Prepare an Excel sheet summary comparison summary that addresses the following: What type of pension fund does the state provide to employees How is the pension fund actually funded - who pays for it Is the pension fully funded What pay and benefits are provided by the pension How much is currently in the pension fund What is the current pension liability for the state

COLORADO Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2014 6 Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2014 John Hickenlooper Governor Department of Personnel & Administration Kathy Nesbitt, Executive Director Robert Jaros, State Controller REPORT LAYOUT The Comprehensive Annual Financial Report is presented in three sections: Introductory, Financial, and Statistical. The Introductory Section includes the controller's transmittal letter and the state's organization chart. The Financial Section includes the auditor's opinion, management's discussion and analysis, the basic financial statements, and the combining statements and schedules. The Statistical Section includes fiscal, economic, and demographic information about the state. INTERNET ACCESS The Comprehensive Annual Financial Report and other financial reports are available on the State Controller's home page at: http://www.colorado.gov/osc STATE OF COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2014 CONTENTS INTRODUCTORY SECTION Page Letter of Transmittal.......................................................................................................................................... Certificate of Achievement ............................................................................................................................... Organization Chart .......................................................................................................................................... 7 13 14 FINANCIAL SECTION INDEPENDENT AUDITORS REPORT ......................................................................................................... 16 MANAGEMENT'S DISCUSSION AND ANALYSIS .................................................................................... 21 BASIC FINANCIAL STATEMENTS: Government-Wide Financial Statements: Statement of Net Position .................................................................................................................... Statement of Activities ......................................................................................................................... 45 46 Fund Financial Statements: Balance Sheet - Governmental Funds ................................................................................................ Reconciliation of the Balance Sheet to the Statement of Net Position ............................................................................................................. Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds...................................................................... Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities ............................................................. Statement of Net Position - Proprietary Funds .................................................................................. Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds ............. Statement of Cash Flows - Proprietary Funds ................................................................................... Statement of Fiduciary Net Position - Fiduciary Funds ..................................................................... Statement of Changes in Fiduciary Net Position - Fiduciary Funds .................................................. Statement of Net Position - Component Units .................................................................................... Statement of Revenues, Expenses, and Changes in Fund Net Position - Component Units ............... Statement of Revenues, Expenses, and Changes in Net Position - Component Units Recast to the Statement of Activities Format ................................................................................ 48 50 52 54 56 58 60 64 65 66 68 70 Notes to the Financial Statements Notes 1 Through 7 - Summary of Significant Accounting Policies Note 1 - Government-Wide Financial Statements .............................................................................. Note 2 - Reporting Entity .................................................................................................................... Note 3 - Basis of Presentation - Government-Wide Financial Statements ......................................... Note 4 - Basis of Presentation - Fund Financial Statements .............................................................. Note 5 - Basis of Accounting .............................................................................................................. Note 6 - Accounting Policies Affecting Specific Assets, Liabilities, and Net Position ...................... Note 7 - Accounting Policies Affecting Revenues, Expenditures/Expenses ...................................... Note 8 - Stewardship, Accountability, and Legal Compliance.................................................................. 1 71 71 73 74 77 78 82 84 Notes 9 Through 17 - Details of Asset Items Note 9 - Cash and Pooled Cash .......................................................................................................... Note 10 - Noncash Transactions in the Proprietary Fund Types ........................................................ Note 11 - Receivables ......................................................................................................................... Note 12 - Inventory ............................................................................................................................. Note 13 - Prepaids, Advances, and Deferred Charges ........................................................................ Note 14 - Investments ......................................................................................................................... Note 15 - Treasurer's Investment Pool ............................................................................................... Note 16 - Other Long-Term Assets .................................................................................................... Note 17 - Capital Assets ..................................................................................................................... 87 88 89 90 90 91 101 101 102 Notes 18 Through 27 - Details of Liability Items Note 18 - Pension System and Obligations......................................................................................... Note 19 - Other Postemployment Benefits and Life Insurance .......................................................... Note 20 - Other Employee Benefits .................................................................................................... Note 21 - Risk Management ............................................................................................................... Note 22 - Lease Commitments ........................................................................................................... Note 23 - Short-Term Debt ................................................................................................................. Note 24 - Notes, Bonds, and Certificates of Participation Payable .................................................... Note 25 - Changes in Long-Term Liabilities ...................................................................................... Note 26 - Defeased Debt..................................................................................................................... Note 27 - Pollution Remediation Obligations..................................................................................... 105 108 111 113 118 120 121 124 126 127 Note 28 - Deferred Inflows and Outflows of Resources ........................................................................... 128 Notes 29 Through 32 - Details of Net Position and Fund Balance Note 29 - Prior Period Adjustments and Accounting Changes ........................................................... Note 30 - Fund Balance ...................................................................................................................... Note 31 - Stabilization Arrangements ................................................................................................ Note 32 - Minimum Fund Balance Policies ........................................................................................ 130 132 134 134 Note 33 - Interfund Receivables and Payables .......................................................................................... Note 34 - Transfers Between Funds .......................................................................................................... Note 35 - Donor Restricted Endowments.................................................................................................. Note 36 - Pledged Revenue ....................................................................................................................... Note 37 - Segment Information ................................................................................................................. Note 38 - Component Units ..................................................................................................................... Note 39 - Related Parties and Organizations ............................................................................................. Note 40 - Service Concession Arrangements ............................................................................................ Note 41 - Encumbrances ........................................................................................................................... Note 42 - Unusual or Infrequent Transactions .......................................................................................... Note 43 - Financial Guarantees ................................................................................................................. Note 44 - Contingencies ............................................................................................................................ Note 45 - Subsequent Events..................................................................................................................... 136 140 142 143 145 147 148 150 150 150 150 150 153 REQUIRED SUPPLEMENTARY INFORMATION: Budget and Actual Schedules - Budgetary Basis: Schedule of Revenues, Expenditures, and Changes in Fund Balances - General Funded ............................................................................. Schedule of Revenues, Expenditures/Expenses, and Changes in Fund Balances/Net Position - Cash Funded ............................................................. Schedule of Revenues, Expenditures/Expenses, and Changes in Fund Balances/Net Position - Federally Funded ...................................................... Reconciling Schedule All Budget Fund Types to All GAAP Fund Types .............................................. 2 156 157 158 160 General Fund Schedule of Revenues, Expenditures, and Changes in General Fund Surplus - Budget and Actual - Budgetary Basis ............................... 162 Notes to Required Supplementary Information: Note RSI-1 Budgetary Information ................................................................................................... Note RSI-2 Other Postemployment Benefit Information .................................................................. 164 167 SUPPLEMENTARY INFORMATION: Governmental Funds: Combining Balance Sheet - General Fund Components .................................................................... Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances - General Fund Components ............................................................ Combining Balance Sheet - Capital Projects Fund Components ....................................................... Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances - Capital Projects Fund Components ............................................... Combining Balance Sheet - Other Governmental Funds .................................................................... Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Other Governmental Funds ........................................................... Combining Balance Sheet - Special Revenue Funds ........................................................................... Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Special Revenue Funds .................................................................. Combining Balance Sheet - Permanent Funds ................................................................................... Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Permanent Funds ........................................................................... Proprietary Funds: Combining Statement of Net Position - Other Enterprise Funds ........................................................ Combining Statement of Revenues, Expenses, and Changes in Fund Net Position - Other Enterprise Funds ............................................................ Combining Statement of Cash Flows - Other Enterprise Funds ......................................................... Combining Statement of Net Position - Internal Service Funds ......................................................... Combining Statement of Revenues, Expenses, and Changes in Fund Net Position - Internal Service Funds.............................................................. Combining Statement of Cash Flows - Internal Service Funds .......................................................... Fiduciary Funds Combining Statement of Fiduciary Net Position - Private Purpose Trust Funds ............................... Combining Statement of Changes in Fiduciary Net Position - Private Purpose Trust Funds ........................................................................................................ Combining Statement of Changes in Fiduciary Assets and Liabilities - Agency Funds ..................... Component Units: Combining Statement of Net Position - Other Component Units........................................................ Combining Statement of Revenues, Expenses, and Changes in Net Position - Other Component Units ..................................................................... Other Schedules Schedule of Capital Assets Used in Governmental Activities .............................................................. Schedule of Other Funds Detail .......................................................................................................... 3 172 173 176 177 180 181 184 186 190 191 194 196 198 204 206 208 214 216 218 222 223 226 229 STATISTICAL SECTION FINANCIAL TRENDS Government-Wide Schedule of Net Position - Last Ten Fiscal Years ............................................................. Government-Wide Schedule of Changes in Net Position - Last Ten Fiscal Years .......................................... Schedule of Revenues, Expenditures, and Changes in Fund Balance All Governmental Fund Types - Last Ten Fiscal Years ................................................................................. General Purpose Revenues (After TABOR Refunds) - General Fund - Last Ten Fiscal Years........................ Expenditures by Department and Transfers - Funded by General Purpose Revenues Last Ten Fiscal Years ..................................................................................................................................... Fund Balance - General Fund and All Other Governmental Fund Types Last Ten Fiscal Years ..................................................................................................................................... 236 242 248 250 252 254 REVENUE CAPACITY TABOR Revenues, Expenditures, Fiscal Year Spending Limitations, and Refunds - Last Ten Fiscal Years ..................................................................................................................................... Individual Income Tax Returns by Adjusted Gross Income Class ................................................................... Sales Tax Returns by Industry Class ................................................................................................................. Colorado Tax Rates - Last Ten Years .............................................................................................................. 256 258 258 259 DEBT CAPACITY Debt Service Expenditures - All Governmental Fund Types - Last Ten Fiscal Years .................................... Total Outstanding Debt - Primary Government - Last Ten Fiscal Years ........................................................ Revenue Bond Coverage - Last Ten Fiscal Years ............................................................................................ 260 260 262 DEMOGRAPHIC AND ECONOMIC INFORMATION Colorado Demographic Data - Last Ten Years ................................................................................................ Colorado Employment by Industry - Last Ten Years....................................................................................... Value of Total Construction in Colorado by Type - Last Ten Years ............................................................... Colorado Sales and Gross Farming Revenue - Last Ten Years........................................................................ 263 263 264 264 OPERATING INFORMATION Demand Drivers of the Primary Government - Last Ten Years ....................................................................... Number of Full-Time Equivalent State Employees by Function, and Average Monthly Salary - Last Ten Fiscal Years ................................................................................... Colorado State Highway System - Centerline and Lane Miles - Last Ten Years ............................................ Colorado State-Owned Bridges by Functional Classification - Last Nine Years ............................................. Building Square Footage Owned by the Primary Government - Last Four Years ........................................... Building Square Footage Leased by the Primary Government - Last Four Years ........................................... 268 270 270 271 271 OTHER INFORMATION Colorado Facts .................................................................................................................................................. 272 4 266 Introductory Section Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2014 6 1525 Sherman St. Denver, CO 80203 To the Citizens, Governor, and Legislators of the State of Colorado: It is our privilege to present the Comprehensive Annual Financial Report (CAFR) on the operations of the State of Colorado for the fiscal year ended June 30, 2014. This report is prepared by the Office of the State Controller and is submitted as required by Section 24-30-204 of the Colorado Revised Statutes. Except for certain institutions of higher education, the State Controller is responsible for managing the finances and financial affairs of the State and is committed to sound financial management and governmental accountability. We believe the financial statements are fairly presented in all material aspects. They are presented in a manner designed to set forth the financial position, results of operations, and changes in net position or fund balances of the major funds and nonmajor funds in the aggregate. All required disclosures have been presented to assist readers in understanding the State's financial affairs. Except as noted below, the basic financial statements contained in the CAFR are prepared in conformity with generally accepted accounting principles (GAAP) applicable to governments as prescribed by the Governmental Accounting Standards Board (GASB), and except for the discretely presented component units, they are audited by the State Auditor of Colorado. The basic financial statements comprise the Management Discussion and Analysis (MD&A), financial statements, notes to the financial statements, and Required Supplementary Information. The MD&A, which begins on page 21, contains additional financial analysis and supplementary information that is required by GASB and should be read in conjunction with this transmittal letter. The schedules comparing budgeted to actual activity, included in the section titled Required Supplementary Information, are not presented in accordance with GAAP; rather, they reflect the budgetary basis of accounting which defers certain payroll, Medicaid, and other statutorily defined expenditures to the following fiscal year. (See additional information on \"Cash Basis Accounting\" on page 39 of the Management's Discussion and Analysis.) In addition to the basic financial statements, the CAFR includes: combining financial statements that present information by fund category, certain narrative information that describes the individual fund categories, supporting schedules, and statistical tables that present financial, economic, and demographic data about the State. The funds and entities included in the CAFR are those for which the State is financially accountable based on criteria for defining the financial reporting entity as prescribed by GASB. The primary government is the legal entity that comprises the major and nonmajor funds of the State, its departments, agencies, and State institutions of higher education. It also includes certain university activities that are legally separate but have been blended with the accounts of the institution that is financially accountable for the activity. The State's elected officials are financially accountable for other legally separate entities that qualify as discretely presented component units. The following entities qualify as discretely presented component units of the State: Colorado Water Resources and Power Development Authority University of Colorado Foundation Colorado State University Foundation Colorado School of Mines Foundation University of Northern Colorado Foundation Other Component Units (nonmajor): Denver Metropolitan Major League Baseball Stadium District CoverColorado Venture Capital Authority HLC @ Metro, Inc. Additional information about these component units and other related entities is presented in Note 2 of the financial statements (see page 71). Audited financial reports are available from each of these entities. 1525 Sherman St., Denver, CO 80203 P 303.866.6200 www.colorado.gov/osc John W. Hickenlooper, Governor | Kathy Nesbitt, Executive Director 7 PROFILE OF THE STATE OF COLORADO Colorado became the thirty-eighth state of the United States of America when it was admitted to the union in 1876. Its borders encompass 103,718 square miles of the high plains and the Rocky Mountains with elevations ranging from 3,315 to 14,433 feet above sea level. The State's major economic sectors include agriculture, manufacturing, technology, tourism, energy production, and mining. Considerable economic activity is generated in support of these sectors by government, wholesale and retail trade, transportation, communications, public utilities, finance, insurance, real estate, and other services. Given the State's semi-arid climate, water resource development, allocation, and conservation are ongoing challenges for State management. The State maintains a separation of powers utilizing three branches of government - executive, legislative, and judicial. The executive branch comprises four major elected officials - Governor, State Treasurer, Attorney General, and Secretary of State. Most departments of the State report directly to the Governor; however, the Departments of Treasury, Law, and State report to their respective elected officials, the Department of Education reports to the elected State Board of Education. The elected officials serve four-year terms with a limit on the number of terms allowed. The Legislature is bicameral and comprises thirty-five senators and sixty-five representatives who are also term limited. It is a citizen legislature whose general session lasts 120 days beginning in January of each year. Special sessions may be called by the Governor at his discretion and are limited to the topics identified by the Governor. The Legislature's otherwise plenary power is checked by the requirement for the Governor to sign its legislation and by specific limitations placed in the State Constitution by voters. The most significant fiscal limitation is the restriction related to issuing debt, raising taxes, and changing existing spending limits. From a fiscal perspective, the Joint Budget Committee of the Legislature, because of its preparation of the annual budget and supplemental appropriations bills, holds the most important power vested in the Legislature. The Committee is bipartisan with members drawn from each of the houses of the Legislature. The Governor's Office of State Planning and Budgeting develops and submits an executive branch budget proposal, but there is no requirement for the Joint Budget Committee or the General Assembly to adopt that proposal. The Judicial Branch is responsible for resolving disputes within the State, including those between the executive and legislative branches of government, and for supervising offenders on probation. The branch includes the Supreme Court, Court of Appeals, and district and county courts, served by more than 300 justices and judges in 22 judicial districts across the State (excluding 23 Denver county court judges). Municipal courts are not part of the State system. There are also seven water courts, one in each of the State's major river basins. The Judicial Branch budget is appropriated by the Legislature, and it is funded primarily from general-purpose revenues of the General Fund. ECONOMIC CONDITION AND OUTLOOK The State's General Fund general-purpose revenues reflect the overall condition of the State economy, which showed improved growth in Fiscal Year 2013-14; General Fund revenues increased by $434.7 million (5.1 percent) from the prior year. In absolute dollars, the Office of State Planning and Budgeting (OSPB) reports personal income in the State increased by approximately 3.4 percent for 2013 and is forecast to increase by 5.8 percent for 2014. State nonagricultural employment levels rose by 69,100 in 2013, and are forecasted to increase by another 71,600 in 2014. PERCENT CHANGE IN REAL GROSS DOMESTIC PRODUCT 4 P E R C E N T 3 2 1 0 -1 -2 The Bureau of Economic Analysis reports that inflation adjusted national gross domestic product (GDP) grew at an -4 annualized rate of 2.4 percent in the third quarter of calendar year 2013 and 2.0 percent in the third quarter of 2014. Inflation adjusted GDP increased 2.3 percent from the third quarter of 2013 to the third quarter of 2014 (all percentage changes in the balance of this paragraph are measured on the third quarter to third quarter basis). National personal consumption expenditures account for over two-thirds of GDP and increased 2.3 percent. The increase in personal consumption was led by an increase of 7.5 percent in durable goods, the most significant in motor and recreational vehicle and household equipment sales. Additionally, private domestic investment increased 3.8 percent, primarily in the construction and acquisition of nonresidential structures and equipment offset by a declining investment in the maintenance of inventory levels. Government spending increased quarter-over-quarter by 0.4 percent related to decreases in federal, and increases in state and local government spending. Quarter-over-quarter exports -3 8 increased by 4.6 percent and imports grew by 3.2 percent; net imports continued to be a reduction of GDP at a slightly greater amount than in the third quarter of 2013. The national economy is continuing through a prolonged, anemic recovery resulting from the credit and housing boom and bust of the past two decades. This has been compounded by uncertainties in global markets and debates in the U.S. Congress over increases to federal debt ceiling, automatic tax increases and spending cuts. The September, 2014 Economic and Revenue Forecast of the Colorado Legislative Council observed that: COMPONENTS OF COLORADO'S POPULATION CHANGE Net-Migration Births 150,000 Deaths 100,000 50,000 0 (50,000) 2009 2010 2011 2012 2013 \"Economic activity is expected to continue to grow throughout 2014 and 2015, despite a stumble in the first quarter of 2014. The first quarter decline was largely attributable to unusually harsh weather and a response to a previous buildup in inventories. The labor market continues to slowly improve with more jobs and fewer people looking for work. Personal income is on the rise and business activity has been increasing over the past several years. Overall, economic conditions have improved throughout 2014 and are expected to do so through the forecast period. Because of momentum in the economy, the Federal Reserve has indicated that they will stop purchasing assets to expand the money supply by the end of the year. This may dampen economic growth if the asset reduction occurs too quickly.\" Colorado's economy continues to expand at a pace that is among the best in the nation. The state's concentration of individuals and businesses focused on products that are in high demand in today's economy, such as those involving information technology, bioscience, engineering and aerospace continue to feed economic growth. Colorado also benefits from a high degree of business dynamism, as well as a growing culture for innovation and collaboration among individuals and firms. Historically, Colorado economic activity and in-migration have been interdependent. Net migration has averaged approximately 38,300 from 2009 to 2013. In 2013, a 10 year high of approximately 45,300 net migrations occurred. International immigration decreased from approximately 12,400 (2008) to 8,573 (2013). Similarly, domestic migration from other states decreased from 38,500 (2008) to 36,284 (2013). The information in the adjacent chart is based on current Census Bureau estimates. The Colorado State Demographer forecasts net population growth of 85,682 for 2014 and 88,718 for 2015, and OSPB forecasts net migration of 49,500 and 51,900, for those years respectively, which indicates persistent immigration. The OSPB September 20, 2014 quarterly estimate predicts continued growth in Colorado's economy in 2014; however, federal fiscal policy issues surrounding debt and budget levels could result in larger-than-expected negative economic consequences. Additionally, current weaker global economic conditions, as well as continued geo-political tensions, are concerns. Unexpected events surrounding these issues could have negative implications on the global financial system and economy. OSPB has made the following calendar year forecast for Colorado's major economic variables: Unemployment will average 5.5 percent for 2014 compared with 6.8 and 7.8 percent in 2013 and 2012, respectively, and it is expected to slightly decrease in 2015 to 4.7 percent. Wages and salary income will increase by 6.2 percent in 2014, by 6.0 percent in 2015, and by 5.8 percent in 2016. Total personal income will increase by 5.8 percent in 2014, and reach 5.7 percent by 2015. Net migration is expected to be 49,500 in 2014 and 51,900 in 2015 with total population growth of about 1.5 and 1.6 percent, respectively. Retail trade sales will increase by 6.0 percent in 2014 followed by an increase of 5.8 percent in 2015. Colorado inflation will be 2.8 percent in 2014, and decrease to 2.6 percent in 2015. 9 MAJOR GOVERNMENT FISCAL INITIATIVES The General Assembly enacted and the Governor signed a large number of bills during the 2014 session. There were several areas of focus including education, social programs and services, disaster mitigation and recovery, disbursement of funds received from the taxation of recreational marijuana, and capital spending. The following measures had the most significant financial impact: To implement the Public School Finance Act of 1994, the General Assembly provided an appropriation for an additional $55.4 million for fiscal year 2013-14, primarily for the State share of school districts' total program funding. In addition, for fiscal year 2014-15 the General Assembly made several adjustments to appropriations, including an increase of $152.4 million, for the state share of districts' total program funding, as well as an increase for state aid to charter school facilities and additional support for the intervention funding for the early literacy program. The General Assembly also made several changes to the existing school counselor corps grant program and increased support for categorical programs such as special education programs for gifted and talented children. Additionally, the General Assembly created the School Turnaround Leaders Development Programs to develop high quality leadership for low performing schools. The General Assembly enacted legislation that made several modifications to the Colorado child care assistance program (CCCAP). Also related to CCCAP the General Assembly extended the repeal date of the cliff effect pilot program. The cliff effect pilot program allows families to remain in the child care assistance program when working parents receive a small increase in salary that would otherwise make them ineligible for CCCAP; however, the increase of salary is not enough to cover the costs of the child care without assistance. The General Assembly enacted legislation to extend the repeal date for the breast and cervical cancer prevention and treatment program and additional funding was provided for allocation to the intellectual and developmental disabilities services cash fund for increasing system capacity for home-based and community-based intellectual and developmental disability programs, services and support. To address the concern of the use of long-term isolated confinement for inmates with serious mental illness the General Assembly provided funding to create a work group that shall advise the Department of Corrections (DOC) on policies and procedures related to this concern. The General Assembly also provided DOC with funds to develop and implement programs to assist offenders in correction facilities to prepare for release and transition into the community. For the purpose of assisting law enforcement agencies pertaining to the enforcement of driving under the influence of alcohol or drugs, the General Assembly directed the Colorado Bureau of Investigation to operate a state toxicology laboratory by July 1, 2015. The General Assembly enacted several disaster mitigation and recovery efforts, including: Legislation that allows payment of claims resulting from the Lower North Fork wildfire, in excess of the State's maximum liability. Under this act, the general assembly approved payment of the total claims specified in the act. The act also states that in accepting the payment, a claimant agrees to release the State from any future claims arising from the wildfire. Direction to the State Board of Education to pay funds from the contingency reserve to school districts that were in financial need due to problems related to the flood of September 2013. Additional support to the Colorado firefighting air corps. Creation of a natural disaster grant fund within the Water Quality Control Division of the Colorado Department of Public Health and Environment. The act requires that the division award grants to eligible local governments that have domestic wastewater treatment works, public drinking water systems, or on-site wastewater treatments systems that were impacted, damaged or destroyed as a result of the flood of September 2013. Authorization to reimburse county treasurers that either issued a tax credit or a tax reimbursement on real or business personal property that was destroyed by a natural cause during calendar year 2013. Creation of a stream restoration grant account in the flood and drought response fund to the Colorado Water Conservation Board. Funds will be used by the Board to make grants to help pay the costs of watershed cleanup and stream restoration affected by the flood. The General Assembly passed a measure making a disposition of tax money collected on the sale of marijuana and marijuana products. After the transfer of the first $40.0 million of revenue to the Public School Capital Construction Assistance Fund, after the required 15 percent to local governments, and all revenue from the 2.9 percent state sales tax on the sale of medical and retail marijuana and marijuana products will be deposited in a newly created marijuana tax cash fund. The act also appropriated marijuana tax cash funds to: Support for the school health professional grant program, 10 Enhance the Tony Grampsas youth services program, for the provision of substance use disorder treatment services for adolescents and pregnant women, for the expansion and enhancement of jail-based behavioral health services, for the enhancement of programs to provide services to juvenile offenders, and for child welfare training specific to issues arising from marijuana use and abuse, Expand training for the peace officer standards and training board, Provide services for school-based substance abuse intervention and prevention grant programs, and for behavioral health community programs for school-based prevention and early intervention substance use disorder services to be provided by behavioral health organizations, and Create the Office of Marijuana Coordination. The General Assembly addressed the State's capital needs with the appropriation of $364.4 million of general-purpose revenues to fund 30 capital projects, 66 controlled maintenance projects, and 4 lease purchase payments for Fiscal Year 2014-15. To maintain the infrastructure of the digital trunked radio system the General Assembly passed a measure for the replacement of legacy radio equipment and hardware at radio tower sites used for the statewide digital trunked radio system. The General Assembly appropriated approximately $136.6 million from the Colorado Water Conservation Board Construction Fund for 12 projects and for loans to special water districts to enable them to purchase storage space in the Chatfield reallocation project. Finally, the State continued efforts to replace its internal statewide financial system with a modern enterprise solution, known as the Colorado Operations Resource Engine (CORE). BUDGETARY AND OTHER CONTROL SYSTEMS The General Assembly appropriates the annual State budget for ongoing programs at a line item level segregated by department, except for custodial funds, certain statutory cash funds, and most federal funds. New programs are funded for the first time through enabling legislation and are continued through the Long Appropriations Act in future periods. For the most part, operating appropriations lapse at the end of the fiscal year unless the State Controller approves, at a line item level, an appropriation rollforward based on express legislative direction or extenuating circumstances. The State Controller, with the approval of the Governor, may also allow expenditures in excess of the appropriated budget. This approval occurs at a budget line item level. Capital construction appropriations are normally effective for three years and do not require State Controller rollforward approval. The State records the appropriated budget and certain nonappropriated spending authority (including most institutions of higher education activity) in its accounting system along with estimates of federal awards, statutory cash funds, and custodial funds of the various departments. The accounting system will not disburse monies without spending authority. Revenues and expenses/expenditures are accounted for on the basis used for the fund in which the budget is recorded except for certain budgetary basis exceptions (see Note RSI-1A). Encumbrances are recorded throughout the year and result in a reduction of the available spending authority. Encumbrances represent the estimated amount of expenditures that will be incurred when outstanding purchase orders, contracts, or other commitments are fulfilled. At fiscal year end, encumbrances lapse except those that represent appropriations that are approved for rollforward into the subsequent fiscal year, and legal or contractual obligations in the Capital Projects Fund and the Department of Transportation's portion of the Highway Users Tax Fund (see Note 41). In developing the State's accounting system, consideration has been given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition. Those controls also assure the reliability of financial records for preparing financial statements and maintaining the accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived from that control. The evaluation of costs and benefits requires estimates and judgments by management. All internal control evaluations occur within this framework. We believe that the State's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. INDEPENDENT AUDIT The State Auditor performs an audit of the Basic Financial Statements. The opinion of the State Auditor is on page 16 of this report. Besides annually auditing the statewide financial statements, the State Auditor has the authority to audit the financial statements and operations of the departments and institutions within State government. In 1996, the United States Congress amended the Single Audit Act of 1984. The amended act clarifies the State's and the auditor's responsibility for ensuring that federal moneys are used and accounted for properly. Under the requirements of this 11 13 PRINCIPAL ORGANIZATIONS AND KEY OFFICIALS CONSTITUTION OF COLORADO GENERAL ASSEMBLY SENATE GOVERNOR JOHN W. HICKENLOOPER HOUSE SUPREME COURT CHIEF JUSTICE NANCY E. RICE SENATE PRESIDENT MORGAN CARROLL SPEAKER OF THE HOUSE STATE COURT ADMINISTRATOR BOARD OF REGENTS OF UNIVERSITY OF COLORADO MARK FERRANDINO TREASURER WALKER STAPLETON LT. GOVERNOR JOE GARCIA SECRETARY OF STATE SCOTT GESSLER ATTORNEY GENERAL JOHN W. SUTHERS BOARD OF EDUCATION COURT OF APPEALS DEPARTMENT OF EDUCATION 22 JUDICIAL DISTRICT COURTS DEPARTMENT OF PERSONNEL & ADMINISTRATION DEPARTMENT OF AGRICULTURE DEPARTMENT OF HIGHER EDUCATION DEPARTMENT OF REGULATORY AGENCIES DEPARTMENT OF CORRECTIONS DEPARTMENT OF PUBLIC HEALTH & ENVIRONMENT DEPARTMENT OF LOCAL AFFAIRS DEPARTMENT OF MILITARY & VETERANS AFFAIRS DEPARTMENT OF TRANSPORTATION DEPARTMENT OF HUMAN SERVICES DEPARTMENT OF PUBLIC SAFETY DEPARTMENT OF REVENUE DEPARTMENT OF LABOR AND EMPLOYMENT DEPARTMENT OF NATURAL RESOURCES DEPARTMENT OF HEALTH CARE POLICY & FINANCING Financial Section Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2014 17 18 19 20 COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT 21 MANAGEMENT'S DISCUSSION AND ANALYSIS 22 COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion and analysis is supplementary information required by the Governmental Accounting Standards Board (GASB), and it is intended to provide an easily readable explanation of the information provided in the attached basic financial statements. Fiscal Year 2012-13 balances have been restated to reflect the implementation of GASB Statement No. 65 - Items Previously Reported as Assets and Liabilities for comparison to Fiscal Year 2013-14. It is by necessity highly summarized, and in order to gain a thorough understanding of the State's financial condition, the attached financial statements and notes should be reviewed in their entirety. FINANCIAL HIGHLIGHTS Government-wide: Assets of the State's governmental activities exceeded liabilities by $15,649.7 million, an increase in net position of $702.3 million as compared to the restated prior year amount of $14,947.4 million. Cash and restricted cash balances increased by $509.2 million primarily as a result of increased general-purpose tax revenue, resource extracting activity, and a variety of other activities in Other Special Revenue Funds. Taxes Receivable, net of refunds payable, also increased by $106.2 million while investments and restricted investments increased by $28.3 million. Capital assets, net of accumulated depreciation, increased by $48.5 million, primarily due to increases in infrastructure construction and public school construction offset by depreciation charges of $501.8 million. Assets of the State's business-type activities exceeded liabilities by $7,289.8 million, an increase in net position of $631.6 million as compared to the restated prior year amount of $6,658.2 million. The overall increase was primarily the result of the following net position changes: an increase of $315.3 million in Higher Education Institutions, an increase of $186.8 million in Unemployment Insurance, and an increase of $130.2 million in Other Enterprises (primarily in the Transportation Enterprise). In total, net position of the State increased by $1,333.9 million to $22,939.5 million. Fund Level: Governmental fund assets exceeded liabilities resulting in total fund balance of $6,734.1 million (prior year $6,100.2 million). In total, governmental fund balances increased by $633.9 million from the prior year due to increases in the General Fund, Resource Extraction Fund, Capital Projects Fund, and Other Governmental Funds, which were partially offset by reductions in the State Education Fund and the Highway Users Tax Fund (HUTF). The General Fund increase of $135.9 million was due to improved general-purpose tax collections in the General Purpose Revenue Fund. The General Purpose Revenue Fund portion of the General Fund is required to maintain a reserve of five percent of General Purpose Revenue Fund appropriations on a legal basis; $249.2 million was available on a GAAP basis to partially fund the reserve for Fiscal Year 2013-14. The reserve is required to increase to 6.5 percent in the Fiscal Year 2014-15. The Resource Extraction Fund increased by $213.5 million due to increased cash related to severance taxes, mineral leasing, and fees. The HUTF decreased by $67.2 million with increases in expenditures outpacing increases in revenue. The Capital Projects Fund increased by $219.8 million due to additional funding from the General Purpose Revenue Fund. The State Education Fund decreased by $165.2 million due to significantly smaller transfers-in of $38.6 million from the State's general fund surplus as compared to $1,073.5 million in the prior year. The Other Governmental Funds increased by $296.9 million, largely due to activity in the Labor, Tobacco Impact Litigation, Resource Management, Unclaimed Property and Other Special Revenue funds. Enterprise Fund assets exceeded liabilities resulting in total net position of $7,289.8 million (restated prior year $6,658.2 million), of which $4,901.4 million (prior year $4,536.7 million) was restricted or invested in capital assets, and the balance of $2,388.4 million (restated prior year $2,121.5 million) was unrestricted. The total increase of $631.6 million in Enterprise Fund net position was primarily due to an increase of $315.3 million in Higher Education Institutions, $186.8 million in the Unemployment Insurance Fund, and $130.2 million in Other Enterprises, primarily the Transportation Enterprises. COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT 23 Debt Issued and Outstanding: The outstanding governmental activities' notes, bonds, and Certificates of Participation at June 30, 2014, were $1,729.1 million (restated prior year $1,765.6 million), which is 21.0 percent (restated prior year 24.3 percent) of financial assets (cash, receivables, and investments) and 8.4 percent (prior year 9.1 percent) of total assets of governmental activities. The governmental activities debt is primarily related to infrastructure, State buildings, and public school buildings. The infrastructure debt is secured by future federal revenues and State highway revenues, State building debt by gaming distributions and judicial fees, and public school buildings debt by School Trust Land revenues. The State's Enterprise Funds have notes, bonds, and Certificates of Participation outstanding that total $4,375.6 million (restated prior year $4,044.2 million). The majority of the outstanding revenue bonds is related to Higher Education Institutions and is invested in capital assets that generate a future revenue stream to service the related debt. The Division of Unemployment Insurance also has bonds outstanding secured by future employer insurance premiums. Revenue and Spending Limits: The State Constitution indirectly limits the rate of spending increases and directly limits the State's ability to retain revenue in excess of the limit. Any excess must be refunded to the taxpayers unless otherwise approved by the voters. In the November 2005 election, voters passed Referendum C, which allowed the State to retain revenues in excess of the TABOR limit for Fiscal Years 2005-06 through 2009-10. The State did not have revenues in excess of the Referendum C Excess State Revenue Cap for Fiscal Year 2013-14, and although it did exceed the TABOR limit by $2,125.3 million, no refund was required because Referendum C replaced the TABOR limit with the Excess State Revenues Cap as the threshold for refunds. The $0.7 million TABOR Refund Liability shown on the financial statements is the residual amount of a Fiscal Year 2004-05 TABOR refund that was not distributed as of June 30, 2014. (See page 29 for more information on the TABOR requirements and Referendum C.) OVERVIEW OF THE FINANCIAL STATEMENT PRESENTATION There are three major parts to the basic financial statements - government-wide statements, fund-level statements, and notes to the financial statements. Certain required supplementary information (in addition to this MD&A), including budget-to-actual comparisons and funding progress for other post-employment benefits is presented following the basic financial statements. Supplementary information, including combining fund statements and schedules, follows the required supplementary information in the Comprehensive Annual Financial Report. Government-wide Statements The government-wide statements focus on the government as a whole. These statements are similar to those reported by businesses in the private sector, but they are not consolidated financial statements because certain intra-entity transactions have not been eliminated. Using the economic resources perspective and the accrual basis of accounting, these statements include all assets, liabilities, deferred inflows, and deferred outflows on the Statement of Net Position and all expenses and revenues on the Statement of Activities. These statements can be viewed as an aggregation of the governmental and proprietary fund-level statements along with certain perspective and accounting-basis adjustments discussed below. Fiduciary activities are excluded from the government-wide statements because those resources are not available to support the State's programs. The Statement of Net Position shows the financial position of the State at the end of the fiscal year. Net position measures the difference between assets and deferred outflows and liabilities and deferred inflows. Restrictions reported in net position indicate that certain assets, net of the related liabilities, can only be used for specified purposes. Increases in total net position from year to year indicate the State is better off financially, while decreases in total net position indicate the State is worse off. The Statement of Activities shows how the financial position has changed since the beginning of the fiscal year. The most significant financial measure of the government's current activities is presented in the line item titled \"Change in Net Position\" at the bottom of the Statement of Activities. The statement is presented in a net program cost format, which shows the cost of programs to the government by offsetting revenues earned by the programs 24 COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT against expenses of the programs. Due to the large number of programs operated by the State, individual programs are aggregated into functional areas of government. On the Statement of Net Position, columns are used to segregate the primary government, including governmental activities and business-type activities, from the discretely presented component units. On the Statement of Activities, both columns and rows are used for this segregation. The following bullets describe the segregation. Governmental activities are the normal operations of the primary government that are not presented as business-type activities. Governmental activities include Internal Service Funds and are primarily funded through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are primarily funded by charges to external parties for goods and services. These activities are generally reported in Enterprise Funds in the fund-level statements because the activity has revenue-backed debt or because legal requirements or management decisions mandate full cost recovery. Discretely presented component units are legally separate entities for which the State is financially accountable. More information on the discretely presented component units can be found in Note 2 on page 71. Fund-Level Statements The fund-level statements present additional detail about the State's financial position and activities. However, some fund-level statements present information that is different from the government-wide statements due to the perspective and the basis of accounting used. Funds are balanced sets of accounts tracking activities that are legally defined or are prescribed by generally accepted accounting principles. Funds are presented on the fundlevel statements as major or nonmajor based on criteria set by the Governmental Accounting Standards Board (GASB). There are three types of funds operated by the State - governmental, proprietary, and fiduciary. In the fund-level statements, each fund type has a pair of statements that show financial position and activities of the fund; a statement showing cash flows is also presented for the proprietary fund type. Governmental Funds - A large number of the State's individual funds and activities fall in this fund type; however, only some are reported as major - the remaining funds are aggregated into the nonmajor column with additional fund detail presented in the Supplementary section of this report. Governmental Funds are presented using the current financial resources perspective, which is essentially a short-term view that excludes capital assets, debt, and other long-term liabilities. The modified accrual basis of accounting is used. Under modified accrual, certain revenues are deferred because they will not be collected within the next year, and certain expenditures are not recognized, even though they apply to the current period, because they will not be paid until later fiscal periods. This presentation focuses on when cash will be received or disbursed, and it is best suited to showing amounts available for appropriation. The governmental fund type includes the General Fund, Special Revenue Funds, Debt Service Fund, Capital Projects Fund, and Permanent Funds. Proprietary Funds - Proprietary fund type accounting is similar to that used by businesses in the private sector. It is used for the State's Enterprise Funds and Internal Service Funds. Enterprise Funds generally sell to external customers while Internal Service Funds generally charge other State agencies for goods or services. These funds are presented under the economic resources measurement focus, which reports all assets and liabilities. Accrual accounting is used, which results in revenues recognized when they are earned and expenses reported when the related liability is incurred. Because this is the same perspective and basis of accounting used on the government-wide statements, Enterprise Fund information flows directly to the business-type activities column on the government-wide statements without adjustment. Internal Service Fund assets and liabilities are reported in the governmental activities on the government-wide Statement of Net Position because Internal Service Funds primarily serve governmental funds. The net revenue or net expense of Internal Service Funds is reported as an increase or reduction to program expenses on the government-wide Statement of Activities. On the fund-level statements, nonmajor Enterprise Funds are aggregated in a single column, as are all Internal Service Funds. Fiduciary Funds - These funds report resources held under trust agreements for other individuals, organizations, or governments. The assets reported are not available to finance the State's programs, and COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT 25 therefore, these funds are not included in the government-wide statements. The State's fiduciary funds include Pension and Other Employee Benefits Trust Funds, several Private-Purpose Trust Funds, and several Agency Funds. Agency Funds track only assets and liabilities and do not report revenues and expenses on a statement of operations. All Fiduciary Funds are reported using the accrual basis of accounting. The State has elected to present combining financial statements for its component units. In the report, the component unit financial statements follow the fund-level financial statements discussed above. Notes to Basic Financial Statements The notes to the financial statements are an integral part of the basic financial statements. They explain amounts shown in the financial statements and provide additional information that is essential to fair presentation. Required Supplementary Information (RSI) Generally accepted accounting principles require certain supplementary information to be presented in this Management's Discussion and Analysis and following the notes to the financial statements. Required supplementary information differs from the basic financial statements in that the auditor applies certain limited procedures in reviewing the information. In this report, RSI includes budgetary comparison schedules and a schedule of funding progress for other post-employment benefits. The chart on the following page is a graphic representation of how the State's funds are organized in this report. Fiduciary Funds are not shown in the chart; they occur only in fund-level statements. 26 COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT GOVERNMENT-WIDE LEVEL GOVERNMENTAL ACTIVITIES COMPONENT UNITS BUSINESS TYPE ACTIVITIES Modified to Full Accrual Conversion FUND LEVEL Component Units Major CWRPDA Foundations: CU CSU CSM UNC Governmental Funds Major Proprietary Fund Types Enterprise Funds Major Nonmajor Nonmajor General Fund Resource Extraction Highway Users Tax Other Higher Education Institutions Unemployment Insurance Capital Projects Nonmajor Other Internal Service Funds Other Lottery State Education COMBINING LEVEL General Purpose Revenue Special Purpose Regular Special Special Revenue Debt Service Permanent Public School Risk Management Other State Lands Other Labor Gaming Tobacco Impact Resource Management Environ. & Health Protection Unclaimed Property Other CollegeInvest Parks and Wildlife College Assist State Fair Correctional Industries Nursing Homes Prison Canteens Petroleum Storage Transportation Enterprise Other Central Services Information Tech. Telecommunications Capitol Complex Highways Public Safety Admin Courts Legal Services Other DMMLBSD Cover Colorado Venture Capital HLC @ Metro, Inc. COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT 27 OVERALL FINANCIAL POSITION AND RESULTS OF OPERATIONS The following table was derived from the current and prior year government-wide Statement of Net Position. (Amounts in Thousands) Governmental Activities 2013-14 Total Primary Government Business-Type Activities 2013-14 2012-13 Restated 2013-14 2012-13 Restated 8,134,005 11,483,728 $ 6,066,266 7,246,840 $ 5,731,940 6,692,826 $ 15,113,521 18,779,095 $ 13,865,945 18,176,554 20,579,510 19,617,733 13,313,106 12,424,766 33,892,616 32,042,499 18,289 19,975 118,103 88,453 136,392 108,428 Current Liabilities Noncurrent Liabilities 2,407,790 2,539,956 2,022,074 2,668,200 1,446,884 4,694,527 1,359,106 4,495,878 3,854,674 7,234,483 3,381,180 7,164,078 Total Liabilities 4,947,746 4,690,274 6,141,411 5,854,984 11,089,157 10,545,258 338 - - - 338 - 10,125,644 10,107,082 3,653,265 3,571,408 13,778,909 13,678,490 3,554,380 1,969,691 3,656,639 1,183,713 1,248,152 2,388,381 965,311 2,121,516 4,802,532 4,358,072 4,621,950 3,305,229 $ 15,649,715 $ 14,947,434 $ 7,289,798 $ 6,658,235 $ 22,939,513 $ 21,605,669 Noncapital Assets Capital Assets Total Assets Deferred Outflow of Resources Deferred Inflow of Resources Net Investment in Capital Assets Restricted Unrestricted Total Net Position $ 9,047,255 11,532,255 2012-13 Restated $ The amount of total net position is one measure of the health of the State's finances, and the State reports significant positive balances in all categories of net position. However, this measure must be used with care because large portions of the balances related to capital assets or restricted assets may be unavailable to meet the day-to-day payments of the State. Capital assets, net of related debt and deferred outflows, account for $13.8 billion or 60.1 percent of the State's total net position, which represents an increase of $100.4 million from the prior year; capital assets increased in both business-type activities and governmental activities. The increase of $18.6 million in the net investment in governmental capital assets was attributable to transportation projects, public school construction, and office consolidation in the Department of Agriculture offset to a large degree by depreciation charges of $501.8 million on bridge and roadway infrastructure. The current year capital net investment increase in of $81.9 million in business-type activities was primarily attributable to Higher Education Institutions and the Other Enterprise Funds. The addition of capital assets in Other Enterprises (primarily the Transportation Enterprise) from nonfinanced sources of $103.8 million was offset by a reduction in Higher Education Institutions resulting from an increase in financed capital acquisition. It should be noted that the value of the capital assets is not available to meet related debt service requirements, which must be paid from current receipts or available liquid assets. Assets restricted by the State Constitution or external parties account for another $4,802.5 million or 20.9 percent of net position, which represents an increase of $180.6 million over the prior year. In general, these restrictions dictate how the related assets must be used by the State, and therefore, the amount may not be available for the general use of the State's programs. The constitutionally mandated State Education Fund fund balance, the Highway Users Tax Fund fund balance, and resources pledged to debt service are examples of restrictions on the State's net position. Governmental activities Restricted Net Position decreased by $102.3 primarily related to the required transfer of the excess general fund surplus of $38.6 million to the State Education Fund, while businesstype activities increased by $282.8 million. The Unrestricted Net Position of $4,358.1 million represents 19.0 percent of total net position and is the amount by which total assets and deferred outflows exceed total liabilities and deferred inflows after all restrictions and capital asset exclusions are considered. This represents an increase of $1,052.8 million from the prior fiscal year. The governmental activities unrestricted net position increased by $786.0 million and business-type activities 28 COLORADO COMPREHENSIVE ANNUAL FINANCIAL REPORT increased by $266.9 million. The largest portion of unrestricted net position is reported in Special Revenue Funds; however, legislative action is generally required to mak