Financial Statements Audit Report

Washington Counties Risk

Pool

For the period October 1, 2025 through December 31, 2025

Published August 31, 2026

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Report No. 1040389

Office of the Washington State Auditor

Pat McCarthy

August 31, 2026

Board of Directors

Washington Counties Risk Pool

Tumwater, Washington

Report on Financial Statements

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

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

condition.

Sincerely,

Pat McCarthy, State Auditor

Olympia, WA

Americans with Disabilities

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

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

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

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

TABLE OF CONTENTS

Schedule of Audit Findings and Responses.................................................................................... 4

Summary Schedule of Prior Audit Findings .................................................................................. 10

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

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

Government Auditing Standards ................................................................................................... 12

Independent Auditor's Report on the Financial Statements.......................................................... 15

Financial Section........................................................................................................................... 19

About the State Auditor's Office................................................................................................... 55

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SCHEDULE OF AUDIT FINDINGS AND RESPONSES

Washington Counties Risk Pool

October 1, 2025 through December 31, 2025

2025-001

The Pool did not comply with solvency requirements, increasing

the risk it will be unable to pay its outstanding claims.

Background

The Washington Counties Risk Pool was established in 1988 to provide member

counties with joint programs and services including self-insurance, purchasing of

insurance, and contracting for or hiring of personnel to provide risk management,

claims handling, and administrative services.

State regulations hold property and liability programs, such as those administered

by the state’s 15 risk pools, to standards of solvency that are defined in Washington

Administrative Code (WAC). To be considered solvent, the Pool’s assets must be

at least equal to its actuarial estimate of unpaid claims at fiscal year-end.

Specifically, WAC requires that the Pool establish and maintain an amount of

primary assets, including cash and investments, that is at least equal to the actuary’s

expected unpaid claims estimate. WAC also requires the Pool’s total assets,

including primary assets and secondary assets such as real estate and insurance

receivables, to be at least equal to the unpaid claim estimate at the 80% confidence

level.

Pools that do not meet either of these requirements must notify the State Risk

Manager, and they risk receiving a cease-and-desist order or other required

corrective action.

Description of Condition

Historically, the Pool has operated with a fiscal year end of September 30. For

2025, the Board authorized the Pool to change its fiscal period to a calendar year

ending December 31. The Pool did not meet the total asset solvency test, as defined

in WAC, by at fiscal year-end December 31, 2025.

The Pool’s management notified the State Risk Manager in July 2026 that it did not

meet these requirements for fiscal year-end 2025.

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Cause of Condition

The Pool recently experienced an increase in claims-associated costs. During the

prior audit, we identified and reported that the Pool did not meet solvency

requirements. As the current audit is only for a three-month period, the Pool did not

have sufficient time to implement our recommendation.

Effect of Condition

The Pool did not have sufficient cash and investments at year-end to cover its

unpaid claims liabilities. As of December 31, 2025, the Pool’s total assets were

$98.6 million, which was about $25.3 million short for the total asset test. This

shortage increases the possibility that the Pool would not be able to cover its

members’ unpaid claims.

Recommendation

We recommend the Pool establish and follow procedures, including increased

monitoring, to ensure it meets regulatory solvency requirements.

We further recommend the Pool work with the State Risk Manager regarding its

compliance with solvency requirements at year-end and resolve any ongoing

concerns.

Pool’s Response

The Washington Counties Risk Pool (“WCRP”) acknowledges the audit finding

and responds accordingly.

During fiscal year 2025 and the three-month stub year from October 2025 through

December 2025, the WCRP experienced a significant increase in claim activity and

related liabilities. As a result, the Pool fell below the year-end solvency

requirements for both the primary asset test and the total asset test.

In response, WCRP Management has taken the following steps:

•

Notified the designated contact within the Washington State Department of

Enterprise Services Risk Management (DES) in November 2025 and again

in January 2026, consistent with WAC requirements.

•

Begun scheduling meetings with DES to discuss further corrective action

plans.

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At its October 23-24, 2025, annual board meeting, the Board of Directors approved

several funding and program actions to strengthen the Pool’s financial position

and restore compliance with solvency requirements. These actions include:

•

A 35% percent base-rate increase for the Liability Program for fiscal year

2026, resulting in a direct injection of capital to our net position.

•

Property Program assessments remain unchanged from the prior year even

though premiums for property insurance decreased for fiscal year 2026.

This provided additional capital to our net position.

•

Cyber Program assessments remain unchanged, and the Pool’s self-insured

retention was reduced from $500,000 to $25,000, again adding capital to

our net position as we did not need to collect the same amount as the prior

fiscal year for our actuarial projections for retained losses.

The WCRP continues to monitor claim development, liquidity, and actuarial

reserve projections.

With the above actions taken by the Board of Directors, we estimate an increase to

our net position of $17.2 million in fiscal year 2026. We expect this increase to

restore compliance with both solvency thresholds.

In addition, the Pool is implementing enhanced solvency monitoring procedures,

including:

•

Quarterly monitoring of primary and total asset solvency ratios.

Regular reporting to the Board of Directors on liquidity and reserve trends.

Continued coordination with the State Risk Manager on corrective action

progress.

•

Ongoing evaluation of funding adequacy through actuarial analysis and

budget development.

The WCRP believes these corrective actions and enhanced monitoring procedures

appropriately address the solvency condition identified in the audit finding and

demonstrate the Board of Directors commitment to the WCRP’s long-term financial

stability.

Auditor’s Remarks

We thank the Pool for its cooperation throughout the audit and the steps it is taking

to address these concerns. We will review the status of the Pool’s corrective action

during our next audit.

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Applicable Laws and Regulations

Government Auditing Standards, July 2018 Revision, paragraphs 6.40 and 6.41

establish reporting requirements related to significant deficiencies or material

weaknesses in internal control, instances of fraud, and noncompliance with

provisions of laws, regulations, contracts, or grant agreements.

The American Institute of Certified Public Accountants defines significant

deficiencies and material weaknesses in its Codification of Statements on Auditing

Standards, section 265, Communicating Internal Control Related Matters Identified

in an Audit, paragraph 7.

WAC 200-100-020 Definitions, states in part:

(18) “Primary assets” means cash, short-term investments, and long-term

investments.

(21) “Secondary assets” means insurance and member receivables, real

estate or other assets the value of which can be independently verified by

the state risk manager.

WAC 200-100-03001 Standards for solvency – Actuarially determined liabilities,

program funding and liquidity requirements states:

(1) All joint self-insurance programs shall obtain an annual actuarial

review as of fiscal year end which provides written estimates of the liability

for unpaid claims measured at the expected level and the seventy, eighty,

and ninety percent confidence level.

(2) The governing body of the joint self-insurance program shall establish

and maintain primary assets in an amount at least equal to the unpaid

claims estimate at the expected level as determined by the program's

actuary as of fiscal year end. All joint self-insurance programs meeting this

requirement shall be considered in compliance with the primary asset test.

All joint self insurance programs that do not meet the requirements of the

primary asset test shall notify the state risk manager in writing of the

condition. The state risk manager shall take corrective action, which may

include the service of a cease-and-desist order upon the program, to require

that the program increase primary assets in an amount equal to the unpaid

claims estimate at the expected level as determined by the program's

actuary as of fiscal year end.

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(3) The governing body of every joint self-insurance program operating

under this chapter shall establish and maintain total primary and secondary

assets in an amount equal to or greater than the unpaid claim estimate at

the eighty percent confidence level as determined by the program's actuary

as of fiscal year end.

(4) All joint self-insurance programs authorized by chapter 48.62 RCW

shall meet the requirements of both the primary asset test and the total asset

test. The governing body of all joint self-insurance programs that do not

meet requirements of the total asset test shall notify the state risk manager

in writing of the condition. The state risk manager shall require that the

program submit a written corrective action plan to the state risk manager

within sixty days of notification. Such plan shall include a proposal for

improving the financial condition of the self-insurance program and a time

frame for completion. The state risk manager shall approve or deny the

proposed plan in writing within thirty days of receipt of the final plan

submission. Joint self-insurance programs operating under an approved

plan and making satisfactory progress according to the terms of the plan

shall remain under supervisory watch by the state risk manager until the

terms of the approved plan have been met. Programs under supervisory

watch but not making satisfactory progress may be subject to the following

requirements:

(a) Increase in frequency of examinations, the cost of which shall be

the responsibility of the program;

(b) Submission of quarterly reports;

(c) On-site monitoring by the state risk manager; or

(d) Service of a cease-and-desist order upon the program.

(5) Failure by the joint self-insurance program to respond or submit a plan

to improve the financial condition of the program shall cause the state risk

manager to take corrective action, which may include written notification

to every member of the joint self-insurance program, the service of a cease

and-desist order upon the program, and other available remedies necessary

to ensure the program operates in a financially sound manner.

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(6) All joint self-insurance programs that do not maintain total primary and

secondary assets in an amount equal to or greater than unpaid claim

estimate at the seventy percent confidence level, as determined by the

program’s actuary, as of fiscal year end shall be issued a cease-and-desist

order by the state risk manager. Such programs will be considered under a

supervisory cease and desist order.

(7) The state risk manager shall evaluate the operational safety and

soundness of the program by monitoring changes in liquidity, claims

reserves and liabilities, member equity, self-insured retention, and other

financial trends over time. Programs experiencing adverse trends may

cause the state risk manager to increase frequency of on-site program

review and monitoring, including increased communication with the

governing body and requirements for corrective plans.

(8) When the state risk manager determines it necessary to analyze the

program’s soundness and financial safety, the state risk manager may

obtain an independent actuarial evaluation to determine the accuracy of the

estimate for unpaid claims liabilities, including the estimate of unallocated

loss adjustment expenses. Costs of these services shall be the responsibility

of the joint self-insurance program.

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SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS

Washington Counties Risk Pool

October 1, 2025 through December 31, 2025

This schedule presents the status of findings reported in prior audit periods.

Audit Period:

Report Ref. No.:

Finding Ref. No.:

1039864

2025-001

10/01/2024 – 09/30/2025

Finding Caption:

The Washington Counties Risk Pool did not comply with solvency requirements, increasing

the risk it will be unable to pay its outstanding claims.

Background:

The Pool did not have sufficient cash and investments at year-end to cover its unpaid claims

liabilities. The audit found the Pool’s primary assets were $88.4 million and its total assets

were $97.7 million. As of September 30, 2025, the Pool was about $550,000 short of meeting

its regulatory solvency requirements for the primary asset test, and it was about $21.2 million

short for the total asset test. These shortages increase the possibility that the Pool would not be

able to cover its members’ unpaid claims.

Status of Corrective Action: (check one)

☐ Fully

☒ Partially

☐ Finding is considered no

☐ Not Corrected

Corrected

longer valid

Corrective Action Taken:

At its October 23–24, 2025 annual board meeting, the Board of Directors approved several

funding and program actions to strengthen the Pool’s financial position and restore

compliance with solvency requirements. These actions include:

• A 35 percent increase in Liability Program base-rates.

• Property Program assessments remain unchanged, while market premium costs have

decreased.

• Cyber Program assessments remain unchanged, and the Pool’s self-insured retention

has been reduced from $500,000 to $25,000.

• Continued monitoring of claims development, liquidity, and actuarial reserve

projections.

• WCRP estimates that these actions will increase net position by $17.2 million in fiscal

year 2026 and restore compliance with both solvency thresholds.

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In addition, the Pool is implementing enhanced solvency monitoring procedures, including:

• Quarterly monitoring of primary and total asset solvency ratios.

• Regular reporting to the Board of Directors on liquidity and reserve trends.

• Continued coordination with the State Risk Manager on corrective action progress.

• Ongoing evaluation of funding adequacy through actuarial analysis and budget

development.

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INDEPENDENT AUDITOR’S REPORT

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

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

Government Auditing Standards

Washington Counties Risk Pool

October 1, 2025 through December 31, 2025

Board of Directors

Washington Counties Risk Pool

Tumwater, Washington

We have audited, in accordance with auditing standards generally accepted in the United States of

America and the standards applicable to financial audits contained in Government Auditing

Standards, issued by the Comptroller General of the United States, the financial statements of the

Washington Counties Risk Pool, as of and for the year ended December 31, 2025, and the related

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

and have issued our report thereon dated August 26, 2026.

REPORT ON INTERNAL CONTROL OVER FINANCIAL

REPORTING

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

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

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

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

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

internal control.

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

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

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

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

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

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

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

to merit attention by those charged with governance.

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

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

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

that were not identified.

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

that we consider to be material weaknesses.

REPORT ON COMPLIANCE AND OTHER MATTERS

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

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

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

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

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

opinion.

The results of our tests disclosed instances of noncompliance or other matters that are required to

be reported under Government Auditing Standards and which are described in the accompanying

Schedule of Audit Findings and Responses as Finding 2025-001.

POOL’S RESPONSE TO FINDINGS

Government Auditing Standards requires the auditor to perform limited procedures on the Pool’s

response to the findings identified in our audit and described in the accompanying Schedule of

Audit Findings and Responses. The Pool’s response was not subjected to the auditing procedures

applied in the audit of the financial statements and, accordingly, we express no opinion on the

response.

PURPOSE OF THIS REPORT

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

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

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

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

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

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

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

Pat McCarthy, State Auditor

Olympia, WA

August 26, 2026

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INDEPENDENT AUDITOR’S REPORT

Report on the Audit of the Financial Statements

Washington Counties Risk Pool

October 1, 2025 through December 31, 2025

Board of Directors

Washington Counties Risk Pool

Tumwater, Washington

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

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

as of and for the year ended December 31, 2025, and the related notes to the financial statements,

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

of our report.

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

material respects, the financial position of the Washington Counties Risk Pool, as of December 31,

2025, and the changes in financial position and cash flows thereof for the year then ended in

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

Basis for Opinion

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

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

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

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

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

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

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

and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

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

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

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

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

fraud or error.

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

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

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

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

Auditor’s Responsibilities for the Audit of the Financial Statements

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

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

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

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

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

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

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

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

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

reasonable user based on the financial statements.

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

following responsibilities:

•

Exercise professional judgment and maintain professional skepticism throughout the audit;

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

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

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

disclosures in the financial statements;

•

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

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

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

is expressed;

•

Evaluate the appropriateness of accounting policies used and the reasonableness of

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

presentation of the financial statements;

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

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

concern for a reasonable period of time; and

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

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

control-related matters that we identified during the audit.

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Required Supplementary Information

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

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

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

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

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

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

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

required supplementary information in accordance with auditing standards generally accepted in

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

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

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

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

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

express an opinion or provide any assurance.

Other Information

The other information comprises the Pool’s DES Schedule of Expenses and List of Participating

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

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

opinion on the basic financial statements does not cover this other information, and we do not

express an opinion or provide any assurance thereon. In connection with the audit of the basic

financial statements, our responsibility is to read the other information and consider whether a

material inconsistency exists between the other information and the basic financial statements, or

the other information otherwise appears to be materially misstated. If, based on the work

performed, we conclude that an uncorrected material misstatement of the other information exists,

we are required to describe it in our report.

OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING

STANDARDS

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

August 26, 2026 on our consideration of the Pool’s internal control over financial reporting and

on our tests of its compliance with certain provisions of laws, regulations, contracts and grant

agreements and other matters. The purpose of that report is to describe the scope of our testing of

internal control over financial reporting and compliance and the results of that testing, and not to

provide an opinion on the effectiveness of the Pool’s internal control over financial reporting or

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

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

and compliance.

Pat McCarthy, State Auditor

Olympia, WA

August 26, 2026

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FINANCIAL SECTION

Washington Counties Risk Pool

October 1, 2025 through December 31, 2025

REQUIRED SUPPLEMENTARY INFORMATION

Management’s Discussion and Analysis – 2025

BASIC FINANCIAL STATEMENTS

Statement of Net Position – 2025

Statement of Revenues, Expenses and Changes in Net Position – 2025

Statement of Cash Flows – 2025

Notes to Financial Statements – 2025

REQUIRED SUPPLEMENTARY INFORMATION

Schedule of Proportionate Share of Net Pension Liability – PERS 1, PERS 2/3 – 2025

Schedule of Employer Contributions – PERS 1, PERS 2/3 – 2025

MLC Claims Development – 2025

Notes to the Required Supplementary Information - 2025

SUPPLEMENTARY AND OTHER INFORMATION

DES Schedule of Expenses – 2025

List of Participating Members – 2025

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Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

WASHINGTON COUNTIES RISK POOL

2558 R.W. Johnson Blvd SW, Suite 106

Tumwater, WA 98512-6103

Created by Counties for Counties

Management’s Discussion & Analysis

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

financial activities following the conclusion of its Stub-Year, ending December 31, 2025. The information in this

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

accompanying notes to understand WCRP’s financial position.

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

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

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

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

WCRP’s operating revenues are derived primarily from member county assessments. Operating expenses consist

mainly of claim payments, including allocated loss adjustment expenses, as well as premiums for reinsurance and

excess liability, property, cyber risk/security, and crime insurance policies purchased from highly rated

commercial carriers.

The Pool transitioned to a January through December fiscal year as of 2026; therefore, the period from October

1 through December 31, 2025, represents a three-month stub reporting period. Because the reporting period covers

only three months (October through December 2025), financial results are not directly comparable to the prior

twelve-month fiscal year.

Discussion of the Financial Statements:

The basic financial statements are comprised of two components: the financial statements and the notes to those

financial statements. WCRP’s two financial statements in a condensed format are presented hereafter with two-

year comparative data.

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

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

COMPARATIVE STATEMENT OF

Fiscal Years Ending

NET POSITION

09/30/2025

$111,273,054

12/31/2025

$105,595,393

Current Assets

Total Current Assets

$111,273,054

$105,595,393

Capital Assets (Net)

Lease / SBITA (Net)

Net Pension Asset (Non-current)

Total Non-Current Assets

$540,927

58,236

281,786

$880,949

$523,152

189,037

281,786

$993,975

Deferred Outflows of Resources

$357,179

$376,611

Total Deferred Outflows

$357,179

$376,611

Current Liabilities

Non-Current Liabilities

Total Liabilities

$30,163,153

73,249,474

$103,412,627

$24,781,342

75,832,492

$100,613,834

Deferred Inflows of Resources

$110,859

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Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Total Deferred Inflows of Resources

$110,859

Investment in Capital Assets

Unrestricted Net Position

Restricted Net Position (Pension - GASB 68)

Total Net Position

$540,927

8,164,983

281,786

$523,152

5,436,348

281,786

$8,987,696

$6,241,286

Because the current reporting period represents a three-month stub period, comparisons to the prior twelve-month

fiscal year are not necessarily meaningful.

Analysis:

Between September 30, 2025, and December 31, 2025, total assets decreased by approximately $5.6 million, while

total liabilities decreased by approximately $2.8 million. Because the decrease in assets exceeded the decrease in

liabilities, net position decreased by approximately $2.8 million during the three-month Stub-Year.

Independent actuarial estimates increased unpaid claim liabilities by approximately $4.8 million across multiple

coverage years. The impact of these adjustments were partially offset by investment earnings and Board-directed

funding in excess of operating costs. Management and the Board of Directors continue to monitor reserve adequacy

and funding levels in response to evolving loss experience and actuarial guidance.

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

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

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

expenses.

COMPARATIVE STATEMENT OF REVENUES,

EXPENSES AND CHANGES IN NET POSITION

Fiscal Year Ending

9/30/2025

12/31/2025

Operating Revenues

Member Liability Assessments

Member Cyber/Terrorism/Crime Assessments

Member Property Assessments

Operating Revenues – Miscellaneous

Total Operating Revenues

Non-Operating Revenues

Interest Income

$44,957,034

731,889

8,453,992

157,593

$11,239,258

182,363

2,113,498

2,503

$54,300,508

$13,537,622

$3,747,976

15,000

$973,907

3,750

Rental Income

Gain on Capital Asset Disposition

Fair Value Adjustment of Investments

Total Non-Operating Revenues

Total Revenues

0

345,718

4,108,694

$58,409,202

102,148

1,079,805

$14,617,427

Operating Expenses

Liability, Property, Cyber, ULAE Reserve & Pr. Yr. Adj.

Premiums for Liability Insurance Policies

Premium for Cyber Insurance Policy

Premiums for Property Insurance Policies

Premium for Terrorism Insurance Policy

Premium for Crime Insurance Policy

$37,533,745

15,200,598

253,900

7,105,965

60,847

$10,526,855

3,800,150

50,780

1,776,491

12,169

43,643

11,436

Depreciation, Amortization & Operating Expenses

Total Operating Expenses

5,007,964

$65,206,662

1,223,424

$17,401,305

Non-Operating Expenses

Rental Expense

$2,408

$482

Page 21

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Jail Health Monitoring Reimbursements

Total Non-Operating Expenses

199,687

$202,095

25,000

$25,482

Total Expenses

$65,408,757

$17,426,787

Changes in Net Position

($6,999,555)

$15,987,251

0

($2,809,359)

$8,987,696

62,949

Beginning Net Position (October 1^st)

Error Correction

Ending Net Position (December 31st)

$8,987,696

$6,241,286

Because the current reporting period represents a three-month stub period, comparisons to the prior twelve-month

fiscal year are not necessarily meaningful.

Analysis:

For the Stub-Year ending December 2025, Member Liability Assessments were calculated using twenty-five

percent of the 2024-25 fiscal year calculations resulting in member assessments of $11,239,258 for liability and

$2,113,498 for property. Member Cyber/Terrorism/Crime Assessments were also calculated at the same rate

resulting in member assessments of $182,363. The additional actuarial adjustments for new claims during the

2025 Stub-Year further reduced the Pool’s Net Position to approximately $6.2 million.

Overall Analysis of Financial Position and Result of Operations:

The WCRP’s Self-Insured Retention (SIR) has increased over recent years to its current $3M in the Stub-Year,

which was adopted in FY2024-25. This increased SIR has increased the Pool’s exposure and uncertainty, requiring

a continued aggressive funding approach in building the Pool’s Net Position. While Stub-Year 2025 saw a

decrease in the net position, continued direct capital funding in future years is expected to support restoration of

long-term net position growth.

The Pool remains focused on its overall financial position, financial practices, claims management, and its

investment strategy and performance. In recent years, the Pool has taken deliberate steps to strengthen its Net

Position, budgeting additional contributions of $1,200,000 in 2022, $5,000,000 in 2023, $7,000,000 in 2024, and

$8,750,000 in 2025, including the October–December 2025 stub period.

For Fiscal Year 2026, the Board has approved $15.4 million in funding, with any premium overages or shortages

in Property, Cyber, Terrorism, or Crime also directly impacting the fund balance. Although liability costs have

grown faster than the additional funding, the Board of Directors is prepared to further increase future

contributions to meet and exceed projected loss trends. WCRP continues to monitor reserve adequacy, pending

litigation, actuarial projections, and funding levels as part of its ongoing financial oversight practices.

Solvency Position and Board Actions: In accordance with Washington Administrative Code (WAC) 200‑100, the

Pool’s solvency is evaluated annually based on actuarial estimates of unpaid claims using both the Primary Asset

Test and the Total Asset Test. As disclosed in Note 10, as of December 31, 2025, the Pool satisfied the Primary

Asset Test but did not satisfy the Secondary Asset Test under (WAC) 200-100. These results represent

point‑in‑time measurements and do not reflect actions taken by the Board immediately following year‑end.

At its Annual Meeting held October 23–24, 2025, the Board approved significant funding measures, most notably

a 35 percent increase in the Liability Program base rate and other program adjustments, estimated to increase net

position by approximately $17.2 million once assessments are collected in early 2026. The Pool communicated

these actions to the Washington State Risk Manager on November 5, 2025, and again on January 27, 2026.

Management projects that the approved funding measures will materially improve solvency metrics during 2026,

although actual results will depend on future claims development and actuarial estimates.

The WCRP remains focused on maintaining long‑term financial stability and has taken proactive steps to

strengthen its solvency position to be aligned with the requirements of Washington Administrative Code (WAC)

200‑100.

Page 22

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Budget Variance Analysis:

Operating expenses did not exceed the approved 2025 Stub-Year budget.

Request for Information:

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

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

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

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

4500.

Page 23

Washington Counties Risk Pool

Stub-Year 2025

MCAG NO. 0774

Statement of Net Position

December 31, 2025

ASSETS:

CURRENT ASSETS:

As of

December 31, 2025

Cash and Cash Equivalents (Including WF Sweep Account)

Investments

Accounts Receivable

Accrued Interest

Prepaid Expenses

5,809,063

97,150,705

1,350,465

839,348

445,812

TOTAL CURRENT ASSETS

105,595,393

NON-CURRENT ASSETS:

Capital Assets (Net of Accumulated Depreciation)

LEASE / SBITA (Net of Accumulated Amortization)

Net Pension Asset

523,152

189,037

281,786

TOTAL NON-CURRENT ASSETS

TOTAL ASSETS

993,975

106,589,368

376,611

TOTAL DEFERRED OUTFLOWS RELATED TO PENSIONS

LIABILITIES:

CURRENT LIABILITIES:

"SIR" Claims Reserves

Open Claims - SIR Reserves

Open Claims - Corridor Reserves

Property Reserves

16,598,180

215,000

460,428

72,500

Cyber Reserves

Accounts Payable

Payroll Liabilities

194,230

99,207

Unearned Revenue

LEASE / SBITA Liabilities

7,088,468

53,329

TOTAL CURRENT LIABILITIES

24,781,342

NON-CURRENT LIABILITIES

"SIR" Claims Reserves

Open Claims - SIR Reserves

IBNR Reserves - IBNR

Reserve for ULAE

LEASE / SBITA Liabilities

Compensated Absences

Net Pension Liability

24,714,960

49,463,158

1,113,000

136,026

338,062

67,286

TOTAL NON-CURRENT LIABILITIES

TOTAL LIABILITIES

75,832,492

100,613,834

110,859

TOTAL DEFERRED INFLOWS RELATED TO PENSIONS

NET POSITION:

Net Investment in Capital Assets

Restricted Net Position - (Pension - GASB 68)

Unrestricted Net Position

523,152

281,786

5,436,348

TOTAL NET POSITION

6,241,286

The accompanying notes are an integral part of these financial statements

Page 24

Washington Counties Risk Pool

Stub-Year 2025

MCAG NO. 0774

Statement of Revenues, Expenses, and Changes in Fund Net Position

For Stub-Year Ending December 31, 2025

As of

OPERATING REVENUES:

12/31/2025

Members' Assessments -- MLC

Members' Assessments -- WCPP

Cyber/Terrorism/Crime Coverage

Other Operating Income

$

11,239,258

2,113,498

182,363

2,503

Total Operating Revenues

$

13,537,622

OPERATING EXPENSES:

Current Year Liability SIR

Current Year Liability $2M x $8M SIR

Current Year Property SIR

$

5,250,000

375,000

80,770

Current Year Cyber SIR

72,500

Adjustment in Prior Years' Liability SIR

Adjustment in Prior Years' Liability Corridor SIR

Adjustment in Prior Years' Property SIR

Adjustment in Prior Years' Cyber SIR

Adjustment in Reserve for ULAE

MLC Reinsurance Premiums/Excess

WCPP Insurance Premiums

4,802,691

150,000

(75,362)

(59,744)

(69,000)

3,800,150

1,776,491

50,780

Cyber Liability Premiums

Crime Liability Premiums

11,436

Terrorism Liability Premiums

Depreciation

12,169

17,775

Amortization Expense (Lease/SBITA)

Interest Expense - Copier Lease

Operating Expenditures

10,339

183

1,195,127

17,401,305

Total Operating Expenses

$

OPERATING INCOME

$

(3,863,683)

NON-OPERATING REVENUES (EXPENSES)

Interest Income

Rental Income

Rental Expense

Jail Health Monitoring Reimbursements

Adjustment to Investments

$

973,907

3,750

(482)

(25,000)

102,148

1,054,324

Total Nonoperating Revenues (Expenses)

CHANGES IN NET POSITION

$

(2,809,359)

Beginning Net Position, as previously reported

Correction of prior period error

8,987,696

62,949

Beginning Net Position, as restated

TOTAL NET POSITION, as of December 31st

$

9,050,645

6,241,286

The accompanying notes are an integral part of these financial statements

Page 25

Washington Counties Risk Pool

Statement of Cash Flows

For the Stub-Year Ending

December 31, 2025

MCAG NO. 0774

Year Ended

12/31/2025

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from Members & Insurers

$

7,622,384

Cash payments for goods and services

Cash payments to employees for services

(8,139,740)

(432,071)

Net Cash Provided (Used) by Operating Activities

$

(949,427)

CASH FLOW FROM INVESTING ACTIVITIES:

Investment Income

1,076,055

Net cash provided by Investing Activities

$

1,076,055

CASH FLOW FROM CAPITAL FINANCING ACTIVITIES:

SBITA - Principal Payments

Leases - Principle Payments

Rental Income (net)

(9,281)

(1,167)

3,269

Net cash provided by Financing Activities

(7,179)

CASH FLOW FROM NON-CAPITAL FINANCING ACTIVITIES:

Jail Health Monitoring Payments

(25,000)

Net cash provided by Non-Capital Financing Activities

($25,000)

Increase (Decrease) in Cash and Cash Equivalents

$

94,449

Cash and Cash Equivalents - Beginning of the Year

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

102,865,320

102,959,769

Page 26

Washington Counties Risk Pool

Statement of Cash Flows

For the Stub-Year Ending

December 31, 2025

MCAG NO. 0774

Year Ended

12/31/2025

RECONCILIATION OF OPERATING INCOME TO NET CASH

PROVIDED (USED) BY OPERATING ACTIVITIES

OPERATING INCOME

$

(3,863,683)

Adjustments to Reconcile Net Operating Income (Loss) to Net Cash Used by Operations:

Depreciation Expense

Error Correction

17,775

62,949

Cash provided (used) by Operating Activities:

Changes in Assets and Liabilities

Decrease (Increase) in Accounts Receivable

(Increase) Decrease in Accrued Interest

(Increase) Decrease in Prepaid Expenses

Increase (Decrease) in Unearned Revenue

Increase (Decrease) in SIR Reserves

Increase (Decrease) in Corridor SIR Reserves

Increase (Decrease) in SIR Reserves Cyber/Property

Increase (Decrease) in Accounts Payable

Increase (Decrease) in Payroll Liabilities

521,111

(21,666)

5,272,665

(6,436,350)

3,805,618

150,000

(228,285)

(177,314)

28,709

Increase (Decrease) in ULAE Reserves

(69,000)

(3,046)

10,521

Increase (Decrease) in Compensated Absences

Increase (Decrease) Right to Use SBITA's / Leases Amortization

Change in Deferred Inflows and Outflows:

(Increase) Decrease in deferred outflows - Pensions and OPEB

(19,432)

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

$

(949,427)

The accompanying notes are an integral part of these financial statements

Page 27

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

NOTES TO FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Generally Accepted Accounting Principles (GAAP) as applied to governmental units. The Governmental Accounting

Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial

principles. The significant accounting policies are described below.

A.

Reporting Entity

The WCRP was formed by Interlocal Agreement in August 1988 pursuant to Chapters 48.62 and 39.34

Revised Code of Washington (“RCW”).

The WCRP is governed by its 24-member Board of Directors with a President, Vice-President, and

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

its Summer Conference & Board Meeting and its Fall Conference & Board Meeting, while also holding a

WCRP Symposium in the Spring. The Symposium is open to member county staff to enhance risk

management skills, interact with peers for exchange of information, and learn best practices for mitigating

risks. The WCRP’s Executive Committee, consisting of eleven (11) members of the Board of Directors,

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

Through the Executive Director, the Pool’s 14-member staff work to conduct the mission and directives of

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

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

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

Services Department provides various risk management training opportunities, scholarships, conference

event planning, and other educational resources to and for participating members.

Annual deposit assessments are revised to incorporate actuarial projections and operational needs and then

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

members would be responsible for outstanding liabilities of the WCRP.

B.

Basis of Accounting and Presentation

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

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

standards established by the Governmental Accounting Standards Board (GASB) Statement No. 10,

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

Statement No. 30, Risk Financing Omnibus, and GASB Statement No. 31, Accounting and Financial

Reporting for Certain Investments and for External Investment Funds.

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

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

accounted for within the financial statements.

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

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

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

expenses.

Page 28

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

C.

Assets, Liabilities and Net Position

1.

Cash and Cash Equivalents

The WCRP considers cash and cash equivalents to be cash on hand, demand deposits, and all

highly liquid investments (including restricted assets) with a maturity of three months or less when

purchased. In addition, because the LGIP and Spokane Investment Pools are sufficiently liquid to

effectively allow for deposit and withdrawal of cash at any time without prior notice or penalty as

if it were a demand deposit account, equity in the investment pools is also deemed to be cash

equivalent.

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

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

2.

3.

Investments

See Note 3, Deposits and Investments.

Receivables

Amounts due from members and reinsurers related to deductible obligations and reinsurance

recoveries are reported within the Statement of Net Position.

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

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

are considered uncollectible. Uncollectible accounts are recorded as an “expense” in the period they

are deemed uncollectible.

4.

Compensated Absences

Compensated absences are “leave” for which employees may receive cash payments, either when

leave is used or upon termination of employment. Compensated absences include vacation (annual)

leave, sick leave, holidays, and bereavement leave.

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

death. Sick leave may be accumulated up to 130 days, does not vest until retirement or death, and

may be partially converted to annual leave under specified conditions. The accrued sick leave

liability is recorded at 35 percent of the amount earned, based on average usage over a three-year

period.

Compensated absence liabilities are calculated using employee wages as of December 31, 2025, and

include certain defined contribution pensions and other salary-related payments in accordance with

GASB Statement No. 101, effective December 15, 2023.

5.

6.

Prepaid Items

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded

as prepaid items and reclassified as expense in the period benefited.

Capital Assets and Depreciation

See Note 7, Capital Assets, Note 8, Leases, and Note 9, Subscription-Based Information

Technology Arrangements (SBITA).

Page 29

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

7.

Unpaid Claim Liabilities

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

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

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

The length of time for which such costs must be estimated varies depending on the coverage type

involved. Estimated amounts of salvage and subrogation and reinsurance recoverable on unpaid

claims are deducted from the liability for unpaid claims. Because actual claims’ costs depend on

such complex factors as inflation and changes in doctrines of legal liability and in damage awards,

the process used in computing claims liabilities does not necessarily result in an exact amount,

particularly general liability coverage.

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

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

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

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

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

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

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

8.

Reinsurance

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

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

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

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

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

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

by reinsurers.

The cumulative to-date incurred loss amount deducted from claims liabilities as of December 31,

2025, as being reinsured was $213,754,378. Premiums paid to reinsurers for liability coverage

during the 2025 Stub-Year were $3,800,150. The independent actuary’s estimate for the ceded

reinsured amount of gross loss reserves as of December 31, 2025, was $54,550,631.

9.

Member Assessments and Unearned Member Assessments

Member assessments for the Stub-Year ending December 31, 2025, were billed and collected with

the fiscal year 2024-25 assessments and recognized as revenue in the period for which the coverage

was provided. On the balance sheet, member assessments receivables were billed on or about

October 1^stof 2024 with up to the amount equivalent to 100% of the prior year’s assessment being

due by October 31^st, and any remaining assessments balance(s) due before May 1^st. The assessments

calculated for liability coverage were based in substantial part upon the members’ prior year’s

worker hours.

The assessments for Stub-Year 2025 and FY 2024-25 property coverage were calculated based upon

the values of the real and personal properties scheduled by the participating counties. Member

counties are billed on or about October 1^stwith up to 50% of the assessment due by October 31^st,

and the remaining balance due before May 1^st.

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

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

Page 30

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

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

crime coverage is allocated based on total employee count.

Investment income is not currently considered for the determination of member assessments.

Unpaid Claims

10.

11.

Liability claims/lawsuits are recorded to “expense” as incurred. Claims reserves represent the

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

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

Value process and updated by WCRP’s independent actuary. 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 liability claims in process and those liability claims

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

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

current earnings.

12.

13.

Exemption from Federal and State Taxes

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

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

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

Pensions

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

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

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

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

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

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

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

pension assets, was calculated using the GASB preferred method.

The reporting period is a three-month stub period. Pension expense and deferred outflows have been

reported accordingly. Contributions subsequent to the measurement date include contributions

through December 31, 2025.”

14.

Leases (GASB 87)

The Pool has lease agreements for office copy machines with lease terms of up to 60 months. These

agreements convey the right to control the use of identified assets.

At the commencement of the lease term, the Pool recognized a lease liability and a corresponding

right-to-use lease asset measured at the present value of future lease payments. Lease liabilities were

measured using a discount rate of 4%, based on the average yield of the Washington State Local

Government Investment Pool, which management determined to be a reasonable estimate of the

Pool’s incremental borrowing rate.

Page 31

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

The right-to-use lease asset is amortized over the lease term using the straight-line method. Lease

liabilities are reduced as payments are made, with interest expense recognized over the term of the

lease. Lease payments used to measure the lease liability exclude sales and other taxes assessed on

the Pool, which are expensed as incurred.

15.

16.

Subscription-Based Information Technology Arrangements (GASB 96)

The Pool is committed under subscription agreements for software used to conduct business. In

accordance with GASB Statement No. 96, the Pool reports subscription-based information

technology arrangements (SBITA) with contractual periods of not less than 12 months and that meet

the $10,000 SBITA threshold established in WCRP’s implementation policy.

Unearned Revenue

The balance remaining in unearned revenue is related to FY2026 member assessments that were

paid prior to December 31, 2025.

NOTE 2 – ACCOUNTING CHANGES AND ERROR CORRECTIONS

Change in Fiscal Year

Effective October 1, 2025, the Pool changed its fiscal year-end from September 30 to December 31. As a result, the

accompanying financial statements include a three-month transition reporting period covering October 1, 2025

through December 31, 2025 (the "Stub-Year").

This change was made to align the Pool's fiscal year with our members budget cycle and operational reporting,

resulting in a calendar year reporting period beginning January 1, 2026. Accordingly, financial information presented

for the Stub-Year is not directly comparable to prior fiscal year financial statements, which covered a twelve-month

reporting period.

Correction of Prior Period Error

During the current reporting period, the Pool identified an error in the previously issued financial statements for the

fiscal year ended September 30, 2025. The Stub-Year Terrorism Premium totaling $62,949 was recognized as an

expense rather than recorded as a prepaid asset in error.

In accordance with Governmental Accounting Standards Board (GASB) Statement No. 100, Accounting Changes and

Error Corrections, the Pool corrected the error by adjusting beginning net position for the Stub-Year reporting period

(October 1, 2025, through December 31, 2025). The correction increased prepaid expenses and beginning net position

by $62,949.

The following summarizes the effect of the correction on beginning net position:

Description

Amount

Beginning Net Position, as previously reported

Correction of prior period error

$8,987,696

62,949

Beginning Net Position, as restated

$9,050,645

Page 32

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

NOTE 3 – DEPOSITS AND INVESTMENTS

A. Deposits

In accordance with RCW 39.58, WCRP maintains a single operating bank account and deposits its funds into

a public depository, with collateral held in a multiple financial institution collateral pool administered by the

Washington Public Deposit Protection Commission (PDPC). Funds are transferred between the WCRP’s

public depository (depositories) and either the State Treasurer’s Local Government Investment Pool (LGIP);

a US Bank custodial account; or the Spokane County Treasurer’s Spokane County Investment Pool (SCIP).

There are no credit ratings for positions in external investment pools.

WCRP funds deposited as of December 31, 2025, were as follows:

12/31/2025

Wells Fargo Operating Account (Checking/Sweep)

$5,809,063

Washington State Investment Pool (LGIP)

Spokane County Investment Pool (SCIP)

3,999,688

727,319

US Bank Custodial Account

92,423,698

Total deposits and investments

$102,959,768

B.

Investments:

2025 Stub-Year Concentration of Credit:

Market

Value

Average

Duration

Average

Maturity

Rating

Moody/Sp

Percent of

Portfolio

Issuer:

Cost

Government of the

United States

Federal Home Loan

Bank

Federal Farm Credit

Bank

First American Govt

Obligation Fund

Cash (Receivable)

$78,170,044

$6,741,747

$6,504,736

$78,892,622

$6,730,773

$6,539,992

2.01

2.16

Aa1 AA+

85.36%

7.28%

7.08%

.27%

1.09

.92

0

1.14

.97

0

Aa1 AA+

$252,945

$7,366

$252,945

$7,366

Aaa AAAm AAA

Investments Measured at Fair Value

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

accepted accounting principles, as follows:

x

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

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

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

other than quoted prices that are not observable.

x

Level 3: Unobservable inputs for an asset or liability.

As of December 31, 2025, WCRP had the following investments measured at fair value:

Investments by Fair Value Level

Spokane County Investment Pool

U.S. Agencies

12/31/2025

$727,319

Level 1

Level 2

$727,319

Level 3

13,270,765

78,892,622

13,270,765

78,892,622

U.S. Treasuries

Total Investments measured at

Fair Value

$92,890,706

Page 33

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Investments at Amortized Cost

LGIP

Cash (Receivable)

Money Market Fund

$3,999,688

7,366

252,945

Total Investments at Amortized Cost

$4,259,999

Total Investments in Statement of Net Position

Disclosure of Custodial Credit Risk

$97,150,705

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

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

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

transactions will be evidenced by safekeeping receipts.

Concentration of Credit Risk

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

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

concentration risk currently meets this requirement.

Interest Rate Risk

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

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

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

funds that are not needed for current cash flow purposes. The Pool has deposits of $727,320 with the Spokane County

Investment Pool and $3,999,688 with the Local Government Investment Pool (LGIP) that are available immediately.

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

differently in different interest rate environments. The Pool restricts callable securities to a maximum of 20% of the

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

index selected by the Investment Committee based on the Pool’s investment objectives, constraints, and risk

tolerances.

Investment in Local Government Investment Pool (LGIP)

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

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

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

responsible for establishing the investment policy for the pool and reviews the policies annually and proposed changes

are reviewed by the LGIP advisory Committee.

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

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

the maturity, quality, diversification, and liquidity requirements set forth by GASB No. 79 for external investment

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

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

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

report is available from the Office of the State Treasurer, PO Box 40200, Olympia, WA 98504-0200, online at

http://www.tre.wa.gov

Page 34

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

NOTE 4 – JOINT SELF-INSURED RETENTION

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

insured retention (SIR) limits and that provided under its reinsurance contracts. For 2025, the Pool’s SIR for liability

claims were $3,000,000. For the 2025 three-month Stub-Year, the Pool also made the decision to retain the $2,000,000

excess of $8,000,000 layer.

The decision to retain this additional $2 million layer was based on a careful review of premium costs relative to

potential exposure. Purchasing the extra layer was determined to be less cost-effective than assuming the risk of

liability claims potentially reaching that level. This adjustment strengthens the Pool’s ability to manage catastrophic

losses while maintaining prudent control over reinsurance expenses. Future loss development analysis within this

additional layer will determine the ultimate financial benefit of retaining this additional layer. Future decisions to

retain this, or other layers, will be based on reinsurance pricing compared to actuarially projected losses within a layer.

Each member’s selected and applicable deductible is a part of, and not in addition to, the Pool’s SIR. Through pre-

funded member liability assessments (deposit assessments) collected at the beginning of the Pool’s fiscal year, the

WCRP committed assets of $9,425,150, specifically for funding its liability SIR and insurance premiums for the Stub-

Year 2025.

For 2025 stub-year, the WCRP group purchased first-party property coverage through various insurers. The WCRP

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

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

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

collected at the beginning of the Pool’s fiscal year, WCRP committed assets of $1,857,261, specifically for funding

its property SIR and insurance premiums for the Stub-Year 2025.

The WCRP also secures cyber coverage for all participating member counties. For 2025 stub-year, the WCRP’s Self-

Insured Retention was $500,000 with zero member deductibles. This SIR is fully funded by the membership at

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

at the beginning of the Pool’s fiscal year, WCRP committed assets of $50,780, specifically for funding its cyber-SIR

for the Stub-Year 2025.

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

herein that is more specifically outlined in Note 5.

NOTE 5 – REINSURANCE/EXCESS INSURANCE CONTRACTS

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

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

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

contracts, and policies for Stub-Year 2025 are as follows:

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

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

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

damage, errors and omissions, and advertising injury.

For the Stub-Year 2025, the total “occurrence” coverage remained at $20,000,000 with an additional

“occurrence” limit of $5,000,000 available for member counties to acquire as an individual (county-by-county)

option. For the first $10,000,000 of coverage, the Pool acquires reinsurance from reinsurers that follow the

WCRP’s MLC coverage form. The reinsurance is acquired from multiple higher-rated carriers as protection for

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

Page 35

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

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

for the maximum annual reimbursements to the Pool of $20,000,000 (lowest reinsured layer) and $20,000,000

(second layer). The Pool purchases excess coverage for the additional $10,000,000 with an aggregate limit of

$20,000,000 (first layer), $10,000,000 (second layer), $10,000,000 (third layer), and $7,500,000 (fourth layer).

Since the Pool is a cooperative program, there is a joint liability among the participating members. Fifteen (15

of the Pool’s member counties group purchase an additional $5,000,000 policy in excess of the pooled

$20,000,000.

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

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

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

Reinsurance and excess premiums ceded for liability coverage during the 2025 stub-year totaled $3,800,150.

B. Washington Counties Property Program (“WCPP”): For the Stub-Year 2025, WCRP offered jointly

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

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

policies issued by the various participating insurers. All 24 WCRP counties participated in the Stub-Year 2025

WCPP, with covered properties (in composite) exceeding $4 billion.

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

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

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

Upgrades, and Reproduction for Historic Structures, All Other Perils (AOP) occurrence deductibles between

$5,000 and $50,000 were/are selected by the participating counties which they are solely responsible for paying.

Higher deductibles apply to catastrophe losses.

C. Cyber Risk and Other Coverage: For the Stub-Year 2025, the Pool group purchased cyber coverage

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

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

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

For the Stub-Year 2025, the WCRP group purchased first and third-party terrorism coverage, with the liability

coverage having a per occurrence limit of $25 million, no WCRP retentions and no member deductibles, and

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

member deductibles.

For the Stub-Year 2025, the WCRP group purchased crime coverage having per occurrence limits of

$2,000,000, which includes employee theft, forgery or alteration, theft of money and securities, and funds

transfer fraud.

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 those counties that were WCRP members for the deficient period(s).

During the Stub-Year 2025, there were no deficiencies, and no additional retroactive assessments were levied or

collected from members.

Page 36

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

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 of more than one year. Capital assets are recorded at historical cost.

Capital assets activities for the stub year ended December 31, 2025, were as follows:

Beginning

Balance

10/01/2025

Ending

Balance

12/31/2025

Capital Assets (Depreciable)

Increase

Decrease

Building & Improvements

Furniture/Equipment/Vehicles

Depreciable Capital Asset

Total

1,338,353

270,079

1,338,353

270,079

$1,608,432

Less Accumulated

Depreciation:

Building & Improvements

Furniture/Equipment/Vehicles

Total Accumulated

Depreciation

825,776

241,729

12,143

5,632

837,919

247,361

$1,067,505

$1,085,280

NET CAPITAL ASSET

TOTAL

$540,927

$523,152

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

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

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

Asset

Years

30

Building

Building Improvements

Vehicles

30

5

Equipment

5

NOTE 8 – LEASES (GASB STATEMENT NO. 87)

The Washington Counties Risk Pool (the Pool) has lease agreements for office copy machines used in its operations.

These agreements convey the right to control the use of identified assets for a stated period of time in exchange for

consideration and are accounted for as leases in accordance with Governmental Accounting Standards Board (GASB)

Statement No. 87, Leases.

During prior fiscal years, the Pool identified copier lease arrangements and expensed lease payments as incurred,

while disclosing remaining contractual commitments. During the current fiscal year, management refined its

application of GASB Statement No. 87 and determined that these lease agreements should be recognized as lease

liabilities and corresponding right-to-use lease assets. Management evaluated prior period impacts quantitatively and

determined they were not material to the financial statements taken as a whole.

Page 37

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Lease Assets

At the commencement of the lease term, the Pool recognized a right-to-use lease asset and a corresponding lease

liability measured at the present value of future lease payments. Right-to-use lease assets are amortized over the lease

term using the straight-line method.

As of December 31, 2025, the Pool reported the following right-to-use lease assets:

Description

Cost

Accumulated

Amortization

Net Book Value

Copier Leases

Lease Liabilities

$21,160

$3,879

$17,281

Lease liabilities are reduced as payments are made, with interest expense recognized over the term of the lease. Lease

liabilities were measured using a discount rate of 4%, based on the average yield of the Washington State Local

Government Investment Pool, which management determined to be a reasonable estimate of the Pool’s incremental

borrowing rate.

The Pool’s copier leases have remaining lease terms of up to 60 months.

As of December 31, 2025, future minimum lease payments and the related lease liability are as follows:

Principal

Interest

Total

2026

2027

2028

2029

2030

Total

4,037

4,201

4,372

4,550

439

630

466

295

117

1

4,667

440

$17,599

$1,509

$19,108

Lease Expense

For Stub-Year 2025 the Pool recognized:

x

Amortization expense of $984 related to right-to-use lease assets, and

Interest expense of $182.54 related to lease liabilities.

These expenses are reported as operating expenses in the Statement of Revenues, Expenses, and Changes in Net

Position.

NOTE 9 – SUBSCRIPTION-BASED IT ARRANGEMENTS (SBITA)

Per GASB Statement No. 96, a subscription-based information technology arrangement (SBITA) is a contract that

conveys control of the right to use another party’s information technology software, alone or in combination with

tangible capital assets, for a period of time in an exchange or exchange-like transaction.

The Pool reports SBITA contracts with subscription terms greater than one year and that exceed the capitalization

threshold of $10,000 in payments over the subscription term. At the commencement of the subscription term, the Pool

recognizes a subscription liability measured at the present value of subscription payments and a corresponding

subscription asset, which includes the subscription liability, capitalizable initial implementation costs, and payments

made at contract commencement. Subscription assets are amortized over the subscription term using the straight-line

Page 38

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

method. Subscription liabilities are reduced as payments are made. The subscription term begins when the subscription

asset is placed into service, which occurs upon completion of the initial implementation stage and when the Pool has

obtained control of the right to use the underlying IT assets.

Initial implementation costs that are capitalizable include ancillary charges necessary to place the subscription asset

into service, such as configuration, coding, testing, and installation. Training costs are expensed as incurred. Short-

term SBITA contracts, defined as subscriptions with a maximum term of one year or less, including renewal options,

and subscriptions that do not meet the capitalization threshold are expensed as incurred.

SBITA Reporting

The following represents capitalized SBITA asset balances as of December 31, 2025.

Beginning

Balance

$166,957

127,060

Increase

Decrease

Ending Balance

SBITA Assets

Less Accumulated Amortization

Net SBITA Asset

143,995

12,136

$310,952

139,196

$171,756

$39,897

Principal and Additions/Deletions

As of December 31, 2025, the related SBITA liabilities are as follows:

December 31, 2025

SBITA Liability

2026

2027

2028

2029

$49,293

$50,134

$42,926

$29,403

NOTE 10 – SOLVENCY

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

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

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

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

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

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

independently verified by the state risk manager.

The following solvency test results presented represent point-in-time measurements as of December 31, 2025, and do

not reflect Board-approved funding or programmatic changes adopted subsequent to fiscal year-end.

Page 39

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Primary Asset Test 1

Cash and cash equivalents

Investments

SY-2025

$5,809,063

97,150,705

$102,959,768

888,140

7,088,468

$94,983,160

$92,638,000

Pass

Total

Non-claims Liabilities

Unearned Revenues

Total Primary Assets

Claims Liability – Expected Level

Test 1 Result – Primary Asset Test

Secondary Asset Test

Total Primary Assets

Receivables

SY-2025

$94,983,160

1,350,465

445,812

Prepaid Expenses

Accrued Interest

839,348

Capital Assets

523,152

Leases/SBITAs

189,037

Net Pension Asset

281,786

Total Primary plus Secondary Assets

Claims Liabilities at 80%

Test 2 Results – Secondary Asset Test

$98,612,760

$123,925,000

Fail

NOTE 11 – PENSION PLANS

Payroll employer pension contributions recognized during the Stub-Year were reclassified to Deferred Outflows

of Resources as contributions subsequent to the June 30, 2025 measurement date and therefore did not result in

additional actuarially determined pension expense during the Stub-Year.

The following table represents the aggregate pension amounts for all plans for the Stub-Year 2025:

Aggregate Pension Amounts – All Plans

2025

Pension liabilities

($67,285)

281,786

376,611

(110,859)

0.00

Pension assets

Deferred outflows of resources

Deferred inflows of resources

Actuarially Determined Pension Expense

Because the June 30, 2025 actuarial measurement date used in the September 30, 2025 financial statements did not

change during the October 1 through December 31, 2025 Stub-Year, no new actuarial valuation or measurement

occurred during the reporting period. Accordingly, the actuarially determined components of pension expense,

deferred inflows, deferred outflows (other than employer contributions subsequent to the measurement date), and the

net pension liability (asset) remained unchanged. Employer contributions made subsequent to the measurement date

increased Deferred Outflows of Resources by $19,431.87 and were reclassified from payroll pension expense in

accordance with GASB Statement No. 68. As a result, no additional actuarially determined pension expense was

recognized during the Stub-Year.

Description

Amount

Deferred Outflows – September 30, 2025

Additional employer contributions subsequent to measurement date

Deferred Outflows – December 31, 2025

$357,179

19,432

$376,611

Page 40

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

State Sponsored Pension Plans

Substantially all (city/county/district’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

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

systems.

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

Washington, issues a publicly available annual comprehensive financial report (ACFR) that includes financial

statements and required supplementary information for each plan.

The DRS ACFR can be downloaded from the DRS website at www.drs.wa.gov.

Public Employees’ Retirement System (PERS)

PERS members include elected officials; state employees; employees of local governments; and higher education

employees not participating in higher education retirement programs. PERS is composed of and reported as three

separate plans for accounting purposes: Plan 1, Plan 2/3 and Plan 3. Plan 1 accounts for the defined benefits of Plan 1

members. Plan 2/3 accounts for the defined benefits of Plan 2 members and the defined benefit portion of benefits for

Plan 3 members. Plan 3 accounts for the defined contribution portion of benefits for Plan 3 members. Although

employees can be a member of only Plan 2 or Plan 3, the defined benefits of Plan 2 and Plan 3 are accounted for in

the same pension trust fund. All assets of Plan 2/3 may legally be used to pay the defined benefits of any Plan 2 or

Plan 3 members or beneficiaries.

PERS Plan 1 provides retirement, disability, and death benefits. Retirement benefits are determined as 2% of the

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

members’ 24 highest consecutive service months. Members are eligible for retirement from active status at any age

with at least 30 years of service, at age 55 with at least 25 years of service, or at age 60 with at least five years of

service. PERS Plan 1 retirement benefits are actuarially reduced if a survivor benefit is chosen. Members retiring from

active status prior to the age of 65 may also receive actuarially reduced benefits. Other benefits include an optional

cost-of-living adjustment (COLA). PERS 1 members were vested after the completion of five years of eligible service.

The plan was closed to new entrants on September 30, 1977.

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

member’s AFC times the member’s years of service for Plan 2 and 1% of AFC for Plan 3. The AFC is the average of

the member’s 60 highest-paid consecutive service months. Members are eligible for retirement with a full benefit at

65 with at least five years of service credit. Retirement before age 65 is considered an early retirement. PERS Plan 2/3

members who have at least 20 years of service credit and are 55 years of age or older, are eligible for early retirement

with a benefit that is reduced by a factor that varies according to age for each year before age 65. PERS Plan 2/3

retirement benefits are actuarially reduced if a survivor benefit is chosen. Other PERS Plan 2/3 benefits include a

COLA based on the CPI, capped at 3% annually. PERS 2 members are vested after completing five years of eligible

service. Plan 3 members are vested in the defined benefit portion of their plan after ten years of service; or after five

years of service if 12 months of that service are earned after age 44. PERS Plan 3 defined contribution benefits are

totally dependent on employee contributions and investment earnings on those contributions. Members are eligible to

withdraw their defined contributions upon separation. Members have multiple withdrawal options, including purchase

of an annuity. PERS Plan 3 members are immediately vested in the defined contribution portion of their plan.

PERS Contributions

The PERS Plan 1 member contribution rate is established by State statute at 6%. The PERS 1 employer and PERS 2/3

employer and employee contribution rates are developed by the Office of the State Actuary, adopted by the Pension

Funding Council and is subject to change by the legislature. The PERS Plan 2/3 employer rate includes a component

to address the PERS Plan 1 Unfunded Actuarial Accrued Liability (UAAL).

Page 41

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

As established by Chapter 41.34 RCW, Plan 3 defined contribution rates are set at a minimum of 5% and a maximum

of 15%. PERS Plan 3 members choose their contribution rate from six options when joining membership and can

change rates only when changing employers. Employers do not contribute to the defined contribution benefits.

The PERS Plans defined benefit required contribution rates (expressed as a percentage of covered payroll) for the

fiscal year were as follows:

Employer Contribution Rates PERS Plan 1

PERS Plan 1

Actual Contribution Rates

January 2025 – June 2025

PERS Plan 1

PERS Plan 1 UAAL

Administrative Fee

Total

Employer

Employee

6.36%

2.55%

0.20%

9.11%

6.00%

July 2025 – December 2025

PERS Plan 1

PERS Plan 1 UAAL

Administrative Fee

Total

5.38%

0.00%

0.20%

5.58%

5.38%

The WCRP’s actual contribution to the plan for Calendar Year ended December 31, 2025 was $16,456.

Employer Contribution Rates PERS Plan 2/3

PERS Plan 2/3

Actual Contribution Rates

Employer

2/3

Employee 2

Employee 3

Varies

January 2025 – June 2025

PERS Plan 2/3

PERS Plan 1 UAAL

Administrative Fee

Employee PERS Plan 3

6.36%

2.55%

0.20%

6.36%

Varies

Total

9.11%

6.36%

July 2025 – December 2025

PERS Plan 2/3

5.38%

0.00%

0.20%

5.38%

Varies

PERS Plan 1 UAAL

Administrative Fee

Employee PERS Plan 3

Total

5.58%

5.38%

The WCRP’s actual contribution to the plans for Calendar Year ended December 31, 2025 was $78,384.

Actuarial Assumptions

The total pension liability (TPL) was calculated as of the valuation date and rolled forward to the measurement date

of June 30, 2025. Plan liabilities were rolled forward from June 30, 2024, to June 30, 2025, reflecting each plan’s

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

The TPL for each of the DRS plans were determined using the most recent actuarial valuation completed in 2024 with

a valuation date of June 30, 2024. The actuarial assumptions used in the valuation were based on the results of the

Office of the State Actuary’s (OSA) 2013-2018 Demographic Experience Study and the 2024 Economic Experience

Study. Additional assumptions for subsequent events and law changes are current as of the 2024 actuarial valuation

report. The TPL was calculated as of the valuation date and rolled forward to the measurement date of June 30, 2025.

Page 42

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Plan liabilities were rolled forward from June 30, 2024, to June 30, 2025, reflecting each plan’s normal cost (using

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

x

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

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

grow by service-based salary increase.

x

Investment rate of return: 7.00%

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

status (that is active, retiree, or survivor), as our base table. OSA applied age offsets for each system, as appropriate,

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

improvement scale, also developed by the Society of Actuaries, to project mortality rates for every year after the 2010

base table. Under “generational” mortality, a member is assumed to receive additional mortality improvements in each

future year throughout their lifetime.

Based on the 2025-27 Collective Bargaining Agreements (CBA) with the Washington State Patrol Trooper

Association for the 2025-27 Biennium, the assumed general salary growth was increased to 17% in Fiscal Year (FY)

2026 for WSPRS. OSA improved their modeling of benefits paid to retirees and beneficiaries in their month of death

to better match current administration.

Discount Rate

The discount rate used to measure the total pension liability for all DRS plans was 7.00%. To determine that rate, an

asset sufficiency test was completed to test whether each pension plan’s fiduciary net position was sufficient to make

all projected future benefit payments for current plan members. Based on OSA’s assumptions, the pension plans’

fiduciary net position was projected to be available to make all projected future benefit payments of current plan

members. Therefore, the long-term expected rate of return of 7.00% was used to determine the total pension liability.

Long-Term Expected Rate of Return

The long-term expected rate of return on the DRS pension plan investments of 7.00% was determined using a building-

block-method. In selecting this assumption, OSA reviewed the historical experience data, considered the historical

conditions that produced past annual investment returns, and considered Capital Market Assumptions (CMAs) and

simulated expected investment returns provided by the Washington State Investment Board (WSIB). The WSIB uses

the CMA’s and their target asset allocation to simulate future investment returns at various future times.

Estimated Rates of Return by Asset Class

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

the pension plan’s target asset allocation as of June 30, 2025. The inflation component used to create the table is 2.50%

and represents the WSIB’s long-term estimate of broad economic inflation consistent with their 2023 CMA’s.

% Long-Term Expected

Asset Class

Target Allocation

Real Rate of Return

Arithmetic

2.1%

Fixed Income

Tangible Assets

Real Estate

Global Equity

Private Equity

19%

8%

18%

30%

25%

100%

4.5%

4.8%

5.6%

8.6%

Page 43

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Sensitivity of the Net Pension Liability/(Asset)

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

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

liability would be if it were calculated using a discount rate that is 1-percentage point lower (6%) or 1-percentage

point higher (8%) than the current rate.

1% Decrease

(6%)

Current Rate

(7%)

1% Increase

(8%)

2025

PERS 1

PERS 2/3

$113,537

457,270

$67,285

(281,786)

$26,721

(888,758)

Pension Plan Fiduciary Net Position

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

financial report.

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

Resources Related to Pensions

At December 31, 2025, the Washington Counties Risk Pool reported its proportionate share of the net pension

liabilities (assets) as follows:

2025

Liability (or Asset)

($67,285)

$281,786

PERS 1

PERS 2/3

As of December 31, 2025, the Washington Counties Risk Pool proportionate share of the collective net pension

liabilities was as follows.

Proportionate

Share 6/30/25

Change in

Proportionate Share

PERS 1

PERS 2/3

.005707%

.007384%

.000362%

.000370%

Employer contribution transmittals received and processed by the DRS for the fiscal year ended June 30, 2025, are

used as the basis for determining each employer’s proportionate share of the collective pension amounts reported by

the DRS in the Schedules of Employer and Non-employer Allocations for all plans except LEOFF 1.

Pension Expense

For the three-month Stub-Year ended December 31, 2025, the Washington Counties Risk Pool did not recognize

additional actuarially determined pension expense as indicated above.

2025

Pension Expense

$0.00

PERS 1

PERS 2/3

TOTAL

0.00

$0.00

Payroll employer pension contributions recognized during the Stub-Year were reclassified to Deferred Outflows of

Resources as contributions subsequent to the June 30, 2025 measurement date and therefore did not result in additional

actuarially determined pension expense during the Stub-Year.

Page 44

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Deferred Outflows of Resources and Deferred Inflows of Resources

As of December 31, 2025, the Washington Counties Risk Pool reported deferred outflows of resources and deferred

inflows of resources related to pensions from the following sources:

Deferred Outflows of

Resources

Deferred Inflows of

Resources

PERS 1

Net difference between projected

and actual investment earnings on

pension plan investments

(4,626)

TOTAL

(4,626)

Deferred Inflows of

Resources

Deferred Outflows of

Resources

PERS 2/3

Differences between expected and

actual experience

$206,025

Net difference between projected

and actual investment earnings on

pension plan investments

($63,456)

(7,781)

Changes of assumptions

108,900

24,345

Changes

differences between contributions

and proportionate share of

contributions

in

proportion

and

(34,996)

Contributions subsequent to the

measurement date

Total

37,341

$376,611

($106,233)

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

after the measurement date will be recognized as a reduction of the net pension liability for FY2024-25 and the three-

month Stub-Year October 1, 2025 through December 31, 2025. Other amounts reported as deferred outflows and

deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ended

December 2025:

2026

PERS 1

$4,414

PERS 2/3

$97,147

2027

2028

2029

(3,215)

(3,339)

(2,485)

36,130

35,359

13,036

2030

37,252

Thereafter

TOTAL

14,114

$233,037

($4,626)

NOTE 12 – QUALIFIED PENSION PLAN

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

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

Association). Employer contributions to the Qualified Pension Plan for the Stub-Year ended December 31, were $26,789.

There are no employee contributions to this plan.

NOTE 13 – 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 that are strictly employee contributions only.

Page 45

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

The plans are with MissionSquare Retirement (formerly known as The International City/County Management Association)

and the Washington State Department of Retirement. The plans, available to all eligible employees, permit them to

defer a portion of their wages until future years. The deferred compensation is not available to contributing employees

until their termination, retirement, death, or unforeseeable emergency.

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

participants and their beneficiaries. Pursuant to Governmental Accounting Standards Board (GASB) Statement No.

32, and since the WCRP is not the owner of these assets, these plans’ assets and liabilities are not reported in the

WCRP financial statements.

NOTE 14 – LONG-TERM LIABILITIES

During the Stub-Year ended December 31, 2025, the following changes occurred in long-term liabilities:

Beginning

Balance

9/30/2025

Ending

Balance

12/31/2025

Due Within

One Year

Changes in Long-Term Liabilities

Additions

Reductions

Claims Reserves

Corridor Reserves

$86,970,679

65,000

$3,805,619

150,000

$90,776,298

215,000

$16,598,180

215,000

Property

ULAE Reserve

Lease Liability (GASB 87)

SBITA Liability (GASB 96)

Compensated Absences

Net Pension Liability (GASB 68)

700,819

1,182,000

18,583

39,897

341,108

67,286

(240,391)

(69,000)

(984)

(12,136)

(3,046)

460,428

1,113,000

17,599

171,756

338,062

67,286

460,428

0

4,036

49,293

0

143,995

0

Total Long-Term Liabilities

89,385,372

93,159,429

$17,326,937

NOTE 15 – UNPAID CLAIMS LIABILITIES

As briefly discussed in Notes 1.C.7 and 1.C.10, WCRP establishes a liability for both reported and unreported insured events

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

changes in those aggregate liabilities for WCRP’s SIR Reserves, reinsurance corridor deductibles, and quota share during

the Stub-Year ended December 31, 2025:

SY2025

SIR - Incurred Claims & Claims Adjustment Expenses:

$86,970,679

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

5,250,000

Provisions for Insured Events of the Current Year

375,000

Provisions for $2M x $8M (PY2024-25 & Stub-Year 2025 only)

4,802,691

Increase (Decrease) in Provision for Insured Events Prior Years

SIR - Total Incurred Claims & Claims Adjustment Expense

$97,398,370

SIR - Payments:

0.00

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

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

(6,622,072)

SIR - Payments

($6,622,072)

SIR - Total Payments & Adjustments

$90,776,298

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

Page 46

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

Corridor – Incurred Claims & Claims Adjustment Expenses:

65,000

0.00

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

Provisions for Insured Events of the Current Year

150,000

$215,000

Increase (Decrease) in Provision for Insured Events Prior Years

Corridor - Total Incurred Claims & Claims Adjustment Expense

Corridor – Payments:

0.00

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

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

Corridor – Payments

0.00

Corridor - Total Payments & Adjustments

$215,000

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

Property – Incurred Claims & Claims Adjustment Expenses:

Property Program Balance at beginning of year

Provisions for Insured Events of the Current Year

Increase (Decrease) in provision for Property Program

Property - Total Incurred Claims & Claims Adjustment Expense

Property – Payments:

$700,819

80,770

(75,362)

$706,227

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

Property – Payments

(245,799)

($245,799)

$460,428

Property - Total Payments & Adjustments

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

Cyber – Incurred Claims & Claims Adjustment Expenses:

Cyber Program Balance at beginning of year

Provisions for Insured Events of the Current Year

Increase (Decrease) in provision for Cyber Program

Cyber - Total Incurred Claims & Claims Adjustment Expense

Cyber – Payments:

$60,394

72,500

0.00

$132,894

0.00

(650)

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

Cyber – Payments

(59,744)

$72,500

Cyber - Total Payments & Adjustments

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

$91,524,226

1,113,000

Grand Total all Coverages (SIR, Corridor, Property, and Cyber) at year end

Unallocated Loss Adjustment expense (ULAE) at year end

$92,637,226

Total Claims Reserve at Year End

The actuary estimated the current portion of total liability net reserves at the end of the three-month Stub-Year 2025

to be $16,598,180, respectively.

Page 47

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

NOTE 16 – SUBSEQUENT EVENTS

Subsequent Board-approved funding actions and related solvency communications are discussed in Management’s

Discussion and Analysis and did not require adjustment to the financial statements.

Page 48

Page 49

Page 50

Page 51

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

REQUIRED SUPPLEMENTARY INFORMATION

This required supplementary information is an integral part of the organization’s financial statements.

1.

2.

Department of Enterprise Services (DES) Schedule

The DES Schedule of Expenses – Risk Pools

Ten-Year Claims Development Information

The 10-year Claims Triangle table illustrates how the WCRP earned revenues (net of reinsurance) and

investment income compared to related costs of loss (net of loss assumed by reinsurers) and other expenses

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

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

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

revenue.

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

expenses not allocable to individual claims.

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

assumed by reinsurers, and net incurred claims and allocated adjustment expenses (both paid and

accrued) as originally reported at the end of the first year in which the event that triggered coverage

under the contract occurred (called policy year).

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

each policy year.

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

year for each accident year.

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

of successive years. (This annual estimation results from latest information received on known claims,

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

known.)

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

(line 3) and shows whether this latest estimate of net claims cost is greater or less than originally thought.

As data for individual policy years mature, the correlation between original estimates and estimated

amounts is commonly used to evaluate the accuracy of net incurred claims currently recognized in less

mature policy years. The columns of the table show data for successive policy years.

2.

Reconciliation of Claims Liabilities by Type of Contract

The schedule presented in Note 15 presents the changes in claims liability for Stub-Year 2025.

Page 52

Washington Counties Risk Pool

FY2025 DES Schedule

MCAG NO. 0774

12/31/2025

Insurance Premiums/Reserve Expense

ULAE Expense

$

11,429,296

(69,000)

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

Adjustment to Prior Years' "SIR" Reserves

Adjustment to Prior Years' Property/Cyber

150,000

4,802,691

(135,106)

Contracted Services:

Actuarial

State Audit Expense

State Risk Manager Expenses

Legal Fees

IT Consultants

Property Appraiser

Independent Adjusting Expense

Investment Advisor

Other Consulting/Contracted Service & Fees

65,000

0

2,930

257,661

8,485

3,125

12,147

15,491

4,232

General Administrative Expenses

Employee Salaries and Benefits

Communication

530,971

5,077

Supplies

3,403

Dues and Memberships

Travel - Employee

Committee and Board Meetings

Depreciation/Amortization

Building and Auto Insurance

Operating Leases

Utilities/Building Maintenance

Member Services - Training

Member Services - Scholarships

Miscellaneous Expenses

2,248

24,272

47,619

28,296

0

14,679

12,312

163,619

16,661

5,197

Total Operating Expenses

$17,401,305

Page 53

Washington Counties Risk Pool – MCAG NO. 0774

Notes to Financials

October 1, 2025 Thru December 31, 2025

LIST OF PARTICIPATING MEMBERS

The following is a list of WCRP membership during the Stub-Year 2025.

Adams County

Benton County

Chelan County

Clallam County

Cowlitz County

Lewis County

Mason County

Okanogan County

Pacific County

Pend Oreille County

Douglas County

Franklin County

Grays Harbor County

Island County

San Juan County

Skagit County

Spokane County

Thurston County

Walla Walla County

Jefferson County

Kittitas County

Klickitat County

Whatcom County

Yakima County

Page 54

ABOUT THE STATE AUDITOR’S OFFICE

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

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

and serves four-year terms.

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

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

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

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

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

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

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

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

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Office of the Washington State Auditor

sao.wa.gov