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Comprehensive Annual Financial Report
Fiscal Year End Report
December 31, 2005

August 4, 2006

To the Honorable Board of Commissioners and Citizens of Yakima County:

We are pleased to present to you the Comprehensive Annual Financial Report of Yakima County for the fiscal year  which ended December 31, 2005, in accordance with the provisions of Chapter 36.22 of the Revised Code of Washington.  The financial statements are presented in conformity with generally accepted accounting principles (GAAP), and audited in accordance with generally accepted auditing standards by the Office of the Washington State Auditor. This annual report has been reformatted to comply with the financial reporting model developed by the Government Accounting Standards Board (GASB) Statement 34.

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A).  This letter of transmittal is designed to complement the MD&A and should be read in conjunction with the financial statements.  Yakima County’s MD&A can be found immediately following the State Auditor’s report.

In addition to the fund-by-fund financial information in the County’s financial statements, the report includes government-wide financial statements. The government-wide financial statements include a Statement of Net Assets that provides the total net equity of the County including infrastructure and the Statement of Activities that shows the cost of providing government services.  These statements have been prepared using the accrual basis of accounting versus the modified accrual method used in the fund financial statements.  The reporting model (GASB 34) includes an emphasis on the County’s major funds as shown in the Governmental Fund Statements.  These statements combined with other information are further analyzed in a narrative section called Management’s Discussion and Analysis (MD&A).  The MD&A provides “financial highlights” and interprets the financial reports by analyzing trends and by explaining changes, fluctuations, and variances in the financial data.  In addition, the MD&A is intended to disclose any known significant events or decisions that affect the financial condition of the County.

The County is responsible for the accuracy, completeness, and fairness of the data presented in this report, including all disclosures. We prepared this report in accordance with the following standards:

The Office of the Washington State Auditor, an independent arm of the State of Washington, has in accordance with state statutes audited the financial statements of Yakima County. This examination is conducted in accordance with Generally Accepted Auditing Standards, Standards of Audit of Governmental Organizations, Program, Activities, and Functions, (issued by the U.S. General Accounting Office); the Single Audit Act of 1984 (P.L. 98-502) and Circular A-133, Audits of State and Local Governments, issued by the U.S. Office of Management and Budget.  The State Auditor’s report is presented as the first component of the financial section of this report.  

PROFILE OF THE GOVERNMENT

Yakima County was created by an act of the Legislative Assembly of the Territory of Washington on January 21, 1865.  In 1870, the county seat became permanently located at Yakima City (now Union Gap).  In 1887, the courthouse was moved to North Yakima (now Yakima).

Yakima County is situated in south central Washington State.  The County encompasses 4,296 square miles, or roughly 6.5 percent of the state’s land area, it is the second largest county in land area in Washington State and seventh largest in population in the State.  The county seat, Yakima, is located 145 miles southeast of Seattle which is the major metropolitan city in the State of Washington.  The rich volcanic soil, unique irrigation system, abundant sunshine and an average growing season of 195 days, have made agricultural products the largest contributor to the County's economy.  Of the 3,072 counties in the United States, Yakima ranks first in the number of all fruit trees, first in the production of apples, mint, winter pears and hops, and fourth in the value of all fruits.

The unique growing conditions also help make the Yakima Valley one of the few places in the world where premium vineyards thrive.  There are over 50 local wineries with many gaining international acclaim for award winning wines. Yakima County’s economic base has diversified manufacturing industry complementing a large presence of agriculture and other resource-based industries.

FACTORS AFFECTING FINANCIAL CONDITION

The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment in which Yakima County operates.

Local Economy:  The Yakima County economy had a reasonably good year in 2005.  Nonagricultural wage and salary employment averaged 76,200 jobs last year, a respectable annual growth rate of 1.5 percent.  Across Washington the labor market expanded at a more robust pace of 2.8 percent during 2005.  An encouraging sign for the local economy was the timing of this job growth.  Hiring increased in Yakima County in the 4th quarter of 2005 during which jobs were added at a 2.5 percent clip.  This was a substantial improvement from the marginal 0.8 percent pace countywide in the 3rd quarter and approached the strong 3.0 percent 4th quarter pace of job growth across Washington.  The annual average unemployment rate for Yakima County was 7.7 percent in 2005, down from 8.5 percent in 2004 and 9.7 percent in 2003.   Other advantages to living in Yakima is the cost of living in Yakima is lower, the commute time is 10 to 15 minutes for most employees and there is a good pool of employees that are either technically or service oriented. 

Positive developments also have been recorded in home sales in the County with the November 2004 to November 2005 sales volume increasing more that 31 percent from $558 million to $733 million.  Home prices are going up 10.3 percent from $130,253 to $143,612.  Retiring couples who sold their homes in Western Washington and are purchasing comparable ones in the Yakima Valley have had a significant impact on the price of luxury homes. 

Other improvements include the Hilton Garden Inn, an $11 million, 106 room hotel, currently under construction in the downtown Yakima area.  Also in the same area there’s nearly $2 million in grant and donation money being put toward significant Capitol Theatre updates.  In March of 2005, Ace Hardware announced plans to build an 800,000 square foot distribution center in Moxee, WA.  This center will replace a 21 year old facility in Yakima.  In addition, Pacific Northwest University of Health Sciences, a new osteopathic school planned for Yakima could initially bring 140 to 160 high paying jobs into the community.        

Since 1999, Yakima County’s Supporting Investments in Economic Diversification (S.E.I.D),  has invested more than $23 million, mostly in infrastructure improvements, that has led to the creation of more than 1,000 jobs countywide.  An example of this investment is about $200,000 for road improvements which allowed Jeld-Wen in Yakima to complete a $6.2 million plant expansion, creating an expected 40 jobs. 

Agriculture is in transition with four growers and packing companies merging sales and marketing operations into Yakima Fresh, LLC.  By joining forces these companies will be able to sell a wider variety of produce under one roof.   Milk production and associated forage crops have also emerged as major players in Yakima agricultural economy.    But the good news from the non-agricultural sector, which includes tourism, will more than make up for some of the region’s recent loss in agricultural jobs.       

Long-Term Financial Planning.  The Board of County Commissioners is committed to providing a high level of services at a reasonable cost to residents of Yakima County and to maintaining a cooperative relationship with incorporated areas of the County.  The annual budget serves as the foundation for the County’s financial planning and control.  At the request of the County Auditor’s office all agencies of Yakima County are required to submit requests for appropriation on or before the second Monday in August.  A compilation of these requests and projections is submitted to the Board of County Commissioners before the first Tuesday in September.  The Commissioners schedule a budget hearing which must begin between the first Monday in October and the first Monday in December.  The hearing may be continued from day to day for no more than five days.  At the conclusion of the hearing, the Commissioners adopt the budget. 

Yakima and Benton County Commissioners continue to support a new water storage reservoir called Black Rock. Located 40 miles east of Yakima, the 1.7 million acre feet proposed reservoir would double the existing water storage capacity in the Yakima River Basin.  Yakima and Benton Counties helped fund an initial study for the project that would have profound economic and recreational benefits to the Yakima Valley. The project could take 10 years to complete once Federal funding is allocated for the project.

Builders, developers and the public are able to access development services at a single location with the County’s Development Services Center (DSC) Pilot Project.  The remodel of the Courthouse’s fourth floor is substantially complete which will ultimately allow the DSC to operate at full capacity. The Center brings together Planning, Permit Services, and other services for streamlined customer service.  Previously, developers worked with each department separately for subdivision applications, resulting in multiple trips to different departments.  Coordination of these services offer better service and convenience. 

Yakima County continues to work aggressively on its Six-Year Transportation Improvement Plan anticipating almost $170 million in expenditures on roads and bridges throughout Yakima County during the following six years. 

Yakima County has developed a Carryout Policy which allows departments that do not spend their budget allocations in the prior year to receive a percentage of these unspent funds in the next budget year.   These funds must be used for one-time purchases which do not add to the bottom line budget growth in the future.

Cash management policies and practices.  On April 1, 2005, Yakima County implemented an Investment Pool, which averaged a daily balance of $184 million during 2005.  Prior to the Pool’s establishment, the County Treasurer invested on behalf of County departments and outside districts and agencies, at their request, in the State of Washington’s Local Government Investment Pool, approved savings accounts or term investments as allowed by law.  Undesignated surplus cash is invested for the benefit of the General Fund.  Since the inception of the Yakima County Investment Pool and with signed resolutions by all participants in the Pool, the County Treasurer under the authority of RCW 36.29 pools the requested funds of County departments and other special districts and public authorities to take advantage of economies of scale, simplify administration and achieve a potentially higher yield than other available programs.  The pool distributed to its participants $4.96 million in interest earned for 2005.  In accordance with RCW 36.48.070, the County’s Finance Committee reviews the Pool’s investment practices and policies on a regular basis.  The Pool seeks to obtain a market rate of return while preserving and protecting capital.  The investment pool pursues its objectives by investing in high quality securities authorized by State statue, including U.S. Treasuries, U.S. Agencies, certificates of deposit and the State of Washington’s Local Government Investment Pool.  

During 2005, the County’s Investment Pool realized an average gross yield of 3.58 percent.  Total interest earnings of County funds in 2005 were over $3.2 million, including over $1.28 million for the General Fund.

Risk Management.  Yakima County is a member of the Washington Counties Risk Pool with a $250,000 deductible for each claim.  The Liability Insurance Fund accounts for all claims made against the County and payments of risk pool premiums.

The Voluntary Employee Benefit Fund accounts for the employer and employee premiums paid to Premera Blue Cross for employee medical insurance.

Yakima County insures its property (buildings and contents) through Acordia Northwest, Inc.  Full faith performance bonding is carried on the County’s employees.

The County is self-insured for unemployment compensation claims.  The Unemployment Compensation fund reserves accumulate at a rate of .5% of each employee’s gross wage funded by the County. 

The Workmen’s Compensation fund operates as a co-insurance program for the first $225,000 of each occurrence.

Pension and Other Post-Employment Benefits.   Substantially all County full time employees and qualifying part-time employees participate in one of the statewide public employee retirement systems administered by the Department of Retirement Systems (DRS), under a cost-sharing multiple-employer defined benefit public employee retirement system.  The Public Safety Employees’ Retirement System (PSERS) is a new retirement system which covers public employees in limited-authority law enforcement or adult corrections occupations, who are not eligible for membership in the Law Enforcement Officers and Fire Fighters (LEOFF) retirement system.  The DRS, a department within the primary government of the State of Washington, issues a publicly available comprehensive annual financial report (CAFR) that includes financial statements and required supplementary information for each plan.

The State Pension Funding Council and the director of the Department of Retirement Systems, based on recommendations by the Office of the State Actuary, set employer and employee contribution rates to continue to fully fund the plan.  All employers are required to contribute at the level established by State law.  The methods used to determine the contribution rates are established under State statute in accordance with chapter 41.40 and 41.45 RCW.

Additional information of the County’s pension arrangements and post-employment benefits can be found in the notes to the financial statements.

AWARDS AND ACKNOWLEDGMENTS

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Yakima County for its Comprehensive Annual Financial Report (CAFR) for the December 31 year-end of all fiscal years beginning with 1986 through 2004, a total of nineteen years.

In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, whose contents conform to program standards.  Such reports must satisfy both generally accepted accounting principles and applicable legal requirements.

Preparation of this report could not have been accomplished without the professional, efficient and dedicated services of the entire staff of the Auditor's Office and the various department heads and employees who assisted and contributed to its preparation.

Yakima County thanks Gene Soules and Robin Russell for the cover design.  For the initial preparation of this document, Yakima County is grateful to the following Auditor's Office employees:  Mike Madison, Christina Risenhoover, Barbara Olson and Lynda Sissom and Commissioners’ Office employees: Forrest Smith and Craig Warner.

The County would also like to thank Melanie Brown, Oda del Rosario, Kimberly Harvey, Carmen Hayter, Christie Rogers and Joanne Wells from Public Works; Donna Devine, Laraine Rising, Teresa Roche and Ilene Thomson from the Treasurer's Office; and Mike Sloon from Technology Services; for their input.

Our appreciation also goes to the County Printing Department--Robin Russell and Lori Bisconer—for their excellence in printing quality and their cooperation in getting the job done.

A special thanks is extended to the Yakima Valley Visitors and Convention Bureau for the information provided from their Yakima Valley Visitors Guide mentioned in the Economic Condition and Outlook section.  We also would like to acknowledge Washington State Employment Security for its information on labor issues.

Further appreciation is extended to Sue Remer and Sarah Walker for their continual encouragement and guidance from the State Auditor’s Office in assisting in always improving on the previous years reporting.  Also, appreciation is extended to the Board of County Commissioners for their interest and support in planning and conducting the financial operations of the County in a responsible and progressive manner.

                                                                    Respectfully submitted,
                                                                    Corky Mattingly
                                                                    Yakima County Auditor