Washington State Auditor’s Office  
Financial Statements Audit Report  
Washington Counties Risk Pool  
Thurston County  
Audit Period  
October 1, 2007 through September 30, 2008  
Report No. 1001791  
Issued July 20, 2009  
Reissued July 23, 2009  
Washington State Auditor  
Brian Sonntag  
July 23, 2009  
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.  
In addition to this work, we look at other areas of our audit client’s operations for compliance with state  
laws and regulations. The results of that audit will be included in a separately issued accountability  
report.  
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, 2007 through September 30, 2008  
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, 2007 through September 30, 2008  
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 year ended September 30, 2008, and have issued our report thereon dated  
June 16, 2009. The prior year partial comparative information has been derived from the Risk Pool’s  
2007 basic financial statements that we issued our report thereon dated March 14, 2008.  
We conducted our audit 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 audit, 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 entity’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 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.  
_________________________________________________________________________________________________________  
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  
June 16, 2009  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
2
Independent Auditor’s Report on Financial  
Statements  
Washington Counties Risk Pool  
Thurston County  
October 1, 2007 through September 30, 2008  
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 year ended September 30, 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 audit. The prior year partial comparative  
information has been derived from the Risk Pool’s 2007 financial statements and, in our report dated  
March 14, 2008, we expressed an unqualified opinion on the basic financial statements.  
We conducted our audit in accordance with auditing standards generally accepted in the United States of  
America and the standards applicable to financial audits contained in Government Auditing Standards,  
issued by the Comptroller General of the United States. Those standards require that we plan and  
perform the audit to obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts  
and disclosures in the financial statements. An audit also includes assessing the accounting principles  
used and significant estimates made by management, as well as evaluating the overall financial  
statement presentation. We believe that our audit provides 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, 2008, and the changes in  
financial position and, where applicable, cash flows thereof for the year then ended in conformity with  
accounting principles generally accepted in the United States of America.  
The financial statements include partial prior year comparative information. Such information does not  
include all of the information required for presentation in conformity with accounting principles general  
accepted in the United States of America. Accordingly, such information should be read in conjunction  
with the Pool’s financial statements for the year ended September 30, 2007, from which such partial  
information was derived.  
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 audit.  
The management’s discussion and analysis on pages 6 through 9 and risk pool information on pages 23  
through 26 are not a required part of the basic financial statements but are supplementary information  
required by the Governmental Accounting Standards Board. We have applied certain limited procedures,  
which consisted principally of inquiries of management regarding the methods of measurement and  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
3
presentation of the required supplementary information. However, we did not audit the information and  
express no opinion on it.  
BRIAN SONNTAG, CGFM  
STATE AUDITOR  
June 16, 2009  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
4
Financial Section  
Washington Counties Risk Pool  
Thurston County  
October 1, 2007 through September 30, 2008  
REQUIRED SUPPLEMENTAL INFORMATION  
Management’s Discussion and Analysis – 2008  
BASIC FINANCIAL STATEMENTS  
Comparative Statement of Net Assets – 2008 and 2007  
Comparative Statement of Revenues, Expenses and Changes in Fund Net Assets – 2008 and  
2007  
Comparative Statement of Cash Flow – 2008 and 2007  
Notes to Financial Statements – 2008 and 2007  
SUPPLEMENTAL INFORMATION  
Ten-Year Claims Development Information Notes – 2008  
Ten-Year Claims Development – 2008  
List of Participating Members – 2008  
Reconciliation of Claims Liabilities – 2008 and 2007  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
5
WCRP… Management’s Discussion and Analysis  
The management of the Washington Counties Risk Pool (“WCRP”) offers this narrative overview and  
analysis of the financial activities of the WCRP for the fiscal year ended September 30, 2008. To  
enhance their understanding of the WCRP financial performance, we encourage readers to consider the  
information presented here in conjunction with the financial statements and notes to those financial  
statements.  
Financial Highlights from Py2008  
·
Total Assets grew $3.3 million (12%) to nearly $31.1 million. Specifically, current assets increased  
$2.9 million (11%) while non-current assets increased $0.4 million (54%).  
·
Operating Income was experienced of $0.8 million. This represented a $1.0 million (505%) turn-  
around from the $0.2 million Operating Loss experienced the prior year. A 7% reduction in the  
estimates by the independent actuary for claims reserves ($8.2 vs. $8.8 million) substantially  
contributed to this positive change.  
·
The Pool’s claims-related database reflected a total of 15,506 third-party liability claims and lawsuits  
having been reported during the twenty years the Risk Pool had operated (Oct. 1988 – Sep. 2008).  
Of those events only 457 remained classified as “open” at year’s end. Independent actuarial  
estimates project another 578 claims will be filed for occurrences from all WCRP years through  
September 2008.  
·
·
Interest Income slipped $0.13 million (17%) even with the larger surpluses (funds not needed for  
current operations) for investing. The reduction resulted from the lowering of interest rates to address  
the declining economy.  
Net Assets (also referred to as Members’ Equity) increased nearly $0.9 million to nearly $6.8 million  
at September 30, 2008. $5.7 million remains ‘Restricted’ to satisfy in large part the Section D  
provisions of the WCRP Underwriting Policy, which were enhanced by the Board of Directors in  
March 2007. The remaining $1.1 million is invested in Capital Assets (net of debt). The WCRP  
Board of Directors will determine if, how much, and when distributions of the 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 WCRP 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 its member counties within the state of Washington. Its primary source of revenue is the  
fees/assessments paid by its present and former member counties. 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 WCRP, this  
narrative must be viewed in context with information contained in the companion financial statements and  
the 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 Statement of Net Assets (formerly referred to as the Balance Sheet) presents the financial position of  
the WCRP at September 30th of the Pool’s most recent fiscal year(s). Information is displayed on assets  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
6
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 Statement of (Revenues, Expenses and) Changes in 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 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  
9/30/2008  
$29,961,103  
9/30/2007  
$27,030,628  
716,338  
Change $  
$2,930,475  
387,428  
Chg %  
10.8  
54.1  
Current Assets  
Non-current (Capital) Assets  
Total Assets  
1,103,766  
$31,064,869  
$27,746,966  
$3,317,903  
12.0  
Current Liabilities  
$24,286,365  
5,674,738  
1,103,766  
0
$22,428,702  
4,601,926  
716,338  
0
$1,857,663  
1,072,812  
387,428  
0
8.3  
Restricted Equity – UW Policy, § D  
Invested in Capital Assets, Net of Debt  
Unrestricted Net Assets  
23.3  
54.1  
0.0  
Total Liabilities and Net Assets  
$31,064,869  
$27,746,966  
$3,317,903  
12.0  
REVENUES, EXPENSES and CHANGES IN NET ASSETS  
Py2008  
Py2007  
Change $  
Chg %  
Operating Revenues  
Member JSLIP Assessments  
Member WCPP Assessments  
Operating Revenues – Miscellaneous  
Total Operating Revenues  
$9,141,287  
2,322,429  
100,000  
$9,141,407  
2,286,503  
28,776  
$11,456,686  
$ (120) 0.0  
35,926  
71,224  
1.6  
247.5  
0.9  
$11,563,716  
$107,030  
Non Operating Revenues (and Expenses)  
Interest Income  
Miscellaneous Income  
Rental Income (net)  
Total Non-Operating Revenues  
Total Revenues  
$630,365  
855  
8,200  
$ 639,420  
$12,203,136  
$760,477  
4,645  
0
$ 765,122  
$12,221,809  
$(130,112)  
(3,790)  
8,200  
($ 125,702)  
($18,672)  
-17.1  
-81.6  
100.0  
-16.4  
-1.5  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
7
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  
$1,264,343  
1,825,000  
(251,088)  
40,932  
3,806,063  
384,790  
2,260,094  
70,947  
1,341,814  
$10,742,895  
$1,182,993  
2,000,000  
554,843  
174,960  
3,772,810  
384,790  
2,266,927  
65,372  
1,256,874  
$11,659,569  
$81,350  
(175,000)  
(805,931)  
(134,028)  
33,253  
0
(6,833)  
5,575  
84,940  
($916,674)  
6.9  
-8.8  
-145.2  
-76.6  
.9  
0
-.3  
8.5  
6.8  
-7.9  
Administrative Expenses  
Total Operating Expenses  
CHANGES IN NET ASSETS  
$1,460,241  
$562,240  
$898,001  
159.7  
Beginning Net Assets (October 1st)  
Ending Net Assets (September 30th)  
$5,318,264  
$6,778,505  
$4,756,024  
$5,318,264  
$562,240  
$1,460,241  
11.8  
27.5  
CASH FLOWS  
9/30/2008  
$(5,766,380)  
(449,320)  
9/30/2007  
$5,897,311  
(17,439)  
Change $  
Chg %  
-197.8  
2,476.5  
-17.1  
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.  
$(11,663,691)  
(431,881)  
630,365  
760,477  
(130,112)  
$(5,585,335)  
$6,640,350  
$(12,225,685)  
-184.1  
Cash & Cash Equivalents (Beg. of Year)  
Cash & Cash Equivalents (End of Year)  
$24,902,986  
$19,317,651  
$18,262,636  
$24,902,986  
$6,640,350  
36.4  
$(5,585,335)  
-22.4  
BUDGETARY VARIATIONS:  
A supplement of $500,000 to the original operating (administrative) budget for Policy (and Fiscal) Year  
2008 was granted by the Pool’s Board of Directors during its Spring Meeting. This substantially was to  
provide the appropriations needed to exercise the “first right of refusal” provisions and purchase the  
added office area.  
The following listing reflects the variations of the greatest significance to the  
administrative budget that occurred during the year ended September 30, 2008.  
1. Staffing levels returned to those established prior to fiscal 2005 with the early Py07 employments of  
both a Loss Control Coordinator and a Claims Representative. These actions elevated Payroll and  
Benefits costs.  
2. Professional Services decreased because there wasn’t an independent claims auditor available to  
perform the planned audits of the larger-deductible member counties.  
3. Travel, Conference & Meeting Expenses increased a little due to the rise in fuel prices and the  
corresponding mileage reimbursement allowance.  
4. Other Expenditures, which includes capital outlays, operating rentals/leases, business insurance,  
office maintenance and miscellaneous items, were significantly greater in Py08 due to the acquisition  
under the previously negotiated joint ownership agreement of more area in the headquarters complex  
and related furnishings.  
5. Training costs were even further increased with an installment for the enhanced training program  
aimed at lessening severities and/or frequencies of member counties’ tortuous occurrences,  
especially those stemming from employment activities.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
8
ADMINISTRATIVE BUDGET  
Comparative  
Payroll & Benefits  
Supplies  
Professional Services  
Actual Py08  
$740,223  
15,942  
179,198  
17,596  
Actual Py07  
$654,962  
21,244  
193,954  
18,310  
Diff $  
Diff %  
13.0  
-25.0  
-7.6  
$85,261  
(5,302)  
(14,756)  
(714)  
Communications  
-3.9  
Travel, Conference & Meeting Expenses  
Repairs & Maintenance  
Other Expenditures (incl. Capital Outlays)  
Training  
TOTAL BUDGET EXPENDITURES  
Operating Adjustments:  
Capitalized & Depreciated Outlays  
Annual/Sick Leave Expense  
TOTAL ADMIN. EXPENDITURES  
149,242  
1,509  
535,313  
155,504  
$1,794,527  
140,613  
2,547  
123,935  
113,135  
$1,268,700  
8,629  
6.1  
(1,038)  
411,378  
42,369  
$525,827  
-40.8  
331.9  
37.4  
41.4  
(458,374)  
5,661  
$1,341,814  
(22,777)  
10,951  
$1,256,874  
(435,597)  
(5,290)  
$84,940  
1,912.4  
-48.3  
6.8  
Pool Year 2008  
Payroll & Benefits  
Supplies  
Professional Services  
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  
238,175  
21,500  
181,800  
4,500  
588,050  
254,400  
$2,087,491  
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  
Communications  
Travel, Conference & Meeting Expenses  
Repairs & Maintenance  
Other Expenditures (incl. Capital Outlays)  
Training  
TOTAL BUDGET EXPENDITURES  
Operating Adjustments:  
Capitalized & Depreciated Outlays  
Annual/Sick Leave Expense  
TOTAL ADMIN. EXPENDITURES  
-38.9  
-14.0  
(458,374)  
5,661  
$1,341,814  
Pool Year 2007  
Payroll & Benefits  
Supplies  
Actual  
$654,962  
21,244  
Budget  
$744,225  
22,200  
Diff $  
($89,263)  
(956)  
Diff %  
-12.0  
-4.3  
Professional Services  
Communications  
193,954  
18,310  
140,613  
2,547  
123,935  
113,135  
$1,268,700  
184,720  
25,300  
159,400  
5,600  
120,750  
110,600  
$1,372,795  
9,234  
5.0  
(6,990)  
(18,787)  
(3,053)  
3,185  
2,535  
($104,095)  
-27.6  
-11.8  
-54.5  
2.6  
2.3  
-7.6  
Travel, Conference & Meeting Expenses  
Repairs & Maintenance  
Other Expenditures (incl. Capital Outlays)  
Training  
TOTAL BUDGET EXPENDITURES  
Operating Adjustments:  
Capitalized & Depreciated Outlays  
Annual/Sick Leave Expense  
TOTAL ADMIN. EXPENDITURES  
(22,777)  
10,951  
$1,256,874  
CAPITAL ASSET AND DEBT ACTIVITIES:  
Capital Assets  
The Washington Counties Risk Pool’s investment in capital assets as of September 30, 2008 was  
$1,103,766 (net of accumulated depreciation). This includes the WCRP real and personal property (e.g.,  
headquarters facilities with networked and individual pieces of electronic computing and security  
equipment, office equipment and furniture, and automobiles). For additional capital asset information,  
see Note 7 in the Notes to Financial Statements.  
Long-Term Debt  
The Risk Pool had no long-term debt as of September 30, 2008.  
REQUEST FOR INFORMATION:  
This 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  
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  
9
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
COMPARATIVE STATEMENT OF NET ASSETS  
As of September 30, 2008 and September 30, 2007  
ASSETS:  
YTD  
9/30/2008  
AUDIT  
9/30/2007  
CURRENT ASSETS:  
Cash and Cash Equivalents  
$ 19,317,651 $ 24,902,986  
Member Deductible & Reinsurance Receivables  
Member Assessment Receivable  
Retro Assessment Premium Receivable  
Property Insurance Assessment Receivable  
Prepaid Expenses  
2,639,448  
943,787  
0
412,721  
6,647,495  
0
898,868  
795,467  
332,708  
0
0
Other Accounts Receivables  
TOTAL CURRENT ASSETS  
100,600  
27,030,628  
29,961,103  
NONCURRENT ASSETS:  
Capital Assets (Net of Accumulated Depreciation)  
1,103,766  
716,338  
TOTAL ASSETS  
LIABILITIES:  
$31,064,869  
$27,746,966  
CURRENT LIABILITIES:  
Claim Reserves  
Reserves for Open Claims  
IBNR Claims Reserve  
$
2,898,097  
4,395,431  
$
3,250,952  
4,692,992  
$400M xs $100M AL/GL Corridor Reserves  
Reserves for Open Claims  
IBNR Claims Reserve  
1,225,000  
2,577,571  
860,564  
350,000  
1,650,000  
819,633  
Reserve for ULAE  
Accounts Payable  
591,462  
182,130  
Accrued Liabilities  
57,684  
52,821  
Unearned Revenue - Members Assessments  
11,680,555  
11,430,175  
TOTAL CURRENT LIABILITIES  
$ 24,286,365 $ 22,428,702  
NET ASSETS:  
Restricted Net Assets - Underwriting Policy Section D  
Capital Assets Net of Debt  
Non Restricted Net Assets  
$
5,674,738  
1,103,766  
$
4,601,926  
716,338  
0
Total Net Assets  
$
6,778,505  
$
5,318,264  
TOTAL NET ASSETS AND LIABILITIES  
$ 31,064,869 $ 27,746,966  
The accompanying notes are an integral part of this financial statement.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
10  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
COMPARATIVE STATEMENT OF REVENUES AND EXPENSES  
AND CHANGES IN FUND NET ASSETS  
For the Fiscal Years Ended September 30, 2008 and September 30, 2007  
Audit  
YTD  
9/30/2008  
Year Ended  
9/30/2007  
OPERATING REVENUES:  
Member Assessments -- Liability Insurance  
Member Assessments -- Property Insurance  
Miscellanous Operating Income  
$
$
9,141,287  
2,322,429  
100,000  
$
$
9,141,407  
2,286,503  
28,776  
Total Operating Revenues  
11,563,716  
11,456,687  
OPERATING EXPENSES:  
Current Year's "Claims" Reserve  
Current Year's "Corridor" Reserve  
Adjustment of Prior Years' Claims Reserves  
Reserve for ULAE  
$
1,264,343  
1,825,000  
(251,088)  
40,932  
$
1,182,993  
2,000,000  
554,843  
174,960  
Reinsurance Premiums  
3,806,063  
384,790  
2,260,094  
70,947  
3,772,810  
384,790  
2,266,927  
65,372  
Excess Insurance Premiums  
Property Insurance Premiums  
Depreciation Expense  
Operating Expenditures  
1,341,814  
1,256,874  
Total Operating Expenses  
Operating Income  
$
10,742,895  
820,820  
$
11,659,569  
(202,882)  
$
$
NON OPERATING REVENUES (EXPENSES)  
Interest Income  
$
630,365  
10,314  
(2,114)  
855  
$
760,477  
0
Rental Income on Suite 104  
Rental Suite 104 Expenses  
Miscellaneous Income  
4,645  
Total Nonoperating Revenues (Expenses)  
$
639,420  
$
765,122  
CHANGES IN NET ASSETS  
TOTAL NET ASSETS, Beginning of Year  
TOTAL NET ASSETS, End of Year  
$
$
$
1,460,241  
5,318,264  
6,778,505  
$
$
$
562,240  
4,756,024  
5,318,264  
The accompanying notes are an integral part of this financial statement.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
11  
MCAC No. 0774  
WASHINGTON COUNTIES RISK POOL  
COMPARATIVE STATEMENT OF CASH FLOW  
AND CHANGES IN FUND NET ASSETS  
For the Fiscal Years Ended September 30, 2008 and September 30. 2007  
2008  
CASH FLOWS FROM OPERATING ACTIVITIES:  
2007  
Cash received from members & Insurers  
Cash payments for goods and services  
Cash payments to employees for services  
$ 9,945,781 $ 15,143,551  
(14,966,278)  
(745,883)  
(8,580,328)  
(665,913)  
Net Cash Provided (Used) by Operating Activ $ (5,766,380) $ 5,897,311  
CASH FROM CAPITAL ACTIVITIES:  
Purchase of Equipment & Building  
Miscellanous Revenues  
$
$
(458,374) $  
855  
(22,778)  
Cash from Rental of Office (net)  
8,199  
5,339  
Net Cash Provided (Used) by Capital Activitie $  
(449,320) $  
(17,439)  
CASH FLOW FROM INVESTING ACTIVITIES:  
Proceeds from sales of investments  
Interest received  
$
-
630,365  
630,365  
$
$
-
760,477  
760,477  
Net Cash Provided (Used) by Investing Activi $  
Increase (Decrease) in Cash and Cash Equivalent $ (5,585,335) $ 6,640,350  
Cash and Cash Equivalents - Beginning of the Ye $ 24,902,986 $ 18,262,636  
Cash and Cash Equivalents - End of the Year  
$ 19,317,651 $ 24,902,986  
RECONCILIATION OF OPERATING INCOME TO NET CASH  
PROVIDED (USED) BY OPERATING ACTIVITIES  
Operating Income  
$
820,821  
$
(202,882)  
Adjustments to reconcile net income to net cash:  
Cash provided by operating activities:  
Depreciation expense  
70,946  
(1,868,314)  
1,152,154  
40,932  
250,380  
(6,237,468)  
4,169  
65,372  
1,398,096  
2,204,930  
174,960  
2,288,768  
(42,884)  
10,951  
Decrease (Increase) in Accounts Receivabl  
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  
Net Cash Provided for Operating Activities  
$ (5,766,380) $ 5,897,311  
The accompanying notes are an integral part of this financial statement.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
12  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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).  
No member county may withdraw for sixty months after joining the WCRP. A member may  
withdraw after that time at the end of any WCRP fiscal year, provided it has given the WCRP 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 2008 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 any loss 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 million dollars per occurrence/annual aggregate catastrophe limits each for earthquake  
and flood coverage. The 2008 policy year began with twenty-six participating counties and ended  
with twenty-seven participants.  
b.  
Basis of Accounting and Presentation  
The accounting records of the WCRP are maintained in accordance with methods prescribed by  
the State Auditor’s Office under the authority of Chapter 43.09 RCW. The WCRP also follows the  
accounting standards established by the Governmental Accounting Standards Board (GASB)  
Statement 10, Accounting And Financial Reporting For Risk Financing And Related Insurance  
Issues, as amended by GASB Statement 30, Risk Financing Omnibus, GASB Statement 31,  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
13  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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. Unbilled receivables are recorded at year end.  
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.  
Vacation (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  
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  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
14  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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.  
Claim liabilities are actuarially recomputed periodically using 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 amount deducted from  
claims liabilities as of September 30, 2008 and 2007 for reinsurance were $9,458,734 and  
$8,907,186 respectively. Premiums ceded to reinusrers during 2008 and 2007 were $3,806,063  
and $3,772,810 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. Investment income is not considered during the determination of member  
assessments.  
k.  
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.  
l.  
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  
15  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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 - 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, 2008 and 2007, of $19,269,287 and  
$22,113,922 respectively.  
NOTE 3 - 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 2008 and 2007 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 is $35,000,000.  
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, 2008 and 2007 of  
$1,264,343 and $1,182,993 respectively, and is committing $1,437,299 for PY-2009, specifically for the  
purpose of funding its self-insured retentions for those years.  
NOTE 4 – 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-2008 and PY-2007 are as follows:  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
16  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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 an 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 for at the beginning of Py2008; and the 27th joined in March of 2008. The  
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.  
$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  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
17  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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.  
NOTE 5 - MEMBER'S SUPPLEMENTAL ASSESSMENTS AND CREDITS  
RCW 48.62.141 and the WCRP Interlocal Agreement provide for the contingent liability of participants in  
the program if assets of the program are insufficient to cover the program's liabilities. Deficits of the  
WCRP are financed through supplemental (retroactive) assessments against its affected member  
counties. During policy year 2008 no additional retroactive assessments were levied. Payment received  
from previously levied supplemental assessments reduced the outstanding balance by $322,708. At the  
end of policy year 2008, all prior retroactive assessments had been paid in full.  
NOTE 6 – CAPITAL ASSETS  
Capital assets are defined by WCRP policy as having an initial, individual cost of at least $2,500 and an  
estimated useful life in excess of one year. Capital assets are recorded at historical cost.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
18  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
Capital assets activities for the fiscal year ended September 30, 2008 were as follows:  
Beginning  
Ending  
Balance  
Increase  
Balance  
9/30/07  
(Decrease)  
9/30/08  
Capital Assets Being Depreciated:  
Building  
Office Furnishings and Equipment  
Total Capital Assets being Depreciated  
$ 685,304  
322,782  
$ 1,008,086  
440,355  
(14,303)  
426,052  
1,125,659  
308,479  
1,434,138  
Less Accumulated Depreciation for:  
Building  
Office Furnishings and Equipment  
Total Accumulated Depreciation  
$
34,266  
257,482  
30,183  
8,441  
70,946  
64,449  
265,923  
330,372  
$ 291,748  
$ 716,338  
TOTAL CAPITAL ASETS NET  
355,106  
1,103,766  
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 7 - 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 combination defined  
benefit/defined contribution plan. Membership in the system includes: elected officials; state employees;  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
19  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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 in national higher education retirement programs); 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. 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.  
Plan 1 retirement benefits are vested after an employee completes five years of eligible service. Plan 1  
members are eligible for retirement at any age 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 pension is 2 percent of the average  
final compensation per year of service, capped at 60 percent. The average final compensation is based  
on the greatest compensation during any 24 eligible consecutive compensation months. If qualified, after  
reaching the age of 66 a cost-of-living allowance is granted based on years of service credit and is capped  
at 3 percent annually.  
Plan 2 retirement benefits are vested after an employee completes five years of eligible service. Plan 2  
members may retire at the age of 65 with five years of service, or at the age of 55 with 20 years of service,  
with an allowance of 2 percent of the average final compensation per year of service. The average final  
compensation is based on the greatest compensation during any eligible consecutive 60-month period.  
Plan 2 retirements 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 3 percent per year reduction applies; otherwise an actuarial reduction will  
apply. There is no cap on years of service credit; and a cost-of-living allowance is granted (indexed to the  
Seattle Consumer Price Index), capped at 3 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 1 percent of the average final compensation per year of service. The average final  
compensation is based on the greatest compensation during any eligible consecutive 60-month period.  
Plan 3 members become eligible for retirement if they have: at least ten years of service; or five years  
including twelve months that were earned after age 54; or five service credit years earned in PERS Plan 2  
prior to June 1, 2003. Plan 3 retirements 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 3 percent per year reduction applies; otherwise an  
actuarial reduction will apply. There is no cap on years of service credit; and Plan 3 provides the same  
cost-of-living allowance as Plan 2. The defined contribution portion can be distributed in accordance with  
an option selected by the member, either as a lump sum or pursuant to other options authorized by the  
Employee Retirement Benefits Board.  
There are 1,169 participating employers in PERS. Membership in PERS consisted of the following as of  
the latest actuarial valuation date for the plans of September 30, 2004:  
Retirees and Beneficiaries Receiving Benefits  
Terminated Plan Members Entitled to But Not Yet Receiving Benefits  
Active Plan Members Vested  
Active Plan Members Nonvested  
Total  
66,846  
21,031  
103,039  
53,217  
244,183  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
20  
MCAG No. 0774  
Funding Policy  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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 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. PERS Plan 3 defined contribution is a non-contributing plan for  
employers. Employees who participate in the defined contribution portion of PERS Plan 3 do not  
contribute to the defined benefit portion of PERS Plan 3. 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. 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 2007 were as follows:  
PERS Plan  
1
PERS Plan  
2
PERS Plan  
3
Employer*  
Employee  
8.13%  
8.13%  
8.13%**  
6.00%  
5.45%  
***  
* The employer rates include the employer administrative expense fee currently set at 0.22%.  
** 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
PERS Plan  
2
PERS Plan  
3
2008  
2007  
2006  
$7,414  
$5,630  
$3,478  
$26,127  
$18,186  
$ 8,844  
$1,890  
$1,609  
$0  
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, 2008 and 2007  
were $33,819 and $29,950, respectively.  
NOTE 8 - 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.  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
21  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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  
22  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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  
23  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
24  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
2.  
List of Participating Member  
The following is a list of WCRP membership for the fiscal year 2007-2008  
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  
25  
MCAG No. 0774  
WASHINGTON COUNTIES RISK POOL  
NOTES TO FINANCIAL STATEMENTS  
October 1, 2007 Thru September 30, 2008  
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:  
2008  
2007  
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  
$ 7,943,944  
1,264,343  
(251,086)  
$ 8,957,201  
$ 7,739,015  
1,182,993  
554,842  
Total Incurred Claims and Claims Adjustment Expenses  
Payments:  
$ 9,476,850  
Claims and Claims Adjustment Expenses Attributable to  
Insured Events of the Current Year  
$
87,032  
$
75,153  
Claims and Claims Adjustment Expenses Attributable to  
Insured Events of Prior Years  
1,576,641  
1,457,753  
Total Payments  
$ 1,663,673  
$ 1,532,906  
Total Unpaid Claims and Claims Adjustment Expenses  
End of Year  
$
7,293,528 $ 7,943,944  
_________________________________________________________________________________________________________  
Washington State Auditor's Office  
26  
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)