Washington State Auditor’s Office  
Financial Statements Audit Report  
Washington Counties Risk Pool  
Thurston County  
Audit Period  
October 1, 2008 through September 30, 2009  
Report No. 1003226  
Issued March 29, 2010  
Reissued May 10, 2010  
Washington State Auditor  
Brian Sonntag  
May 10, 2010  
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, 2008 through September 30, 2009  
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, 2008 through September 30, 2009  
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, 2009 and 2008, and have  
issued our report thereon dated February 18, 2010.  
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 control deficiency 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 misstatements on a timely basis.  
A significant deficiency is a control  
deficiency, or combination of control deficiencies, that adversely affects the Pool's ability to  
initiate, authorize, record, process or report financial data reliably in accordance with generally  
accepted accounting principles such that there is more than a remote likelihood that a  
misstatement of the Pool's financial statements that is more than inconsequential will not be  
prevented or detected by the Pool's internal control.  
A material weakness is a significant deficiency, or combination of significant deficiencies, that  
results in more than a remote likelihood that a material misstatement of the financial statements  
will not be prevented or detected by the Pool's internal control.  
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  
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Washington State Auditor's Office  
1
in internal control that might be 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.  
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 18, 2010  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
2
Independent Auditor’s Report on Financial  
Statements  
Washington Counties Risk Pool  
Thurston County  
October 1, 2008 through September 30, 2009  
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, 2009 and  
2008, 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, 2009 and  
2008, 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 10 and risk pool information on  
pages 25 through 26 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 States of America has determined is  
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Washington State Auditor's Office  
3
necessary to supplement, although 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 Reconciliation of Claims Liabilities 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 18, 2010  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
4
Financial Section  
Washington Counties Risk Pool  
Thurston County  
October 1, 2008 through September 30, 2009  
REQUIRED SUPPLEMENTAL INFORMATION  
Management’s Discussion and Analysis – 2009 and 2008  
BASIC FINANCIAL STATEMENTS  
Comparative Statement of Net Assets – 2009 and 2008  
Comparative Statement of Revenues, Expenses and Changes in Fund Net Assets –  
2009 and 2008  
Comparative Statement of Cash Flows – 2009 and 2008  
Notes to Financial Statements – 2009 and 2008  
REQUIRED SUPPLEMENTAL INFORMATION  
Ten-Year Claims Development Information Notes – 2009  
Ten-Year Claims Development – 2009  
List of Participating Members – 2009  
Reconciliation of Claims Liabilities – 2009 and 2008  
_________________________________________________________________________________________________________  
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,  
2009. To enhance understanding of the WCRP financial performance, we encourage readers to consider  
the information presented here in conjunction with the financial statements for Fiscal Year (“FY”) 2009  
and the notes to those financial statements.  
Financial Highlights from FY-2009  
·
·
Operating Income was experienced during FY-2009 of $1.15 million, a 40% increase from FY-2008.  
Interest Income slipped to just $0.22 million (-65%) due to the nearly non-existent interest rates  
associated with the national and worldwide recession.  
·
·
Total Assets grew by $4.64 million (15%) to more than $35.71 million. Specifically, current assets  
increased $4.69 million (16%) while non-current assets decreased $0.05 million (-4%).  
966 cases were added to the Risk Pool’s claims-related database during FY-2009, which raised the  
to-date (Oct. 1988 – Sep. 2009) total of third-party liability claims and lawsuits submitted by WCRP  
member counties to 16,470.  
Only 492 cases remained classified as “open” at year’s end.  
Independent actuarial estimates suggest another 553 claims may be filed for covered occurrences  
from all years-to-date through September 2009.  
·
Net Assets (also referred to as “Members’ Equity”) increased nearly $1.38 million to more than $8.16  
million at September 30, 2009. $6.35 million is classified as ‘Restricted’ to satisfy the Section D  
provisions of the WCRP Underwriting Policy (enhanced by the Board of Directors in March 2007).  
Another $1.06 million is invested in Capital Assets (net of debt). The remaining $0.76 million is listed  
as ‘Non-Restricted’ and is available. The WCRP Board of Directors is the authority to decide if, how  
much, and when distributions of any (Non-Restricted) Net Assets are to be made.  
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 its 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 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.  
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Washington State Auditor's Office  
6
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 (formerly referred to as the Balance Sheet) presents the  
financial position of the WCRP at September 30th of the Risk Pool’s 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 (formerly referred to as the  
Income Statement) 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.  
COMPARATIVE FINANCIAL INFORMATION – Washington Counties Risk Pool  
NET ASSETS  
09/30/2009  
$34,650,705  
09/30/2008  
$29,961,102  
1,103,766  
Change $  
$4,689,603  
-45,564  
Chg %  
15.7  
Current Assets  
Non-current (Capital) Assets  
-4.1  
1,058,202  
Total Assets  
$35,708,908  
$31,064,868  
$4,644,040  
14.9  
Current Liabilities  
Restricted Equity – UW Policy, § D  
Unrestricted Net Assets  
Invested in Capital Assets, Net of Debt  
Total Liabilities and Net Assets  
$27,546,544  
6,345,958  
758,203  
1,058,202  
$35,708,908  
$24,286,364  
5,674,738  
0
1,103,766  
$31,064,868  
3,260,180  
671,220  
758,203  
-45,564  
$4,644,040  
13.4  
11.8  
100.0  
-4.1  
14.9  
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Washington State Auditor's Office  
7
REVENUES, EXPENSES and CHANGES IN NET ASSETS  
FY-2009  
FY-2008  
Change $  
Chg %  
0.0  
Operating Revenues  
Member JSLIP Assessments  
Member WCPP Assessments  
Operating Revenues – Miscellaneous  
Total Operating Revenues  
$9,139,429  
$9,141,287  
2,322,429  
($1,858)  
2,546,189  
70,566  
9.6  
-29.4  
1.7  
223,760  
100,000  
$11,563,716  
(29,434)  
$192,468  
$11,756,184  
Non Operating Revenues (and Expenses)  
Interest Income  
$221,392  
0
$630,365  
855  
($408,973)  
(855)  
-64.9  
-100.0  
94.9  
Miscellaneous Income  
Rental Income (net)  
15,985  
8,200  
7,785  
Total Non-Operating Revenues  
Total Revenues  
$ 237,378  
$11,993,562  
$ 639,420  
$12,203,136  
($ 402,042)  
($209,574)  
-62.9  
-1.7  
Operating Expenses  
Current Year’s Claims Reserve  
Current Year’s Aggregate Stop Loss  
Prior Years’ Claim Reserve Adjustment  
Reserve for ULAE  
$1,437,299  
1,825,000  
(878,038)  
43,585  
$1,264,343  
1,825,000  
(251,088)  
40,932  
$172,956  
0
(626,950)  
2,653  
13.7  
0.0  
249.7  
6.5  
Reinsurance Premiums (JSILP)  
Excess (Liability) Insurance Premiums  
WCPP (Property) Premiums  
Depreciation Expenses  
Administrative Expenses  
Total Operating Expenses  
3,697,000  
369,661  
2,460,925  
45,564  
1,608,706  
$10,609,703  
3,806,063  
384,790  
2,260,094  
70,947  
1,341,814  
$10,742,895  
(109,063)  
(15,129)  
200,831  
(25,383)  
266,892  
($133,192)  
-2.9  
-3.9  
8.9  
-35.8  
19.9  
-1.2  
CHANGES IN NET ASSETS  
$1,383,859  
$1,460,241  
($76,382)  
-5.2  
Beginning Net Assets (October 1st)  
Ending Net Assets (September 30th)  
$6,778,505  
$8,162,363  
$5,318,264  
$6,778,505  
$1,460,241  
$1,383,858  
27.5  
20.4  
CASH FLOWS  
09/30/2009  
$3,212,402  
15,985  
09/30/2008  
$(5,766,380)  
(449,320)  
Change $  
$8,978,782  
465,305  
Chg %  
155.7  
103.6  
-64.9  
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.  
221,392  
630,365  
(408,973)  
$9,035,114  
$3,449,780  
$(5,585,335)  
161.8  
Cash & Cash Equivalents (Beg. of Year)  
Cash & Cash Equivalents (End of Year)  
$19,317,651  
$22,767,431  
$24,902,986  
$19,317,651  
$(5,585,335)  
$3,449,780  
-22.4  
17.9  
BUDGETARY VARIATIONS:  
The following listing reflects the variations to the administrative budget with the greatest significance that  
occurred during the year ended September 30, 2009.  
1. Staffing levels remained at those established prior to FY-2005. Further implementation of the board-  
approved salary schedule in 2006 with authorized cost of living adjustments and employee benefits  
elevated the Payroll and Benefits costs during FY-2009.  
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Washington State Auditor's Office  
8
2. Stock binders, tabs and inserts used for multiple WCRP-sponsored trainings were generally  
responsible for the enhancement in the cost for Supplies during FY-2009.  
3. Professional Services increased substantially during FY-2009 as funds were used to acquire:  
a. Specialty property appraisal and software development services associated with the  
Washington Counties Property Program (“WCPP”);  
b. Additional actuarial services to assist the Finance Committee with the reexamination of the  
Risk Pool’s experience rating methodology and factors;  
c. Increased audit costs (SAO) and oversight fees (SRM); and  
d. Legal services associated with the fraudulent actions of a former WCRP employee, public  
records requests presented to the Risk Pool, coverage questions, and pre-defense reviews.  
4. Other Expenditures, which includes capital outlays, operating rentals/leases, business insurance,  
office maintenance and miscellaneous items, were significantly greater during FY-2008 due to capital  
acquisitions. However, increases in headquarters ownership and operating costs, and in the claims  
management software support services, materialized in FY-2009.  
5. Training costs declined slightly even with another installment for the enhanced training program  
aimed at lessening severities and/or frequencies of member counties’ tortuous occurrences,  
especially those stemming from employment activities.  
6. Operating Adjustments – Leave Expense increased with the stabilization of the Risk Pool’s  
employment base and no significant, unexpected absences.  
ADMINISTRATIVE BUDGET  
Comparative  
Actual FY-09  
$781,599  
20,767  
Actual FY-08  
$740,223  
15,942  
Diff $  
$41,376  
4,825  
189,849  
(43)  
Diff %  
5.6  
30.3  
105.9  
-0.2  
Payroll & Benefits  
Supplies  
Professional Services  
369,047  
17,553  
179,198  
17,596  
Communications  
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  
149,242  
1,509  
535,313  
155,504  
$1,794,527  
(5,463)  
(601)  
(422,129)  
(8,759)  
($200,945)  
-3.7  
-39.8  
-78.9  
-5.6  
-11.2  
Capitalized & Depreciated Outlays  
Annual/Sick Leave Expense  
TOTAL ADMIN. EXPENDITURES  
0
15,124  
$1,608,706  
(458,374)  
5,661  
$1,341,814  
458,374  
9,463  
$266,892  
100.0  
167.2  
19.9  
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Washington State Auditor's Office  
9
Fiscal Year 2009  
Payroll & Benefits  
Supplies  
Professional Services  
Communications  
Actual  
$781,599  
20,767  
369,047  
17,553  
Budget  
$807,826  
17,600  
Diff $  
$(26,227)  
3,167  
Diff %  
-3.2  
18.0  
25.8  
-6.1  
293,475  
18,700  
75,572  
(1,147)  
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  
Fiscal Year 2008  
Payroll & Benefits  
Supplies  
Professional Services  
Communications  
Travel, Conference & Meeting Expenses  
Repairs & Maintenance  
Other Expenditures (incl. Capital Outlays)  
Training  
TOTAL BUDGET EXPENDITURES  
Operating Adjustments:  
Actual  
$740,223  
15,942  
179,198  
17,596  
149,242  
1,509  
535,313  
155,504  
$1,794,527  
Budget  
$780,066  
19,000  
Diff $  
($39,843)  
(3,058)  
(58,977)  
(3,904)  
(32,558)  
(2,991)  
(52,737)  
(98,896)  
($292,964)  
Diff %  
-5.1  
-16.1  
-24.8  
-18.2  
-17.9  
-66.5  
-9.0  
238,175  
21,500  
181,800  
4,500  
588,050  
254,400  
$2,087,491  
-38.9  
-14.0  
Capitalized & Depreciated Outlays  
Annual/Sick Leave Expense  
TOTAL ADMIN. EXPENDITURES  
(458,374)  
5,661  
$1,341,814  
CAPITAL ASSET AND DEBT ACTIVITIES:  
Capital Assets  
The Risk Pool made no Capital Asset purchases in 2009.  
Long-Term Debt  
The Risk Pool also had no long-term debt as of September 30, 2009.  
REQUEST FOR INFORMATION:  
This Management’s Discussion and Analysis is designed to provide a general overview of the  
Washington Counties Risk Pool for all those with an interest in its 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  
10  
MCAG NO. 0774  
WASHINGTON COUNTIES RISK POOL  
COMPARATIVE STATEMENT OF NET ASSETS  
For the Fiscal Years Ended September 30, 2009 and 2008  
ASSETS:  
Year Ended  
Year Ended  
9/30/2008  
9/30/2009  
CURRENT ASSETS:  
Cash and Cash Equivalents  
$
22,767,431  
787,861  
8,193,385  
2,086,033  
706,987  
0
$
19,317,651  
955,451  
1,683,997  
943,787  
412,721  
6,647,495  
0
Member Deductible  
Excess/Reinsurance Recoverable  
Member Liability Assessment Receivable  
Property Insurance Assessment Receivable  
Prepaid Expenses  
Other Accounts Receivables  
109,009  
TOTAL CURRENT ASSETS  
$
$
34,650,705  
$
$
29,961,102  
NONCURRENT ASSETS:  
Capital Assets (Net of Accumulated Depreciation)  
1,058,202  
1,103,766  
TOTAL ASSETS  
LIABILITIES:  
$35,708,908  
$31,064,868  
CURRENT LIABILITIES:  
Claim Reserves  
Reserves for Open Claims  
IBNR Claims Reserve  
$
3,354,196  
3,738,490  
$
2,898,097  
4,395,431  
$400M xs $100M AL/GL Corridor Reserves  
Reserves for Open Claims  
IBNR Claims Reserve  
3,476,000  
1,659,214  
904,149  
1,225,000  
2,577,571  
860,564  
Reserve for ULAE  
Accounts Payable  
81,019  
591,462  
Accrued Liabilities  
72,808  
57,684  
Unearned Revenue - Members Assessments  
14,260,668  
11,680,555  
TOTAL CURRENT LIABILITIES  
$
$
27,546,544  
$
$
24,286,364  
NET ASSETS:  
Restricted Net Assets - Underwriting Policy Section D  
Non-Restricted Net Assets  
6,345,958  
758,203  
5,674,738  
1,103,766  
6,778,504  
31,064,868  
Capital Assets Net of Debt  
1,058,202  
TOTAL NET ASSETS  
$
8,162,363  
$
TOTAL NET ASSETS AND LIABILITIES  
$
35,708,908  
$
The accompanying notes are an integral part of this financial statements  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
11  
WASHINGTON COUNTIES RISK POOL  
COMPARATIVE STATEMENT OF REVENUES, EXPENSES  
AND CHANGES IN FUND NET ASSETS  
MCAG NO 0774  
Year Ended  
Year Ended  
9/30/2008  
OPERATING REVENUES:  
9/30/2009  
Member Assessments -- Liability Insurance  
$
$
9,139,429  
$
9,141,287  
2,322,429  
100,000  
Member Assessments -- Property Insurance  
Member Services - Revenues  
2,546,189  
70,566  
Total Operating Revenues  
11,756,184  
$
$
11,563,716  
OPERATING EXPENSES:  
Current Year's "Claims" Reserve  
Current Year's "Corridor" Reserve  
Adjustment of Prior Years' Claims Reserves  
Reserve for ULAE  
$
1,437,299  
1,825,000  
(878,038)  
43,585  
1,264,343  
1,825,000  
(251,088)  
40,932  
Reinsurance Premiums  
3,697,000  
369,661  
3,806,063  
384,790  
Excess Insurance Premiums  
Property Insurance Premiums  
Depreciation Expense  
2,460,925  
45,564  
2,260,094  
70,947  
Operating Expenditures  
1,608,706  
10,609,703  
1,341,814  
10,742,895  
Total Operating Expenses  
$
$
OPERATING INCOME  
$
1,146,481  
$
820,821  
NON OPERATING REVENUES (EXPENSES)  
Interest Income  
$
221,392  
20,518  
(4,533)  
0
$
630,365  
10,314  
(2,114)  
855  
Rental Income  
Rental Expense  
Miscellaneous Income  
Total Nonoperating Revenues (Expenses)  
$
237,378  
$
639,420  
CHANGES IN NET ASSETS  
TOTAL NET ASSETS, Beginning of Year  
TOTAL NET ASSETS, End of Year  
$
$
$
1,383,859  
6,778,504  
8,162,363  
$
$
$
1,460,241  
5,318,263  
6,778,504  
The accompanying notes are an integral part of this financial statements  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
12  
WASHINGTON COUNTIES RISK POOL  
MCAG NO. 0774  
COMPARATIVE STATEMENT OF CASH FLOW  
For the Fiscal Years Ended September 30, 2009 and 2008  
Year Ended  
9/30/2009  
Year Ended  
9/30/2008  
CASH FLOWS FROM OPERATING ACTIVITIES:  
Cash received from members & insurers  
Cash payments for goods and services  
Cash payments to employees for services  
$
$
6,448,979  
(2,439,853)  
(796,724)  
$
9,945,781  
(14,966,278)  
(745,883)  
Net Cash Provided (Used) by Operating Activities  
3,212,402  
$
(5,766,380)  
CASH FROM CAPITAL ACTIVITIES:  
Purchase of Equipment & Building  
Miscellaneous Revenues  
$
$
-
-
$
$
(458,374)  
855  
Cash from Rental of Office (net)  
15,985  
8,199  
Net Cash Provided (Used) by Capital Activities  
$
$
15,985  
$
$
(449,320)  
CASH FLOW FROM INVESTING ACTIVITIES:  
Proceeds from sales of investments  
Interest received  
-
-
221,392  
630,365  
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  
$
$
$
$
221,392  
3,449,780  
19,317,651  
22,767,431  
$
$
$
$
630,365  
(5,585,335)  
24,902,986  
19,317,651  
RECONCILIATION OF OPERATING INCOME TO NET CASH  
PROVIDED (USED) BY OPERATING ACTIVITIES  
OPERATING INCOME  
$
1,146,481  
$
820,821  
Adjustments to Reconcile Net Operating Income to Net  
Cash provided (useD) by Operating Activities:  
Depreciation Expense  
45,564  
(7,887,318)  
1,131,801  
43,585  
2,580,113  
(510,444)  
15,125  
70,946  
(1,868,314)  
1,152,154  
40,932  
250,380  
(6,237,468)  
4,169  
Decrease (Increase) in Accounts Receivable  
Increase (Decrease) in Claims 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  
6,647,495  
3,212,402  
$
$
(5,766,380)  
The accompanying notes are an integral part of this financial statements  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
13  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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 for sixty months 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 county of less than 125,000 population. The membership of the WCRP presently  
includes 28 counties with populations ranging from 2,400 to 443,800.  
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 by the WCRP to its member counties during policy year 2009 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 layer 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 fifty million dollars per occurrence/annual aggregate catastrophe limits each for  
earthquake and flood coverage. During the 2009 policy year, there were twenty-six 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  
14  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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 maturity 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 the 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 previous 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  
15  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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 from reinsurers. The amount deducted  
from claims liabilities as of September 30, 2009 and 2008 for reinsurance were $10,443,682 and  
$9,458,734 respectively. Premiums ceded to reinsurers during 2009 and 2008 were $3,697,000  
and $3,806,063 respectively.  
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 are based on the members’ prior year’s worker hours and licensed  
vehicle counts.  
assessments.  
Investment income is not considered for the determination of member  
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  
16  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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 awaiting sentencing.  
The former employee’s sentencing hearing was conducted August 3, 2009 before Superior Court Judge  
Toni A. Sheldon. The former employee was sentenced by Judge Sheldon to 60 months confinement in  
the custody of the state Department of Corrections and taken into custody immediately.  
A restitution hearing was conducted concurrently with the sentencing hearing to consider the recoveries  
sought by the Pool. Included was the $231,229.43 that the Pool had paid to settle a civil dispute and  
acquire the property, or for reconveyance of the real property that was fraudulently conveyed by the  
former employee without (fair market) payment. Also included was the $7,506.61 incurred by the Pool in  
support of the special investigations into the matter.  
Judge Sheldon included restitution in favor of the Pool in the sentencing order in the amount of  
$237,053.26 with payments of not less than $50.00 per month commencing within 60 days following  
release from confinement. The order also reserved to the Court jurisdiction to consider additional  
restitution amounts for potential civil litigation to set aside a fraudulent conveyance and/or for civil  
litigation for failure of property owner to disclose engineering issues to a buyer, and/or for significant  
depreciation or diminution in value of the property based upon prevailing market conditions and/or a  
reasonable rental value, if sought. Any funds from the sale of property by WCRP shall offset restitution  
amount.  
Later in the week of the 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, have been obtained be the Pool’s legal counsel. These documents  
still need to be filed by the Pool’s legal counsel in Mason County, Washington.  
The Pool’s legal counsel has served the individual named defendants in the property dispute and has  
received either acknowledgements or an affidavit of service (as to the incarcerated former employee). By  
the end of December, counsel will move for default. The publication of service as to all other “interested  
parties” is complete as well, and the Pool’s counsel will move for default as to the other “interested  
parties” at the same time as the individual defendants.  
The restitution order stands as it was issued by the Court at the sentencing hearing. And to obtain the  
cooperation needed on the Quit Claim deed and on the lawsuit, the Pool’s counsel agreed that no damages  
in the quiet title action would be sought as to anyone other than the former employee. Further, there are  
no specific plans presently for seeking a judgment for damages against the former employee. So the  
restitution order is likely sufficient, but the question remains whether it will ever be paid.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
17  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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  
Invested with the Local Government Investment Pool and administered by the State Treasurer,  
the WCRP had invested funds on September 30, 2009 and 2008, of $21,696,579 and $19,269,287  
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 the excess insurance contracts.  
For fiscal years 2009 and 2008 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.  
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, 2009 and 2008 of $1,437,299 and  
$1,264,343 respectively, and is committing $1,502,751 for PY-2010, 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-2009 and PY-2008 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.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
18  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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; and a 27th participated March through September  
2008. 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.  
SUBLIMITS: Are within, and do not increase, the limits stated in the Limits of Insurance.  
$250,000,000 Earthquake and Volcanic Eruption – Per Occurrence and Annual Aggregate  
$250,000,000 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  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
19  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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.  
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 2009, 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.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
20  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
Capital assets activities for the fiscal year ended September 30, 2009 were as follows:  
Beginning  
Balance  
9/30/08  
Ending  
Balance  
9/30/09  
Increase  
(Decrease)  
Capital Assets Being Depreciated:  
Building  
Office Furnishings and Equipment  
Total Capital Assets being Depreciated  
$ 1,125,659  
308,479  
$ 1,434,138  
1,125,659  
303,034  
1,428,693  
(5,445)  
(5,445)  
Less Accumulated Depreciation for:  
Building  
Office Furnishings and Equipment  
Total Accumulated Depreciation  
$
64,448  
265,924  
37,522  
2,597  
40,119  
101,970  
268,521  
370,491  
$ 330,372  
TOTAL CAPITAL ASETS NET  
$ 1,103,766  
45,564  
1,058,202  
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
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.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
21  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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 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  
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Washington State Auditor's Office  
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MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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 1,190 participating employers in PERS. Membership in PERS consisted of the following as of  
the latest actuarial valuation date for the plans of June 30, 2007:  
Retirees and Beneficiaries Receiving Benefits  
Terminated Plan Members Entitled to But Not Yet Receiving Benefits  
Active Plan Members Vested  
71,244  
26,583  
105,447  
52,575  
Active Plan Members Nonvested  
Total  
255,849  
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  
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 2008 were as follows:  
PERS Plan 1  
8.31%**  
6.00%****  
PERS Plan 2  
8.31%**  
5.45%****  
PERS Plan 3  
8.13%***  
*****  
Employer*  
Employee  
* 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.  
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Washington State Auditor's Office  
23  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2008 Thru September 30, 2009  
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  
$8,662  
$7,414  
PERS Plan 2  
$30,613  
$26,127  
PERS Plan 3  
$3,674  
$1,890  
2009  
2008  
2007  
$5,630  
$18,186  
$1,609  
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, 2009 and 2008  
were $35,203 and $33,813, respectively.  
NOTE 9 - 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.  
NOTE 10 – SUBSEQUENT EVENTS  
Reinsurance agreements are acquired by the WCRP to reduce its exposure to large third-party liability  
losses. Reinsurance companies however sometimes require weeks, or even months when the amount is  
substantial, to review and process WCRP loss recovery payments. Late-year case resolutions or  
judgments, some substantial, resulted in receivables from reinsurers as of September 30, 2009 of  
$8,193,385. But more than $7.5 million (over 92%) of the year-end receivables were paid and satisfied  
within ten (10) weeks of the year-end closing date.  
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Washington State Auditor's Office  
24  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
October 1, 2008 Thru September 30, 2009  
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.  
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Washington State Auditor's Office  
25  
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Washington State Auditor's Office  
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MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
October 1, 2008 Thru September 30, 2009  
2.  
List of Participating Member  
The following is a list of WCRP membership for the fiscal year 2008-2009  
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  
27  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
October 1, 2008 Thru September 30, 2009  
RECONCILATION OF CLAIMS LIABILITIES  
As discussed in Note 1, 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  
2008  
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  
$ 7,293,528  
1,437,299  
(878,040)  
$ 7,852,787  
$ 7,943,944  
1,264,343  
(251,086)  
$8,957,201  
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  
$
0.00  
760,101  
760,101  
$
87,032  
1,576,641  
Total Payments  
$
$ 1,663,673  
Total Unpaid Claims and Claims Adjustment Expenses  
End of Year  
$
7,092,686  
$ 7,293,528  
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Washington State Auditor's Office  
28  
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  
Web Site  
www.sao.wa.gov  
Subscription Service  
https://www.sao.wa.gov/EN/News/Subscriptions/  
(SAO FACTS.DOC - Rev. 06/09)