ARKANSAS The Natural State Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2020 ARKANSAS Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2020 Asa Hutchinson Governor Larry W. Walther Secretary Department of Finance and Administration Prepared By The Department of Finance and Administration Office of Accounting The requirements of State agencies to print annual reports, such as the State of Arkansas’s Comprehensive Annual Financial Report, were reduced by Ark. Code Ann. § 25-1-203. The report is available in electronic format at https://www.dfa.arkansas.gov/accounting-office/CAFR. The photograph of Governor Asa Hutchinson is courtesy of the Governor’s Office. Governor Asa Hutchinson STATE OF ARKANSAS ASA HUTCHINSON GOVERNOR January 15, 2021 To the People of Arkansas and the Honorable Members of the Arkansas General Assembly: I am pleased to submit the Fiscal Year 2020 Arkansas Comprehensive Annual Financial Report (CAFR). This annual publication demonstrates my commitment to accurate and timely financial reporting. The financial statements and accompanying disclosures provide detailed information of the State of Arkansas’s financial status, accounting methods and economic data to the public. The Fiscal Year 2020 CAFR goes beyond generally accepted accounting principles to highlight important statistical information of the State. For these efforts, I am pleased to report that the 2019 CAFR received the Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting. Arkansas has received this prestigious award twenty-two times for its transparency in reporting. I appreciate the work performed by all State employees who have maintained financial records. Using this information, the Department of Finance and Administration team has worked over the last several months to complete this fiscal year 2020 report for your review. 500 WOODLANE STREET, SUITE 250 · LITTLE ROCK, AR 72201 TELEPHONE (501) 682-2345 www.governor.arkansas.gov ARKANSAS Acknowledgments The Comprehensive Annual Financial Report was prepared by the Department of Finance and Administration Office of Accounting: Larry W. Walther Secretary Paul S. Louthian, CPA Deputy Director/State Comptroller Financial Reporting Staff: Gerald Plafcan, CPA, CFE, CGFM, MBA Assistant Administrator of Office of Accounting Gary Puls, CPA – CAFR Accounting Manager Dan Brassart, CPA – SEFA Accounting Manager Jessica Primm, CPA, MBA – Technical Accounting Manager David Paes, CPA – CAFR Coordinator Ed Niday, CPA – CAFR Coordinator Josh Loy, CPA – CAFR Coordinator Marilyn Hannibal, CPA – CAFR Coordinator Rhonda Harris, CPA – CAFR Coordinator Becky Salewski Cassie Cantlon, MBA Emil James White, CPA George Williams, CPA Jerry Ellis, CPA Joseph R. Cox, CPA Leah Campbell Lisa Marts, CPA, MAFM Marcella Winzerling, CPA, CGFM Kathy Crawford Megan Weick Special appreciation is given to all personnel throughout the State whose extra effort to contribute accurate, timely financial data for their agencies made this report possible. ARKANSAS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2020 TABLE OF CONTENTS Page Introductory Section Letter of Transmittal i GFOA – Certificate of Achievement for Excellence in Financial Reporting xi Organizational Chart xii Principal Officials xiii Financial Section Independent Auditor’s Report 1 Management’s Discussion and Analysis 7 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 20 Discretely Presented Component Units Consolidated Statement of Financial Position 22 Statement of Activities 24 Discretely Presented Component Units Consolidated Statement of Activities 26 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet 28 Reconciliation of the Governmental Fund Balance Sheet to the Statement of Net Position 29 Statement of Revenues, Expenditures and Changes in Fund Balance 30 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of the Governmental Fund to the Statement of Activities 31 Proprietary Funds Financial Statements Statement of Fund Net Position 32 Statement of Revenues, Expenses and Changes in Fund Net Position 34 Statement of Cash Flows 35 Fiduciary Funds Financial Statements Statement of Fiduciary Net Position 37 Statement of Changes in Fiduciary Net Position 38 Notes to the Financial Statements – Table of Contents 39 Required Supplementary Information Pension Funds Schedules 155 Schedule of Expenditures – Budget and Actual – General Fund 167 Notes to Schedule of Expenditures – Budget and Actual – General Fund 168 Ten-Year Claims Development Information – Employee Benefits Division – Public School Employee Health and Life Benefit Plan 170 Ten-Year Claims Development Information – Workers’ Compensation Commission – Death and Permanent Total Disability Trust Fund 172 Ten-Year Claims Development Information – Workers’ Compensation Commission – Second Injury Trust Fund 174 Other Postemployment Benefits Schedules 176 ARKANSAS Page Combining Financial Statements Non-major Enterprise Funds 181 Combining Statement of Fund Net Position 182 Combining Statement of Revenues, Expenses and Changes in Fund Net Position 184 Combining Statement of Cash Flows 185 Fiduciary Funds 186 Combining Statement of Fiduciary Net Position – Pension Trust Funds 187 Combining Statement of Changes in Fiduciary Net Position – Pension Trust Funds 188 Combining Statement of Fiduciary Net Position – Agency Funds 189 Combining Statement of Changes in Assets and Liabilities – Agency Funds 190 Statistical Section (Consolidated) Financial Trends Schedule 1 Net Position by Component 194 Schedule 2 Changes in Net Position 196 Schedule 3 Fund Balances, Governmental Fund 200 Schedule 4 Changes in Fund Balance, Governmental Fund 202 Revenue Capacity Information Schedule 5 Revenue Base – Sales and Use Tax Collections by Industry 204 Schedule 6 Revenue Payers 206 Debt Capacity Information Schedule 7 Ratios of Outstanding Debt by Type 207 Schedule 8 Pledged Revenue Bond Coverage 208 Demographic and Economic Information Schedule 9 Demographic and Economic Indicators 209 Schedule 10 Principal Employers 210 Schedule 11 State Employees by Function 212 Operating Information Schedule 12 Operating Indicators by Function 214 Schedule 13 Capital Asset Statistics by Function 218 Other Information Schedule 14 Miscellaneous Statistics 219 INTRODUCTORY SECTION OFFICE OF THE SECRETARY STATE OF ARKANSAS 1509 West Seventh Street, Suite 401 Post Office Box 3278 Department of Finance Little Rock, Arkansas 72203-3278 Phone: (501) 682-2242 and Administration Fax: (501) 682-1029 www.arkansas.gov/dfa January 15, 2021 The Honorable Asa Hutchinson, Governor The Honorable Members of the Arkansas General Assembly The Citizens of Arkansas In accordance with the requirements set forth in Arkansas Code of 1987 (Ark. Code Ann.) § 19-4-517, it is my pleasure to transmit to you the Comprehensive Annual Financial Report (CAFR) of the State of Arkansas (the State) for the fiscal year ended June 30, 2020. This report has been prepared by the Department of Finance and Administration (DFA) in conformance with Generally Accepted Accounting Principles (GAAP) for governments as promulgated by the Governmental Accounting Standards Board (GASB). The accuracy of agency-level data that support these financial statements is the responsibility of agency management. The completeness and fairness of the presentation, including all disclosures, rests with DFA. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position of the State. All disclosures necessary to enable the reader to gain an understanding of the State’s financial activities have been included. The management of the State is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the State are protected from loss, theft, or misuse and that adequate accounting data are compiled to allow the preparation of the financial statements. The internal control structure has been designed to provide reasonable, but not absolute, assurance regarding the reliability of financial records for preparing financial statements and maintaining accountability for the safeguarding of public assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and that the valuation of costs and benefits require estimates and judgments by management. Arkansas Legislative Audit performed the audit for the fiscal year ended June 30, 2020. Auditing standards generally accepted in the United States of America were used by the auditors in conducting the engagement. The auditors’ report on the basic financial statements is included in the financial section of this report. The Management’s Discussion and Analysis (MD&A) introduces the basic financial statements and provides an analytical overview of the government’s financial activities. This letter of transmittal complements the MD&A and should be read in conjunction with it. The State’s MD&A can be found in the financial section immediately following the report of the independent auditor. PROFILE OF THE GOVERNMENT Originally part of the Louisiana Purchase of 1803, Arkansas was organized into a territory in 1819 with the same northern, eastern, and southern borders it shares today. In 1836, Arkansas became the 25th state of the United