and Volcanic Eruption – Per Occurrence and Annual Aggregate  
$200,000,000 Flood – Per Occurrence and Annual Aggregate, except:  
$ 25,000,000 Flood for locations wholly or partially within a SFHA – Per Occurrence and  
Annual Aggregate  
$ 20,000,000 Terrorism, certified and non-certified  
$100,000,000 Equipment Breakdown  
VALUATION:  
A. Real and Personal Property and Mobile Equipment – Replacement Cost  
B. Vehicles on Premises – Actual Cash Value  
C. Business Interruption and Extra Expense – Actual Loss Sustained  
DEDUCTIBLES  
A. All loss, damage, and/or expense arising out of any one occurrence shall be adjusted as  
one loss, and from the amount of each such adjusted loss shall be deducted the sum of  
$5,000 (to $50,000 as individual county selection) except;  
B. Earthquake: $100,000, except Puget Sound Earthquake (ISO Zone 2) shall be 2% of the  
total values at the time of loss at each location involved in the loss subject to a minimum  
of $ 100,000, for any one occurrence shall be deducted from any adjusted Earthquake  
loss; or  
C. Flood: The following sum(s) shall be deducted from any adjusted loss due to Flood;  
(1) With respect to locations wholly or partially within Special Flood Hazard Areas  
(SFHA), areas of 100-year flooding, as defined by the Federal Emergency  
Management Agency (if these locations are not excluded elsewhere in this policy  
with respect to the peril of flood), the deductible shall be 5% of the total values at  
the time of loss at each location involved in the loss, subject to a minimum of  
$1,000,000 for any one occurrence;  
(2) With respect to Named Storms (a storm that has been declared by the National  
Weather Service to be a Hurricane, Typhoon, Tropical Cyclone or Tropical Storm),  
the deductible shall be 5% of the total values at the time of loss at each location  
involved in the loss, subject to a minimum of $100,000 for any one occurrence;  
(3) With respect to any other flood loss, the deductible shall be $100,000 any one  
occurrence.  
D. Windstorm and Hail: All loss, damage, and/or expense arising out of any one occurrence  
shall be adjusted as one loss, and from the amount of each such adjusted loss shall be  
deducted the sum of $5,000 (to $50,000 as individual county selection);  
NOTE: If two or more deductible amounts in this policy apply to a single occurrence, the total  
to be deducted shall not exceed the largest deductible applicable.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
21  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
NOTE 6 - 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 its affected member counties.  
During policy year 2010, no additional retroactive assessments were levied or collected.  
NOTE 7 – 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, 2010 were as follows:  
Beginning  
Balance  
9/30/09  
Ending  
Balance  
9/30/10  
Increase  
(Decrease)  
Capital Assets Being Depreciated:  
Building  
Office Furnishings and Equipment  
Total Capital Assets being Depreciated  
$ 1,125,659  
303,034  
$ 1,428,693  
1,125,659  
330,477  
1,456,136  
27,443  
27,443  
Less Accumulated Depreciation for:  
Building  
Office Furnishings and Equipment  
Total Accumulated Depreciation  
$ 101,970  
268,521  
$ 370,491  
37,522  
14,614  
52,136  
139,492  
283,135  
422,627  
TOTAL CAPITAL ASSETS NET  
$ 1,058,202  
$ (24,693)  
$1,033,509  
When equipment is retired or otherwise disposed of, its cost and accumulated depreciation are removed  
from the WCRP asset 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  
Years  
Buildings  
Building Improvements  
Vehicles  
30  
30  
5
Equipment  
5
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
22  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
NOTE 8 - PENSION PLANS  
a.  
Public Employees’ Retirement System (PERS) Plans 1, 2, and 3  
The Washington Counties Risk Pool’s 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 Department of Retirement Systems (DRS), a department within the  
primary government of the State of Washington, issues a publicly available comprehensive annual  
financial report (CAFR) that includes financial statements and required supplementary information for  
each plan. The DRS CAFR may be obtained by writing to: Department of Retirement Systems,  
Communications Unit, P.O. Box 48380, Olympia, WA 98504-8380. The following disclosures are made  
pursuant to GASB Statement No. 27, Accounting for Pensions by State and Local Government  
Employers.  
Plan Description  
PERS is a cost-sharing multiple-employer retirement system comprised of three separate plans for  
membership purposes: Plans 1 and 2 are defined benefit plans and Plan 3 is a defined plan with a defined  
contribution component.  
Membership in the system includes: elected officials; state employees; employees of the Supreme,  
Appeals, and Superior Courts (other than judges currently in a judicial retirement system); employees of  
legislative committees; community and technical colleges, college and university employees not  
participating in national higher education retirement program; judges of district and municipal courts;  
and employees of local governments.  
PERS participants who joined the system by September 30, 1977, are Plan 1 members. Those who  
joined on or after October 1, 1977 and by either, February 28, 2002 for state and higher education  
employees, or August 31, 2002 for local government employees, are Plan 2 members unless they exercise  
an option to transfer their membership to Plan 3. PERS participants joining the system on or after March  
1, 2002 for state and higher education employees, or September 1, 2002 for local government employees  
have the irrevocable option of choosing membership in either PERS Plan 2 or PERS Plan 3. The option  
must be exercised within 90 days of employment. An employee is reported in Plan 2 until a choice is  
made. Employees who fail to choose within 90 days default to PERS Plan 3. Notwithstanding, PERS  
Plan 2 and Plan 3 members may opt out of plan membership if terminally ill, with less than five years to  
live.  
PERS defined benefit retirement benefits are financed from a combination of investment earnings and  
employer and employee contributions. PERS retirement benefit provisions are established in state statute  
and may be amended only by the State Legislature.  
PERS Plan 1 members are vested after the completion of five years of eligible service. Plan 1 members  
are eligible for retirement after 30 years of service, or at the age of 60 with five years of service, or at the  
age of 55 with 25 years of service. The annual benefit is two percent of the average final compensation  
(AFC) per year of service, capped at 60 percent. (The AFC is based on the greatest compensation during  
any 24 eligible consecutive compensation months.) Plan 1 members who retire from inactive status prior  
to age 65 may receive actuarially reduced benefits. The benefit is actuarially reduced to reflect the  
choice of a survivor option. A cost-of-living allowance (COLA) is granted at age 66 based upon years of  
service times the COLA amount, increased by three percent annually. Plan 1 members may also elect to  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
23  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
receive an optional COLA amount that provides an automatic annual adjustment based on the Consumer  
Price Index. The adjustment is capped at three percent annually. To offset the cost of this annual  
adjustment, the benefit is reduced.  
PERS Plan 2 members are vested after the completion of five years of eligible service. Plan 2 members  
may retire at the age of 65 with five years of service with an allowance of 2 percent of the AFC per year  
of service. (The AFC is based on the greatest compensation during any eligible consecutive 60-month  
period.) Plan 2 members who retire prior to age 65 receive reduced benefits. If retirement is at age 55 or  
older with at least 30 years of service, a three percent per year reduction applies; otherwise an actuarial  
reduction will apply. The benefit is also actuarially reduced to reflect the choice of a survivor option.  
There is not cap on years of service credit; and a cost-of-living allowance is granted (based on the  
Consumer Price Index), capped at three percent annually.  
Plan 3 has a dual benefit structure. Employer contributions finance a defined benefit component, and  
member contributions finance a defined contribution component. The defined benefit portion provides a  
benefit calculated at one percent of the AFC per year of service. (The AFC is based on the greatest  
compensation during any eligible consecutive 60-month period.) Effective June 7, 2006, 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 twelve months of that service are earned after age 44; or after five service credit years earned  
in PERS Plan 2 prior to June 1, 2003. Plan 3 members are immediately vested in the defined contribution  
portion of their plan. Vested Plan 3 members who retire prior to the age of 65 receive reduced benefits.  
If retirement is at age 55 or older with at least 30 years of service, a three percent per year reduction  
applies; otherwise an actuarial reduction will apply. The benefit is also actuarially reduced to reflect the  
choice of a survivor option. There is no cap on years of service credit, and Plan 3 provides the same  
cost-of-living as Plan 2.  
There are 1,192 participating employers in PERS. Membership in PERS consisted of the following as of  
the latest actuarial valuation date for the plans of June 30, 2008:  
Retirees and Beneficiaries Receiving Benefits  
Terminated Plan Members Entitled to But Not Yet Receiving Benefits  
Active Plan Members Vested  
Active Plan Members Noninvested  
Total  
73,122  
27,267  
105,212  
56,456  
262,057  
Funding Policy  
Each biennium, the state Pension Funding Council adopts Plan 1 employer contribution rates, Plan 2  
employer and employee contribution rates, and Plan 3 employer contribution rates. Employee  
contribution rates for Plan 1 are established by statute at 6 percent for state agencies and local  
government unit employees, and 7.5 percent for state government elected officials. The employer and  
employee contribution rates for Plan 2 and the employer contribution rate for Plan 3 are developed by the  
Office of the State Actuary to fully fund Plan 2 and the defined benefit portion of Plan 3. All employers  
are required to contribute at the level established by the Legislature. Under PERS Plan 3, employer  
contributions finance the defined benefit portion of the plan, and member contributions finance the  
defined contribution portion. The Employee Retirement Benefits Board sets Plan 3 employee  
contribution rates. Six rate options are available ranging from 5 to 15 percent; two of the options are  
graduated rates dependent on the employee’s age. As a result of the implementation of the Judicial  
Benefit Multiplier Program in January 2007, a second tier of employer and employee rates were  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
24  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2009 Thru September 30, 2010  
developed to fund, along with investment earnings, the increased retirement benefits of those justices and  
judges that participate in the program. The methods used to determine the contribution requirements are  
established under state statute in accordance with chapters 41.40 and 41.45 RCW.  
The required contribution rates expressed as a percentage of the current-year covered payroll as of  
December 2009 were as follows:  
PERS Plan 1  
5.31%**  
PERS Plan 2  
5.31%**  
PERS Plan 3  
5.31%***  
*****  
Employer*  
Employee  
6.00%****  
3.90%****  
* The employer rates include the employer administrative expense fee currently set at 0.16%.  
**The employer rate for state elected officials is 12.39% for Plan 1 and 8.31% for Plan 2 and Plan 3.  
*** Plan 3 defined benefit portion only.  
**** Variable from 5.0% minimum to 15.0% maximum based on rate selected by the PERS 3 member.  
Both the WCRP and its employees made their required contributions. The WCRP required contributions  
for the years ending September 30th were as follows:  
PERS Plan 1  
$9,176  
PERS Plan 2  
$18,343  
PERS Plan 3  
$2,740  
2010  
2009  
2008  
$8,662  
$7,414  
$30,613  
$26,127  
$3,674  
$1,890  
b.  
Qualified Pension Plan  
The WCRP also participates in a qualified pension plan created in accordance with Internal Revenue  
Code Section 401(a). This plan is with the International City/County Management Association (ICMA).  
Employer contributions to the Qualified Pension Plan for the years ended September 30, 2010 and 2009  
were $35,330 and $35,203, respectively.  
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 the International City/County  
Management Association (ICMA) and Nationwide Retirement Solutions (NRS). The plans, available to  
all eligible employees, permit them to defer a portion of their salaries until future years. The deferred  
compensation is not available to employees until termination, retirement, death, or unforeseeable  
emergency.  
In 1998 NRS and ICMA Deferred Compensation Program plan 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 no longer the owner of these assets, the  
plan assets and liabilities are no longer reported in the WCRP financial statements.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
25  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
26  
REQUIRED SUPPLEMENTARY INFORMATION  
This required supplementary information is an integral part of the accompanying financial statements.  
1.  
Ten-Year Claims Development Information  
The table below illustrates how the WCRP earned revenues and investment income compare to related  
costs of loss 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:  
(1) This line shows the total of each fiscal year's earned contribution revenues and  
investment revenues.  
(2) This line shows each fiscal year's other operating costs of the WCRP including overhead and  
claims expenses not allocable to individual claims.  
(3) This line shows the WCRP incurred claims and allocated claims adjustment expense (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).  
(4) This section of ten rows shows the cumulative amounts paid as of the end of successive years  
for each policy year.  
(5) This section of ten rows shows how each policy year's incurred claims increased or decreased  
as of the end of successive years. This annual reestimation 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.  
(6) This line compares the latest reestimated incurred claims amount to the amount originally  
established (line 3) and shows whether this latest estimate of claims cost is greater or less than  
originally thought. As data for individual policy years mature, the correlation between original  
estimates and reestimated amounts is commonly used to evaluate the accuracy of incurred claims  
currently recognized in less mature policy years. The columns of the table show data for  
successive policy years.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
27  
RECONCILATION OF CLAIMS LIABILITIES  
As discussed in Note 2, the WCRP establishes a liability for both reported and unreported insured events,  
which includes estimates of both future payments of losses and related claims adjustment expenses. The  
following represents comparative changes in those aggregate liabilities for the WCRP during the past two  
years:  
2009  
2009  
Unpaid Claims and Claims Adjustment Expenses  
Beginning of Year  
Incurred Claims and Claims Adjustment Expenses:  
Provisions for Insured Events of the Current Year  
Increase (Decrease) in Provision for Insured Events  
Prior Years  
$ 7,092,686  
1,502,751  
(1,652,831)  
$ 6,942,606  
$ 7,293,528  
1,437,299  
(878,040)  
$7,852,787  
Total Incurred Claims and Claims Adjustment Expenses  
Payments:  
Claims and Claims Adjustment Expenses Attributable to  
Insured Events of the Current Year  
Claims and Claims Adjustment Expenses Attributable to  
Insured Events of Prior Years  
$
41,324  
756,145  
797,469  
$
0.00  
760,101  
Total Payments  
$
$
$ 760,101  
Total Unpaid Claims and Claims Adjustment Expenses  
End of Year  
6,145,137  
$ 7,092,686  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
28  
2.  
List of Participating Members  
The following is a list of WCRP membership for the fiscal year 2009-2010  
Adams County  
Benton County  
Chelan County  
Clallam County  
Clark County  
Kittitas County  
Lewis County  
Mason County  
Okanogan County  
Pacific County  
Columbia County  
Cowlitz County  
Douglas County  
Franklin County  
Garfield County  
Grays Harbor County  
Island County  
Pend Oreille County  
San Juan County  
Skagit County  
Skamania County  
Spokane County  
Thurston County  
Walla Walla County  
Whatcom County  
Yakima County (*)  
Jefferson County  
Kitsap County  
(*) Not participating in the joint-purchase property program option.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
29  
WASHINGTON COUNTIES RISK POOL  
OFM Schedule of Expenses  
MCAG NO. 0774  
Fiscal Year Ended September 30, 2010  
Insurance Premiums/Reserve Expense  
ULAE Expense  
$12,824,568  
-$14,850  
Adjustment to Prior Years' Reserves  
-$1,652,831  
Contracted Services:  
Actuarial  
State Audit Expense  
State Risk Manager Expenses  
Legal Fees  
$41,600  
$9,499  
$11,734  
$107,818  
$22,574  
$7,369  
IT Consultants  
Other Consulting Fees  
Property Appraiser  
Member Services Consultant  
$47,000  
$32,975  
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  
$790,039  
$17,732  
$15,999  
$9,133  
$79,464  
$87,314  
$53,666  
$15,410  
$41,397  
$19,742  
$92,339  
$18,995  
$6,530  
Utilities  
Member Services - Training  
Grants/Scholarships  
Miscellaneous Expenses  
Total Operating Expenses  
$12,685,217  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
30  
ABOUT THE STATE AUDITOR'S OFFICE  
The State Auditor's Office is established in the state's Constitution and is part of the executive  
branch of state government. The State Auditor is elected by the citizens of Washington and serves  
four-year terms.  
Our mission is to work in cooperation with our audit clients and citizens as an advocate for  
government accountability. As an elected agency, the State Auditor's Office has the independence  
necessary to objectively perform audits and investigations. Our audits are designed to comply with  
professional standards as well as to satisfy the requirements of federal, state, and local laws.  
The State Auditor's Office employees are located around the state to deliver our services effectively  
and efficiently.  
Our audits look at financial information and compliance with state, federal and local laws on the part  
of all local governments, including schools, and all state agencies, including institutions of higher  
education. In addition, we conduct performance audits of state agencies and local governments and  
fraud, whistleblower and citizen hotline investigations.  
The results of our work are widely distributed through a variety of reports, which are available on  
our Web site and through our free, electronic subscription service. We continue to refine our  
reporting efforts to ensure the results of our audits are useful and understandable.  
We take our role as partners in accountability seriously. We provide training and technical  
assistance to governments and have an extensive quality assurance program.  
State Auditor  
Chief of Staff  
Brian Sonntag, CGFM  
Ted Rutt  
Deputy Chief of Staff  
Chief Policy Advisor  
Director of Audit  
Director of Special Investigations  
Director for Legal Affairs  
Director of Quality Assurance  
Local Government Liaison  
Communications Director  
Public Records Officer  
Main number  
Doug Cochran  
Jerry Pugnetti  
Chuck Pfeil, CPA  
Jim Brittain, CPA  
Jan Jutte, CPA, CGFM  
Ivan Dansereau  
Mike Murphy  
Mindy Chambers  
Mary Leider  
(360) 902-0370  
(866) 902-3900  
Toll-free Citizen Hotline  
Website  
www.sao.wa.gov  
Subscription Service  
https://www.sao.wa.gov/EN/News/Subscriptions/  
(SAO FACTS.DOC - Rev. 06/09)