State of Alaska Comprehensive Annual Financial Report For the Fiscal Year July 1, 2017 - June 30, 2018 Prepared by: Department of Administration Division of Finance The FY 18 CAFR is expected to be available on or after February 28, 2019 on our Internet web site at http://doa.alaska.gov/dof/reports/cafr.html. This publication was released by the Department of Administration, Division of Finance to report on the State’s financial status. This publication is required by AS 37.05.210 This page intentionally left blank. STATE OF ALASKA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2018 TABLE OF CONTENTS Page Statement INTRODUCTORY SECTION Letter of Transmittal i Certificate of Achievement ix Exhibits x Organizational Chart xiv Functions of State Departments xv Alaska State Legislature xviii FINANCIAL SECTION 1 INDEPENDENT AUDITOR'S REPORT 3 MANAGEMENT'S DISCUSSION AND ANALYSIS 7 BASIC FINANCIAL STATEMENTS: 17 Government-wide Financial Statements Statement of Net Position 18 1.01 Statement of Activities 20 1.02 Fund Financial Statements Governmental Funds 23 Balance Sheet 24 1.11 Reconciliation of the Balance Sheet to the Statement of Net Position 25 1.12 Statement of Revenues, Expenditures, and Changes in Fund Balances 26 1.13 Reconciliation of the Change in Fund Balances to the Statement of Activities 27 1.14 Proprietary Funds 29 Statement of Net Position 30 1.21 Statement of Revenues, Expenses, and Changes in Fund Net Position 33 1.22 Statement of Cash Flows 34 1.23 Fiduciary Funds 37 Statement of Fiduciary Net Position 38 1.31 Statement of Changes in Fiduciary Net Position 39 1.32 Component Units 41 Statement of Net Position 42 1.41 Statement of Activities 44 1.42 Notes to the Basic Financial Statements 47 REQUIRED SUPPLEMENTARY INFORMATION: 159 Budgetary Comparison Schedule - General Fund 160 2.01 Note to Required Supplementary Information - Budgetary Reporting 161 Information about the State's Pension and Other Postemployment Benefit Plans 162 2.10 - 2.53 STATE OF ALASKA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2018 TABLE OF CONTENTS SUPPLEMENTARY INFORMATION COMBINING FUND STATEMENTS: 199 Governmental Funds General Fund 201 Combining Balance Sheet 207 3.01 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances 208 3.02 Nonmajor Governmental Funds 209 Combining Balance Sheet 210 3.11 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 211 3.12 Permanent Funds 213 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 214 3.23 Nonmajor Special Revenue Funds 215 Combining Balance Sheet 218 3.31 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 220 3.32 Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual 222 3.33 Nonmajor Debt Service Funds 229 Combining Balance Sheet 230 3.41 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 231 3.42 Nonmajor Capital Projects Funds 233 Combining Balance Sheet 234 3.51 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 235 3.52 Proprietary Funds Nonmajor Enterprise Funds 237 Combining Statement of Net Position 240 4.01 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 241 4.02 Combining Statement of Cash Flows 242 4.03 Commercial Assistance Enterprise Funds Combining Statement of Net Position 244 4.11 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 246 4.12 Combining Statement of Cash Flows 248 4.13 Energy Assistance Enterprise Funds Combining Statement of Net Position 250 4.21 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 251 4.22 Combining Statement of Cash Flows 253 4.23 Other Agencies Enterprise Funds Combining Statement of Net Position 254 4.31 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 256 4.32 Combining Statement of Cash Flows 258 4.33 Internal Service Funds 261 Combining Statement of Net Position 262 4.41 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position 263 4.42 Combining Statement of Cash Flows 264 4.43 STATE OF ALASKA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2018 TABLE OF CONTENTS Fiduciary Funds 266 Pension and Other Employee Benefit Trust Funds Combining Statement of Fiduciary Net Position 268 5.01 Combining Statement of Changes in Fiduciary Net Position 270 5.02 Agency Funds Combining Statement of Fiduciary Assets and Liabilities 273 5.11 Combining Statement of Changes in Assets and Liabilities 274 5.12 Component Units Nonmajor Component Units 277 Combining Statement of Net Position 280 6.01 Combining Statement of Activities 282 6.02 OTHER SUPPLEMENTARY INFORMATION: 285 Component Units Nonmajor Component Unit Without Separately Issued Financial Statements Balance Sheet 287 6.03 Statement of Revenues, Expenditures, and Changes in Fund Balances 288 6.04 Schedule STATISTICAL SECTION 289 Financial Trends Net Position by Component 293 A-1 Government-wide Expenses, Program Revenues, and Net (Expense) Revenue 294 A-2 Government-wide General Revenues and Other Changes in Net Position 296 A-3 Fund Balances, Govermental Funds 297 A-4 Changes in Fund Balances, Governmental Funds 298 A-5 Revenue Capacity Alaska Permanent Fund Investment Income 301 B-1 Oil Severance Taxes 302 B-2 Oil Royalties 304 B-3 Debt Capacity Ratios of Outstanding Debt by Type 306 C-1 Pledged-Revenue Coverage 307 C-2 Demographic and Economic Information Statistics 308 D-1 Employment by Industry 309 D-2 Operating Information Full-time Equivalent Government Employees by Function 311 E-1 Operating Indicators by Function 312 E-2 Capital Asset Statistics by Function 314 E-3 INDEX OF FUNDS 315 LEGEND OF ACRONYMS 321 This page intentionally left blank. Department of Administration KELLY TSHIBAKA, COMMISSIONER 10th Fl. State Office Building P.O. Box 110200 Juneau, Alaska 99811-0200 Main: 907.465.2200 Fax: 907.465.2135 www.doa.alaska.gov February 19, 2019 The Honorable Michael J. Dunleavy, Governor Members of the Legislature Citizens of the State of Alaska In accordance with Alaska Statute (AS) 37.05.210, it is our pleasure to present the Comprehensive Annual Financial Report (CAFR) of the State of Alaska for the fiscal year ending June 30, 2018. This report has been prepared by the Department of Administration, Division of Finance. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the State. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and reported in a manner designed to present fairly the financial position and results of operations of the State. Statistical and demographic information are included to enable the reader to gain an understanding of the State's financial activities. INTRODUCTION Internal Controls The Department of Administration, Division of Finance, is primarily responsible for the overall operation of the State’s central accounting system. The State's system of internal controls over the accounting system has been designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived, and the evaluation of costs and benefits requires estimates and judgments by management. Some component units operate outside the State’s central accounting system. Those component units are responsible for establishing and maintaining their own separate internal control structures. Audits The Division of Legislative Audit is the principal auditor of the State’s reporting entity. The audit of the CAFR was conducted in accordance with generally accepted auditing standards (GAAS). The independent auditor’s report is the first item in the financial section of the CAFR and precedes the Management Discussion and Analysis (MD&A) and basic financial statements. The goal of the independent audit is to provide reasonable assurance that the financial statements of the State for the fiscal year ended June 30, i The Honorable Michael J. Dunleavy, Governor February 19, 2019 Members of the Legislature Citizens of the State of Alaska 2018, are free of material misstatement. The audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the CAFR, assessing the accounting principles used, and evaluating the overall financial statement presentation. In addition to the annual audit of the State’s CAFR, the State is required to undergo an annual single audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and the U.S. Office of Management and Budget’s Uniform Grant Guidance 2 CFR Part 200. Information related to this single audit, including a schedule of expenditures of federal awards, the auditor’s reports on internal controls and compliance with applicable laws and regulations, and a schedule of findings and questioned costs will be published at a later date under separate cover by the Division of Legislative Audit. Management’s Discussion and Analysis Governmental Accounting Standards Board Statement No. 34 requires that management provide a narrative introduction, overview, and analysis of the State’s financial activities. This transmittal letter is intended to complement the MD&A and should be read in conjunction with it.The MD&A can be found immediately following the independent auditor’s report. PROFILE OF THE STATE OF ALASKA The State of Alaska was the 49th state admitted into the Union in 1959. The Alaska Constitution was adopted by the Constitutional Convention February 5, 1956, ratified by the people of Alaska April 24, 1956, and became operative with the formal proclamation of statehood January 3, 1959.