Audit Report - Statewide Single Audit Fy2021
Summary
Single Audit of the State of Alaska for the Fiscal Year Ended June 30, 2021, transmitted by the Alaska State Legislature Division of Legislative Audit on July 14, 2022, signed Kris Curtis, CPA, CISA, to members of the legislature, Governor Michael J. Dunleavy and Inspector General Christi Grimm of the U.S. Department of Health and Human Services. The transmittal letter states that the report includes an opinion on the basic financial statements, findings and recommendations, required auditor's reports on internal controls and compliance, and the Schedule of Expenditures of Federal Awards. It states that the FY 20 single audit contained 94 findings, that this report presents a total of 75 findings, 35 of which were presented at least in part last year, and that DHSS was reorganized under Executive Order 121. The contents list Sections I, II and III.
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“Audit Report - Statewide Single Audit Fy2021.”
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LEGISLATIVE BUDGET AND AUDIT COMMITTEE
Division of Legislative Audit
P.O. Box 113300
Juneau, AK 99811-3300
(907) 465-3830
FAX (907) 465-2347
legaudit@akleg.gov
July 14, 2022
Honorable Members of the
Alaska State Legislature
The Honorable Michael J. Dunleavy
Governor
State of Alaska
The Honorable Christi Grimm
Inspector General
Office of the Inspector General
U.S. Department of Health and Human Services
We are pleased to transmit the Single Audit of the State of Alaska for the Fiscal Year Ended
June 30, 2021. The audit was conducted in accordance with auditing standards generally
accepted in the United States of America, Government Auditing Standards issued by the
Comptroller General of the United States, and complies with the United States Office of
Management and Budget’s Uniform Guidance.
The report includes an opinion on the basic financial statements of the State of Alaska for
FY 21, findings and recommendations on financial and compliance matters, required auditor’s
reports on internal controls and compliance, and the Schedule of Expenditures of Federal
Awards.
The findings and recommendations included in this report are organized by department and
include prior financial and compliance findings not fully corrected by the departments. Our
FY 20 single audit contained 94 findings; this report presents a total of 75 findings, 35 of which
were presented, at least in part, last year. With your active support and encouragement, we
hope to see improvement in the implementation of corrective action for these findings by the
State agencies.
The findings and recommendations beginning on Section II page 45 of this report are addressed
to the Department of Health and Social Services (DHSS). However, in accordance with
Members of the Legislature -2- July 14, 2022
Governor Dunleavy
Inspector General Grimm
Executive Order 121, effective July 1, 2022, DHSS was reorganized into two departments –
the Department of Health, and the Department of Family and Community Services. The views
of responsible officials and corrective action plans for findings and recommendations
addressed to DHSS in this report will be obtained from the newly created Department of
Health. No FY 21 findings and recommendations were issued to divisions organized within
the Department of Family and Community Services.
The dedicated staff of the Division of Legislative Audit remains committed to enhancing State
of Alaska operations and accountability. Your active involvement is critical to implementing
corrective actions. We are available to assist you in that effort.
Kris Curtis, CPA, CISA
Legislative Audit
ALASKA STATE LEGISLATURE DIVISION OF LEGISLATIVE AUDIT
TABLE OF CONTENTS
Page
ORGANIZATIONAL CHART V
SECTION I - AUDITOR’S REPORT AND FINANCIAL STATEMENTS
Independent Auditor’s Report ............................................................................................. I – 1
Management’s Discussion and Analysis ............................................................................. I – 7
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position......................................................................................... I – 18
Statement of Activities ............................................................................................. I – 20
Fund Financial Statements:
Governmental Funds
Balance Sheet ..................................................................................................... I – 22
Reconciliation of the Balance Sheet to
the Statement of Net Position ............................................................................. I – 23
Statement of Revenues, Expenditures, and
Changes in Fund Balances.................................................................................. I – 24
Reconciliation of the Change in Fund Balances to
the Statement of Activities ................................................................................. I – 25
Proprietary Funds
Statement of Net Position ................................................................................... I – 26
Statement of Revenues, Expenses, and Changes in Fund Net Position ............. I – 29
Statement of Cash Flows .................................................................................... I – 30
ALASKA STATE LEGISLATURE -i- DIVISION OF LEGISLATIVE AUDIT
TABLE OF CONTENTS
(continued)
Page
SECTION I - AUDITOR’S REPORT AND FINANCIAL STATEMENTS (CONT.)
Fiduciary Funds
Statement of Fiduciary Net Position .................................................................. I – 32
Statement of Changes in Fiduciary Net Position................................................ I – 33
Component Units
Statement of Net Position ................................................................................... I – 34
Statement of Activities ....................................................................................... I – 36
Notes to the Basic Financial Statements ........................................................................ I – 39
Required Supplementary Information:
Budgetary Comparison Schedule – General Fund ......................................................... I – 152
Note to Required Supplementary Information – Budgetary Reporting ......................... I – 153
Information about the State’s Pension and Other Postemployment Benefit Plans ........ I – 154
SECTION II - FINDINGS AND QUESTIONED COSTS
Introduction.......................................................................................................................... II – 1
Summary of Findings……………………………………………………………………... II – 3
Findings and Recommendations .......................................................................................... II – 5
Schedule of Findings and Questioned Costs ....................................................................... II – 139
ALASKA STATE LEGISLATURE - ii - DIVISION OF LEGISLATIVE AUDIT
TABLE OF CONTENTS
(continued)
Page
SECTION III – INTERNAL CONTROL AND COMPLIANCE REPORTS AND
OTHER INFORMATION
Independent Auditor’s Report on Internal Control over Financial
Reporting and on Compliance and Other Matters Based on an
Audit of the Financial Statements Performed in
Accordance with Government Auditing Standards........................................................ III – 1
Independent Auditor’s Report on Compliance for Each Major
Federal Program and Report on Internal Control over Compliance
Required by the Uniform Guidance ............................................................................... III – 5
Schedule of Expenditures of Federal Awards by Federal Agency ...................................... III – 11
Notes to the Schedule of Expenditures of Federal Awards ................................................. III – 49
Summary Schedule of Prior Audit Findings ........................................................................ III – 53
SECTION IV - CORRECTIVE ACTION PLAN
Agency Responses………………………………………………………………………… IV – 1
Legislative Auditor’s Additional Comments ....................................................................... IV – 89
SECTION V - APPENDICES
Schedule of Expenditures of Federal Awards by State Agency .......................................... V – 1
Abbreviations........................................................................................................................ V – 23
ALASKA STATE LEGISLATURE - iii - DIVISION OF LEGISLATIVE AUDIT
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ALASKA STATE LEGISLATURE - iv - DIVISION OF LEGISLATIVE AUDIT
Voters of Alaska
LEGISLATURE EXECUTIVE BRANCH COURT SYSTEM
Office of the
House Senate University of Alaska
Governor
Departments
Administration Natural Resources Law Public Safety
Labor and
Military and Health and Social
Corrections Workforce
Veterans Affairs Services
Development
Alaska Aerospace Corporation
Education and Early Fish and Game Environmental Transportation and
Board of Fish
Development Board of Game
Conservation Public Facilities
Alaska Student Loan Corporation
Alaska State Council on the Arts Knik Arm Bridge and Toll
Authority
Commerce,
Community, and
Revenue
Economic
Development
Alaska Housing Finance Corporation Alaska Industrial Development and Export Authority
Alaska Municipal Bond Bank Authority Alaska Seafood Marketing Institute
Alaska Permanent Fund Corporation Alaska Railroad Corporation
Alaska Mental Health Trust Authority Alaska Energy Authority
Northern Tobacco Securitization Alaska Gasline Development Corporation
Corporation
Alaska Housing Capital Corporation
ALASKA STATE LEGISLATURE - v -- v - DIVISION OF LEGISLATIVE AUDIT
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ALASKA STATE LEGISLATURE - vi -- v - DIVISION OF LEGISLATIVE AUDIT
SECTION I - AUDITOR’S REPORT AND FINANCIAL STATEMENTS
ALASKA STATE LEGISLATURE
LEGISLATIVE BUDGET AND AUDIT COMMITTEE
Division of Legislative Audit
P.O. Box 113300
Juneau, AK 99811-3300
(907) 465-3830
FAX (907) 465-2347
legaudit@akleg.gov
Independent Auditor’s Report
Members of the Legislative Budget
and Audit Committee:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the
business-type activities, the aggregate discretely presented component units, each major fund,
and the aggregate remaining fund information of the State of Alaska, as of and for the year
ended June 30, 2021, and the related notes to the financial statements, which collectively
comprise the State’s basic financial statements as listed in the Table of Contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States
of America. This includes the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit.
We did not audit the financial statements of: Alaska Permanent Fund; International Airports
Fund; University of Alaska; Alaska Housing Finance Corporation; Alaska Industrial
Development and Export Authority; Alaska Railroad Corporation; Alaska Energy Authority;
Alaska Municipal Bond Bank Authority; Alaska Clean Water Fund; Alaska Drinking Water
Fund; Retiree Health Fund; the Invested Assets Under the Investment Authority of the
Commissioner of Revenue; and the Pension and Other Employee Benefit Trust Funds except
for the Alaska National Guard and Alaska Naval Militia Retirement Fund. As shown on the
following page, those financial statements reflect assets and revenues of the indicated opinion
units.
ALASKA STATE LEGISLATURE I - 1 DIVISION OF LEGISLATIVE AUDIT
Percent of Percent of
Opinion Unit Assets _Revenues_
Governmental Activities 90% 74%
Business-Type Activities 80% 36%
Aggregate Discretely Presented
Component Units 90% 92%
Major Funds:
General Fund 78% 2%
Alaska Permanent Fund 100% 100%
Alaska International Airports 100% 100%
Aggregate Remaining
Fund Information 95% 94%
Those statements were audited by other auditors, whose report has been furnished to us, and
our opinions, insofar as they relate to the amounts included for those accounts, funds,
retirement plans, and component units, are based solely on the report of the other auditors. We
conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement. Certain entities of the State of Alaska
were not audited in accordance with Government Auditing Standards. These entities include:
the Alaska Municipal Bond Bank Authority (a discretely presented component unit); the
Retiree Health Fund (a proprietary fund); the Pension and Other Employee Benefit Trust Funds
except for Alaska National Guard and Alaska Naval Militia Retirement Fund (fiduciary funds);
and Invested Assets Under the Investment Authority of the Commissioner of the Department
of Revenue (certain cash and investment accounts).
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our unmodified and qualified audit opinions.
ALASKA STATE LEGISLATURE DIVISION OF LEGISLATIVE AUDIT
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Basis for Qualified Opinion on General Fund
State of Alaska’s General Fund rents and royalties are not reported in accordance with
generally accepted accounting principles and management declined to correct the
misstatements. Misstatements include an unreported General Fund prior period adjustment of
$199.0 million for overstated General Fund royalty revenues of $99.8 million in FY 18 and
$99.2 million in FY 19, and an understatement of $199.0 million due to other funds. The
misstatement was caused by the Department of Natural Resources’ failure to transfer all
statutorily dedicated revenues to the Alaska Permanent Fund. The statutory dedications of
royalty revenues are required by law to be deposited in the Permanent Fund.
Further, fund balances of the State of Alaska’s General Fund were not reported in accordance
with generally accepted accounting principles and management declined to correct the
misstatements. The misstatements were the result of the Attorney General’s determination that
FY 22 appropriations signed into law prior to July 1, 2021, but with a July 1 effective date, are
validly assigned by the legislature and are not considered available for appropriation and,
therefore, not subject to the constitutional requirement to repay the Constitutional Budget
Reserve Fund. Evidence contradicts the Attorney General’s position and supports a
determination that related fund balance is unassigned as of June 30, 2021. Misstatements
include an understatement to General Fund unassigned fund balance of $108.6 million and
overstatements to assigned fund balance for education of $23.7 million, assigned fund balance
for health and human services of $29.3 million, assigned fund balance for public protection of
$13.5 million, and assigned fund balance for development of $42.1 million.
Note two relating to the State’s Constitutional Budget Reserve Fund, a subfund of the General
Fund also referred to as the State’s rainy day fund or savings account, is materially misstated
by $1.5 billion and management declined to correct the misstatement. The overstatement is the
result of not correcting for the $199.0 million misstatement discussed above, the failure to
repay the Constitutional Budget Reserve Fund $108.6 million at year-end, the Attorney
General’s guidance to the Department of Revenue and the Department of Natural Resources
that concludes taxes, royalties, and interest received as a result of decisions by the Federal
Energy Regulatory Commission are not required to be deposited in the Constitutional Budget
Reserve Fund. Historically the receipts have been deposited in the Constitutional Budget
Reserve Fund. Additionally, taxes due as a result of Federal Energy Regulatory Commission
decisions were permitted to be offset against tax credits owed to taxpayers, which further
misstated the Constitutional Budget Reserve Fund balance. The Attorney General also asserted
that similar monies received in prior years that were deposited in the Constitutional Budget
Reserve Fund should be reclassified as General Fund monies, thereby reducing the amount
that the General Fund must repay the Constitutional Budget Reserve Fund in the future. Legal
analysis does not support the Attorney General’s position. The failure to properly deposit
monies received during the fiscal years ended June 30, 2018, June 30, 2019, June 30, 2020,
and June 30, 2021, and the reclassification of prior year monies, violates State law and provides
misleading information to users of the financial statements.
ALASKA STATE LEGISLATURE DIVISION OF LEGISLATIVE AUDIT
I-3
Qualified Opinion
In our opinion, based on our audit and the report of other auditors, except for the effects of the
matter described in the “Basis for Qualified Opinion on General Fund” paragraphs, the
financial statements referred to above present fairly, in all material respects, the financial
position of the General Fund of the State of Alaska, as of June 30, 2021, the changes in
financial position thereof for the year then ended in accordance with accounting principles
generally accepted in the United States of America.
Unmodified Opinions
In our opinion, based on our audit and the report of other auditors, the financial statements
referred to above present fairly, in all material respects, the respective financial position of
the governmental activities, business-type activities, the aggregate discretely presented
component units, Alaska Permanent Fund, Alaska International Airports, the Unemployment
Compensation Fund, and the aggregate remaining fund information of the State of Alaska, as
of June 30, 2021, and the respective changes in financial position and, where applicable, cash
flows thereof for the year then ended in accordance with accounting principles generally
accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
Management’s Discussion and Analysis, the Budgetary Comparison Schedule and the
Corresponding Notes, and the Pension and Other Postemployment Benefit Plans Information,
as listed in the Table of Contents, be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board, who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate operational,
economic, or historical context. We, and the other auditors, have applied certain limited
procedures to the required supplementary information in accordance with auditing standards
generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information
for consistency with management’s responses to our inquiries, the basic financial statements,
and other knowledge we obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the Required Supplementary Information
because the limited procedures do not provide us with sufficient evidence to express an opinion
or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the State of Alaska’s basic financial statements. The Schedule of
Expenditures of Federal Awards, as required by Title 2 U.S. Code of Federal Regulations
ALASKA STATE LEGISLATURE DIVISION OF LEGISLATIVE AUDIT
I-4
Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards is presented for the purpose of additional analysis and is not a required part
of the basic financial statements.
The Schedule of Expenditures of Federal Awards is the responsibility of management and was
derived from and relates directly to the underlying accounting and other records used to
prepare the basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and certain additional
procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic
financial statements themselves, and other additional procedures in accordance with auditing
standards generally accepted in the United States of America by us and other auditors. In our
opinion, based on our audit, the procedures performed as described above, and the report of
the other auditors, the Schedule of Expenditures of Federal Awards is fairly stated, in all
material respects, in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
February 24, 2022, on our consideration of the State of Alaska’s internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts, grant agreements, and other matters. The purpose of that report is solely to describe
the scope of our testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on the effectiveness of the State of Alaska’s
internal control over financial reporting or on compliance. That report is an integral part of an
audit performed in accordance with Government Auditing Standards in considering the State
of Alaska’s internal control over financial reporting and compliance.
Kris Curtis, CPA, CISA
Legislative Auditor
Juneau, Alaska
February 24, 2022 except for our report on the Schedule of Expenditures of Federal Awards,
which is dated July 11, 2022.
ALASKA STATE LEGISLATURE DIVISION OF LEGISLATIVE AUDIT
I-5
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I-6
STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
STATE OF ALASKA
Management’s Discussion and Analysis
As management of the State of Alaska, we offer readers of the State’s financial statements this narrative overview and analysis
of the financial activities of the State for the fiscal year ended June 30, 2021. We encourage readers to consider the information
presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found
in the preceding pages of this report, and the financial statements that follow.
Financial Highlights
Government-wide
¢ The assets and deferred outflows of resources of the State exceeded its liabilities and deferred inflows of resources at the
close of FY 2021 by $91.8 billion (net position). Of this amount, $8.7 billion represents net investment in capital assets,
$62.8 billion is restricted for various purposes, and unrestricted net position is $20.3 billion. Unrestricted net position may
be used to meet the State’s ongoing obligations to citizens and creditors.
Fund level
¢ As of the close of the current fiscal year, the State’s governmental funds reported combined ending fund balances of
$85.7 billion, with $23.8 billion unrestricted (includes committed, assigned, and unassigned), $61.7 billion nonspendable,
and $234.7 million restricted to specific purposes such as development, debt, and education. The nonspendable fund
balance includes $60.7 billion of the Alaska Permanent Fund principal with the remaining related to nonspendable assets
such as inventory, advances and prepaid items, and the principal of other nonmajor permanent funds.
¢ At the end of the current fiscal year, unrestricted fund balance for the General Fund was a surplus of $2.4 billion. This is a
decrease of $903.0 million from FY 2020. The decrease is mainly due to an unassigned fund balance decrease of $944.7
million.
Long-term debt
* As aresult of this year’s activity, the State’s total long-term debt decreased by $234 million (2.85 percent). Long-term debt
decreased primarily due to a decrease in unearned revenue due to expending and recognizing the Coronavirus Relief Funds
and an increase in the net pension liability which was partially offset by a decrease in the other postemployment benefits
(OPEB) liability. Additional information regarding long-term debt can be found in Note 6.
Overview of the Financial Statements
This Management’s Discussion and Analysis (MD&A) is intended to serve as an introduction to the State’s basic financial
statements. The State’s basic financial statements include three components: 1) government-wide financial statements, 2) fund
financial statements, and 3) notes to the basic financial statements. This report also contains other supplementary information in
addition to the basic financial statements themselves.
Government-wide Financial Statements (reporting on the State as a whole)
The government-wide financial statements are designed to provide readers with a broad overview of the State’s finances, in a
manner similar to a private-sector business. It includes all of the State’s funds and component units except for fiduciary funds.
However, the primary focus of the statements is clearly on the State and the presentation allows the user to address the relative
relationship with the discretely presented component units.
The statement of net position presents information on all of the State’s assets, liabilities and deferred outflows and inflows of
resources. Net position is the difference between (a) assets and deferred outflows of resources and (b) liabilities and deferred
inflows of resources. Over time, increases or decreases in net position should serve as a useful indicator of whether the financial
position of the State is improving or deteriorating.
The statement of activities presents information showing how the government’s net position changed during the most recent
fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless
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STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
of the timing of related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will
only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).
Both of the government-wide financial statements report three activities:
* Governmental Activities - Most of the State’s basic services are reported in this category. Governmental activities are
principally supported by interest and investment income, taxes, rents and royalties, and intergovernmental revenues. The
Legislature, the Judiciary, and the general operations of the Executive departments fall within the governmental activities.
¢ Business-type Activities - The State charges fees to customers to help it cover all or most of the cost of certain services it
provides. The State’s International Airports Fund, the various loan funds, and the Unemployment Compensation fund are
examples of business-type activities.
¢ Discretely Presented Component Units - Component units are legally separate organizations for which the State is
financially accountable. The State has one university and ten corporations and authorities that are reported as discretely
presented component units of the State.
The government-wide financial statements are statement numbers 1.01 and 1.02.
This report includes two statements (statement numbers 1.12 and 1.14) that reconcile the amounts reported on the governmental
fund financial statements (modified accrual accounting) with governmental activities (accrual accounting) on the appropriate
government-wide statements. The following summarizes the impact of transitioning from modified accrual to accrual
accounting.
* Capital assets (land, buildings, equipment, infrastructure, intangibles, and construction in progress) used in governmental
activities are not reported in governmental fund statements.
¢ Pension and OPEB assets, and claims and judgments are not current available resources and are not reported in the
governmental fund statements.
¢ Deferred outflows and deferred inflows are not reported in the governmental fund statements.
¢ Internal service funds are reported as governmental activities in the government-wide financial statements, but are reported
as proprietary funds in the fund financial statements.
* Certain revenues, unavailable to pay for current period expenditures, are not reported in the governmental fund statements.
¢ Unless due and payable in the current period, certain long-term liabilities such as net pension liability, net OPEB liability,
capital lease obligations, compensated absences, litigation, notes and bonds payable, and others only appear as liabilities in
the government-wide statements.
* Capital outlay spending results in capital assets in the government-wide statements, but are reported as expenditures on the
governmental fund statements.
¢ Bond and other debt proceeds provide current financial resources to governmental funds; however, issuing debt increases
long-term liabilities in the Statement of Net Position. Repayment of bond principal is an expenditure in the governmental
funds, but the repayment reduces long-term liabilities in the Statement of Net Position.
* Capital lease arrangements are considered a source of financing in the governmental funds but are reported as a liability in
the Statement of Net Position.
¢ Certain expenditures are reported in the funds but either increase or decrease long-term liabilities or deferred outflows on
the Statement of Net Position and have been eliminated from the Statement of Activities.
Fund Financial Statements (reporting on the State’s major funds)
The fund financial statements are statement numbers 1.11 through 1.42 and provide detailed information about the major
individual funds. The State has four major funds, the General Fund, the Alaska Permanent Fund, which are included in the
governmental fund statements, and the International Airports Fund and Unemployment Compensation Fund which are included
in the proprietary fund statements. A fund is a grouping of related accounts that is used to maintain control over resources that
have been segregated for specific activities or objectives. The State of Alaska, like other state and local governments, uses fund
accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the State can be
divided into three categories: governmental funds, proprietary funds, and fiduciary funds. We have also included the discretely
presented component units in the fund financial statements and include detailed information on the four major component units,
the University of Alaska, Alaska Housing Finance Corporation, Alaska Energy Authority and Alaska Industrial Development
and Export Authority.
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STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Governmental funds - Most of the State’s basic services are reported in the governmental funds. Governmental funds include
the General Fund, special revenue funds, capital projects funds, debt service funds, and permanent funds. Governmental fund
financial statement focus is on near-term inflows and outflows of spendable resources, as well as on balances of spendable
resources available at the end of the fiscal year. Such information may be useful in evaluating whether there are more or fewer
financial resources that can be spent in the near future to finance the State’s programs. These funds are reported using modified
accrual accounting, which measures cash and other financial assets that can be readily converted to cash. The governmental
fund financial statements are statement numbers 1.11 through 1.14.
As mentioned earlier, the State has only two major governmental funds, the Alaska Permanent Fund and the General Fund.
Together these two funds represent 96.8 percent of total government-wide cash and investments and 92.2 percent of total
government-wide net position (excluding component units). The governmental funds financial statements present detail on each
of these funds, with summarized information on all other governmental funds. In addition, detail for each of the nonmajor
governmental funds is available in combining statements elsewhere in this report.
The State’s main operating fund is the General Fund. However, the State maintains many accounts and subfunds within the
General Fund, including the Constitutional Budget Reserve Fund, the Statutory Budget Reserve Fund, the Permanent Fund
Dividend Fund, and the Public Education Fund. Because of materiality and public interest in these funds, individual fund data
for each of these subfunds is provided in the combining statement for the General Fund elsewhere in this report.
Proprietary funds - When the State charges customers for the services it provides, whether to outside customers or to other
State agencies, these services are generally reported in proprietary funds. Proprietary funds (enterprise and internal service)
utilize accrual accounting, the same method used by private-sector businesses. Enterprise funds are used to report activities that
provide supplies and services to the general public. The State uses enterprise funds to account for activities such as international
airports operations, various loan funds, and the unemployment compensation fund. These activities are reported within
business-type activities on the government-wide financial statements.
Internal service funds account for activities that provide supplies and services for other State programs. These include, among
others, the State’s equipment fleet and data processing/telecommunications. Because these services primarily benefit
governmental rather than business-type functions, they have been included within governmental activities in the government-
wide financial statements.
The proprietary fund financial statements are statement numbers 1.21 through 1.23. The International Airports Fund and
Unemployment Compensation Fund are major enterprise funds of the State of Alaska. The International Airports Fund is
2.7 percent of total government-wide liabilities (excluding component units). The Unemployment Compensation Fund is
0.1 percent of total government-wide liabilities (excluding component units). The proprietary funds financial statements present
detail for these two funds with summarized information on all other proprietary funds. In addition, detail for each of the
nonmajor proprietary funds is provided in the combining statements elsewhere in this report.
Fiduciary funds - The State acts as a trustee or fiduciary for its employee pension plans. In addition, it is also responsible for
other assets that, because of a trust arrangement, can be used only for the trust beneficiaries. The State’s fiduciary activities are
reported in the Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position. These funds, which
include pension (and other employee benefits), investment trust funds, and custodial funds, are reported using accrual
accounting. Since fiduciary assets are restricted in purpose and are not available to support the State’s own programs, these
fiduciary assets are not presented as part of the government-wide financial statements.
The fiduciary fund financial statements are statement numbers 1.31 and 1.32.
Notes to the Basic Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the government-wide
and fund financial statements. The notes to the basic financial statements can be found immediately following the component
unit statement of activities (statement number 1.42).
Additional Required Supplementary Information (RSI)
In addition to the basic financial statements and accompanying notes, this report includes additional required supplementary
information. Included in the RSI is a budgetary comparison schedule for the General Fund reconciling the statutory and
1-9
STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
generally accepted accounting principles (GAAP) fund balances at fiscal year-end (statement number 2.01). Also included are
schedules displaying the proportionate share of the net pension and OPEB liability/asset, employer contribution amounts, the
sources of changes in the net pension and OPEB liability/asset, components of the net pension and OPEB liability/asset and
related ratios, and the net pension and OPEB liability/asset as a percentage of covered-employee payroll.
Other Supplementary Information
Other supplementary information includes combining financial statements for nonmajor governmental, proprietary, and
fiduciary funds, as well as nonmajor discretely presented component units. These nonmajor funds are added together by fund
type and presented in single columns in the basic financial statements, but are not reported individually on the fund financial
statements. Only the major funds: the General Fund, the Alaska Permanent Fund, the International Airports Fund, and
Unemployment Compensation Fund are presented individually on the primary government fund financial statements. Schedules
of revenues, expenditures, and changes in fund balances - budget and actual are also presented for all governmental funds with
annually adopted budgets.
Government-wide Financial Analysis
As noted earlier, net position should serve over time as a useful indicator of a government’s financial position. State assets and
deferred outflows of resources exceeded liabilities and deferred inflows of resources by $91.8 billion at the close of FY 2021
(see table below). By far the largest portion of the State’s net position (89.1 percent) reflects its investments held in the Alaska
Permanent Fund. However, the majority of these assets are not available for future spending since the principal of the fund
($60.7 billion) may not be spent.
The remainder of the State’s net position (10.9 percent) represents net investment in capital assets ($8.7 billion), resources that
are subject to external restrictions of how they may be used ($2.02 billion), and the remaining is unrestricted net position.
Net Position
(Stated in millions)
Governmental Business-type Total
Activities Activities Primary Government
FY 2021 FY 2020 FY 2021 FY 2020 FY 2021 FY 2020
Current and Other Noncurrent Assets $ 96,004 $ 77,740 $ 2,354 $ 2,246 $ 98,358 $ 79,986
Capital Assets 8,334 7,934 1,141 1,185 9,475 9,119
Total Assets 104,338 85,674 3,495 3,431 107,833 89,105
Deferred Outflows of Resources 1,017 911 11 11 1,028 922
Long-term Liabilities 7,511 7,720 474 498 7,985 8,218
Other Liabilities 8,691 5,832 50 719 8,741 5,911
Total Liabilities 16,202 13,552 524 577 16,726 14,129
Deferred Inflows of Resources 363 283 5 5 368 288
Net Position:
Net Investment in Capital Assets 7,835 7,425 833 863 8,668 8,288
Restricted 61,776 53,237 994 1,009 62,770 54,246
Unrestricted 19,179 12,088 1,150 988 20,329 13,076
Total Net Position $ 88,790 $ 72,750 $ 2,977. $ 2,860 $ 91,767 $ 75,610
The net position of governmental activities increased $16,040 million and business-type activities increased $117 million.
Governmental activities net position increased due to a large increase in interest and investment income associated with the
Permanent Fund. The increase in business type activities is a result of this year’s operations.
STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The following condensed financial information was derived from the government-wide Statement of Activities and reflects how
the State’s net position changed during FY 2021.
Changes in Net Position
(Stated in millions)
Governmental Business-type Total
Activities Activities Primary Government
FY 2021 FY 2020 FY 2021 FY 2020 FY 2021 FY 2020
Revenues
Program Revenues
Charges for Services $ 1,447 $ 1,423 $ 343 §$ 348 §$ 1,790 §$ 1,771
Operating Grants 4,344 2,903 560 399 4,904 3,302
Capital Grants 766 742 66 49 832 791
General Revenues
Taxes 984 1,025 — — 984 1,025
Interest and Investment Income/(Loss) 19,716 2,040 103 53 19,819 2,093
Payments In from Component Units 44 67 — — 44 67
Other Revenues 94 55 1 — 95 55
Total Revenues 27,395 8,255 1,073 849 28,468 9,104
Expenses
General Government 1,102 405 — — 1,102 405
Alaska Permanent Fund Dividend 632 1,025 — — 632 1,025
Education and University 2,093 1,903 — — 2,093 1,903
Health and Human Services 3,744 3,365 — — 3,744 3,365
Law and Justice 232 230 — — 232 230
Public Protection 762 856 — — 762 856
Natural Resources 333 302 — — 333 302
Development 1,500 128 — — 1,500 128
Transportation 752 1,022 — — 752 1,022
Intergovernmental 90 107 — — 90 107
Debt Service 55 67 — — 55 67
Loans — — 9 594 9 594
Insurance — — 849 73 849 73
Airports — — 164 160 164 160
Total Expenses 11,295 9,410 1,022 827 12,317 10,237
Excess (Deficiency) of Revenues
Over Expenditures 16,100 (1,155) 51 22 16,151 (1,133)
Transfers (66) — 66 — — —
Contributions — — — — — —
Change in Net Position 16,034 (1,155) 117 22 16,151 (1,133)
Net Position - Beginning of Year 72,750 73,905 2,860 2,838 75,610 76,743
Prior Period Adjustment 6 — — — 6 —
Net Position - End of Year $ 88,790 $ 72,750 $ 2,977 $ 2,860 $ 91,767 $ 75,610
STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Financial Analysis of the State’s Funds
As noted earlier, the State uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.
Governmental Funds
The focus of the State’s governmental funds is to provide information on near-term inflows, outflows, and balances of
spendable resources. Such information is useful in assessing the State’s financing requirements. In particular, unassigned,
assigned, and committed fund balances may serve as a useful measure of a government’s net resources available for spending at
the end of the fiscal year.
As of the end of the current fiscal year, the State’s governmental funds reported combined ending fund balances of
$85.7 billion, a increase of $15.6 billion in comparison with the prior year.
The General Fund unassigned and committed fund balances, which are available for spending at the government’s discretion,
had balances of $1.0 billion, and $1.5 billion, respectively. The Alaska Permanent Fund (earnings reserve account) had an
unrestricted fund balance of $21.1 billion of which $14.1 billion is assigned and $7.0 billion is committed. The remaining
nonmajor governmental funds had committed fund balances of $59.6 million. The remainder of fund balance is restricted or
nonspendable to indicate that it is not available for new spending such as the principal of the Alaska Permanent Fund ($60.7
billion), and other items that are nonspendable, such as inventory, advances and prepaid items, and principal ($0.96 billion), and
amounts restricted for a variety of other purposes ($235 million).
The General Fund is the chief operating fund of the State. At the end of the current fiscal year, unrestricted fund balance
(includes committed, assigned, and unassigned) of the General Fund was $2.4 billion, while total fund balance reached
$2.7 billion. As a measure of the General Fund’s liquidity, it may be useful to compare both unrestricted fund balance and total
fund balance to total fund expenditures. Unrestricted fund balance represents 22.0 percent of total General Fund expenditures,
while total fund balance represents 23.2 percent of that same amount.
The fund balance of the State’s General Fund decreased by $1.3 billion during the current fiscal year. For FY 2021, the most
significant source of revenue was federal revenues (68.1 percent) followed by taxes (13.4 percent). For FY 2021, the increase in
revenues is attributable to a large increase in federal funds received related to COVID-19. There also was a large increase in
expenditures related to COVID-19 funding as well as the reversal of the $1.0 billion FY 2020 Power Cost Equalization Fund
transfer.
General Fund revenues for FY 2021 were $7.19 billion, an increase of $1.12 billion compared to revenues of $6.06 billion for
FY 2020. Revenues by source for FY 2021 are compared to FY 2020 in the following schedule (in millions):
Revenue Source FY 2021 Percent FY 2020 Percent
Taxes $ 963.3 13.4% $ 1,010.0 16.7 %
Rents and Royalties 751.9 10.5 721.7 11.9
Interest and Investment Income/(Loss) 124.8 1.7 274.0 4.5
Federal 4,893.6 68.1 3,615.9 59.6
Miscellaneous 453.2 6.3 442.3 7.3
Total Revenue $ 7,186.7 100.0 % $ 6,063.9 100.0 %
The primary components of the $1,122.8 million increase in General Fund revenue are $30.2 million in rents and royalties,
$11.0 million in miscellaneous revenue including payments in from component units and a $1,277.7 million increase in federal
revenue during FY 2021. The increases were partially offset by a $46.7 million decrease in taxes, and a $149.2 million decrease
in interest and investment income.
STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Alaska Permanent Fund
The Alaska Permanent Fund (fund) is an asset of the State of Alaska that is managed by the Alaska Permanent Fund
Corporation, an instrumentality of the State of Alaska.
In 1976 the Alaska Constitution was amended to provide that: At least twenty-five percent of all mineral lease rentals, royalties,
royalty sale proceeds, federal mineral revenue sharing payments, and bonuses received by the State shall be placed in a
permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by
law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the General Fund
unless otherwise provided by law.
The fund is made up of three parts.
¢ Nonspendable Fund Balances: The nonspendable fund balances, or principal, include all historical contributions and
appropriations, which are the main body of the fund. On June 30, 2021, this amounted to $46.9 billion. The sources
of contributions and appropriations of the fund, since inception, were as follows: $17.9 billion in dedicated mineral
revenues; $18 billion of fund realized earnings transferred to principal for inflation proofing; $10.9 billion in additional
deposits approved by special legislative appropriation, and $153 million in settlement earnings (State v. Amerada
Hess, et al.).
A portion of accumulated unrealized appreciation on invested assets is also part of the nonspendable fund balances.
The unrealized amounts allocated to contributions and appropriations are nonspendable, unless and until they become
realized, at which point they will be transferred to the assigned fund balance. The portion of the unrealized
appreciation at the end of the fiscal year allocated to principal amounted to $13.8 billion.
¢ Committed Fund Balances: The committed fund balances are realized earnings of the Fund which have been
designated by appropriation for a specific purpose and meet other criteria as defined by Generally Accepted
Accounting Principles. During FY 2019, legislation was passed which provides for a transfer from the Earning
Reserve Account to the General Fund for the payment of unrestricted General Fund expenditures, including the
dividend. The amount of the transfer is based upon a percentage of the average market value of the Fund at the end of
the first five of the preceding six fiscal years. The legislation took effect on July 1, 2019. The FY 2021 balance sheet
reflects a commitment of fund balance of $3.1 billion for transfer during FY 2022.
During FY21, legislation was passed to transfer $4.0 billion from the Earnings Reserve Account to the corpus in FY22.
This transfer will take place in FY22 and the amount is reflected as committed fund balance on the June 30, 2021
balance sheet.
¢ Assigned Fund Balances: The assigned fund balances, which are available for legislative appropriation per
AS 37.13.145, consist of $9.3 billion in realized earnings of the fund and $4.8 billion in accumulated unrealized
appreciation.
General Fund Budgetary Highlights
The difference between the original expenditure budget and the final amended budget was a net increase of $43 million in
appropriations (or 0.2 percent). The net effect of increases and decrease in appropriations can be briefly summarized as follows:
¢ $586 million decrease allocated to transportation
¢ $276 million increase allocated to public protection
* $539 million increase allocated to development
¢ $381 million decrease allocated to health and human services
¢ $126 million increase allocated to education
¢ — The balance is allocated across several expenditure functions
The overall increase in appropriated expenditures was funded out of additional federal receipts in the amount of $503 million.
Interagency receipts (purchases between departments) of $435.0 million make up the majority of other additional revenues.
STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The difference between the final amended budget and actual expenditures was $9.5 billion (or 44.0 percent). The difference was
primarily due to multiyear appropriations exceeding expenditures within FY 2021 by $5.5 billion in transportation and a
$1.3 billion in health and human services.
The difference between the final amended budget and actual revenues was $8.6 billion (or 53.2% percent). The difference was
primarily due to multiyear appropriations exceeding revenues within FY 2021 by $8.3 billion in Federal Grants in Aid. The
biggest variances are due to capital projects that span several fiscal years.
Capital Assets and Debt Administration
Capital assets
The State’s net investment in capital assets for its governmental and business-type activities as of June 30, 2021, amounts to
$8.7 billion. The table below displays total capital assets, net of accumulated depreciation. Depreciation charges for FY 2021
totaled $621 million for governmental activities and $77 million for business-type activities.
Capital Assets
(Stated in Millions)
Business-type Total Primary
Governmental Activities Activities Government
FY 2021 FY 2020 FY 2021 FY 2020 FY 2021 FY 2020
Land $ 1,081 $ 1,068 $ 31 §$ 31 $ 1,112 $ 1,099
Buildings 1,487 1,535 571 600 2,058 2,135
Equipment 624 510 37 32 661 542
Infrastructure 3,650 3,242 479 507 4,129 3,749
Construction in Progress 1,492 1,580 23 14 1,515 1,594
Total Capital Assets $ 8334 $ 7,935 $ 1,141 $ 1,184 $ 9,475 $ 9,119
In FY 2021, increases were in infrastructure and equipment with an increase of $380 million and $119 million, respectively.
These increases were offset with decreases in buildings and construction in progress in the amount of $77 million and
$79 million, respectively. Additional information on the State's capital assets can be found in Note 5 in the notes to the basic
financial statements.
Long-term Debt
At the end of the current fiscal year, the State had total bonded debt outstanding of $1,375 million. Of this amount, $725 million
was general obligation bonds, and $650 million of revenue bonds payable comprised of $311 million issued by the Northern
Tobacco Securitization Corporation (NTSC), and $339 million issued by the International Airport Fund. The general obligation
bonds are secured by the full faith, credit, and resources of the State, whereas the NTSC bonds are secured by and payable
solely from Tobacco Settlement Revenues (TSRs). Neither the State of Alaska, nor the Alaska Housing Finance Corporation
(of which NTSC is a subsidiary) is liable for any debt issued by NTSC. The remaining $339 million are International Airports
revenue bonds secured solely by specified revenue sources. The general obligation and NTSC bonds are reported as
governmental activities debt, and the International Airports bonds are reported as business-type activities debt.
STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Long-term Debt
(Stated in millions)
Business-type Total Primary
Governmental Activities Activities Government
FY 2021 FY 2020 FY 2021 FY 2020 FY 2021 FY 2020
Revenue Bonds Payable $ 311 $ 313 $ 339 §$ 355 §$ 650 $ 668
General Obligation Debt 725 672 — — 725 672
Notes Payable 4 7 — — 4 7
Capital Leases Payable 211 230 — — 211 230
Unearned Revenue 627 1,220 25 36 653 1,256
Certificates of Participation 22 24 — — 22 24
Compensated Absences 198 181 5 5 204 186
Claims and Judgments 217 225 — — 217 225
Pollution Remediation 131 125 6 6 137 131
Other Noncurrent Liabilities 35 3 35 34 70 37
Net OPEB Liability 3 105 — 2 3 107
Net Pension Liability 5,027 4,616 63 60 5,090 4,676
Total $ 7,511 $ 7,721 $ 473 $ 498 $ 7,985 $ 8,218
The State’s total long-term debt decreased by $234 million (2.85 percent) during FY 2021. The decrease in debt is primarily
due to a decrease in unearned revenue due to Coronavirus Relief Funds and an increase in the net pension liability which was
partially offset by an decrease in the OPEB liability.
With the implementation of GASB Statement 68 and 75, the State of Alaska reported net pension liabilities and net OPEB
liabilities/assets in relation to a special funding situation in the amount of $2,158.2 million net pension liability, and $293.3
million net OPEB asset. The State of Alaska, Department of Law issued a legal opinion that the State of Alaska is not legally
responsible for this portion of the net pension liability. Regardless, the financial statements must be reported under generally
accepted accounting principles.
As of June 30, 2021, the State’s General Obligation debt ratings were AA-/A+/Aa3 from S&P Global Ratings (S&P), Fitch
Ratings (Fitch), and Moody's Investors Service, Inc. (Moody’s), respectively. The outlook on S&P and Moody’s ratings is
stable, and the outlook on the Fitch rating is negative. On April 22, 2021, Moody’s revised the State of Alaska’s outlook to
stable from negative. On May 4, 2021, S&P revised the State of Alaska’s outlook to stable from negative.
Additional information regarding the State’s long-term debt can be found in Note 6, in the notes to the basic financial
statements.
Significant Facts
The Public Employee’s Retirement System’s (PERS) net investment income increased $5.0 billion to $5.8 billion during FY
2021. The Teacher’s Retirement System’s (TRS) net investment income increased $2.3 billion to $2.7 billion during FY 2021.
In 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 84, Fiduciary Activities which was
implemented in FY 2021. This statement establishes criteria for identifying and classifying fiduciary activities of state and local
governments. It describes four fiduciary funds that should be reported, if applicable: 1) pension (and other employee benefit)
trust funds, 2) investment trust funds, 3) private-purpose trust funds, and 4) custodial funds, which generally should report
fiduciary activities that are not required to be reported in pension trust funds, investment trust funds, or private-purpose trust
funds. Several fund changes are reflected in the financial statements due to the implementation of GASB 84, see Note 14 for
additional details.
The Permanent Fund ended the fiscal year at 29.73 percent total return. The components of this increase were $1.5 billion in
stock dividends, bond interest, and cash flow income from other investments, $320 million in dedicated mineral deposits, and
an increase in the fair value of investments of $18.1 billion offset by operating expenses and other appropriations of $175
million and the General Fund transfer of $3.1 billion. These results were significantly stronger than the 2.01 percent of FY
I-15
STATE OF ALASKA
MANAGEMENT?’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
2020 and were well above the average over the Fund’s history. FY 2021’s results significantly outperformed any market
returns since 1985 which have ranged from -17.96 percent to 25.58 percent. Please see Note | for further information regarding
this blended component unit and how to obtain the separately issued financial statements.
Economic Factors and Next Year’s Budgets and Rates
¢ The State’s average unemployment rate for FY 2021 was 7.0 percent, up slightly from the seasonally adjusted average
unemployment rate for FY 2020. Alaska’s five year average (2017 to 2021) was 6.5 percent. The United States
unemployment rate for FY 2021 was 6.4 percent.
¢ Total General Fund revenue for FY 2021 was $7.2 billion. Three sources of revenue accounted for 92.0 percent of total
state revenue; federal, taxes, and rents and royalties. Federal accounted for 68.1 percent, taxes accounted for 13.4 percent,
and rents and royalties accounted for 10.5 percent of general fund revenue. The State’s budget is primarily structured
around petroleum and federal revenue. Federal funds are generally restricted for use for federal programs and therefore
cannot be used to balance the State budget. Petroleum revenues continue to be of concern with fluctuating oil prices and
lawmakers continuing to use State reserves to close budget gaps.
¢ FY 2021 crude oil and natural gas liquids production in the State of Alaska for the North Slope averaged 485 thousand
barrels per day. This is 15 thousand barrels per day more than in the prior year. In Cook Inlet, production averaged
approximately 11 thousand barrels per day; a decrease of about three thousand barrels per day compared to the prior year.
¢ The State of Alaska FY 2021 budgeted expenditures include certain items that are unique to Alaska, such as the Alaska
Permanent Fund Dividend and State-operated Pioneer Homes. The Alaska Permanent Fund Dividend ($992/resident) was
paid to each qualifying Alaskan for a total of $632 million.
Requests for Information
This financial report is designed to provide a general overview of the State’s finances. Questions concerning any of the
information provided in this report or requests for additional financial information should be addressed to the State of Alaska,
Division of Finance, P.O. Box 110204, Juneau, AK 99811-0204.
Basic Financial
Statements
STATE OF ALASKA
Statement of Net Position
Government-wide
June 30, 2021
(Stated in Thousands)
STATEMENT 1.01
ASSETS
Cash and Investments
Accounts Receivable - Net
Interest and Dividends Receivable
Internal Balances
Due from Primary Government
Due from Component Units
Due from Other Governments
Loans, Notes, and Bonds Receivable
Inventories
Repossessed Property
Net Investment in Direct Financing Leases
Restricted Assets
Securities Lending Collateral
Net Pension Asset
Net OPEB Asset
Other Assets
Capital Assets:
Equipment, Net of Depreciation
Buildings, Net of Depreciation
Library Books, Net of Depreciation
Infrastructure, Net of Depreciation
Museum Collections
Land / Right-of-Way
Construction in Progress
Total Assets
DEFERRED OUTFLOWS OF RESOURCES
Total Deferred Outflows of Resources
LIABILITIES
Accounts Payable and Accrued Liabilities
Obligations Under Securities Lending
Due to Primary Government
Due to Component Units
Due to Other Governments
Interest Payable
Derivative Instruments
Other Current Liabilities
Primary Government
Governmental Business-Type Component
Activities Activities Total Units
$ 89,232,727 $ 1,583,659 $ 90,816,386 $ 2,466,921
833,174 45,007 878,181 46,495
160,340 13,617 173,957 42,201
(65,483) 65,483 _ _—
— _— _ 40,136
2,864 — 2,864 6,332
779,227 40,163 819,390 91,031
19,568 522,725 542,293 4,846,193
31,043 _— 31,043 16,755
_— 162 162 34,549
— _— _— 95,046
5 75,698 75,703 2,548,432
4,348,802 _— 4,348,802 37,421
20,031 _— 20,031 _—
543,304 5,277 548,581 67,114
98,440 2,339 100,779 50,417
624,110 37,120 661,230 363,789
1,486,785 571,017 2,057,802 1,400,856
— _— _ 6,701
3,649,578 478,926 4,128,504 938,222
— _— _ 7,399
1,081,704 31,202 1,112,906 124,092
1,491,666 22,589 1,514,255 334,359
104,337,885 3,494,984 107,832,869 13,564,461
1,016,627 11,309 1,027,936 274,204
4,247,233 43,084 4,290,317 144,198
4,348,802 — 4,348,802 37,421
— _— _— 5,991
79,769 — 79,769 14,198
_— 4,111 4,111 681
15,176 3,339 18,515 21,463
— _— _ 168,250
_— 284 284 163,180
This statement continues on the next page.
STATE OF ALASKA
Statement of Net Position
Government-wide
June 30, 2021
(Stated in Thousands)
STATEMENT 1.01
LIABILITIES (Continued)
Long-Term Liabilities:
Portion Due or Payable Within One Year:
Claims, Judgments, Compensated Absences, and
Pollution Remediation
Unearned Revenue
Notes, Bonds, and Leases Payable
Other Noncurrent Liabilities
Portion Due or Payable After One Year:
Claims, Judgments, Compensated Absences, and
Pollution Remediation
Unearned Revenue
Notes, Bonds, and Leases Payable
Net Pension Liabilities
Net OPEB Liabilities
Other Noncurrent Liabilities
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Total Deferred Inflows of Resources
NET POSITION
Net Investment in Capital Assets
Restricted for:
Permanent Funds
Nonexpendable
Expendable
Education
Development
Unemployment Compensation
Health and Human Services
Debt Service
Other Purposes
Unrestricted
Total Net Position
Primary Government
Governmental Business-Type Component
Activities Activities Total Units
206,043 4,593 210,636 17,762
374,294 25,267 399,561 180,723
67,955 14,640 82,595 212,913
397 _— 397 _—
339,657 6,847 346,504 5,683
253,160 _— 253,160 1,445
1,204,936 324,419 1,529,355 3,662,386
5,026,565 63,429 5,089,994 329,480
3,299 106 3,405 94
34,993 34,575 69,568 41,696
16,202,279 524,694 16,726,973 5,007,564
362,570 4,681 367,251 599,214
7,834,739 833,325 8,668,064 2,163,740
61,593,950 _— 61,593,950 677,039
— _— _ 201,267
28,798 _— 28,798 641,241
89,729 _— 89,729 90,500
— 369,205 369,205 _—
18,814 579,746 598,560 _—
39,684 16,961 56,645 690,377
4,455 27,446 31,901 1,483,521
19,179,494 1,150,235 20,329,729 2,284,202
$ 88,789,663 $ 2,976,918 $ 91,766,581 §$ 8,231,887
The notes to the financial statements are an integral part of this statement.
STATE OF ALASKA
Statement of Activities
Government-wide
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.02
FUNCTIONS/PROGRAMS
Primary Government:
Governmental Activities:
General Government
Alaska Permanent Fund Dividend
Education
University
Health and Human Services
Law and Justice
Public Protection
Natural Resources
Development
Transportation
Intergovernmental Revenue Sharing
Debt Service
Total Governmental Activities
Business-Type Activities:
Loans
Insurance
Airports
Total Business-Type Activities
Total Primary Government
Component Units:
University of Alaska
Alaska Housing Finance Corporation
Alaska Industrial Development and Export Authority
Alaska Energy Authority
Nonmajor Component Units
Total Component Units
Program Revenues
Charges for Services,
Royalties and Other
Operating Grants and
Capital Grants and
Expenses Fees Contributions Contributions
1,101,963 $ 27,393 $ 519,561 8,211
631,807 — — _—
1,768,748 2,366 471,063 _—
324,043 — — _—
3,743,545 51,259 2,582,277 26,621
231,503 4,911 19,704 604
762,166 175,677 105,467 3,873
332,657 1,137,871 104,579 11,600
1,500,666 290 432,745 1,942
752,471 46,739 68,443 712,761
89,708 — 40,402 _—
55,470 — 156 _—
11,294,747 1,446,506 4,344,397 765,612
8,933 10,544 345 17,871
849,531 211,192 549,554 _—
163,924 121,631 10,382 48,343
1,022,388 343,367 560,281 66,214
12,317,135 $ 1,789,873 $ 4,904,678 831,826
746,094 $ 150,399 $ 368,951 6,492
297,113 143,793 151,343 5,298
330,766 37,581 281,232 976
87,811 23,209 17,292 _—
277,720 188,709 243,350 _—
1,739,504 $ 543,691 $ 1,062,168 12,766
This statement continues on the next page.
STATE OF ALASKA
Statement of Activities
Government-wide
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.02
Net (Expense) Revenue and Changes in Net Position
Primary Government
Governmental Business-Type Component
Activities Activities Total Units
FUNCTIONS/PROGRAMS
Primary Government:
Governmental Activities:
General Government $ (546,798) (546,798)
Alaska Permanent Fund Dividend (631,807) (631,807)
Education (1,295,319) (1,295,319)
University (324,043) (324,043)
Health and Human Services (1,083,388) (1,083,388)
Law and Justice (206,284) (206,284)
Public Protection (477,149) (477,149)
Natural Resources 921,393 921,393
Development (1,065,689) (1,065,689)
Transportation 75,472 75,472
Intergovernmental Revenue Sharing (49,306) (49,306)
Debt Service (55,314) (55,314)
Total Governmental Activities (4,738,232) (4,738,232)
Business-Type Activities:
Loans $ 19,827 19,827
Insurance (88,785) (88,785)
Airports 16,432 16,432
Total Business-Type Activities (52,526) (52,526)
Total Primary Government (4,738,232) (52,526) (4,790,758)
Component Units:
University of Alaska $ (220,252)
Alaska Housing Finance Corporation 3,321
Alaska Industrial Development and Export Authority (10,977)
Alaska Energy Authority (47,310)
Nonmajor Component Unit 154,339
Total Component Units (120,879)
General Revenues
Taxes:
Severance Taxes 525,976 — 525,976 —
Selective Sales/Use 251,001 — 251,001 —
Income Taxes 83,869 — 83,869 —
Property Taxes 120,033 — 120,033 —
Other Taxes 2,620 — 2,620 —
Interest and Investment Income (Loss) 19,716,055 102,821 19,818,876 223,164
Tobacco Settlement 21,406 — 21,406 —
Payments in from Component Units 44,044 — 44,044 —
Payments In from Primary Government _ _ _— 295,739
Other Revenues 72,692 545 73,237 1,020,088
Transfers - Internal Activity (65,670) 65,670 _— _—
Total General Revenues 20,772,026 169,036 20,941,062 1,538,991
and Extraordinary items
Change in Net Position 16,033,794 116,510 16,150,304 1,418,112
Net Position - Beginning of Year 72,749,869 2,860,408 75,610,277 6,804,148
Prior Period Adjustment 6,000 — 6,000 9,627
Net Position - End of Year $ 88,789,663 $ 2,976,918 91,766,581 $ 8,231,887
The notes to the financial statements are an integral part of this statement.
I-21
STATE OF ALASKA
Balance Sheet
Governmental Funds
June 30, 2021
(Stated in Thousands)
STATEMENT 1.11
Alaska Total
General Permanent Nonmajor Governmental
Fund Fund Funds Funds
ASSETS
Cash and Investments $ 4,192,795 $ 83,760,244 $ 1,116,135 $ 89,069,174
Accounts Receivable - Net 201,147 591,880 3,159 796,186
Interest and Dividends Receivable 225 160,104 11 160,340
Due from Other Funds 96,024 35,689 5,823 137,536
Due from Component Units 2,864 — —_ 2,864
Due from Other Governments 776,420 — 215 776,635
Loans, Notes, and Bonds Receivable 19,471 — 97 19,568
Inventories 26,297 — —_ 26,297
Securities Lending Collateral —_ 4,348,802 — 4,348,802
Other Assets 87,635 — 4,069 91,704
Total Assets 5,402,878 88,896,719 1,129,509 95,429,106
LIABILITIES
Accounts Payable and Accrued Liabilities 1,556,566 2,601,006 8,350 4,165,922
Obligations Under Securities Lending —_ 4,348,802 — 4,348,802
Due to Other Funds 179,750 50,116 4,917 234,783
Due to Component Units 79,769 — —_ 79,769
Unearned Revenue 626,737 — 717 627,454
Other Liabilities 34,824 — 566 35,390
Total Liabilities 2,477,646 6,999,924 14,550 9,492,120
DEFERRED INFLOWS OF RESOURCES
Total Deferred Inflows of Resources 256,450 — 264 256,714
FUND BALANCES
Nonspendable:
Inventory 26,297 — —_ 26,297
Principal — 60,748,410 845,540 61,593,950
Advances and Prepaid Items 87,483 — 4,040 91,523
Restricted for:
Debt Service 4,678 — 35,152 39,830
Education 16,269 — 21,606 37,875
Health and Human Services 618 — 18,196 18,814
Development 3,157 — 130,564 133,721
Other Purposes 4,251 — 204 4,455
Committed to:
Education 135,474 — 2,186 137,660
Health and Human Services 289,155 — — 289,155
Public Protection 144,302 — 811 145,113
Permanent Fund 15,430 4,000,000 — 4,015,430
Development 695,554 — 56,611 752,165
Other Purposes 171,436 3,069,296 — 3,240,732
Assigned to:
Education 23,656 — — 23,656
Health and Human Services 29,284 — — 29,284
Public Protection 13,483 — —_ 13,483
Permanent Fund —_ 14,079,089 — 14,079,089
Development 42,176 — —_ 42,176
Unassigned 966,079 — (215) 965,864
Total Fund Balances 2,668,782 81,896,795 1,114,695 85,680,272
Total Liabilities, Deferred Inflows, and Fund Balances $ 5,402,878 $ 88,896,719 $ 1,129,509 $ 95,429,106
The notes to the financial statements are an integral part of this statement.
I-22
STATE OF ALASKA
Reconciliation of the Balance Sheet to the Statement of Net Position
Governmental Funds
June 30, 2021
(Stated in Thousands)
STATEMENT 1.12
Total Fund Balances - Governmental Funds
Amounts reported for governmental activities in the Statement of Net Position are different because:
Capital assets used in governmental activities are not financial resources and therefore are not
reported in the funds (Note 5). These assets consist of:
Equipment, net of depreciation
Buildings, net of depreciation
Infrastructure, net of depreciation
Land / right-of-way
Construction in progress
Some of the state's assets are not current available resources and are not reported in the funds.
Claims and judgments, net of federal reimbursement
Net pension asset (Note 7)
Other post employment benefits asset (Note 7)
Deferred outflows of resources that are not reported in the funds.
Losses on bond refunding
Related to pensions
Related to OPEB
Internal service funds are used by management to charge the costs of certain activities to individual
funds. The assets and liabilities of the internal service funds are included in governmental activities
in the Statement of Net Position (See Statement 1.21).
Certain revenues are not available to pay for the current period's expenditures and therefore are not
reported in the funds.
Long-term liabilities are not due and payable in the current period and therefore are not reported in the
funds (Note 6).
Claims and judgments, net of federal reimbursement
Compensated absences
Pollution remediation
Capital lease obligations
Net pension liability
Net OPEB liability
Long-term bonded debt is not due and payable in the current period and therefore is not reported in
the funds (Note 6).
Notes and bonds payable
Accrued interest payable
Deferred inflows of resources related to pensions that are not reported in the funds.
Net Position of Governmental Activities
The notes to the financial statements are an integral part of this statement.
459,339
1,364,405
3,649,578
1,081,704
1,456,015
2,592
20,031
538,559
4,271
194,254
207,932
(216,841
(192,183
(130,533
(211,165
(4,969,526
)
)
)
)
)
(3,204)
(1,057,867)
(15,176)
85,680,272
8,011,041
561,182
1,006,457
428,852
256,714
(5,723,452)
(1,073,043)
(358,360)
88,789,663
STATE OF ALASKA
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.13
REVENUES
Taxes
Licenses and Permits
Charges for Services
Fines and Forfeitures
Rents and Royalties
Premiums and Contributions
Interest and Investment Income (Loss)
Federal Grants in Aid
Payments In from Component Units
Other Revenues
Total Revenues
EXPENDITURES
Current:
General Government
Alaska Permanent Fund Dividend
Education
University
Health and Human Services
Law and Justice
Public Protection
Natural Resources
Development
Transportation
Intergovernmental Revenue Sharing
Debt Service:
Principal
Interest and Other Charges
Total Expenditures
Excess (Deficiency) of Revenues
Over Expenditures
OTHER FINANCING SOURCES (USES)
Bonds Issued
Bonds Issued Premium
Capital Leases
Transfers In from Other Funds
Transfers (Out to) Other Funds
Total Other Financing Sources and Uses
Net Change in Fund Balances
Fund Balances - Beginning of Year
Fund Balances - End of Year
Alaska Total
General Permanent Nonmajor Governmental
Fund Fund Funds Funds
963,261 — 20,237 $ 983,498
134,710 — 37,063 171,773
149,556 — 744 150,300
23,292 — 71 23,363
751,872 319,585 21,100 1,092,557
20,313 — 16,245 36,558
124,764 19,591,212 182,391 19,898,367
4,893,566 — 1,167 4,894,733
43,328 — — 43,328
82,045 _— 17,116 99,161
7,186,707 19,910,797 296,134 27,393,638
909,595 166,250 2,242 1,078,087
631,807 — — 631,807
1,821,946 — 3,905 1,825,851
322,105 — 680 322,785
3,723,772 — 3,241 3,727,013
246,111 2,198 — 248,309
802,845 — 561 803,406
276,949 6,147 45,721 328,817
1,497,702 — 2,192 1,499,894
1,138,542 — 42,950 1,181,492
89,708 — — 89,708
27,256 — 50,846 78,102
11,971 _— 47,335 59,306
11,500,309 174,595 199,673 11,874,577
(4,313,602) 19,736,202 96,461 15,519,061
— — 84,560 84,560
— — 26,204 26,204
3,561 — — 3,561
3,172,458 — 80,290 3,252,748
(176,489) (3,141,609) (32,220) (3,350,318)
2,999,530 (3,141,609) 158,834 16,755
(1,314,072) 16,594,593 255,295 15,535,816
3,982,854 65,302,202 859,400 70,144,456
2,668,782 $ 81,896,795 $ 1,114,695 $ 85,680,272
The notes to the financial statements are an integral part of this statement.
STATE OF ALASKA
Reconciliation of the Change in Fund Balances to the Statement of Activities
Governmental Funds
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.14
Net Change in Fund Balances - Total Governmental Funds
Amounts reported for governmental activities in the Statement of Activities are different
because:
Governmental funds report capital outlays as expenditures. However, in the Statement of
Activities, the cost of those assets is allocated over their estimated useful lives as
depreciation expense. Primarily this is the amount by which capital outlays exceeded
depreciation in the current period (Note 5).
Capital outlay
Depreciation expense
Internal service funds are used by management to charge the costs of certain activities to
individual funds. The net revenue of the internal service funds is reported in
governmental activities in the Statement of Revenues, Expenses, and Changes in Fund
Net Position (Statement 1.22).
Net current year revenue
Revenues in the Statement of Activities that do not provide current financial resources are
not reported as revenues in the fund.
Bond and other debt proceeds provide current financial resources to governmental funds;
however, issuing debt increases long-term liabilities in the Statement of Net Position.
Repayment of bond principal is an expenditure in the governmental funds, but the
repayment reduces long-term liabilities in the Statement of Net Position (See Statement
1.02).
Bonds issued
Bonds Issued premium
Accrued interest
Repayment of bond principal
Amortization of bond cost
Some capital additions were financed through capital leases. In the governmental funds, a
capital lease arrangement is considered a source of financing, but in the Statement of
Net Position (See Statement 1.01), the lease obligation is reported as a liability.
Certain expenditures are reported in the funds. However, they either increase or decrease
long-term liabilities or deferred outflows reported on the Statement of Net Position (See
Statement 1.01) and have been eliminated from the Statement of Activities (See
Statement 1.02).
Claims and judgments
Compensated absences
Pollution remediation
Capital lease payments
Pension
Other post employment benefits
Change in Net Position of Governmental Activities
The notes to the financial statements are an integral part of this statement.
I-25
$ 15,535,816
984,464
(591,084)
393,380
10,473
(2,025)
(84,560)
(26,204)
(2,085)
62,313
(50,536)
(3,561)
7,904
(16,534)
(5,306)
22,126
(239,869)
381,926
150,247
$ 16,033,794
STATE OF ALASKA
Statement of Net Position
Proprietary Funds
June 30, 2021
(Stated in Thousands)
STATEMENT 1.21
ASSETS
Current Assets:
Cash and Investments
Accounts Receivable - Net
Interest and Dividends
Receivable
Due from Other Funds
Due from Other Governments
Loans, Notes, and Bonds
Receivable
Inventories
Restricted Assets
Other Current Assets
Total Current Assets
Noncurrent Assets:
Interest and Dividends
Receivable
Loans, Notes, and Bonds
Receivable
Repossessed Property
Restricted Assets
Net OPEB Asset
Other Noncurrent Assets
Capital Assets:
Equipment, Net of
Depreciation
Buildings, Net of
Depreciation
Infrastructure, Net of
Depreciation
Land / Right-of-Way
Construction in Progress
Total Noncurrent Assets
Total Assets
DEFERRED OUTFLOWS OF
RESOURCES
Total Deferred Outflows of
Resources
Business-Type Activities Governmental
Enterprise Funds Activities
Nonmajor Enterprise
International Unemployment Enterprise Funds Internal
Airports Compensation Funds Total Service Funds
$ 171,940 $ 284,465 1,127,254 1,583,659 §$ 163,558
4,926 38,847 1,234 45,007 888
— _— 5,768 5,768 _
1,730 66,176 661 68,567 16,238
32,185 372 7,606 40,163 _
—_ _ 33,054 33,054 —
— _— _— _— 4,746
3,681 _— _— 3,681 _
_— — 4 4 6,736
214,462 389,860 1,175,581 1,779,903 192,166
_— — 7,849 7,849 _
— — 489,671 489,671 _
— — 162 162 _—
72,017 _— _— 72,017 _
4,969 — 308 5,277 4,745
_— — 2,335 2,335 _
37,120 _— _— 37,120 164,771
571,017 _— _— 571,017 122,380
478,926 _— _— 478,926 _
31,202 — — 31,202 _—
22,589 — — 22,589 35,651
1,217,840 — 500,325 1,718,165 327,547
1,432,302 389,860 1,675,906 3,498,068 519,713
10,650 _— 659 11,309 10,170
This statement continues on the next page.
STATE OF ALASKA
Statement of Net Position
Proprietary Funds
June 30, 2021
(Stated in Thousands)
STATEMENT 1.21
LIABILITIES
Current Liabilities:
Accounts Payable and
Accrued Liabilities
Due to Other Funds
Due to Other Governments
Interest Payable
Claims, Judgments,
Compensated Absences,
and Pollution
Remediation
Unearned Revenue
Notes, Bonds, and Leases
Payable
Other Current Liabilities
Total Current Liabilities
Noncurrent Liabilities:
Claims, Judgments,
Compensated Absences,
and Pollution
Remediation
Notes, Bonds, and Leases
Payable
Net Pension Liabilities
Net OPEB Liabilities
Other Noncurrent Liabilities
Total Noncurrent
Liabilities
Total Liabilities
DEFERRED INFLOWS OF
RESOURCES
Total Deferred Inflows of
Resources
NET POSITION
Net Investment in Capital
Assets
Restricted for:
Unemployment
Compensation
Health and Human Services
Debt Service
Other Purposes
Unrestricted
Total Net Position
Business-Type Activities Governmental
Enterprise Funds Activities
Nonmajor Enterprise
International Unemployment Enterprise Funds Internal
Airports Compensation Funds Total Service Funds
12,239 8,085 22,760 43,084 27,878
2,591 37 456 3,084 1,807
— 4,111 _— 4,111 _
3,339 _— _— 3,339 _
4,391 _— 202 4,593 3,291
17,105 8,162 _— 25,267 _
14,640 _— _— 14,640 2,770
— 260 24 284 _
54,305 20,655 23,442 98,402 35,746
6,847 — _— 6,847 2,852
324,419 _— _— 324,419 1,089
59,729 — 3,700 63,429 57,039
99 — 7 106 95
— — 34,575 34,575 _
391,094 _ 38,282 429,376 61,075
445,399 20,655 61,724 527,778 96,821
4,409 — 272 4,681 4,210
833,325 _— _— 833,325 318,943
— 369,205 _— 369,205 _
— — 579,746 579,746 _—
16,961 _— _— 16,961 _
27,207 _— 239 27,446 _
115,651 — 1,034,584 1,150,235 109,909
993,144 369,205 $ 1,614,569 $ 2,976,918 §$ 428,852
The notes to the financial statements are an integral part of this statement.
(Intentionally left blank)
I - 28
STATE OF ALASKA
Statement of Revenues, Expenses, and Changes in Fund Net Position
Proprietary Funds
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.22
OPERATING REVENUES
Premiums and Contributions
Charges for Goods and
Services
Allowances for Uncollectible
Revenues
Interest and Investment
Income
Allowance for Uncollectible
Interest
Fines and Forfeitures
Allowance for Uncollectible
Fines
Federal Reimbursements
Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Benefits
Operating
Depreciation
Provision for Loan Losses and
Forgiveness
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES
(EXPENSES)
Interest and Investment
Income
Interest and Investment
Expense
Gain (Loss) on Disposal of
Capital Assets
Other Nonoperating Revenues
(Expenses)
Total Nonoperating Revenues
(Expenses)
Income Before Capital
Contributions and
Transfers
Capital Contributions
Transfers In from Other Funds
Transfers (Out to) Other Funds
Change in Net Position
Total Net Position - Beginning of
Year
Prior Period Adjustment
Total Net Position - End of Year
Business-Type Activities Governmental
Enterprise Funds Activities
Nonmajor Enterprise
International Unemployment Enterprise Funds Internal
Airports Compensation Funds Total Service Funds
$ — $ 121,563 $ 88,546 §$ 210,109 $ 129,439
121,366 — 2,086 123,452 127,690
(506) _— — (506) _—
_— — 8,624 8,624 _
_— — 58 58 _
— 280 121 401 _
— 803 — 803 _—
— 549,554 — 549,554 _
1,118 _ 268 1,386 5,625
121,978 672,200 99,703 893,881 262,754
_— 780,801 65,126 845,927 138,181
86,867 — 8,808 95,675 130,940
77,057 — — 77,057 30,407
— — 1,866 1,866 _—
163,924 780,801 75,800 1,020,525 299,528
(41,946) (108,601) 23,903 (126,644) (36,774)
301 7,272 107,058 114,631 22
(11,640) — (170) (11,810) (17)
278 — — 278 137
35 — (1,864) (1,829) 116
(11,026) 7,272 105,024 101,270 258
(52,972) (101,329) 128,927 (25,374) (36,516)
58,343 — 17,871 76,214 15,089
_— 66,745 — 66,745 31,900
— — (1,075) (1,075) _
5,371 (34,584) 145,723 116,510 10,473
987,773 403,789 1,468,846 2,860,408 412,379
— — — _— 6,000
$ 993,144 $§$ 369,205 $ 1,614,569 $ 2,976,918 428,852
The notes to the financial statements are an integral part of this statement.
I-29
STATE OF ALASKA
Statement of Cash Flows
Proprietary Funds
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.23
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Other Governments
Receipts from Customers
Receipts for Interfund Services Provided
Receipt of Principal from Loan Recipients
Receipt of Interest and Fees from Loan Recipients
Receipts from Insured
Payments to Employees
Payments to Suppliers
Payments to Other Governments
Payments to Loan Recipients
Claims Paid
Payments for Interfund Services Used
Other Receipts
Other Payments
Net Cash Provided (Used) by Operating
Activities
CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES
Operating Subsidies and Transfers (Out to) Other
Funds
Operating Subsidies and Transfers In from Other
Funds
Federal Grants
Proceeds from Issuance of Short-term Debt
Payments on Short-term Debt
Interest and Fees Paid on Borrowing
Net Cash Provided (Used) by Noncapital
Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from Sale of Capital Assets
Acquisition and Construction of Capital Assets
Principal Paid on Capital Debt
Interest and Fees Paid on Capital Debt
Passenger Facility Charges
Federal Grants
Other Receipts (Payments)
Net Cash Provided (Used) by Capital and
Related Financing Activities
Business-Type Activities Governmental
Enterprise Funds Activities
Nonmajor Enterprise
International Unemployment Enterprise Funds Internal
Airports Compensation Funds Total Service Funds
— $ 577,394 $ 2,628 $ 580,022 $ _
127,496 _— 21 127,517 266
_— _— _— — 137,175
— _— 55,506 55,506 _—
_— _— 10,618 10,618 _—
— 126,915 88,663 215,578 128,792
(52,317) _— (3,926) (56,243) (47,933)
(33,558) _— (3,613) (37,171) (71,035)
_— _— (216) (216) _—
_— _— (65,308) (65,308) _—
— (843,354) (63,875) (907,229) (136,996)
_— _— (812) (812) (12,920)
— 204 458 662 5,609
= = (81) (81) =
41,621 (138,841) 20,063 (77,157) 2,958
_— — (2,939) (2,939) _—
_— — — _— 27,893
36 _— _— 36 _
— _— 4,101 4,101 _
_— _— (4,101) (4,101) _—
= = (9) (9) =
36 _— (2,948) (2,912) 27,893
884 _— _— 884 1,388
(33,829) — — (33,829) (16,118)
(13,930) _— — (13,930) (2,778)
(14,337) _— — (14,337) (145)
3,524 _— — 3,524 _—
55,840 _— 11,219 67,059 _—
9,235 _— — 9,235 _—
7,387 _— 11,219 18,606 (17,653)
I - 30
This statement continues on the next page.
STATE OF ALASKA
Statement of Cash Flows
Proprietary Funds
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.23
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sales/Maturities of Investments
Purchase of Investments
Interest and Dividends on Investments
Change in Restricted Cash and Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
Reconciliation of Operating Income (Loss) to Net
Cash Provided (Used) by Operating Activities:
Operating Income (Loss)
Adjustments to Reconcile Operating Income to Net
Cash Provided (Used) by Operating Activities:
Depreciation and Amortization
Bad Debt Expense
Net Changes in Assets, Deferred Outflows of
Resources, Liabilities, and Deferred Inflows of
Resources:
Accounts Receivable - Net
Due from Other Funds
Due from Other Governments
Loans, Notes, and Bonds Receivable - Net
Repossessed Property
Interest and Dividends Receivable - Net
Inventories
Net OPEB Asset
Other Assets
Deferred Outflows of Resources
Due to Other Funds
Due to Other Governments
Unearned Revenue
Accounts Payable and Accrued Liabilities
Net Pension Liability
Net OPEB Liability
Other Liabilities
Deferred Inflows of Resources
Net Cash Provided (Used) by Operating
Activities
Reconciliation of Cash to the Statement of Net
Position
Total Cash and Investments per the Statement of
Net Position
Less: Investments not Meeting the Definition of
Cash or Cash Equivalents
Cash, End of Year
Noncash Investing, Capital, and Financing
Activities
Contributed Capital Assets
Transfers In from Other Funds (Accrual)
The notes to the financial statements are an integral part of this statement.
Business-Type Activities Governmental
Enterprise Funds Activities
Nonmajor Enterprise
International Unemployment Enterprise Funds Internal
Airports Compensation Funds Total Service Funds
196,550 _— 309,372 505,922 _—
(203,197) _— (334,636) (537,833) _—
_— 7,272 8,489 15,761 22
(1,122) _ _ (1,122) _
(7,769) 7,272 (16,775) (17,272) 22
41,275 (131,569) 11,559 (78,735) 13,220
88,186 416,034 365,834 870,054 150,338
$ 129,461 $ 284,465 $ 377,393 $ 791,319 $ 163,558
$ (41,946) $ (108,601) $ 23,903 $ (126,644) $ (36,774)
77,057 _— _— 77,057 30,406
505 _— — 505 _—
4,973 (28,890) (328) (24,245) (510)
— 360 2,504 2,864 9,682
— 27,840 104 27,944 _
_— _— (9,031) (9,031) _—
— _— 790 790 _—
— _— 197 197 _—
_ _ _— _ (92)
80 _— (258) (178) (4,422)
_— _— (26) (26) (3,215)
40 _— (83) (43) (260)
— (2,029) 291 (1,738) 1,763
_— (2,871) — (2,871) _—
4,398 4,930 _— 9,328 _
(4,901) (29,580) 1,471 (33,010) 2,709
2,614 _— 598 3,212 4,283
(1,788) _— (103) (1,891) (1,648)
574 _— (2) 572 884
15 _ 36 51 152
$ 41,621 $ (138,841) $ 20,063 $ (77,157) $ 2,958
$ 171,940 $ 284,465 $ 1,127,254 $ 1,583,659 $ 163,558
(42,479) _— (749,861) (792,340) _—
$ 129,461 $ 284,465 $ 377,393 $ 791,319 $ 163,558
_— — — _— 15,089
— 66,745 _— 66,745 4,007
I-31
STATE OF ALASKA
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2021
(Stated in Thousands)
STATEMENT 1.31
ASSETS
Cash and Cash Equivalents
Investments:
Fixed Income
Broad Domestic Equity
Global Equity ex-US
Opportunistic
Private Equity Pool
Real Assets
Pooled Investment Funds
Collective Investment Funds
Synthetic Investment Contracts
Investment Loss Trust Fund Assets
Accounts Receivable - Net
Contributions Receivable
Loans Receivable - Net
Interest and Dividends Receivable
Securities Lending Collateral
Due from Other Funds
Other Assets
Total Assets
LIABILITIES
Accounts Payable and Accrued Liabilities
Obligations Under Securities Lending
Forfeiture Payable to Employer
Claims Payable
Trust Deposits Payable
Due to Other Funds
Total Liabilities
NET POSITION
Restricted for:
Pension Benefits
Other Postemployment Benefits
Individuals, Organizations, and Other Governments
Total Net Position
Pension and Other
Employee
Benefit Trust Funds
Custodial
Funds
Investment Trust
Funds
$ 295,105
6,858,354
9,260,576
6,187,596
1,973,221
5,021,664
4,152,316
4,981,013
3,220,563
860,590
2,089
7,216
23,057
85,823
36,723
1,305
147,983
6,210
200,882
42,967,211
154,371
10,187
85,824
212
55,070
5,363
6,179
3,713
30,685
52
156,656
40,577
52
18,938,651
14,774,051
9,097,853
113,794
200,830
$ 42,810,555
113,794
200,830
The notes to the financial statements are an integral part of this statement.
STATE OF ALASKA
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.32
ADDITIONS
Contributions:
Employer
Member
Other
Total Contributions
Investment Income:
Net Appreciation (Depreciation) in Fair
Value of Investments
Interest
Dividends
Total Investment Income
Less Investment Expense
Net Investment Income
Securities Lending Income
Less Securities Lending Expense
Net Securities Lending Income
Other Additions
Deposits
Other
Total Additions
DEDUCTIONS
Distributions
Benefits Paid
Refunds of Contributions
Administrative Expenses
Total Deductions
Net Increase (Decrease) in Net Position Restricted for:
Pension Benefits
Other Postemployment Benefits
Individuals, Organizations, and Other Governments
Net Position - Beginning of the Year (Restated)
Net Position - End of the Year
Pension and Other
Employee
Benefit Trust Funds
Custodial
Funds
Investment Trust
Funds
$ 816,081
397,760
240,598
1,454,439
9,443,981
97,522
278,218
29
35,097
9,819,721
89,109
29
35,097
9,730,612
29
35,097
1,026
205
821
125,030
329,450
11,310,902
329,479
35,097
2,401,689
93,767
54,236
318,919
2,106
22,695
2,949,692
321,025
3,792,751
3,106,516
1,861,943
8,454
12,402
34,049,345
105,340
188,428
$ 42,810,555 $
113,794
200,830
The notes to the financial statements are an integral part of this statement.
STATE OF ALASKA
Statement of Net Position
Component Units
June 30, 2021
(Stated in Thousands)
STATEMENT 1.41
ASSETS
Cash and Investments
Accounts Receivable - Net
Interest and Dividends
Receivable
Due from Primary Government
Due from Component Units
Due from Other Governments
Loans, Notes, and Bonds
Receivable
Inventories
Repossessed Property
Net Investment in Direct
Financing Leases
Restricted Assets
Securities Lending Collateral
Net OPEB Asset
Other Assets
Capital Assets:
Equipment, Net of Depreciation
Buildings, Net of Depreciation
Library Books, Net of
Depreciation
Infrastructure, Net of
Depreciation
Museum Collections
Land / Right-of-Way
Construction in Progress
Total Assets
DEFERRED OUTFLOWS OF RESOURCES
Total Deferred Outflows of
Resources
LIABILITIES
Accounts Payable and Accrued
Liabilities
Obligations Under Securities
Lending
Due to Primary Government
Due to Component Units
Due to Other Governments
Interest Payable
Derivative Instruments
Other Current Liabilities
Alaska
Industrial
Alaska Development
Housing and Alaska Nonmajor
University Finance Export Energy Component
of Alaska Corporation Authority Authority Units Total
220,702 $ 635,940 $ 512,568 — $ 1,097,711 2,466,921
28,306 — _ 220 17,969 46,495
691 14,850 5,365 935 20,360 42,201
6,935 2,874 _ 1,268 29,059 40,136
_ 1,251 5,074 7 — 6,332
68,319 2,575 _— 3,991 16,146 91,031
487 2,995,561 667,635 26,011 1,156,499 4,846,193
4,751 — _— _— 12,004 16,755
_ — 34,549 _— _— 34,549
_ 20,287 74,759 _ — 95,046
659,353 505,894 108,387 1,243,953 30,845 2,548,432
_ — _— _— 37,421 37,421
22,854 3,015 866 _— 40,379 67,114
13,985 28,795 269 36 7,332 50,417
182,766 971 _— 1,228 178,824 363,789
1,245,985 59,347 40,707 _— 54,817 1,400,856
6,701 _— _— _ — 6,701
100,103 — 19,440 198,741 619,938 938,222
7,399 — _— _— — 7,399
38,924 20,859 3,165 11,212 49,932 124,092
15,725 _ 36,444 184,898 97,292 334,359
2,623,986 4,292,219 1,509,228 1,672,500 3,466,528 13,564,461
45,852 210,255 3,575 _ 14,522 274,204
50,759 12,061 2,419 29,722 49,237 144,198
_ _— _— _ 37,421 37,421
_— 116 848 1,908 3,119 5,991
14,198 _ _ _ _ 14,198
_— 384 _ _— 297 681
2,904 6,681 1,258 1,484 9,136 21,463
_ 168,250 _— _— — 168,250
16,946 130,697 1,368 29 14,140 163,180
I - 34
This statement continued on next page.
STATE OF ALASKA
Statement of Net Position
Component Units
June 30, 2021
(Stated in Thousands)
STATEMENT 1.41
Long-term Liabilities:
Portion Due or Payable Within
One Year:
Claims, Judgments,
Compensated Absences,
and Pollution
Remediation
Unearned Revenue
Notes, Bonds, and Leases
Payable
Portion Due or Payable After
One Year:
Claims, Judgments,
Compensated Absences,
and Pollution
Remediation
Unearned Revenue
Notes, Bonds, and Leases
Payable
Net Pension Liabilities
Net OPEB Liabilities
Other Noncurrent Liabilities
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Total Deferred Inflows of
Resources
NET POSITION
Net Investment in Capital Assets
Restricted for:
Permanent Funds:
Nonexpendable
Expendable
Education
Development
Debt Service
Other Purposes
Unrestricted
Total Net Position
The notes to the financial statements are an integral part of this statement.
Alaska
Industrial
Alaska Development
Housing and Alaska Nonmajor
University Finance Export Energy Component
of Alaska Corporation Authority Authority Units Total
14,136 2,088 _— _ 1,538 17,762
19,291 155,945 _— _— 5,487 180,723
11,422 94,740 2,935 12,635 91,181 212,913
_ 3,120 _— _— 2,563 5,683
_ _— _— _ 1,445 1,445
282,730 2,271,466 48,815 57,043 1,002,332 3,662,386
249,151 37,163 10,403 _— 32,763 329,480
_— 53 17 _— 24 94
4,925 267 36,504 _ _ 41,696
666,462 2,883,031 104,567 102,821 1,250,683 5,007,564
17,938 3,512 768 _ 576,996 599,214
1,291,644 81,177 85,621 325,614 379,684 2,163,740
_ _— _— _ 677,039 677,039
_ _— _— _ 201,267 201,267
641,241 _— _— _ — 641,241
_ _— _— _ 90,500 90,500
_ 624,266 _— 27,636 38,475 690,377
_ 237,327 15,000 1,216,429 14,765 1,483,521
52,553 673,161 1,306,847 _— 251,641 2,284,202
$ 1,985,438 $ 1,615,931 $ 1,407,468 $ 1,569,679 $ 1,653,371 $ 8,231,887
STATE OF ALASKA
Statement of Activities
Component Units
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.42
Program Revenues
Charges for
Services, Operating Capital
Royalties and Grants and Grants and
Expenses Other Fees Contributions Contributions
FUNCTIONS/PROGRAMS
Component Units
University of Alaska $ 746,094 $ 150,399 $ 368,951 §$ 6,492
Alaska Housing Finance Corporation 297,113 143,793 151,343 5,298
Alaska Industrial Development and Export
Authority 330,766 37,581 281,232 976
Alaska Energy Authority 87,811 23,209 17,292 _—
Nonmajor Component Units 277,720 188,709 243,350 _—
Total Component Units $ 1,739,504 $ 543,691 $ 1,062,168 $ 12,766
I - 36
This statement continued on the next page.
STATE OF ALASKA
Statement of Activities
Component Units
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 1.42
FUNCTIONS/PROGRAMS
Component Units
University of Alaska
Alaska Housing Finance
Corporation
Alaska Industrial
Development and Export
Authority
Alaska Energy Authority
Nonmajor Component Units
Total Component Units
General Revenues:
Interest and Investment
Income (Loss)
Payments In from Primary
Government
Other Revenues
Total General Revenues and
Contributions
Change in Net Position
Net Position - Beginning of
Year
Prior Period Adjustment
Net Position - End of Year
Net (Expense) Revenue and Changes in Net Position
Alaska
Alaska Industrial
Housing Development Alaska Nonmajor Total
University Finance and Export Energy Component Component
of Alaska Corporation Authority Authority Units Units
$ (220,252) $ — $ — $ — $ — $ (220,252)
— 3,321 — — — 3,321
— — (10,977) — — (10,977)
_ _— — (47,310) — (47,310)
— — — — 154,339 154,339
(220,252) 3,321 (10,977) (47,310) 154,339 (120,879)
67,729 4,090 (1,028) 151,983 390 223,164
285,582 — — — 10,157 295,739
— 1,556 — 1,017,213 1,319 1,020,088
353,311 5,646 (1,028) 1,169,196 11,866 1,538,991
133,059 8,967 (12,005) 1,121,886 166,205 1,418,112
1,852,379 1,606,964 1,419,473 438,166 1,487,166 6,804,148
— — — 9,627 — 9,627
$ 1,985,438 $ 1,615,931 $ 1,407,468 $ 1,569,679 $ 1,653,371 $ 8,231,887
The notes to the financial statements are an integral part of this statement.
I - 37
(Intentionally left blank)
I - 38
Notes to the Basic
Financial Statements
(Intentionally left blank)
I - 40
STATE OF ALASKA
INDEX - NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Fiscal Year Ended June 30, 2021
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. THE FINANCIAL REPORTING ENTITY
BASIC FINANCIAL STATEMENTS
MEASUREMENT FOCUS AND BASIS OF ACCOUNTING
FINANCIAL STATEMENT PRESENTATION
FISCAL YEAR ENDS
ASSETS, DEF. OUTFLOWS OF RES., LIABILITIES, DEF. INFLOWS OF RES., AND NET POSITION / FUND BALANCE
GUARANTY DEPOSITS
NOTE 2 —- BUDGETING, BUDGETARY CONTROL, AND LEGAL COMPLIANCE
NOTE 3 - DEFERRED OUTFLOWS AND INFLOWS OF RESOURCES
NOTE 4 —- DEPOSIT AND INVESTMENT RISK
A. DEPOSITS AND INVESTMENTS UNDER THE FIDUCIARY RESPONSIBILITY OF THE COMMISSIONER OF REVENUE
B. DEPOSITS AND INVESTMENTS UNDER CONTROL OF THE ALASKA RETIREMENT MANAGEMENT BOARD
Cc. DEPOSITS AND INVESTMENTS MAINTAINED BY COMPONENT UNITS WHOSE ACCOUNTS
ARE OUTSIDE OF THE STATE TREASURY
NOTE 5 —- CAPITAL ASSETS
NOTE 6 —- SHORT-TERM DEBT, BONDS PAYABLE AND OTHER LONG-TERM OBLIGATIONS
A. SUMMARY OF CHANGES
NET PENSION LIABILITY
NET OTHER POST-EMPLOYMENT BENEFITS LIABILITY/ASSET
GENERAL OBLIGATION BONDS AND REVENUE BONDS AND OTHER LONG-TERM DEBT
CAPITAL AND OPERATING LEASES
CERTIFICATES OF PARTICIPATION
DISCRETELY PRESENTED COMPONENT UNITS
H. ALASKA HOUSING FINANCE CORPORATION DERIVATIVES
NOTE 7 —- DEFINED BENEFIT PENSION PLANS
NOTE 8 —- DEFINED CONTRIBUTION PENSION PLANS
A. PUBLIC EMPLOYEES RETIREMENT SYSTEM
B. TEACHERS RETIREMENT SYSTEM
C. SUPPLEMENTAL BENEFITS SYSTEM
D. UNIVERSITY OF ALASKA
NOTE 9 —- DEFERRED COMPENSATION PLAN
NOTE 10 —- INTERFUND TRANSACTIONS
NOTE 11 — RELATED PARTY ACTIVITY
NOTE 12 -COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS
SICK LEAVE
SCHOOL DEBT
RISK MANAGEMENT AND SELF-INSURANCE
LITIGATION AND ADMINISTRATIVE APPEALS
FEDERAL GRANTS
DISASTER RELIEF FUND
FUTURE LOAN COMMITMENTS
POTENTIAL DEVELOPMENT PROJECTS
INVESTMENT COMMITMENTS
POLLUTION REMEDIATION
ENCUMBRANCES
MEDICAID
OIL AND GAS TAX CREDITS
CONCENTRATIONS
COVID-19
NOTE 13 - SUBSEQUENT EVENTS
ALASKA MUNICIPAL BOND BANK AUTHORITY
ALASKA CLEAN WATER FUND
ALASKA DRINKING WATER FUND
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
ALASKA MENTAL HEALTH TRUST AUTHORITY
NORTHERN TOBACCO SECURITIZATION CORPORATION
AIRPORTS
ALASKA HOUSING FINANCE CORPORATION
I. STATE OF ALASKA
NOTE 14 - PRIOR PERIOD ADJUSTMENTS AND RESTATED BEGINNING NET POSITION
I-41
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STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
NOTE 1 —- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the State of Alaska have been prepared in conformity with Generally Accepted
Accounting Principles (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB). GASB is the
accepted standard-setting body for governmental accounting and financial reporting principles, which are primarily set forth in
GASB’s Codification of Governmental Accounting and Financial Reporting Standards. Preparation of financial statements in
conformity with GAAP requires the use of estimates, as disclosed in the applicable notes.
A. THE FINANCIAL REPORTING ENTITY
The State of Alaska (State) was admitted to the Union in 1959 and is governed by an elected governor and a 60 member elected
legislature. As required by GAAP, these financial statements present all the fund types of the State which includes all agencies,
boards, commissions, authorities, courts, and colleges and universities that are legally part of the State (primary government)
and its component units discussed below. Component units are legally separate entities for which the primary government is
financially accountable or such that their exclusion would cause the State’s financial statements to be misleading or incomplete.
The following component units are included in the accompanying financial statements. Blended component units, although
legally separate entities, are, in substance, part of the State’s operations and provide services entirely or almost entirely to the
State. Discretely presented component units are reported in a separate column in the government-wide financial statements to
emphasize that they are legally separate from the State. The determination that a discretely presented component unit is "major"
is based on the nature and significance of its relationship to the primary government. Fiduciary component units are reported in
the fiduciary section of the fund financial statements and are not included in the government-wide financial statements.
Individual component unit financial reports may also be obtained from these organizations as indicated.
BLENDED COMPONENT UNITS
The Alaska Housing Capital Corporation (AHCC) is a public corporation and government instrumentality of, but having a
legal existence independent and separate from, the State. AHCC is a subsidiary of, but separate and apart from, the Alaska
Housing Finance Corporation (AHFC). The commissioners of the departments of Revenue; Commerce, Community and
Economic Development; Health and Social Services; and four independent public members appointed by the Governor
comprise the AHCC board of directors. The Legislature appropriates the budget for AHCC for the purpose of funding future
capital projects for the State. The corporation has the power to borrow money and issue bonds on its own behalf. AHCC is
reported within the governmental funds as a special revenue fund. AHCC financial statements may be obtained from the Alaska
Housing Finance Corporation, P.O. Box 101020, Anchorage, AK 99510-1020.
The Alaska Permanent Fund Corporation (APFC) is a public corporation and government instrumentality in the Department
of Revenue, Alaska Statute (AS) 37.13.040. A governor-appointed six-member board manages APFC. The Legislature
approves APFC’s budget. The purpose of APFC is to manage and invest the assets of the Alaska Permanent Fund (Fund) and
other funds designated by law. The Fund is a savings device, restricted as to usage, which belongs to all the people of Alaska. It
was created in 1976 when the voters approved an amendment to the State Constitution. The beneficiaries of the Fund are all
present and future generations of Alaskans. The Fund represents 92 percent of the total cash and investments and 89 percent of
total government-wide net position excluding discretely presented component units. The Fund is reported as a permanent fund
(a governmental fund type), and APFC operations are included in the fund statements. Separately issued financial statements
may be obtained from the Alaska Permanent Fund Corporation, P.O. Box 115500, Juneau, AK 99811-5500, or from their web
site at www.apfc.org.
The Northern Tobacco Securitization Corporation (NTSC) is a public corporation and government instrumentality of, but
having a legal existence independent and separate from, the State. NTSC is a subsidiary of, but separate and apart from, the
Alaska Housing Finance Corporation (AHFC). The commissioners of the departments of Revenue; Health and Social Services;
and Commerce, Community and Economic Development; and two independent public members appointed by the Governor
comprise the NTSC board of directors.
The purpose of NTSC is to purchase future rights, title, and interest in Tobacco Settlement Revenues (TSRs) from the State
under the Master Settlement Agreement and Final Judgment (MSA). The MSA resolved cigarette smoking-related litigation
between the settling states and the participating manufacturers, released the manufacturers from past and present smoking-
related claims, and provides for a continuing release of future smoking-related claims, in exchange for certain payments to be
made to the settling states, as well as certain tobacco advertising and marketing restrictions among other things.
I-42
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
NTSC is authorized to issue bonds necessary to provide sufficient funds for carrying out its purpose. When NTSC’s obligations
with the bonds have been fulfilled, the TSRs revert back to the State under the residual certificate. Consideration paid by NTSC
through AHFC to the State for TSRs consisted of a cash amount sent to the State’s custodial trust accounts and a residual
certificate assigned to the State.
The bonds of NTSC are asset-backed instruments secured solely by the TSRs and NTSC’s right to receive TSRs is expected to
produce funding for its obligations. The TSR payments are dependent on a variety of factors, some of which are: the financial
capability of the participating manufacturers to pay TSRs; future cigarette consumption that impacts the TSR payment; and
future legal and legislative challenges against the tobacco manufacturers and the MSA providing for the TSRs. Pursuant to
bond indentures, these adjustments could affect the amount of funds available to pay scheduled debt service payments.
NTSC is reported in the governmental fund types as special revenue and debt service funds. The revenue bond debt is reported
in the government-wide statement of net position in the governmental fund activities column. NTSC financial statements may
be obtained from the Alaska Housing Finance Corporation, P.O. Box 101020, Anchorage, AK 99510-1020.
The Alaska State Council on the Arts (ASCA) is a public corporation and an instrumentality of the State within the
Department of Education and Early Development, but with a legal existence independent of and separate from the State
(AS 44.27.040). The Governor appoints members of the ASCA board of directors. The Legislature approves ASCA’s budget.
ASCA was created for the purpose of stimulating and encouraging throughout the State the study and presentation of the
performing, visual, literary, and fine arts and public interest, participation, and investment in the arts. ASCA financial
statements are included in the Combining Fund section of this ACFR with the Nonmajor Special Revenue Funds as
supplementary information. There are no separately issued financial statements for ASCA.
DISCRETELY PRESENTED COMPONENT UNITS
The Alaska Aerospace Corporation (AAC) is a public corporation of the State located for administrative purposes within the
Department of Military and Veterans Affairs (AS 26.27.010). The Governor appoints the voting members of the AAC board of
directors, and the Legislature approves AAC’s budget. AAC is also affiliated with the University of Alaska but with a separate
and independent legal existence. The purpose of AAC is to allow the State to take a lead role in the exploration and
development of space, to enhance human and economic development, to provide a unified direction for space-related economic
growth, education and research development, and tourism related activities. AAC is also to promote the continued utilization of
the Poker Flat Research Range as a launch site for launch vehicles and for scientific research. Additionally, AAC is to promote
and encourage the continued utilization of Poker Flat Research Range for the University of Alaska’s polar research efforts.
AAC financial statements may be obtained from the Alaska Aerospace Corporation, 4300 B Street, Suite 101, Anchorage, AK
99503.
The Alaska Energy Authority (AEA) is a public corporation of the State in the Department of Commerce, Community and
Economic Development but with a separate and independent legal existence (AS 44.83.020) and is a major component unit.
The purpose of AEA was to promote, develop, and advance the general prosperity and economic welfare of the people of the
State by providing a means of constructing, acquiring, financing, and operating power projects and facilities that recover and
use waste energy.
However, Chapters 18 and 19, Session Laws of Alaska (SLA) 1993, which became effective August 11, 1993, eliminated the
ability of AEA to construct, own, and acquire energy projects, and the programs operated by AEA were transferred to the
Department of Community and Regional Affairs. The corporate structure of AEA was retained but the board of directors of the
Alaska Industrial Development and Export Authority (AIDEA) is now the board of directors of AEA. It is the intent of the
legislation that ongoing operation of the operating assets be assumed by the electric utility companies that use or purchase
power from AEA with oversight responsibility retained by AEA. The Governor appoints all members of the AEA board of
directors, and the Legislature approves AEA’s budget.
Pursuant to legislation effective July 1, 1999, rural energy programs previously administered by the former Department of
Community and Regional Affairs were transferred to AEA for administration as part of a larger reorganization of State
agencies. Rural energy programs were originally part of AEA prior to the reorganization that occurred in 1993. AEA financial
statements may be obtained from the Alaska Industrial Development and Export Authority, 813 W. Northern Lights Blvd.,
Anchorage, AK 99503.
I - 43
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The Alaska Gasline Development Corporation (AGDC) is a public corporation and governmental instrumentality within the
Department of Commerce, Community, and Economic Development, but having a legal existence independent and separate
from the State (AS 31.25.010). Currently, the commissioners of the departments of Commerce, Community and Economic
Development; and Labor and Workforce Development, and five independent public members appointed by the Governor and
confirmed by the Legislature comprise the AGDC board of directors. The Legislature appropriates the budget for AGDC for
the purpose of planning, constructing, and financing in-state natural gas pipeline projects. The corporation has the power to
borrow money and issue bonds on its own behalf. AGDC financial statements may be obtained from the Alaska Gasline
Development Corporation, 3201 C Street, Suite 201, Anchorage, AK 99503.
The Alaska Housing Finance Corporation (AHFC) is a public corporation, a government instrumentality within the
Department of Revenue, but having a legal existence independent of and separate from the State (AS 18.56.020), and is a major
component unit. The Governor appoints the board of directors of AHFC. The Legislature approves AHFC’s budget. AHFC
assists in providing decent, safe, and sanitary housing by financing mortgage loans. AHFC acts as the principal source of
residential financing in the State and functions as a secondary mortgage market. AHFC financial statements may be obtained
from the Alaska Housing Finance Corporation, P.O. Box 101020, Anchorage, AK 99510-1020.
The Alaska Industrial Development and Export Authority (AIDEA) is a public corporation of the State, a political
subdivision within the Department of Commerce, Community and Economic Development (AS 44.88.020), and is a major
component unit. The Governor appoints all members of the AIDEA board of directors and the Legislature approves AIDEA’s
budget. The purpose of AIDEA is to promote, develop, and advance the general prosperity and economic welfare of the people
of Alaska; to relieve problems of unemployment; to create additional employment by providing various means of financing;
and to facilitate the financing of industrial, manufacturing, export, and business enterprises within the State. AIDEA financial
statements may be obtained from the Alaska Industrial Development and Export Authority, 813 W. Northern Lights Blvd.,
Anchorage, AK 99503.
The Alaska Mental Health Trust Authority (AMHTA) is established as a public corporation of the State within the
Department of Revenue (AS 47.30.011). The Governor appoints the AMHTA board of trustees. The Legislature approves
AMHTA’s budget. The purpose of AMHTA is to ensure an integrated comprehensive mental health program. As provided in
AS 37.14.009, AMHTA is to administer the trust established under the Alaska Mental Health Enabling Act of 1956. AMHTA
financial statements may be obtained from the Alaska Mental Health Trust Authority, 3745 Community Park Loop, Suite 200,
Anchorage, AK 99508.
The Alaska Municipal Bond Bank Authority (AMBBA) is a public corporation and an instrumentality of the State within the
Department of Revenue, but with a legal existence independent of and separate from the State (AS 44.85.020). The Governor
appoints members of the AMBBA board of directors. The Legislature approves AMBBA’s budget. AMBBA was created for
the purpose of making available to municipalities within the state, monies to finance their capital projects or for other
authorized purposes by means of issuance of bonds by AMBBA and use of proceeds from such bonds to purchase from the
municipalities their general obligation and revenue bonds. AMBBA commenced operations in August 1975. AMBBA financial
statements may be obtained from the Alaska Municipal Bond Bank Authority, P.O. Box 110405, Juneau, AK 99801.
The Alaska Railroad Corporation (ARRC) is a public corporation and instrumentality of the State within the Department of
Commerce, Community and Economic Development (AS 42.40.010). ARRC has a legal existence independent of and separate
from the State. The powers of ARRC are vested in the board of directors. All members of the board of directors of ARRC are
appointed by and serve at the pleasure of the Governor. ARRC was created by the State Legislature to own and operate the
railroad and manage its rail, industrial, port, and other properties. The ARRC commenced operations on January 6, 1985.
ARRC financial statements may be obtained from the Alaska Railroad Corporation, P.O. Box 107500, Anchorage, AK
99510-7500.
The Alaska Student Loan Corporation (ASLC) is a public corporation and government instrumentality within the
Department of Education and Early Development but having a legal existence independent of and separate from the State (AS
14.42.100). ASLC is governed by a board of directors appointed by the Governor. The Legislature approves ASLC’s budget.
The purpose of ASLC is to improve higher educational opportunities for residents of the State. ASLC financial statements may
be obtained from the Alaska Commission on Postsecondary Education, P.O. Box 110505, Juneau, AK 99811-0505.
The University of Alaska is established as a corporation and is an instrumentality of the State (AS 14.40.040) and is a major
component unit. A board of regents appointed by the Governor and confirmed by the Legislature governs the university. The
Legislature approves the university’s budget. The university is created and acts for the benefit of the State and the public in
I - 44
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
providing education in accordance with an express mandate of the constitution. The financial statements of the university
include the assets, liabilities, and related activity of the University of Alaska Foundation, a legally separate nonprofit
component unit. The university is not accountable for, nor has ownership of, the foundation’s resources. The university’s
financial statements may be obtained from the University of Alaska, Statewide Fund Accounting, 2025 Yukon Drive, suite
209B P.O. Box 756540, Fairbanks, AK 99775-6540.
The Alaska Seafood Marketing Institute (ASMI) is a public corporation of the State (AS 16.51.010). It is an instrumentality
of the State with a legal existence independent of and separate from the State. ASMI is governed by a board of directors
appointed by the Governor, and its budget is approved by the Legislature. The purpose of ASMI is to promote all species of
seafood and their by-products harvested in Alaska for sale, and to develop market-oriented quality specifications. Exercise of
the powers conferred by statute to ASMI is an essential governmental function. ASMI financial statements are included in the
Combining Fund section of this ACFR with the Nonmajor Component Units. The Alaska Seafood Marketing Institute financial
statements may be obtained from Alaska Seafood Marketing Institute, 311 N. Franklin Street, Suite 200, Juneau, AK 99801.
FIDUCIARY COMPONENT UNITS
The Public Employees’ Retirement System (PERS) was established by AS 39.35.095 (defined benefit) and AS 39.35.700
(defined contribution). The Commissioner of the Department of Administration or the commissioner’s designee is the
administrator of PERS. The administrator is responsible for the administration of PERS in accordance with state statutes. The
Commissioner of the Department of Administration adopts regulations to govern the operation of the PERS. Hearings and
rulings on the appeal of the decision of the administrator are in the jurisdiction of the Office of Administrative Hearings (OAH).
The Alaska Retirement Management Board (ARMB) approves employers’ rates. PERS costs, based upon actuarial valuations,
are funded by the State, participating governmental employers, and participants. PERS is reported in the fiduciary fund types as
a pension (and other employee benefit) trust fund. ARMB is the fiduciary of PERS and consists of nine trustees: the
Commissioners of the Department of Administration and Revenue; two members of the general public; one member who is
employed as a finance officer for a political subdivision participating in either the PERS or Teachers’ Retirement System
(TRS); two members of PERS; and two members of TRS. All members of ARMB are appointed by and serve at the pleasure of
the Governor.
The Teachers’ Retirement System was established by AS 14.25.009 (defined benefit) and AS 14.25.310 (defined
contribution). The Commissioner of the Department of Administration or the commissioner’s designee is the administrator of
the system. The administrator is responsible for the administration of TRS in accordance with State statutes. The Commissioner
of the Department of Administration adopts regulations to govern the operation of the TRS. Hearings and rulings on the appeal
of the decision of the administrator are in the jurisdiction of the OAH. ARMB approves employers’ rates. TRS costs, based
upon actuarial valuations, are funded by the State, participating governmental employers, and participants. TRS is reported in
the fiduciary fund types as a pension (and other employee benefit) trust fund. ARMB is the fiduciary of TRS.
The Judicial Retirement System (JRS) was established by AS 22.25.048. The Commissioner of the Department of
Administration is responsible for the administration of JRS. JRS costs, based upon actuarial valuations, are funded by the State
and participants. JRS is reported in the fiduciary fund types as a pension (and other employee benefit) trust fund. ARMB is the
fiduciary of JRS.
The Alaska National Guard and Alaska Naval Militia Retirement System (NGNMRS) was established by AS 26.05.222.
The Commissioner of the Department of Administration is responsible for the administration of NGNMRS. NGNMRS costs,
based upon actuarial valuations, are funded by the State. NGNMRS is reported in the fiduciary fund types as a pension (and
other employee benefit) trust fund. The ARMB is the fiduciary of NGNMRS.
The Supplemental Benefits System (SBS) was established by AS 39.30.150. The Commissioner of the Department of
Administration is responsible for the administration of SBS. SBS is reported in the fiduciary fund types as a pension (and other
employee benefit) trust fund. ARMB is the fiduciary of SBS.
The Deferred Compensation Plan (DCP) was established by AS 39.45.010. The Commissioner of the Department of
Administration is responsible for the administration of DCP. DCP is reported in the fiduciary fund types as a pension (and other
employee benefit) trust fund. ARMB is the fiduciary of DCP. Copies of the audited financial statements for the retirement
systems (excluding NGNMRS), and for SBS and DCP, may be obtained from the Department of Administration, Division of
Retirement and Benefits, P.O. Box 110203, Juneau, AK 99811-0203 or from their website at http://doa.alaska.gov/drb/.
I-45
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
B. BASIC FINANCIAL STATEMENTS
The basic financial statements include government-wide financial statements and fund financial statements (as well as these
notes to the financial statements). The previous financial reporting model emphasized fund types (the total of all funds of a
particular type), while the current financial reporting model focus is on either the State as a whole (government-wide
statements), or on major individual funds (fund financial statements). Both the government-wide and fund financial statements
categorize primary activities as either governmental or business-type.
The government-wide financial statements (Statement of Net Position and Statement of Activities) report information of all
nonfiduciary activities of the State and its component units. For the most part, the effect of interfund activity has been removed
from these government-wide statements. Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and
charges for services. Likewise, the primary government is reported separately from the component units for which the primary
government is financially accountable.
The Statement of Net Position presents the reporting entity’s nonfiduciary assets and deferred outflows of resources, less
liabilities and deferred inflows of resources, with the difference reported as net position. Net position is reported in three
categories:
¢ Net Investment in Capital Assets consists of capital assets, net of accumulated depreciation and reduced by outstanding
balances for bonds, notes, and other borrowing that are attributed to the acquisition, construction, or improvement of those
assets.
¢ Restricted Net Position results when constraints placed on net position use are either externally imposed by creditors,
grantors, contributors, and the like, or imposed by law through constitutional provisions or enabling legislation.
¢ Unrestricted Net Position consists of net position that does not meet the definition of the two preceding categories. The
unrestricted net position often is designated to indicate management does not consider them available for general
operations (see note 1.F.). The unrestricted net position often has constraints on resources that are imposed by management
but can be modified or removed.
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by
program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include
charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a
given function, segment, or component unit. Program revenues also include grants and contributions that are restricted to
meeting the operational or capital requirements of a particular function. Taxes and other items not meeting the definition of
program revenues are reported as general revenue.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the
fiduciary funds are excluded from the government-wide statements. The fund financial statements focus on major funds, of
which the State has four: the General Fund and the Alaska Permanent Fund, both of which are governmental funds; and the
International Airports Fund and the Unemployment Compensation Fund, both of which are enterprise funds. All nonmajor
funds are summarized into a single column on the respective fund statements: governmental; proprietary, which includes
enterprise and internal service fund types; and fiduciary, which includes pension (and other employee benefit) trust funds,
investment trust funds, and custodial funds.
C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING
The government-wide financial statements are reported using the economic resource measurement focus and the accrual basis
of accounting, as are the proprietary and fiduciary fund financial statements. Revenues are recorded when earned and expenses
are recorded when a liability is incurred, regardless of the timing of cash flows. Grants and similar items are recognized as
revenues as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified
accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when they become
measurable and available to finance operations during the current year or to liquidate liabilities existing at the end of the year
(collectible within 60 days of fiscal year end). When an asset is recorded in governmental fund financial statements, but the
revenue is not available, the government reports a deferred inflow of resources until such time as the revenue becomes
I - 46
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
available. Major revenues that are determined to be susceptible to accrual include federal, charges for services, investment
income, and petroleum related taxes and royalties.
Expenditures are recognized when a liability is incurred. However, expenditures related to debt service, compensated absences,
and claims and judgments are recorded only when payment is due and payable.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal
ongoing operations. All other revenues and expenses are reported as nonoperating.
When both restricted and unrestricted resources are available for use, it is the State’s policy to use restricted resources first, then
unrestricted resources as they are needed.
D. FINANCIAL STATEMENT PRESENTATION
The State reports four major funds: the General Fund, and the Alaska Permanent Fund, both of which are governmental funds,
and the International Airports Fund and the Unemployment Compensation Fund, both of which are proprietary enterprise funds.
The General Fund is the State’s primary operating fund. It accounts for all financial resources except those required to be
accounted for in another fund. The Alaska Permanent Fund was created in 1976 to save a portion of the State’s one-time oil
wealth to produce income to benefit current and future generations. The International Airports Fund was created in 1961 to
equip, finance, maintain, and operate two international airports located in Anchorage and Fairbanks. The Unemployment
Compensation Fund is administered by the Department of Labor and Workforce Development and is used to account for
unemployment contributions from employers and unemployment benefits paid to claimants. In addition, the State reports the
following fund types:
GOVERNMENTAL FUND TYPES
Special revenue funds are used to account for the proceeds of specific revenue sources that are generally legally restricted to
expenditure for specified purposes.
Debt service funds are used to account for the accumulation of resources for, and the payment of, general long-term debt
principal and interest.
Capital project funds account for the acquisition or construction of major capital facilities financed by bond proceeds.
Permanent funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal,
may be used for purposes that benefit the government or its citizenry. In addition to the Alaska Permanent Fund (major fund),
the State has two other permanent funds, the Public School Trust Fund and the Alaska Mental Health Trust Authority (a
discretely presented component unit).
PROPRIETARY FUND TYPES
Enterprise funds are used to report any activity for which a fee is charged to external users for goods and services.
Internal service funds are used to report any activity that provides goods or services primarily to other funds or agencies of the
State, rather than to the general public. Internal service fund activities of the State include facilities management of State-owned
buildings, self-insurance health care for State employees, vehicle and equipment maintenance and supplies, and computing and
telecommunication services.
FIDUCIARY FUND TYPES
Pension (and other employee benefits) trust funds are used to report resources that are required to be held in trust for the
members and beneficiaries of defined benefit pension plans, defined contribution plans, and other postemployment benefit
plans. These funds account for the Alaska National Guard and Alaska Naval Militia Retirement System, Deferred
Compensation, Judicial Retirement System, Public Employees’ Retirement System, Supplemental Benefits System, and
Teachers’ Retirement System.
[ - 47
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Investment trust funds are used to report resources invested on a commingled basis by the State on behalf of other governmental
entities. These funds include damage recoveries arising out of the Exxon Valdez oil spill.
Custodial funds are used to report resources for which the State acts solely in a custodial capacity. These funds include
resources from unclaimed property, wage and hour, offender trust accounts, and advocacy/guardianship trusts.
E. FISCAL YEAR ENDS
All funds and discretely presented component units of the State are reported using fiscal years which end on June 30, except the
Alaska Railroad Corporation whose fiscal year ends on December 31.
F. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF
RESOURCES, AND NET POSITION / FUND BALANCE
CASH AND INVESTMENTS, CASH AND CASH EQUIVALENTS
The amounts shown on the statements of net position and the balance sheets as Cash and Investments represent cash on deposit
in banks, petty cash, cash invested in various short-term instruments, and other investments of the State and its component
units. Investments are stated at fair value, which approximates market value. Fair value is the amount at which an investment
could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Investment
purchases and sales are recorded on a trade-date basis.
Marketable debt securities are valued each business day using prices obtained from a pricing service when such prices are
available; otherwise, such securities are valued at the most current sale price or based on a valuation provided by investment
managers. The noninterest bearing deposits are reported at cost, which approximates fair value.
Equity securities are valued each business day using prices obtained from a pricing service or prices quoted by one or more
independent brokers.
Private equity investments are valued quarterly by the general partners and investment sponsors. Underlying assets comprise
venture capital, buyout, restructuring and special situation investments through limited partnership agreements. Each manager
independently determines the limited partnerships to invest in.
The energy related investments consist primarily of loans and preferred stock that are valued at fair value.
Real estate, farmland, private infrastructure, and timber investments are valued quarterly by investment managers and are
appraised annually by independent appraisers or valued by valuation specialists.
Other alternative investments within the fixed income and opportunistic asset classes are valued monthly by the general
partners. Underlying assets comprise hedge fund investments through limited partnership agreements. Each manager
independently determines the limited partnerships to invest in.
Securities expressed in terms of foreign currencies are translated into U.S. dollars at the prevailing exchange rates. Forward
currency contracts are valued at the mid-point of representative quoted bid and asked prices.
The Statement of Cash Flows for the enterprise funds shows changes in cash and cash equivalents. For the purpose of the
Statement of Cash Flows, all highly liquid debt instruments with original maturities of three months or less are considered cash
and cash equivalents. This includes all participants in the Short-Term Fixed Income Pool and the Short-term Treasury Fixed
Income Pool.
RECEIVABLES
Receivables have been established and offset with proper provisions for estimated uncollectible accounts where applicable. The
amount of noncurrent receivables does not constitute expendable available financial resources and therefore are not available
for appropriation.
I - 48
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Practically all accounts receivable of Governmental Funds are due from oil companies and governmental entities, primarily the
federal government, and are considered collectible. Accounts receivable in other funds have arisen in the ordinary course of
business.
INTER/INTRAFUND TRANSACTIONS
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are
referred to as due to/from other funds. Any residual balances outstanding between the governmental activities and business-type
activities are reported in the government-wide financial statements as “internal balances.”
INVENTORIES AND PREPAID ITEMS
Inventories reported for the internal service funds and the General Fund consist mainly of consumable materials and supplies.
Inventories are carried at cost (average cost for Highway Equipment Working Capital; first in first out (FIFO) for the General
Fund) and are accounted for on the consumption method. However, the majority of materials and supplies for State agencies are
accounted for as expenditures at the time of purchase. Inventory of the University of Alaska is carried at the lower of cost or
market. The Alaska Railroad Corporation carries their inventories at the lower of weighted average cost or market.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as other assets in both the
government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when
consumed rather than when purchased.
CAPITAL ASSETS
Capital assets are reported in the Statement of Net Position at cost or estimated historical cost. Donated capital assets are
recorded at acquisition value at the time of donation including Statehood entitlement land that is carried at an estimated value of
$1 per acre.
Capital assets are depreciated on the straight-line method over the estimated useful lives of the related assets.
All public domain infrastructure acquired by the State, such as highways, bridges, harbors, and rural airports is capitalized.
The State possesses certain capital assets that have not been capitalized and depreciated because the assets cannot be reasonably
valued and/or the assets have inexhaustible useful lives. These assets include the State’s art, library reserve, museum, and
historical collections. These assets are held for public exhibition, education, or research rather than financial gain; protected,
kept unencumbered, cared for, and preserved; and proceeds from the sale of collection items are used to acquire other items for
collections.
Additional disclosures related to capital assets are provided in Note 5.
COMPENSATED ABSENCES
Regulations governing annual/personal leave (vacation pay) provide that State employees will receive time off, or pay, for
hours accumulated. Consequently, a liability exists with respect to accumulated annual/personal leave at any given time. This
liability is recognized and reported in the government-wide and proprietary fund financial statements. As of June 30, 2021, the
State’s estimated liability for compensated absences, as reported in the government-wide Statement of Net Position, is
$198.3 million. There is no liability in the accompanying financial statements for unpaid accumulated sick leave. Accumulated
sick leave may be used only for actual illness. When an employee separates from service, any sick leave balance to their credit
is reduced to zero without additional compensation to the employee. See Note 12 for disclosure of the amount of the sick leave
contingency.
The cost of compensated absences (annual/personal leave and sick leave) for State employees is charged against agency
appropriations when leave is used rather than when leave is earned, except for the payment of the accumulated annual/personal
leave balance for an employee terminating from state service. That amount is charged to a terminal leave liability account rather
than the individual agency appropriation. This liability account is funded by a charge to each agency’s operating budget.
I - 49
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
DEFERRED OUTFLOW/INFLOW OF RESOURCES
A deferred outflow of resources represents a consumption of net position applicable to a future reporting period and therefore is
not recognized as a current year expense. A deferred inflow of resources is an acquisition of net position applicable to a future
reporting period and therefore is not recognized as current year revenue.
NET POSITION / FUND BALANCE
Fund assets and deferred outflows less liabilities and deferred inflows is “net position” on the government-wide, proprietary,
and fiduciary fund statements, and is “fund balance” on the governmental fund statements.
FUND BALANCE COMPONENTS
The fund balance amounts for governmental funds are reported as nonspendable, restricted, committed, assigned, or unassigned.
¢ Nonspendable fund balance includes items that cannot be spent. This includes activity that is not in a spendable form
(inventories, prepaid amounts, long-term portion of loans/notes receivable, or property held for resale unless the
proceeds are restricted, committed or assigned) and activity that is legally or contractually required to remain intact,
such as a principal balance in a permanent fund.
¢ Restricted fund balance has constraints placed upon the use of the resources either by an external party or imposed by
law through a constitutional provision or enabling legislation.
¢« Committed fund balance can be used only for specific purposes pursuant to constraints imposed by a formal action of
the Alaska Legislature, the State’s highest level of decision-making authority. This formal action is the passage of law
by the legislature, creating, modifying, or rescinding an appropriation.
« Assigned fund balance includes amounts that are constrained by the State’s intent to be used for a specific purpose but
are neither restricted nor committed. The Alaska Legislature is the body authorized by the Alaska State Constitution to
assign amounts to a specific purpose. Alaska Statute 37.13.020 authorizes the Legislature to assign the funds in the
Earnings Reserve Account, a component of the Alaska Permanent Fund.
¢ Unassigned fund balance is the residual amount of the General Fund not included in the four categories described
above. Also, any deficit fund balances within the other governmental fund types are reported as unassigned.
Each fund has been analyzed to classify the fund balance in accordance with GASB Statement No. 54. Funds are created by the
Legislature and money is authorized to be transferred to the fund for a particular purpose. At this point, balances in these funds
are at least committed, and may be further restricted depending on whether there is an external party, constitutional provision,
or enabling legislation constraint involved.
The appropriated balance in the General Fund (fund 1004) is committed, and the remaining balance is unassigned. All other
governmental funds, including subfunds of the General Fund are presented as restricted or committed, with the exception of the
three subfunds of the General Fund and a Capital Project fund as unassigned. The spendable portion of the Alaska Permanent
Fund is classified as assigned.
The State of Alaska Constitution, Article 9, Section 13, states that “No money shall be withdrawn from the treasury except in
accordance with appropriations made by law. No obligation for the payment of money shall be incurred except as authorized
by law. Unobligated appropriations outstanding at the end of the period of time specified by law shall be void.”
Appropriations formally approved by the Legislature are then forwarded to the Governor for action which either become law or
are vetoed.
Appropriations specify the funding source, and therefore the order in which restricted, committed, assigned, or unassigned fund
balance gets spent.
Article 9, Section 17(d) of the Alaska Constitution, requires annual repayment from the General Fund and the subfunds of the
General Fund for amounts borrowed from the Constitutional Budget Reserve Fund. To implement this provision, unassigned
balances are used first, then committed balances. There are no assigned balances within the General Fund or subfunds.
I-50
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The following shows the composition of the fund balance of the governmental funds for the fiscal year ended June 30, 2021 (in
thousands):
Special Debt Capital
General Permanent Revenue Service Projects
Nonspendable:
Inventory $ 26,297 §$ — §$ — §$ — § —
Principal — 61,593,950 — — —
Advances and Prepaid Items 87,483 — 4,040 — —
Total Nonspendable 113,780 61,593,950 4,040 — —
Restricted:
Debt Service 4,678 — — 35,152 —
Education 16,269 — 21,363 — 243
Health & Human Services 618 — 18,196 — —
Development 3,157 — 46,240 — 84,324
Other Purposes 4,251 — 204 — —
Total Restricted 28,973 — 86,003 35,152 84,567
Committed:
Education
School Foundation Support 857 — — — —
Pupil Transportation 55 — — — —
Education Services 11,274 — 2,186 — —
Construction & Maintenance 123,288 — — — —
Health & Human Services 289,155 — — — —
Public Protection 144,302 — 811 — —
Permanent Fund
Principle — 4,000,000 — — —
Dividend Payments 15,430 — — — —
Development
Natural Resources 83,407 — — — —
Transportation 430,145 — — — —
Other 182,002 — 56,611 — —
Other Purposes 171,436 — — — —
Earnings Reserve Transferable to the General Fund — 3,069,296 — — —
Total Committed 1,451,351 7,069,296 59,608 — —
Assigned:
Education 23,656 — — — —
Health & Human Services 29,284 — — — —
Public Protection 13,483 — — — —
Development 42,176 — — — —
Assigned for Future Appropriations
Realized Earnings — 9,271,412 — — —
Unrealized Appreciation on Invested Assets — 4,807,677 — — —
Total Assigned 108,599 14,079,089 — — —
Unassigned 966,079 — (215) — —
Total Fund Balance $ 2,668,782 $ 82,742,335 $ 149,436 $ 35,152 $ 84,567
I-51
STATE OF ALASKA NOTE 1
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
NET POSITION RESTRICTED BY ENABLING LEGISLATION
The government-wide statement of net position reports $62.8 billion of restricted net position for the primary government, of
which $40.0 million is restricted by enabling legislation.
G. GUARANTY DEPOSITS
The state is the custodian of guaranty deposits held to protect consumers, to secure the State's deposits in financial institutions,
and to ensure payment of taxes and fulfillment of obligations to the State. Guaranty deposits of securities and other properties
are not shown on the financial statements.
NOTE 2 —- BUDGETING, BUDGETARY CONTROL, AND LEGAL COMPLIANCE
Once money received is deposited in the state treasury, it may not be withdrawn from the treasury except in accordance with an
appropriation made by law. Those amounts received by component units are disbursed in accordance with their particular
statutory authority.
The budgetary process is used to establish a balancing of estimated revenues coming into a fund with requested appropriations
for that fund. Except for capital project funds, which prepare only project-length budgets, annual operating (and project-length)
budgets are prepared for practically every fund and are submitted to the legislature for the enactment of appropriations. An
appropriation is an authorization to spend money and to incur obligations. Each appropriation is limited as to purpose, time, and
amount, and each of these limitations is legally binding. The legal level of budgetary control is maintained at the appropriation
level as specified in the enabling legislation, which is generally at the program level within a department.
Appropriations, as enacted by the legislature and signed by the governor, are entered into the accounting records. The balance
of an appropriation is reduced when funds are expended or encumbered. Appropriations are encumbered for anticipated
expenditures in the form of purchase orders, contracts, and other obligations. Encumbrances outstanding at year-end are
reported within restricted, committed or assigned fund balance based upon the resources that eventually will fund those grants
or contracts, and do not constitute expenditures or liabilities. See Note 12 for additional information on encumbrances within
the governmental funds. Unencumbered balances of annual appropriations lapse at the end of the fiscal year.
Expenditures of funds are made only upon properly approved requests for payment. The total of expenditures and
encumbrances (obligations) may not exceed the appropriations to which they pertain. Generally, transfers between
appropriations are not authorized. Agencies faced with potential over expenditure of appropriations must (1) reduce the rate of
expenditures, (2) seek relief through supplemental appropriations, or (3) request necessary approvals to receive and expend
additional funds. In order to provide sufficient funding for several programs during FY 2021, supplemental appropriations
within the operating and capital budgets were enacted. The total supplemental appropriations for the FY 2021 operating budget
was $1.3 billion, of which $45.5 million was from the General Fund, $124.2 million was from other funds, and $1.1 billion was
from federal funds. In addition, total supplemental appropriations for the FY 2021 capital budget was $364.4 million, of which
$36.0 million was appropriated from the General Fund, $4.1 million was from other funds, and $324.3 million was from federal
funds.
Governmental funds with annually approved budgets include the General Fund, Special Revenue Funds (with the exception of
the Alaska Housing Capital Corporation, Northern Tobacco Securitization Corporation, and Reclamation Bonding Pool), and
all Permanent Funds.
SPENDING LIMITS
In 1982, the voters of Alaska approved an amendment to the Alaska Constitution to control state spending. Article IX, section
16, establishes an annual appropriation limit of $2.5 billion plus adjustments for changes in population and inflation since
July 1, 1981. Appropriations for permanent fund dividends, revenue bond proceeds, general obligation bond debt, and money
received from non-state entities held in trust for a specific purpose are excluded from the limit. For FY 2021, the Office of
Management and Budget estimated the appropriation limit to be approximately $10.3 billion. The FY 2021 budget, not counting
the excluded appropriations, was $5.4 billion, or $4.9 billion less than the constitutional limit.
STATE OF ALASKA NOTE 2
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
CONSTITUTIONAL BUDGET RESERVE FUND
In 1990, the voters of Alaska approved an amendment to the Alaska Constitution to establish a budget reserve fund (CBRF).
Article IX, section 17, states, in part, “Except for money deposited into the permanent fund under Section 15 of this article, all
money received by the State after July 1, 1990, as a result of the termination, through settlement or otherwise, of an
administrative proceeding or of litigation in a state or federal court involving mineral lease bonuses, rentals, royalties, royalty
sale proceeds, federal mineral revenue sharing payments or bonuses, or involving taxes imposed on mineral income,
production, or property, shall be deposited in the budget reserve fund.”
The fund was established to enhance budget stability by depositing certain monies into the CBRF (where they could not be
easily spent) rather than into the General Fund (where they would be readily available for appropriation for expenditure).
Money may be appropriated from the fund in accordance with the provisions of section 17(b) and (c).
The constitution further provides that all money appropriated from the fund must be repaid to the fund. Section 17(d) states “If
an appropriation is made from the budget reserve fund, until the amount appropriated is repaid, the amount of money in the
General Fund available for appropriation at the end of each succeeding fiscal year shall be deposited in the budget reserve fund.
The legislature shall implement this subsection by law.” All borrowing from the CBRF was completely repaid in FY 2010 and
no borrowing activity from the CBRF occurred during FY 2011 through FY 2014.
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 2
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The following is a schedule of amounts appropriated from the CBRF, the amounts transferred back to the CBRF from the
General Fund as provided in section 17(d) (in thousands). The paragraphs following the schedule provide an explanation of the
entries.
Chapter 18, SLA 2014, Section 48
Subtotal FY 15
Chapter 1, SSLA 2015, Section 12(b)
Article IX, Section 17(d) Alaska Constitution (FY 2016)
Subtotal FY 2016
Chapter 3, 4SSLA 2016, Section 35(a)
Chapter 3, 4SSLA 2016, Section 35(b)
Article IX, Section 17(d) Alaska Constitution (FY 2017)
Subtotal FY 2017
Chapter 1, SSSLA 2017, Section 45(a)
Chapter 1, SSSLA 2017, Section 45(b) and (c)
Correction of Prior Year Error
Article IX, Section 17(d) Alaska Constitution (FY 2018)
Subtotal FY 2018
Chapter 17, SLA 2018, Section 29(a)
Chapter 17, SLA 2018, Section 29(b) and (c)
Article IX, Section 17(d) Alaska Constitution (FY 2019)
Subtotal FY 2019
Chapter 1, SSSLA 2019, Section 17(a)
Chapter 1, SSSLA 2019, Section 1
Chapter 1, SSSLA 2019, Section 4
Chapter 1, SSSLA 2019, Section 7
Chapter 8, SLA 2020, Section 38(y)
Chapter 1, SSSLA 2019, Section 17(b) and (c)
Article IX, Section 17(d) Alaska Constitution (FY 2020)
Subtotal FY 2020
Chapter 8, SLA 2020, Section 45(a)
Chapter 1, SSSLA 2019, Section 1
Chapter 1, SSSLA 2019, Section 4
Chapter 1, SSSLA 2019, Section 7
Chapter 8, SLA 2020, Section 8
Chapter 8, SLA 2020, Section 23(d)
Chapter 8, SLA 2020, Section 41(a) and (b)
Chapter 8, SLA 2020, Section 45(b) and (c)
Article IX, Section 17(d) Alaska Constitution (FY 2021)
Subtotal FY 2021
Total appropriated from the CBRF
$3,000,000
3,000,000
3,617,867
(522,510)
3,095,357
522,510
3,033,935
(479,729)
3,076,716
479,729
1,866,095
(1,170,209)
(431,688)
743,927
431,688
504,530
(1,728,029)
(791,811)
1,728,029
37,499
12
256
5,000
1,178,728
(1,509,566)
1,439,958
1,509,566
2,406
2,534
2,901
19,142
320,000
84,640
711,319
(437,916)
2,214,592
‘$_12,778,739_
The schedule above shows the effect of Article IX, Section 17(d), of the Alaska Constitution, which provides that the amount of
money in the general fund available for appropriation at the end of each succeeding fiscal year shall be deposited in the budget
reserve fund until the amount appropriated is repaid. The amount was fully repaid at the end of FY 2010, so this schedule
shows the repayment activity that has occurred since then.
SLA 2014, Chapter 18, Section 48 (a) appropriated the sum of $1 billion to the defined benefit plan account in the Public
Employees Retirement and (b) appropriated $2 billion to the defined benefit plan account in the Teachers’ Retirement System
from the CBRF as additional state contributions for FY 2015, which results in a liability of the General Fund.
1-54
STATE OF ALASKA NOTE 2
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
SSLA 2015, Chapter 1, Section 12(b) appropriated additional amounts from the CBRF to the general fund to fund any shortfalls
between state revenue and general fund appropriations for FY 2016.
SSLA 2016, Chapter 3, Section 35(b) appropriated additional amounts from the CBRF to the general fund to fund any shortfalls
between state revenue and general fund appropriations for FY 2017.
SSSLA 2017, Chapter 1, Section 45(b) and (c) appropriated additional amounts from the CBRF to the general fund to fund any
shortfalls between state revenue and general fund appropriations for FY 2018.
SLA 2018, Chapter 17, Section 29(b) and (c) appropriated additional amounts from the CBRF to the general fund to fund any
shortfalls between state revenue and general fund appropriations for FY 2019.
SSSLA 2019, Chapter 1, Section 17 (b) and (c) appropriated additional amounts from the CBRF to the general fund to fund any
shortfalls between state revenue and general fund appropriations for FY 2020.
SSSLA 2019, Chapter 1, Section 1, Section 4 and Section 7 appropriated amounts from CBRF to fund miscellaneous capital
projects and grants.
SLA 2020, Chapter 8, Section 28(b), appropriated amounts from CBRF for responding to the COVID-19 public health disaster
emergency. Chapter 8, SLA 2020, Section 38(y), appropriated funds to the disaster relief fund. SLA 2020, Chapter 8, Section
18(a) and (b) changed CBRF as a funding source for some appropriations made in SSSLA 2019, Chapter 1, Section 1. SLA
2020, Chapter 8, Section 23(d) appropriated a transfer to the permanent dividend division fund. SLA 2020, Chapter 8, Section
8, appropriated amounts from CBRF to fund miscellaneous capital projects and grants. SLA 2020, Chapter 8, Section 41(a) and
(b) appropriated a transfer to the PERS and TRS.
During prior tax years 1997 through 2017, amounts paid to the State of Alaska as a result of Federal Regulatory Commission
(FERC) disputes were erroneously deposited into the CBRF. As determined by the Alaska Attorney General, a FERC case is
not an administrative proceeding or litigation involving production tax or royalty for the purposes of the CBRF fund
amendment. The amount due to be repaid to the CBRF from the General Fund has been reduced by these amounts.
The CBRF fund balance as of June 30, 2021, was $13,681 million.
STATUTORY BUDGET RESERVE FUND
The Statutory Budget Reserve Fund (SBRF) was created through Alaska Statute 37.05.540. Once the full debt of CBRF was
repaid in FY 2010, the legislature began to make appropriated transfers from the General Fund into the SBRF in addition to
directing any year-end available fund balance of the General Fund to be transferred to the SBRF. As the balance of this fund
continued to increase so did the political and public interest; therefore, the presentation of SBRF was added to the Combining
Balance Sheet for the General Fund for Statements 3.01 and 3.02.
A legislative transfer from the General Fund to SBRF totaling $250 million was made at the beginning of FY 2013 in
accordance with SLA 2012, Chapter 15, Section 32(b). Section 32(c) states that if the unrestricted amount available for
appropriation in the fiscal year ending June 30, 2013, is insufficient to cover General Fund appropriations, the amount
necessary to balance revenue and General Fund appropriations or to prevent a cash deficiency in the General Fund is
appropriated from the SBRF to the General Fund. For FY 2013, this resulted in a year-end transfer from the SBRF to the
General Fund for $776 million, for a net impact to the SBRF of $526 million.
SLA 2013, Chapter 14, Section 34, outlines the appropriation to the General Fund giving authority to take from the SBRF if the
unrestricted state revenue available for appropriation in the fiscal year ending June 30, 2014, is insufficient to cover General
Fund appropriations made for the fiscal year ending June 30, 2014, the amount necessary to balance revenue and General Fund
appropriations or to prevent a cash deficiency in the General Fund. For FY 2014, this resulted in a year-end transfer from the
SBRF to the General Fund for $1,920 million.
SLA 2014, Chapter 16, Section 34, states that if the unrestricted state revenue available for appropriation in the fiscal year
ending June 30, 2015, is insufficient to cover General Fund appropriations made for the fiscal year ending June 30, 2015, the
amount necessary to balance revenue and general fund appropriations or to prevent a cash deficiency in the General Fund is
appropriated from the budget reserve fund (AS 37.05.540(a)) to the General Fund. For FY 2015, this resulted in a year-end
transfer from the SBRF to the General Fund for $2,503 million.
I-55
STATE OF ALASKA NOTE 2
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
SSSLA 2021, Chapter 1, Section 77(a), states that the unencumbered balance of any unrestricted general fund appropriation that
is determined to be available for lapse at the end of the fiscal year ending June 30, 2021, after the appropriations made in sec.
24, ch. 8, SLA 2020, and sec. 15(a) of this Act, is appropriated to the budget reserve fund. For FY2021, this resulted in a year-
end transfer from the General Fund to the SBRF for $156 million. SSSLA 2021, Chapter 1, Section 77(b) states that for
FY 2021, funds were appropriated from the General Fund to the SBRF. This resulted in a year-end transfer from the General
Fund to the SBRF for $325 million.
Article IX, Section 17(d), of the Alaska Constitution, which provides that the amount of money in the general fund available for
appropriation at the end of each succeeding fiscal year shall be deposited in the budget reserve fund until the amount
appropriated is repaid.
Recent superior court litigation — Alaska Federation of Natives v. Dunleavy — has prompted new interpretation and created
uncertainty concerning the statutory budget reserve fund status as subject to the sweep. New interpretation of the statutory
budget reserve funds sweep status is based primarily on two facts. First, the description of the statutory budget reserve fund in
AS 37.05.540 is described as a separate fund in the state treasury. Second, the superior court decision in Alaska Federal of
Natives v. Dunleavy distinguished between the general fund and the power cost equalization fund. Given these facts, the
Department of Law concluded that it was reasonable for the legislature to pass and the governor to sign into law FY 2022
appropriations from the Statutory Budget Reserve to pay the dividend. Division of Finance did not sweep the fund as
historically was the case and the funds were used to make the required appropriations.
NOTE 3 — DEFERRED OUTFLOWS AND INFLOWS OF RESOURCES
In the fund financial statements, governmental funds reported deferred inflows of resources of $256,714 thousand as this
amount represents revenues that are earned and measurable, but not available within two months of the end of the reporting
period.
Deferred Outflows and Inflows of Resources reported in the government-wide Statement of Net Position as of June 30, 2021
consisted of the following (in thousands):
Deferred Outflows and Inflows of Resources
Primary Government
Governmental Business-Type Discrete
Activities Activities Component Units
Deferred Outflows:
Change in Fair Value-Interest Rate Swaps $ — §$ — § 167,094
Deferred Charge on Bond Refundings 4,271 — 42,187
Deferred Lease Obligation — — 1,985
Deferred Outflows Related to Postretirement Benefits 211,328 3,775 24,241
Deferred Outflows Related to Pensions 801,028 7,534 38,697
Total Deferred Outflows $ 1,016,627 $ 11,309 $ 274,204
Deferred Inflows:
Unearned Grant Revenue $ — $ — § 552,047
Deferred Inflows Related to Bond Refundings — — 713
Deferred Inflows Related to Postretirement Benefits 327,742 4,229 28,260
Deferred Inflows Related to Pensions 34,828 452 18,194
Total Deferred Inflows $ 362,570 $ 4,681 §$ 599,214
Internal service funds predominantly serve the governmental funds. Accordingly, deferred outflows and deferred inflows for
internal service funds are included as part of the above totals for governmental activities. Note 6 provides additional
information on these deferred outflows/inflows.
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 3
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The deferred outflows for the internal service funds is made up of the following (in thousands):
Related to Postretirement Benefits
Related to Pensions
Highways Equipment Working Capital Fund
Information Services Fund
Alaska Public Building Fund
1,002 1,999
2,368 4,724
26 51
The deferred inflows for the internal service funds is made up of the following (in thousands):
Related to Postretirement
Related to Pensions
Highways Equipment Working Capital Fund
Information Services Fund
Alaska Public Building Fund
1,122 120
2,653 283
29 3
The deferred outflows for the business-type activities is made up of the following (in thousands):
International Airports Fund
Agricultural Revolving Loan Fund
Commercial Fishing Revolving Loan Fund
Fisheries Enhancement Revolving Loan Fund
Related to Postretirement
Related to Pensions
Commercial Charter Fisheries Revolving Loan Fund
Mariculture Revolving Loan Fund
Alaska Microloan Revolving Loan Fund
Bulk Fuel Loan Fund
3,556 7,094
18 36
173 346
25 49
— 2
1 2
— 1
2 4
The deferred inflows for the business-type activities is made up of the following (in thousands):
International Airports Fund
Agricultural Revolving Loan Fund
Commercial Fishing Revolving Loan Fund
Fisheries Enhancement Revolving Loan Fund
Related to Postretirement
Related to Pensions
Commercial Charter Fisheries Revolving Loan Fund
Mariculture Revolving Loan Fund
Bulk Fuel Loan Fund
3,983 426
20 2
194 21
27 3
1 _
1 _
3 _
Note 6 provides additional information on the business-type activities deferred outflows/inflows.
1-57
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 3
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The deferred outflows for the component units is made up of the following (in thousands):
Deferred Deferred Outflows Deferred
Change in Fair Charge on Deferred Related to Outflows
Value-Interest Bond Lease Postretirement Related to
Rate Swaps Refundings Obligation Benefits Pensions
Alaska Railroad Corporation — — — 2,597 9,495
Alaska Housing Finance
Corporation 167,094 35,692 — 3,558 3,911
Alaska Aerospace Corporation — — — 25 50
Alaska Gasline Development
Corporation — — — 198 309
Alaska Industrial Development
Export Authority — — 1,985 354 1,236
Alaska Seafood and Marketing
Institute — — — 116 232
University of Alaska — 6,495 — 16,892 22,465
Alaska Mental Health Trust
Authority — — — 501 999
The deferred inflows for the component units is made up of the following (in thousands):
Deferred Deferred Inflows Deferred
Inflows Related Related to Inflows
to Bond Unearned Postretirement Related to
Refundings Grant Revenue Benefits Pensions
Alaska Railroad Corporation — 552,047 7,870 15,558
Alaska Housing Finance Corporation 713 — 2,436 363
Alaska Aerospace Corporation — 28 3
Alaska Gasline Development Corporation — — 291 434
Alaska Industrial Development Export Authority — — 694 74
Alaska Seafood and Marketing Institute — 130 14
University of Alaska — 16,250 1,688
Alaska Mental Health Trust Authority — — 561 60
Note 6 provides additional information on the component units activity for deferred outflows/inflows related to postretirement
benefits and pensions.
NOTE 4 — DEPOSIT AND INVESTMENT RISK
Deposits and investments may be exposed to various types of risks. These risks are interest rate risk, credit risk, custodial credit
risk, concentration of credit risk, and foreign currency risk. Interest rate risk is the risk that changes in interest rates will
adversely affect the fair value of an investment. Credit risk is the risk that an issuer or other counterparty to an investment will
not fulfill its obligations. Custodial credit risk is the risk that deposits may not be returned in the event of a bank failure.
Concentration of credit risk is the risk of loss attributed to the magnitude of an investment in a single issuer. Foreign currency
risk is the risk that changes in exchange rates will adversely impact the fair value of an investment.
A. DEPOSITS AND INVESTMENTS UNDER THE FIDUCIARY RESPONSIBILITY OF THE COMMISSIONER
OF REVENUE
By law, all deposits and investments are under the fiduciary responsibility of the Commissioner of the Department of Revenue
(Commissioner) except where the legislature has delegated that responsibility to other entities or boards responsible for separate
subdivisions of component units of the State. Those agencies and component units that manage their own cash and investments
are: Alaska Permanent Fund Corporation, Alaska Energy Authority, Alaska Housing Finance Corporation, Alaska Industrial
I-58
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Development and Export Authority, Alaska Municipal Bond Bank Authority, Alaska Railroad Corporation, Alaska Retirement
Management Board, Alaska Student Loan Corporation, University of Alaska, Alaska Mental Health Trust Authority, and the
Exxon Valdez Oil Spill Trustee Council.
Invested assets under the fiduciary responsibility of the Commissioner are comprised of the General Fund and Other Non-
Segregated Investments (GeFONSI), Constitutional Budget Reserve Fund, International Airports Fund, Retiree Health
Insurance Fund, Power Cost Equalization Endowment Fund, General Obligation Bond Fund, Mine Reclamation Trust Fund, as
well as the Public School and Investment Loss trust funds (all collectively, Funds).
As the fiduciary, the Commissioner has the statutory authority (AS 37.10.070-37.10.071) to invest the assets under the Prudent
Investor Rule which requires that investments shall be made with the judgment and care, under circumstances then prevailing
that an institutional investor of ordinary professional prudence, discretion, and intelligence exercises in managing large
investment portfolios.
The Department of Revenue, Treasury Division (Treasury) has created a pooled environment by which it manages the
investments for which the Commissioner has fiduciary responsibility. Actual investing is performed by investment officers in
Treasury or by contracted external investment managers. Specifically, the Tobacco Revenue Fixed Income, Domestic Equity,
and the International Equity Pools are managed externally. Treasury manages the Short-term Fixed Income Pool, Short-term
Treasury Fixed Income Pool, Non-interest Bearing Deposits, Intermediate-term Fixed Income Pool, and Broad Market Fixed
Income Pool in addition to acting as oversight manager for all externally managed investments.
Additional information related to the various pools and investments is disclosed in the financial schedules issued by the
Department of Revenue, Treasury Division. These financial schedules are available through the Department of Revenue,
Treasury Division, P.O. Box 110405, Juneau, AK 99811-0405 or at http://treasury.dor.alaska.gov/.
I-59
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Combined schedule of invested assets as of June 30, 2021 is as follows:
Fair Value (in thousands)
Broad
Short-term Non- Market Tobacco
Fixed interest Fixed Revenue Income
Investment Income Bearing Income Domestic International Fixed Receivable
Type Pool Deposits Pool Equity Pool Equity Pool Income (Payable)
General Fund
and GeFONSI $ 2,831,305 $ 41,926 $ 737,242 $ 216,952 $ 143,678 $ 10,427 $ (68)
Constitutional
Budget
Reserve Fund 1,076,103 —_— — — — —_— (36)
Public School
Trust Fund 7,304 —_ 244,912 359,697 232,833 — —_
Investment
Loss Trust
Fund 3,749 — — — — — —
General
Obligation
Bond Fund 86,518 —_ — —_ — —_ (3)
International
Airports
Construction
Fund 31,531 —_— — —_— —_— —_— (1)
International
Airports Fund 152,991 _ 42,479 —_— — — (5)
Power Cost
Equalization
Endowment
Fund 9,852 —_— 689,141 280,130 170,043 — —
Retiree Health
Insurance
Fund
Major
Medical 18,963 — — — — — (1)
Long-
Term
Care 6,198 — 408,228 207,376 134,256 — —
Mine
Reclamation
Fund 13 —_— 427 627 406 — —
Total Invested
Assets $ 4,224,527 $ 41,926 $ 2,122,429 $ 1,064,782 $ 681,216 $ 10,427 $ (114)
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. At June 30, 2021
all fixed income securities met the Treasury's compliance metrics related to effective duration.
Short-term Fixed Income Pool
As a means of limiting its exposure to fair value losses arising from increasing interest rates, Treasury’s investment policy
limits individual fixed rate securities to 14 months to maturity or 14 months expected average life upon purchase. Floating rate
securities are limited to three years to maturity or three years expected average life upon purchase. These constraints apply to
trade date, except for securities bought at new issue, for which settlement date applies.
Intermediate and Broad Market Fixed Income Pools
Duration is a measure of interest rate risk. It measures a security’s sensitivity to a 100-basis point change in interest rates. The
duration of a pool is the average fair value weighted duration of each security in the pool taking into account all related cash
flows. Treasury uses industry-standard analytical software developed by The Yield Book, Inc. to calculate effective duration.
I - 60
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The software considers various possible future interest rates, historical and estimated prepayment rates, call options, and other
variable cash flows for purposes of the effective duration calculation.
Through its investment policy, Treasury manages its exposure to fair value losses arising from increasing interest rates by
limiting the effective duration of its other fixed income pool portfolios to the following:
Intermediate-term Fixed Income Pool - + 20% of the Barclays 1-3 Year Government Bond Index.
Broad Market Fixed Income Pool - + 20% of the Barclays Capital U.S. Aggregate Bond Index.
At June 30, 2021, the effective duration by investment type was as follows:
Effective Duration (in years)
Certificate of Deposit 0.17
Corporate Bonds 6.19
Mortgage-backed 3.24
Municipal Bonds 13.67
Other Asset-backed 0.46
U.S. Government Agency 5.02
US. Treasury Bills, Notes, and Bonds 1.51
Yankee Corporate Bonds 2.42
Yankee Government Bonds 3.18
Portfolio Effective Duration 2.11
Credit Risk
Credit risk is the risk that an issuer or other counter party to an investment will not fulfill its obligations.
Short-term Fixed Income Pool investments are limited to instruments with a long-term credit rating of at least A3 or equivalent
and instruments with a short-term credit rating of at least P-1 or equivalent. Commercial paper must be rated at least P-1 by
Moody’s and A-1 by Standard and Poor’s. Asset-backed and non-agency mortgage securities must be rated A3 or equivalent.
The A3 rating is defined as the median rating of the following three rating agencies: Standard & Poor’s Corporation, Moody’s
and Fitch. Asset-backed and non-agency mortgage securities may be purchased if only rated by one of these agencies if they are
rated AAA.
Intermediate-term and Broad Market Fixed Income Pool investments are limited to securities with a long-term credit rating of at
least Baa3 or equivalent and securities with a short-term credit rating of at least P-1 or equivalent. The Broad Market Fixed
Income Pool can hold within its portfolio up to 5% high-yield bonds. Asset-backed and non-agency mortgage securities must be
rated investment grade. The investment grade rating is defined as the median rating of the following three rating agencies:
Standard & Poor’s Corporation, Moody’s and Fitch. Asset-backed and non-agency mortgage securities may be purchased if
only rated by one of these agencies if they are rated AAA.
The bond indentures governing the investment of tobacco revenue related bond proceeds limit the investment in commercial
paper to only those securities rated A-1 or equivalent. Tobacco Revenue Fixed Income Securities consisted of commercial
paper rated A-1.
I-61
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
At June 30, 2021 the State’s internally managed Pools consisted of investments with credit quality ratings issued by nationally
recognized statistical rating organizations as follows (using Standard and Poor’s Corporation rating scale, in thousands):
Short-term Fixed Broad Market Fixed
Income Pool Income Pool
AAA $ 1,653,230 $ 201,569
AA 32,225 87,438
A 193,089 374,502
A-1 60,101 —
BBB 7,063 346,127
BB — 6,521
U.S. Government Agency — 158,358
US. Treasury Bills, Notes, and Bonds 2,559,528 469,294
Not Rated 389,053 578,344
No Credit Risk (321,436) 21,085
Other Fiduciary (348,326) (120,810)
$ 4,224,527 §$ 2,122,428
Custodial Credit Risk - Deposits
Custodial credit risk is the risk that deposits may not be returned in the event of a bank failure. Treasury’s investment policy
requires the State’s depository banks to collateralize State deposits to the extent they exceed insurance coverage provided by the
Federal Deposit Insurance Corporation (the FDIC provides $250 thousand of coverage). In accordance with Treasury policy,
they are required to retain collateral equal to 100 percent of uninsured deposits.
The bond indentures governing the investment of tobacco revenue related bond proceeds do not establish policy with regard to
custodial credit risk.
At June 30, 2021 the State had no uncollateralized and uninsured deposits.
Concentration of Credit Risk
Treasury’s policy with regard to concentration of credit risk is to prohibit the purchase of more than five percent of a pool’s
holdings in corporate bonds backed by any one company or affiliated group. At June 30, 2021, no pool had exposure to any one
issuer greater than 5 percent of total invested assets.
Foreign Currency Risk
The Commissioner of Revenue formally adopts asset allocation policies for each fund at the beginning of each fiscal year,
which places policy limitations on the amount of international securities each fund is allowed to hold. The following policies
were in place during FY 2021 and invested assets included the following holdings at June 30, 2021, for the funds invested in the
International Equity Pool:
Policy Actual
Education Endowment Fund 28% +/- 5% 27.56 %
GeFONSI II 3% - 3% /+ 5% 3.02 %
Higher Education Fund 28% +/- 5% 27.57 %
Illinois Creek Mine Reclamation Fund 28% +/- 5% 27.57 %
Power Cost Equalization Endowment Fund 15% +/- 5% 14.80 %
Public School Trust Fund 28% +/- 5% 27.56 %
Retiree Health Insurance Fund, Long Term Care 18% +/- 5% 17.76 %
I-62
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
At June 30, 2021, the funds invested in the International Equity Pool had no exposure to foreign currency risk.
Fair Value Measurements
Various inputs are used in valuing the investments held by the Commissioner. Generally Accepted Accounting Principles
establishes a hierarchy of inputs used to value investment emphasizing observable inputs and minimizing unobservable inputs.
These inputs are summarized as follows:
Level | - Quoted prices for identical assets in an active market
Level 2 - Inputs, other than quoted prices, that are observable for the asset, either directly or indirectly or quoted in less
active markets
Level 3 - Unobservable inputs. Unobservable inputs should only be used to the extent that observable inputs are not
available for a particular asset.
The Commissioner categorizes fair value measurements within the fair value hierarchy established by generally accepted
accounting principles. The Commissioner has the following recurring fair value measurements as of June 30, 2021 (in
thousands):
Investment by Fair Value Level Total Level 1 Level 2 Level 3
Cash Equivalents
Certificates of Deposits $ 23,012 $ — $ 23,012 $ —
Deposits 64,704 64,704 — —
Money Market 10,429 — 10,429 —
Repurchase Agreement 412,400 — 412,400 —
Total Cash Equivalents 510,545 64,704 445,841 —
Debt Securities
Corporate Bonds 954,892 — 954,892 —
Mortgage Backed 534,225 — 534,225 —
Municipal Bonds 17,820 — 17,820 —
Other Asset Backed 1,598,127 — 1,598,127 —
U.S. Government Agency 158,358 — 158,358 —
U.S. Treasury Bills, Notes, and Bonds 3,028,821 — 3,028,821 —
Yankee Corporate Bonds 311,069 — 311,069 —
Yankee Government Bonds 77,718 — 77,718 —
Total Debt Securities 6,681,030 — 6,681,030 —
Equity Securities
Commingled Equity Funds 1,887,221 1,887,221 — —
Total Equity Securities 1,887,221 1,887,221 — —
Total Investments by Fair Value Level $ 1,951,925 $ 7,126,871 $ —
Total Investments Measured at Fair Value $ 9,078,796
Other Fiduciary Responsibility ~~ (610,487)
Net Receivables/(Payables) from Investment Activity (323,002)
Total Commissioner Invested Assets $ 8,145,307
Securities classified as level 1 are valued using prices quoted in active markets for those securities. Securities classified as level
2 are valued using matrix pricing. Pricing is obtained from various sources.
Foreign Exchange, Foreign Exchange Contracts, Off-Balance Sheet Risk and Derivative Exposure
The Commissioner is exposed to credit risk on investment derivative instruments that are in asset positions. The Commissioner
has no policy of requiring collateral or other security to support derivative instruments subject to credit risk. Additionally, the
Commissioner has no policy regarding entering into netting arrangements when it enters into derivative instrument transactions
with a counterparty, nor does the Commissioner have a policy or contingencies. There was no income from derivative
investments as of June 30, 2021.
I - 63
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The International Equity Pool includes foreign currency forward contracts to buy and sell specified amounts of foreign
currencies at specified rates on specified future. The counterparties to the foreign currency forward contracts consist of a
diversified group of financial institutions. Credit risk exposure exists to the extent of nonperformance by these counterparties;
however, the risk of default is considered to be remote. The market risk is limited to the difference between contractual rates
and forward rates at the balance sheet date. At June 30, 2021, the International Equity Pools had no outstanding contracts.
B. DEPOSITS AND INVESTMENTS UNDER CONTROL OF THE ALASKA RETIREMENT MANAGEMENT
BOARD
The Alaska Retirement Management Board (ARMB) is the investment oversight authority for the State of Alaska’s Retirement
and Benefits Plans (Plans). These Plans are made up of six systems: the Public Employees’ Retirement System (PERS),
Teachers Retirement System (TRS), Judicial Retirement System (JRS), National Guard and Naval Militia Retirement Systems
(NGNMRS), Supplemental Benefits System (SBS), and Deferred Compensation Plan (DCP). The systems comprise a mix of
individual Defined Benefit and Defined Contribution Retirement Plans. Fiduciary responsibility for the ARMB’s invested
assets is pursuant to Alaska Statutes 37.10.210-390.
Alaska Statute 37.10.071 provides that investments shall be made with the judgment and care under circumstances then
prevailing that an institutional investor of ordinary professional prudence, discretion and intelligence exercises in managing
large investment portfolios.
Additional information related to the various pools and investments is disclosed in the financial schedules issued by the ARMB.
These schedules of invested assets and of investment income and changes in invested assets are those of the six systems’
invested assets and not the systems as a whole and are available through the Department of Revenue, Treasury Division,
P.O. Box 110405, Juneau, AK 99811-0405 or at http://treasury.dor.alaska.gov/armb/.
Investments and Related Policies
Securities are valued each business day using prices obtained from a pricing service when such prices are available; otherwise,
such securities are valued at the most current sale price or based on a valuation provided by investment managers. Fair values
of investments that have no readily determinable fair value are generally reported by using the net asset value per share (or its
equivalent) of the investment. Pooled participant directed accounts and the collective investment funds are valued based on a
unit value determined by the managers or trustees multiplied by the total units held by the Plan. The unit value is determined
by the respective managers or trustees based on the fair value of the underlying assets. The Plan's Investments in fully benefit-
responsive Synthetic Investment Contracts (SICs) are stated at contract value. Investment purchases and sales are recorded on a
trade-date basis. Investment income includes realized and unrealized gains and losses and interest income on investments and
income from securities lending.
Fair Value Measurements
Various inputs are used in valuing the investments held by the ARMB. U.S. generally accepted accounting principles (GAAP)
establishes a hierarchy of inputs used to value investment emphasizing observable inputs and minimizing unobservable inputs.
These inputs are summarized as follows:
Level | - Quoted prices for identical assets in an active market
Level 2 - Inputs, other than quoted prices, that are observable for the asset, either directly or indirectly
Level 3 - Unobservable inputs. Unobservable inputs should only be used to the extent that observable inputs are not available
for a particular asset.
I - 64
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The ARMB categorizes fair value measurements with the fair value hierarchy established by GAAP. The ARMB has the
following fair value measurements at June 30, 2021 (in thousands):
Totals Level 1 Level 2 Level 3
Investment by Fair Value Level
Cash Equivalents
Certificates of Deposit $ 1,746 $ — §$ 1,746 $ —
Deposits 26,990 26,990 — —
Money Market 261,504 —_— 261,504 —_—
Repurchase Agreement 31,286 —_— 31,286 —
Total Cash Equivalents 321,526 26,990 294,536 —
Debt Securities
Commingled Debt Funds 2,295,950 1,838,343 457,607 —
Convertible Bonds 256 _— 256 _
Corporate Bonds 1,446,166 —_ 1,446,166 —_—
Mortgage Backed 1,122,685 —_— 1,122,685 —_—
Other Asset Backed 563,112 —_ 563,112 —_—
U.S. Government Agency 142,445 —_— 142,445 —_—
US. Treasury Bills, Notes, and Bonds 1,451,252 —_ 1,451,252 —_—
Yankee Corporate Bonds 364,713 —_— 364,713 —_—
Yankee Government Bonds 114,722 —_— 114,722 —_—
Total Debt Securities 7,501,301 1,838,343 5,662,958 —
Equity
Commingled Equity Funds 5,597,435 5,597,435 — —
Common and Preferred Equity 12,608,278 12,606,236 5 2,037
Depository Receipts 214,573 214,573 —_— —
Futures (382) (382) —_— —_—
Real Estate Investment Trust 970,813 970,813 — —
Rights 32 32 _— _—
Warrants 18,678 18,678 — —
Total Equities 19,409,427 19,407,385 5 2,037
Other
Balanced Funds 2,205,115 —_ 2,205,115 —_—
Target Date Funds 2,775,176 —_ 2,775,176 —_—
Securities Lending Collateral Invested 85,824 —_— 85,824 —_—
Total Other 5,066,115 _— 5,066,115 _—
Total Investments by Fair Value Level $ 32,298,369 §$ 21,272,718 $ 11,023,614 $ 2,037
Investments Measured at the NAV
Alternative Beta $ 311,149
Alternative Fixed Income 827,673
Energy 62,212
Farmland 900,100
Infrastructure 742,124
Private Equity 5,026,490
Real Estate 1,521,574
Timber 366,936
Total Investments Measured at NAV 9,758,258
Total Investments Measured at Fair Value $ 42,056,627
Synthetic Investment Contract at Contract Value 860,524
Net Receivables / ( Payables) (124,879)
Total Invested Assets $ 42,792,272
Securities classified as level 1 are valued using prices quoted in active markets for those securities. Securities classified as level
2 are valued using matrix pricing. Each balanced and target date options classified as level 2 are priced daily by the investment
managers based on the prevailing market values of the underlying security portfolios. Pricing is sourced from various sources.
Securities classified as level 3 are valued using the last traded price or a price determined by the investment manager’s
valuation committee.
I-65
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Investments in alternative beta, alternative fixed income, energy, farmland, infrastructure, private equity, real estate, and timber
are measured at net asset value (NAV) per share of the investments (or its equivalent) of the capital account balance nearest to
the balance sheet date, adjusted for subsequent contributions and distributions. These investments undergo annual independent
financial statement audits. Additional information about these investments is listed in the following table (in thousands):
Redemption Frequency Redemption
Fair Value (if currently available) Notice Period
Alternative Beta $ 311,149 N/A N/A
Alternative Fixed Income 827,673 Quarterly 2-90 days
Energy 62,212 No redemptions No redemptions
Farmland 900,100 N/A N/A
Infrastructure 742,124 Quarterly 30-90 days
Private Equity 5,026,490 No redemptions No redemptions
Real Estate 1,521,574 Varied Varied
Timber 366,936 N/A N/A
Total Investments
Measured at NAV $ 9,758,258
Alternative Beta and Alternative Fixed Income: Investment strategies include pooled investment vehicles and securities in a
variety of markets.
Energy: This type includes investments in three energy funds which invest in the debt and equity of energy-related companies.
These investments can never be redeemed. The nature of these investments is such that distributions are received through the
liquidation of underlying assets of the funds. These investments are expected to be funded through the fiscal year 2022.
Farmland: This type includes investments of a wholly owned agriculture fund. This fund is for the purpose of owning and
managing real estate property devoted to agricultural use. Investment properties include row crops, permanent crops and
vegetable crops. This investment is a fund of one, therefore can be liquidated at any time.
Infrastructure (Private): This type includes investments in two open-ended infrastructure funds. Investments include
electricity generation, transmission, toll roads, pipelines, bridges, and other infrastructure-related assets. Funds can be redeemed
on a quarterly basis with proper notice.
Private Equity: This type includes investments in 34 private equity funds including two gatekeeper managers who invest on
behalf of the ARMB. These funds are diversified in various sectors including but not limited to venture capital, acquisitions,
debt, and special situations. These investments can never be redeemed. The nature of these investments is such that distributions
are received through the liquidation of underlying assets of the funds. These investments are expected to be funded through the
fiscal year 2029.
Real Estate: This type includes investments in 15 real estate funds that invest primarily in U.S. commercial real estate
including value-added, opportunistic and core investments. Three of these funds are funds of one, and therefore can be
liquidated at any time. For the remaining 18 funds, investments can never be redeemed. The nature of these investments is such
that distributions are received through the liquidation of underlying assets of the funds. These investments are expected to be
funded through fiscal year 2032.
Timber: This type includes an investment in one wholly owned timber fund that invests, acquires, manages, and disposes of
timberland property and associated timber. This investment is a fund of one, and therefore can be liquidated at any time.
Synthetic Investment Contracts (SICs): The ARMB’s investment manager entered into investment contracts, on behalf of the
ARMB, with five financial institutions. These institutions provide wrap contracts that cover separately managed SIC portfolios.
The accounts are credited with earnings and investment deposits, less administrative expenses charged by the financial
institutions and investment withdrawals. The contracts are included in the ARMB’s statements at contract value. They are fully
benefit-responsive. There are no reserves against contract value for the credit risk of the contract issuer or otherwise. The
crediting interest rate is based on the approximate rate of interest that will amortize differences between contract and market
value over the portfolio’s average duration. Accounts and terms of SICs in effect at June 30, 2021 are as follows (in thousands):
I - 66
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Alaska Retirement
Contract Provider Management Board
Contract Value of Investment Contract Prudential Insurance Company of America $ 165,577
Market Value of Portfolio Prudential Insurance Company of America 170,394
Average Crediting Rate Prudential Insurance Company of America 1.94 %
Contract Value of Investment Contract New York Life Insurance Co. 165,307
Market Value of Portfolio New York Life Insurance Co. 169,863
Average Crediting Rate New York Life Insurance Co. 1.89 %
Contract Value of Investment Contract Pacific Life Insurance Co. 165,711
Market Value of Portfolio Pacific Life Insurance Co. 170,745
Average Crediting Rate Pacific Life Insurance Co. 1.99 %
Contract Value of Investment Contract State Street Bank & Trust Co. 165,746
Market Value of Portfolio State Street Bank & Trust Co. 170,490
Average Crediting Rate State Street Bank & Trust Co. 1.98 %
Contract Value of Investment Contract Massachusetts Mutual Life Insurance Co. 165,376
Market Value of Portfolio Massachusetts Mutual Life Insurance Co. 169,823
Average Crediting Rate Massachusetts Mutual Life Insurance Co. 1.89 %
Interest Rate Risk
The ARMB invests its cash in the State of Alaska, Treasury Division's (Treasury) Short-Term Fixed Income Pool. As a means
of limiting its exposure to fair value losses arising from increasing interest rates, Treasury’s investment policy limits individual
fixed rate securities to 14 months to maturity or 14 months expected average life upon purchase. Floating rate securities are
limited to three years to maturity or three years expected average life upon purchase. At June 30, 2021, all securities within the
Short-term Fixed Income Pool met these compliance metrics.
Duration is a measure of interest rate risk. It measures a security’s sensitivity to a 100-basis point change in interest rates. The
duration is the average fair value weighted duration of each security considering all related cash flows. At June 30, 2021, the
effective duration of the ARMB’s fixed income by investment type, was as follows:
Effective Duration
(in years)
Corporate Bonds 9.06
Mortgage-backed 3.17
Other Asset Backed 1.22
U.S. Government Agency 3.63
U.S. Treasury Bills, Notes, and Bonds 7.70
Yankee Corporate Bonds 5.76
Yankee Government Bonds 7.38
Total Portfolio 6.17
Synthetic Investment Contracts
The ARMB contracts with an external investment manager who is given the authority to invest in SICs and a reserve. This
external manager also manages the securities underlying the SICs. In the case of the ARMB’s constant duration SICs, duration
is the fair value weighted average term to maturity of all fixed income securities underlying the contracts and their related cash
flows. Duration of the Plan’s structured payout SICs is the weighted average maturity of the contract payments. Through the
ARMB’s investment policy, exposure to fair value losses arising from increasing interest rates is managed by limiting the
duration on SICs as follows:
I - 67
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Constant duration SICs duration cannot exceed the longer of six years or the duration of the Bloomberg Barclays
Aggregate Bond Index plus one-half year. The weighted average duration of the constant duration SICs was 4.16 years at
June 30, 2021. The duration of the Bloomberg Barclays Aggregate Bond Index was 6.48 years at June 30, 2021. The
account's weighted average effective duration will generally not exceed the effective duration of the Bloomberg Barclays
U.S. Intermediate Aggregate Bond Index plus 10%. The weighted average duration of the account was 4.01 years at June
30, 2021. The duration of the Bloomberg Barclays U.S. Intermediate Aggregate Bond Index was 4.08 years at June 30,
2021. The balance of the reserve is invested in the custodian's Institutional Treasury Money Market Fund and the external
manager's Cash Reserves Trust Fund. The account did not hold any buy-and-hold SICs or structured payout SICs
investments at June 30, 2021.
Credit Risk
At June 30, 2021, ARMB’s invested assets consisted of fixed income securities with credit quality ratings issued by nationally
recognized statistical rating organizations. Securities lending collateral was invested in a registered 2(a)-7 money market fund
that was not rated. Using Standard & Poor’s Corporation rating scale, the values for each rating are as follows (in thousands):
Rating U.S. Dollar Foreign
A $ 788,384 §$ —
A-1 4,559 —
AA 206,764 —
AAA 587,134 —
B 12,890 —
BB 21,390 —
BBB 786,597 —
Not Rated 3,499,629 256
U.S. Government Agency 142,445 —
U.S. Treasury Bills, Notes, and Bonds 1,451,252 —
$ 7,501,044 $§$ 256
Synthetic Investment Contracts
The ARMB’s investment policy has the following credit risk limitations for SICs, investments underlying the synthetic
investment contracts and the reserve:
Synthetic investment contract issuers must have an investment grade rating. Supranational Agency and Foreign
Government entity investments must have a minimum rate of A- or equivalent. Corporate debt securities must have a
minimum rating of BBB- or equivalent. Asset-backed securities must have a minimum rating of AAA or equivalent. The
ratings assigned to issuers of money market instruments must have the highest rating of any nationally recognized
statistical rating organization. This limitation does not apply to the investment funds maintained by the custodian.
Custodial Credit Risk - Deposits
The ARMB does not have a policy in relation to custodial credit risk for deposits. At June 30, 2021, the ARMB’s invested
assets had uncollateralized and uninsured foreign currency deposits of $15,015 thousand.
Foreign Currency Risk
The ARMB’s Stable Value Fund policy requires that all investments underlying a synthetic investment contract be denominated
in U.S. dollars. For all other funds, through its asset allocation, the ARMB limits risk by limiting total investments in foreign
currencies to the following:
I - 68
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Global
Equity Ex- Private Real Assets
Pension System Opportunistic US. Equity Pool Pool
Public Employees! Retirement System 10 % 23 % 18 % 20 %
Teachers' Retirement System 10 23 18 20
Judicial Retirement System 10 23 18 20
Alaska National Guard and Naval Militia Retirement
System 10 17 12 11
At June 30, 2021, the ARMB had exposure to foreign currency risk with the following deposits and investments (in thousands):
Currency Convertible Bonds Deposits Equity Private Equity Rights & Warrants
Australian Dollar $ — §$ 114 $ 74,665 §$ 793 $ —_
Brazilian Real — 466 53,429 — 2
Canadian Dollar — 1,307 118,550 — —
Chilean Peso — 35 6,258 — —
Colombian Peso _— —_— 484 —_— —_—
Czech Koruna _— 12 7718 — —
Danish Krone — 135 60,381 — —
Euro Currency — 2,744 788,300 333,550 30
Hong Kong Dollar —_— 623 234,159 —_— —_—
Hungarian Forint — 22 1,873 — —
Iceland Krona — — 2,570 — —
Indian Rupee —_— 28 65,555 —_— —_—
Indonesian Rupiah — 7 5,083 — —
Japanese Yen — 3,387 573,913 — —
Kuwaiti Dinar — 95 1,197 — —
Malaysian Ringgit —_— 3 5,113 —_— —_—
Mexican Peso — 682 21,846 — —
New Israeli Sheqel — 82 5,224 — —
New Taiwan Dollar — 478 91,068 — —
New Zealand Dollar — — 5,308 — —
Norwegian Krone —_— 149 25,138 —_— —_—
Philippine Peso — — 1,721 — —
Polish Zloty — 16 3,217 — —
Pound Sterling — 934 318,500 63,978 —
Qatari Rial _— 95 4,715 —_— _—
Russian Ruble — 293 60,761 — —
Saudi Riyal —_— 48 22,412 — —_—
Singapore Dollar — 79 19,732 — —
South African Rand — 54 21,144 — —
South Korean Won — 719 119,866 — —
Swedish Krona —_— 142 94,290 22,310 —_—
Swiss Franc 256 759 189,071 — 11
Thailand Baht —_— 26 13,260 — 1
Turkish Lira — 34 7,704 — —
Uae Dirham — 101 4,079 — —
Yuan Renminbi — 1,986 86,341 — —
$ 256 $ 15,015 $ 3,107,705 $ 420,631 $ 44
I-69
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Concentration of Credit Risk
At June 30, 2021, the ARMB’s Invested Assets did not have exposure to any one issuer greater than 5% of total invested assets.
Synthetic Investment Contracts
The ARMB’s policy with regard to concentration of credit risk, underlying investments, and reserve is as follows:
No investment will be made if, at the time of purchase, total investment in any single issuer of investment contracts would
exceed thirty-five percent of the synthetic investments contracts’ total value.
No investment will be made if, at the time of the purchase, the investment could cause any single issuer, or all issuers of the
securities held as supporting investments under synthetic investment contracts to exceed thresholds in the table below. The
maximum exposure to securities rated BBB- and BBB+ is limited to twenty percent of the total value underlying synthetic
investment contracts.
Investment Type Issuer All Issuers
U.S. Treasury and Agencies 100 % 100 %
U.S. Agency Securities 100 100
Agency Mortgage-Backed Securities 50 50
Non-Agency Mortgage-Backed Securities 5 50
Asset-Backed Securities 5 50
Domestic and Foreign Corporate Debt Securities 5 50
Supranational Agency and Foreign Government Entity Securities 5 50
Money Market Instruments - Nongovernmental/Agency 5 100
Custodian Short-term Investment Fund 100 100
For the reserve, the total investment of any single issuer of money market instruments may not exceed 5 percent of the total
value underlying synthetic investment contracts. This limitation does not apply to the investment funds maintained by the
custodian.
Derivatives, Foreign Exchange, and Counterparty Credit Risk
The ARMB is exposed to credit risk on investment derivative instruments that are in asset positions. The ARMB has no policy
of requiring collateral or other security to support derivative instruments subject to credit risk. Additionally, the ARMB has no
policy regarding entering into netting arrangements when it enters into derivative instrument transactions with a counterparty,
nor does the ARMB have a policy for contingencies. On June 30, 2021, the ARMB had the following derivative instruments
outstanding (in thousands):
Change in Fair Value Fair Value
Classification Amount Classification Amount Notional
Commodity Futures Long Investment Revenue $ (2,899) Futures $ — §$ —_
Fixed Income Futures Long _ Investment Revenue (655) Futures — 19,800
Fixed Income Futures Short Investment Revenue — Futures — —
FX Forwards Investment Revenue 2,702 Long Term Instruments 1,052 149,252
Index Futures Long Investment Revenue 21,834 Futures — 17
Index Futures Short Investment Revenue (2,876) Futures — —
Rights Investment Revenue 320 Common Stock 32 232
Warrants Investment Revenue 7,320 Common Stock 18,678 1,368
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The International Equity Pool includes foreign currency forward contracts to buy and sell specified amounts of foreign
currencies at specified rates on specified future dates for the purpose of hedging existing security positions. The counterparties
to the foreign currency forward contracts consist of a diversified group of financial institutions. Credit risk exposure exists to
the extent of non-performance by these counterparties; however, the risk of default is considered to be remote. The market risk
is limited to the difference between contractual rates and forward rates at the balance sheet date. At June 30, 2021, the ARMB
had the following foreign currency risk related to derivatives (in thousands):
Right & Warrant
Currency Name Options Net Receivable Net Payables Total Exposure
Australian Dollar $ — § (251) $ — § (251)
Brazilian Real 2 — — 2
Canadian Dollar — (337) (2) (339)
Swiss Franc 11 — 60 71
Danish Krone — — 23 23
Euro Currency 30 — 899 929
Pound Sterling — — 492 492
Japanese Yen — (193) 21 (172)
South Korean Won — — 35 35
Mexican Peso — (3) — (3)
Norwegian Krone — — 7 7
Swedish Krona — — 301 301
Singapore Dollar — — — —
Thailand Baht 1 — — 1
$ 44 $ (784) $ 1,836 $ 1,096
At June 30, 2021 the ARMB had no counterparty credit and counterparty concentration risk associated with its investment
derivative positions.
Securities Lending
Alaska Statute 37.10.071 authorizes the ARMB to lend assets, under an agreement and for a fee, against deposited collateral of
equivalent fair value. The ARMB lends marketable debt and equity securities through a contract with State Street Bank and
Trust (the Bank). International equity security loans were collateralized at not less than 105 percent of their fair value. All other
security loans were collateralized at not less than 102 percent of their fair value. Loaned securities and collateral were marked
to market daily and collateral was received or delivered the following day, as necessary, to maintain collateral levels. The
ARMB cannot pledge or sell collateral received until and unless a borrower defaults. At June 30, 2021, the ARMB has no credit
risk exposure to the borrowers because the amounts the ARMB owes to the borrowers exceeded the amounts the borrowers owe
the ARMB.
The fair value of securities on loan at June 30, 2021, was approximately $83.6 million. At June 30, 2021, cash collateral
received totaling $85.8 million is reported as a securities lending payable and the fair value of the re-invested cash collateral
totaling $85.8 million is reported as security lending collateral invested in the Schedule of Invested Assets.
Cash collateral was invested in a registered 2(a)-7 money market fund. Maturities of investments in the money market fund
generally did not match the maturities of the loaned securities because the lending agreements were terminable at will.
Securities under loan, cash collateral and cash collateral payable are recorded on the financial schedules at fair value. The Bank
and the ARMB received a fee from earnings on invested collateral. The Bank and the ARMB shared the fee paid by the
borrower.
There was limited credit risk associated with the lending transactions since the ARMB was indemnified by the Bank against any
loss resulting from counterparty failure or default on a loaned security or its related income distributions. The Bank further
indemnified the ARMB against loss due to borrower rebates in excess of earnings on cash collateral. Indemnifications were
subject to limitation relating to a force majeure event as outlined in the contract.
I-71
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
For the year ended June 30, 2021 there were no losses incurred as a result of securities lending transactions and there were no
significant violations of legal or contractual provisions nor failures by any borrowers to return loaned securities.
DEFERRED COMPENSATION PLAN
The State’s Internal Revenue Code Section 457 Deferred Compensation Plan (DCP) holds investments in several collective
investment funds, Pooled Investments Funds, and Stable Value Fund. At June 30, 2021, Deferred Compensation Plan
investments totaled $1.220 billion.
Each participant designates how their contribution is to be allocated among the investment options. Each participant’s account
is credited with the participant’s contributions, adjusted for the appreciation or depreciation in unit value for the investment
funds, and reduced for administrative fees.
The carrying values of participant-directed investments at June 30, 2021 are as follows (in thousands):
FY 2021
S&P 500 Stock Index Fund $ 270,931
Stable Value Fund 206,109
T. Rowe U.S. Small-Cap Trust 155,398
Alaska Long-Term Balanced Trust 92,255
Passive U.S. Bond Index Fund 80,473
International Equity Fund 59,797
Environmental, Social, and Governance Fund 55,663
Russell 3000 Index Fund 51,363
Alaska Balanced Trust 44,250
Alaska Target Date Retirement 2025 Trust 32,318
Alaska Target Date Retirement 2020 Trust 26,016
State Street Institutional Treasury Money Market Fund 20,818
World Equity Ex-U.S. Index Fund 20,186
Alaska Target Date Retirement 2030 Trust 19,093
Blackrock Strategic Completion Fund 15,810
Alaska Target Date Retirement 2035 Trust 13,474
Alaska Target Date Retirement 2040 Trust 13,411
Alaska Target Date Retirement 2045 Trust 10,128
Alaska Target Date Retirement 2015 Trust 9,958
Alaska Target Date Retirement 2050 Trust 7,953
Alaska Target Date Retirement 2055 Trust 6,370
Alaska Target Date Retirement 2010 Trust 3,334
Mass Mutual Equity Fund 2,626
Alaska Target Date Retirement 2060 Trust 1,462
Alaska Target Date Retirement 2065 Trust 515
Mass Mutual Bond Fund 17
$ 1,219,728
Additional investment information is disclosed in the financial statements issued by the Department of Administration, Division
of Retirement and Benefits. These financial statements are available through the Department of Administration, Division of
Retirement and Benefits, P.O. Box 110203, Juneau, AK 99811-0203 or at http://doa.alaska.gov/drb/.
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Risk and Uncertainty
DCP invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, market,
and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that
changes in the values of investment securities will occur in the near term and that such changes could materially affect
participants’ account balances and the amounts reported in the statement of fiduciary net position.
DCP may invest in pooled separate accounts that include securities with contractual cash flows, which may include asset-
backed securities, collateralized mortgage obligations, and commercial mortgage-backed securities. The value, liquidity, and
related income of these securities are sensitive to changes in economic conditions, including real estate value, delinquencies or
defaults, or both, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates.
SUPPLEMENTAL BENEFITS SYSTEM
The State’s Supplemental Benefits System (SBS) holds investments in several collective investment funds, a Stable Value Fund
and the Pooled Investment Funds. At June 30, 2021, SBS investments totaled $5.064 billion.
Each participant designates how their contribution is to be allocated among the investment options. Each participant’s account
is credited with the participant’s contributions, adjusted for the appreciation or depreciation in unit value for the investment
funds, and reduced for administrative fees.
The carrying values of participant-directed investments at June 30, 2021 are as follows (in thousands):
FY 2021
Alaska Balanced Trust $ 1,217,645
Alaska Long-term Balanced Trust 771,486
S&P 500 Stock Index Fund 525,484
Stable Value Fund 491,868
T. Rowe Price U.S. Small Cap Trust 284,471
Passive U.S. Bond Index Fund 190,149
Environmental, Social, and Governance Fund 170,464
International Equity Fund 150,615
Russell 3000 Index Fund 136,280
Alaska Target Date Retirement 2055 Trust 126,305
Alaska Target Date Retirement 2050 Trust 124,902
Alaska Target Date Retirement 2025 Trust 115,257
Alaska Target Date Retirement 2045 Trust 111,642
Alaska Target Date Retirement 2035 Trust 97,531
Alaska Target Date Retirement 2030 Trust 96,586
Alaska Target Date Retirement 2040 Trust 94,296
Alaska Target Date Retirement 2020 Trust 93,312
Alaska Target Date Retirement 2015 Trust 83,149
State Street Institutional Treasury Money Market Fund 67,593
World Equity Ex-U.S. Index Fund 58,739
Blackrock Strategic Completion Fund 36,405
Alaska Target Date Retirement 2010 Trust 10,061
Alaska Target Date Retirement 2060 Trust 7,262
Alaska Target Date Retirement 2065 Trust 2,876
$ 5,064,378
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Additional investment information is disclosed in the financial statements issued by the Department of Administration, Division
of Retirement and Benefits. These financial statements are available through the Department of Administration, Division of
Retirement and Benefits, P.O. Box 110203, Juneau, AK 99811-0203 or at http://doa.alaska.gov/drb/.
Risk and Uncertainty
SBS invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, market,
and credit risks. Due to the level of risk associated with certain investment securities it is at least reasonably possible that
changes in the values of investment securities will occur in the near term and that such changes could materially affect
participant’s account balances and the amounts reported in the statement of fiduciary net position. SBS may invest in pooled
separate accounts that include securities with contractual cash flows, which may include asset-backed securities, collateralized
mortgage obligations, and commercial mortgage-backed securities. The value, liquidity, and related income of these securities
are sensitive to changes in economic conditions, including real estate value, delinquencies or defaults, or both, and may be
adversely affected by shifts in the market’s perception of the issuers and changes in interest rates.
C. DEPOSITS AND INVESTMENTS MAINTAINED BY COMPONENT UNITS WHOSE ACCOUNTS ARE
OUTSIDE OF THE STATE TREASURY
There are many component units of the State that maintain their accounts outside of the State treasury. However, the
overwhelming majority of the activity is within the Alaska Permanent Fund Corporation (APFC). Information on deposits and
investments maintained by the other component units are available within their separately issued audit reports.
ALASKA PERMANENT FUND CORPORATION
APFC is managed by a six member board of trustees (the “Trustees” or “Board’”) consisting of the Department of Revenue
Commissioner, one other head of a principal State department, and four governor-appointed public members with recognized
competence and experience in finance, investments, or other business management-related fields. The Alaska Permanent Fund
(the “Fund’’) assets are diversified across a wide variety of investments, in accordance with statutes, regulations, and APFC
investment policies.
Investments and Related Policies
Carrying value of investments
The Fund considers all of its ownership interests in securities and other assets to be investments because they are held for the
purpose of income or profit and have a present service capacity based solely on their ability to generate cash or be sold to
generate cash. Investments are reported at fair value in the financial statements. Investments without a readily determinable fair
value are generally reported by using the NAV per share (or its equivalent) of the investment. Securities transactions are
recorded on the trade date that securities are purchased or sold. Unrealized gains and losses are reported as components of net
change in fund balance.
State investment regulations
In accordance with Alaska Statute 37.13.120(a), the Trustees have adopted regulations designating the types of eligible
investments for Fund assets. The regulations follow the prudent investor rule, requiring the exercise of judgment and care under
the circumstances then prevailing that an institutional investor of ordinary prudence, discretion, and intelligence exercises in the
designation and management of large investments entrusted to it, not in regard to speculation, but in regard to the permanent
disposition of funds, considering preservation of the purchasing power of the Fund over time while maximizing the expected
total return from both income and the appreciation of capital.
Investment policy - Asset allocation
The Trustees have established a long-term goal of achieving a five percent real rate of return over time on the Fund’s
investment portfolio. To help achieve this goal, the Trustees allocate the Fund’s investments among various asset classes.
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
At June 30, 2021, the APFC’s strategic asset allocation targets were as follows:
Asset Class Asset Class Target
Public Equities 39%
Fixed Income 21%
Private Equity and Special Opportunities 15%
Real Estate 7%
Infrastructure and Private Income 9%
Absolute Return 6%
Risky Parity 1%
Cash 2%
To allow for market fluctuations and to minimize transaction costs, the Trustees have adopted ranges that permit percentage
deviations from the strategic asset allocation targets in accordance with specified reporting requirements and other procedures.
Generally, for each asset class, the APFC’s Chief Investment Officer has discretionary authority to permit target deviations
within one specified range (referred to as the “green zone” in the investment policy), the APFC’s Executive Director can
approve target deviations for up to 90 days within a broader range (the “yellow zone’’), and the Board can approve operating for
longer than 30 days within a third range (the “red zone’). For example, the target dollar allocation for the public equities class is
39 percent, with the green zone range set at plus or minus five percent, the yellow zone range set at zero to five percent beyond
the green zone, and red zone range set at greater than five percent beyond the green zone. In a similar manner, the APFC
investment policy also requires the APFC to monitor relative risk (the expected investment portfolio’s risk and return relative to
the risk benchmark using standard industry risk measures), active budget risk (risk due to active management decisions made
by managers), and limits on private investments and future commitments.
Interest Rate Risk
The APFC manages the Fund’s exposure to interest rate risk in part through tracking error guidelines set forth in the APFC’s
investment policy. Duration is an indicator of a portfolio’s market sensitivity to changes in interest rates. In general, the major
factors affecting duration are, in order of importance: maturity, prepayment frequency, level of market interest rates, size of
coupon, and frequency of coupon payments. Rising interest rates generally translate into the value of fixed income investments
declining, while falling interest rates are generally associated with increasing value. Effective duration attempts to account for
the price sensitivity of a bond to changes in prevailing interest rates, including the effect of embedded options. As an example,
for a bond portfolio with a duration of 5 years, a one percentage point parallel decline in interest rates would result in an
approximate price increase on that bond portfolio of five percent.
At June 30, 2021, the Fund held fixed income investments with floating, variable, and step interest rates, valued at
$758,105 thousand. These fixed income investments were both domestic and non-domestic, and had current annual interest
rates ranging from zero to 15.5 percent.
Credit Risk
The APFC requires that its investment grade fixed income managers, both internal and external, invest in domestic and
non-domestic bonds that have an explicit or implied investment grade rating. Should the required ratings on an existing fixed
income security fall below the minimum standards, the security must be sold within seven months. Certain high yield
investment managers are allowed to invest a specified amount of funds in bonds rated below investment grade.
Custodial Credit Risk
The APFC generally requires that all investment securities at custodian banks be held in the name of the Fund or the APFC (on
behalf of the Fund). For the Fund’s non-domestic securities held by most sub-custodians, the APFC’s primary custodian
provides contractual indemnities against sub-custodial credit risk. Excess cash in custodial accounts is swept daily to a money
market fund. Late deposits of cash which miss the money market sweep deadline are deposited to an interest bearing account at
the custodian.
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STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Concentration of Credit Risk
The APFC manages the Fund’s concentration of credit risk by following its strategic asset allocation policy, diversifying
investments among managers with varying investment styles and mandates, and monitoring tracking error. Tracking error is a
measure of how closely a portfolio follows the index to which it is benchmarked. The APFC’s policy for mitigating this risk of
loss for fixed income and equity investments is to ensure compliance with APFC investment policy and investment manager
contracts. There is no single-issuer exposure within the APFC portfolio that comprises five percent or more of the overall
portfolio. Therefore, no concentration of credit risk is reported in the notes to the financial statements.
Foreign Currency Risk
Foreign currency risk is managed through foreign currency forward contracts, and by diversifying assets into various countries
and currencies.
Forward Exchange Contracts
Fund managers enter into a variety of forward currency contracts in their trading activities and management of foreign currency
exchange rate risk exposure. These contracts are typically intended to neutralize the effect of foreign currency fluctuations, and
the contract amounts do not appear on the balance sheet. Realized gains and losses are included in the net increase/decrease in
the fair value of investments at the time the contract is settled and determined based on the difference between the contract rate
and the market rate at the time of maturity or closing. Unrealized gains and losses are also included in the net increase/decrease
in the fair value of investments, and are calculated based on the difference between the contract rate and a forward market rate
determined as of the balance sheet date.
A portion of the investment in forward exchange contracts is intended to manage, rather than neutralize, foreign currency
fluctuations. Certain managers seek to control the effect of fluctuations in foreign exchange rates within their overall portfolio
strategy rather than on a security by security basis. They attempt to optimize their foreign currency exposure in a market rather
than accept the natural geographical exposure to the market’s currency.
Futures
Certain equity and fixed income managers for the Fund are permitted to buy and sell equity and interest rate index futures. The
gross contract and fair value of futures do not appear in the balance sheets. The net unrealized gain or loss on open futures
trades is included in investments on the balance sheets, based on the difference between the future’s purchase price and the
current value of such index futures. Realized gains and losses on futures are included in the net increase in the fair value of
investments at the time the futures contract expires. The net change in unrealized gains and losses is included in the net increase
in the fair value of investments.
Cash and Temporary Investments
The amounts shown on the balance sheets as cash and temporary investments include cash on deposit at the custodian bank,
cash swept to overnight investment funds, cash collateral held at derivatives brokers, U.S. Treasury bills, commercial paper,
and the net fair value of foreign exchange forward contracts. The APFC’s asset allocation includes approximately two percent
in cash. APFC’s investment policy specifies that funds dedicated to this portion of the asset allocation will be invested in
money market funds or fixed income securities with weighted-average maturities of no greater than 24 months.
Cash and temporary investments, which include the market values of foreign currency (FX) and FX forward exchange
contracts, are summarized as follows at June 30, 2021 (in thousands):
Cash $ 202,593
Pooled Funds 1,322,111
Commercial Paper 563,191
USS. Treasury Bills 3,715,823
FX Forward Exchange Contracts 24,695
Total Cash and Temporary Investments $ 5,828,413
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STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Uninvested cash was held at the custodian, sub-custodian, or derivatives broker banks, primarily in interest-bearing accounts.
All pooled funds were invested in a money market fund. U.S. Treasury bills are explicitly guaranteed by the U.S. government.
Marketable Debt Securities
Marketable debt securities at June 30, 2021, are summarized as follows (in thousands), categorized by debt instrument type and
by country of registration:
Unrealized
Cost Fair Value Gains/(Losses)
U.S. Treasury and Government Notes/Bonds $ 2,389,975 §$ 2,396,855 $ 6,880
Mortgage-backed Securities 2,535,497 2,543,881 8,384
U.S. Corporate Bonds 6,259,931 6,700,979 441,048
Commercial Mortgage/Asset-backed Securities 674,984 681,384 6,400
Non-U.S. Treasury and Government Bonds 2,358,445 2,333,976 (24,469)
Non-U.S. Corporate Bonds 998,114 1,073,502 75,388
Commingled and exchange traded funds 712,403 707,792 (4,611)
Total Marketable Debt Securities $ 15,929,349 $ 16,438,369 $ 509,020
Marketable Debt Credit Ratings
To manage credit risk for marketable debt securities, the APFC monitors fair values of all securities daily and routinely reviews
its investment holdings’ credit ratings. For accounts with an investment grade mandate, issues falling below the minimum
standards are required to be sold within seven months of the downgrade date. Minimum standards are a Standard & Poor's
Corporation rating BBB or better, or Moody's Investors Service, Inc. rating of Baa or better, or a comparable rating by another
Nationally Recognized Statistical Rating Organizations (NRSRO) or by a recognized rating service in the jurisdiction of the
issuer. Managers with high yield mandates are allowed to hold positions in assets with below investment grade ratings (high
yield bonds) based on the terms of their contracts. For purposes of this note, if credit ratings differ among the NRSROs used,
the rating with the highest degree of risk (the lowest rating) is reported.
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STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
At June 30, 2021, the Fund’s credit ratings for its marketable debt securities are as follows (in thousands):
Total Percent of
NRSRO Quality Rating Domestic Non-Domestic Fair Value Holdings
AAA $ 466,392 $ 276,968 $ 743,360 4.52%
AA 510,927 354,475 865,402 5.26
A 1,405,528 565,066 1,970,594 11.99
BBB 3,260,232 974,917 4,235,149 25.76
BB 940,040 360,982 1,301,022 7.91
B 612,114 245,705 857,819 5.22
CCC 132,794 78,399 211,193 1.28
CC 464 — 464 0.00
C — — — 0.00
D 108 40,766 40,874 0.25
Total Fair Value of Rated Debt
Securities 7,328,599 2,897,278 10,225,877 62.21
Commingled and exchange traded funds 707,792 1 707,793 4.31
Not Rated 63,345 531,765 595,110 3.62
U.S. Government Explicitly Backed by
the U.S. Government (AA) 2,952,208 — 2,952,208 17.96
U.S. Government Implicitly Backed by
the U.S. Government (AA) 1,957,381 — 1,957,381 11.91
Total Fair Value Debt Securities $ 13,009,325 $ 3,429,044 $ 16,438,369 100.00 %
Marketable Debt Duration
To manage its interest rate risk on marketable debt securities, the APFC monitors fair values daily and routinely reviews
portfolio effective duration in comparison to established benchmarks. At June 30, 2021, the effective duration by investment
type, based on fair value, is as follows:
Percent of bond Duration
holdings (Years)
Domestic Bonds
Treasury and Government Notes/Bonds 18.43 % 7.21
Mortgage-backed Securities 19.55 4.58
Corporate Bonds 51.51 8.54
Commercial Mortgage and Asset-backed Securities 5.07 3.90
Commingled and Exchange Traded Funds 5.44 —
Total Domestic Bonds 100.00 % 6.82
Non-domestic Bonds
Treasury and Government Bonds 68.06 % 7.88
Corporate Bonds 31.31 7.10
Commercial Mortgage and Asset-backed Securities 0.63 9.12
Commingled and Exchange Traded Funds — 4.68
Total Non-domestic Bonds 100.00 % 7.64
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Preferred and Common Stock
Direct investments in preferred and common stock are held by the APFC’s custodian bank on behalf of the Fund. The Fund also
invests in commingled stock funds, which are held by the custodian bank of the fund manager on behalf of fund investors, and
equity index futures, which are held at the prime broker.
Preferred and common stocks and commingled stock funds at June 30, 2021 are summarized as follows (in thousands) which
include the net fair value of equity index futures of $9.1 million:
Unrealized Holding
Cost Fair Value Gains/(Losses)
Direct Investments
Domestic Stock $ 11,706,300 $ 16,522,154 $ 4,815,854
Non-domestic Stock 10,561,737 13,379,045 2,817,308
Commingled Funds 459,173 570,594 111,421
Total Preferred and Common Stock $ 22,727,210 $ 30,471,793 $ 7,744,583
Foreign Currency Exposure
Foreign currency risk is managed by the international investment managers in part through their decisions to enter into foreign
currency forward contracts. Foreign currency risk is also managed through the diversification of assets into various countries
and currencies.
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STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 4
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
At June 30, 2021, the Fund’s cash holdings, foreign currency forward contracts, non-domestic public and private equity, and
debt securities had exposure to foreign currency risk as follows (shown in U.S. dollar equivalent at fair value and based on the
currency in which the securities are held and traded) (in thousands):
Foreign
Exchange Equity,Private Total Foreign
Cash and Forward Debt, Real Estate, Currency
Foreign Currency Equivalents Contracts Infrastructure Marketable Debt Exposure
Australian Dollar $ 4,348 $ 36,263 $ 404,656 $ 51,645 $ 496,912
Brazil Real 4,219 (1,508) 187,154 44,513 234,378
Canadian Dollar 8,349 92,323 684,165 43,149 827,986
Chilean Peso 1,744 (17,549) 8,336 19,876 12,407
Chinese Yuan Renminbi 7,638 (108,394) 284,036 149,161 332,441
Columbian Peso 2,243 (22,177) 1,275 38,744 20,085
Czech Koruna 475 (972) 1,641 17,861 19,005
Danish Krone 6,177 (2,748) 188,570 — 191,999
Dominican Republic Peso —_— —_— — 391 391
Egyptian Pound 4,483 (4,231) 224 5,657 6,133
Euro Currency 60,826 (335,177) 3,661,842 415,845 3,803,336
Hong Kong Dollar 9,267 (15,843) 1,322,895 — 1,316,319
Hungarian Forint 240 5,553 6,141 6,789 18,723
Indian Rupee 2,036 7,275 336,572 28 345,911
Indonesian Rupiah 2,427 (28,831) 46,058 78,989 98,643
Israeli Shekel (6,067) 8,979 44,148 —_— 47,060
Japanese Yen 9,562 (335,990) 1,540,396 365,317 1,579,285
Kuwaiti Dinar 26 — 1,124 — 1,150
Malaysian Ringgit 1,201 (17,219) 23,759 66,384 74,125
Mexican Peso (4,816) (15,307) 61,690 73,579 115,146
New Taiwan Dollar 4,790 (1,745) 499,561 — 502,606
New Zealand Dollar 4,079 (145,740) 14,656 8,923 (118,082)
Norwegian Krone 1,191 (180,021) 69,628 11,508 (97,694)
Pakistan Rupee 108 —_— 538 —_— 646
Peruvian Sol 402 (7,978) —_— 13,388 5,812
Phillipines Peso 261 1,572 10,122 — 11,955
Polish Zloty 868 24,118 53,507 20,681 99,174
Pound Sterling 1,548 (215,089) 1,095,451 100,570 982,480
Qatari Riyal 3 79 9,207 — 9,289
Romanian Leu 124 7,431 — 2,706 10,261
Russian Ruble 4,728 (25,476) 51,931 66,384 97,567
Saudi Arabian Riyal 605 — 83,798 — 84,403
Serbian Dinar 372 _— —_ —_— 372
Singapore Dollar 1,159 1,484 52,404 — 55,047
South African Rand 3,443 (34,284) 92,688 48,288 110,135
South Korean Won 5,611 (36,206) 565,995 48,136 583,536
Swedish Krona 5,066 121,397 283,266 —_— 409,729
Swiss Franc 1,488 (77,441) 410,733 —_— 334,780
Thailand Baht 367 2,861 33,752 22,710 59,690
Turkish Lira 540 3,751 22,311 4,031 30,633
UAE Dirham 57 _— TAT — 7,228
Ukraine Hryvana — — — 61 61
Uruguayan Peso —_ —_ —_ 658 658
Total foreign currency exposure $ 151,188 $ (1,316,840) $ 12,161,401 $ 1,725,972 $ 12,721,721
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STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Cash amounts in the schedule include receivables, payables, and cash balances in each related currency. If payables exceed
receivables and cash balances in a currency, then the total cash balance for that currency will appear as a negative value. The
remaining Fund investments are denominated in U.S. dollars and are not included in the schedule above.
Real Estate
The Fund holds a variety of real estate interests, including directly owned real estate, real estate investment trusts, multi-family
and industrial real estate operating companies, private real estate funds, and other entities in which the assets consist primarily
of real property. The Fund’s directly owned real estate is through ownership of interests in corporations, limited liability
companies, and partnerships that hold title to the real estate. External institutional real estate management firms administer the
Fund’s directly owned real estate investments. An internal real estate management program was initiated during FY 2021 and
two existing direct holdings were moved into this program. The Fund also holds a portfolio of real estate loans collateralized by
income-producing, institutional real estate in the United States; these are administered by an external institutional real estate
management firm.
The APFC periodically reviews real estate investments for other than temporary impairment. During FY 2021, it was
determined that one direct real estate holding was impaired because it was more likely than not that the Fund would not recover
the carrying cost over the remaining estimated holding period of the asset. In order to reflect the impairment in statutory net
income and fund balance classifications, $3.8 million of unrealized losses were realized through a write-down of cost to fair
value.
Real estate investments at June 30, 2021 are summarized as follows (in thousands):
Fair Unrealized Holding
Cost Value Gains (Losses)
Real Estate Investment Trusts $ 682,890 $ 944,695 $ 261,805
Real Estate Funds and Notes 987,201 1,043,254 56,053
American Homes 4 Rent II 115,866 145,832 29,966
Directly Owned Real Estate
Retail 794,974 1,347,873 552,899
Office 1,073,478 1,274,920 201,442
Hotel 59,422 65,947 6,525
Industrial 242,284 477,168 234,884
Multifamily 176,475 291,093 114,618
Development 71,926 71,945 19
Total Real Estate $ 4,204,516 $ 5,662,727 $ 1,458,211
Alternative Investments
Alternative investments include the Fund’s investments in absolute return and risk parity strategies, private equity,
infrastructure, and private credit. The APFC periodically reviews alternative investments for other than temporary impairment.
Absolute return strategies are investments in specialized funds that seek to deliver returns that are largely uncorrelated with
traditional market driven asset classes. The Fund invested in two absolute return limited partnerships in which the Fund was the
only limited partner (“fund-of-one”); both are currently in liquidation. The Fund also holds direct hedge fund investments, in
which the Fund is one of many limited partners. Risk parity strategies also seek to deliver returns that are largely uncorrelated
with global public markets, however they do so through allocation of risk rather than allocation of capital. External investment
management services for both strategies are provided by institutional investment managers who have acknowledged their status
as fiduciaries to the Fund. Because of the off-exchange and private nature of many absolute return strategies, investments may
have no readily determinable fair value, and the estimated fair values could differ significantly from values that would be
obtained in a market transaction for the assets. Risk parity strategy investments are generally more liquid but may also not have
readily determinable fair value depending on the underlying investments of a given fund. For both strategies, each manager
provides the Fund with fair value estimates of partnership interests and undergoes an annual independent audit.
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STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The Fund holds private equity through investments in limited liability companies and limited partnerships that typically invest
in unlisted, illiquid common and preferred stock and, to a lesser degree, subordinated and senior debt of companies that are in
most instances privately held. The APFC has hired external advisors to assist in the selection of private equity holdings
diversified by geography and strategy. Private equity is funded slowly over time as opportunities are identified by APFC staff ,
the external advisors and the underlying fund managers. The underlying private equity funds provide the Fund with fair value
estimates of the investments utilizing the most current information available. In addition, the external advisors review the fair
value estimates and the underlying private equity funds undergo annual independent audits. Private equity investments by their
nature generally have no readily determinable fair value, and the estimated fair values may differ significantly from values that
would be obtained in a market transaction for the assets. During FY 2021, it was determined that twelve private equity funds
were impaired because it was more likely than not that the Fund would not recover their carrying cost over the remaining
estimated holding period of the assets. In order to reflect the impairment in statutory net income and fund balance
classifications, $49.8 million of unrealized losses were realized through a write-down of cost to fair value. These impairments
have no impact on the carrying value of investments or on the net increase in the fair value of private equity investments.
Infrastructure investments involve ownership or operating agreements in essential long-term service assets with high barriers to
entry. Examples of infrastructure assets include: toll roads; airports; deep water ports; communication towers; and energy
generation, storage and transmission facilities. Investments in this asset class are expected to have inflation protection attributes
and exhibit low correlations with other major asset classes in the Fund’s investment strategy. The Fund holds infrastructure
investments through commingled funds organized as limited partnerships whose investment managers provide periodic fair
value estimates, as well as through securities listed on public exchanges. The limited partnerships undergo annual independent
audits. Infrastructure investments by their nature generally have no readily determinable fair value, and the estimated fair values
may differ significantly from values that would be obtained in a market transaction for the assets. During FY 2021 it was
determined that no infrastructure funds were impaired.
The Fund invests in private credit through limited partnerships that invest either directly in distressed or mezzanine debt, or in
commingled limited liability funds with a distressed debt or credit opportunity focus. These investments are funded over time,
as opportunities arise. The limited partnerships and funds undergo annual independent audits. Private credit investments by
their nature generally have no readily determinable fair value, and the estimated fair values may differ significantly from values
that would be obtained in a market transaction for the assets.
During FY 2021, it was determined that three private credit funds were impaired because it was more likely than not that the
Fund would not recover the carrying cost over the remaining estimated holding period of the assets. In order to reflect the
impairment in statutory net income and fund balance classifications, $11.1 million of unrealized losses were realized through a
write-down of cost to fair value.
Alternative investments at June 30, 2021 are summarized as follows (in thousands):
Fair Unrealized Holding
Cost Value Gains
Absolute Return $ 4,180,792 $ 5,170,653 $ 989,861
Private Equity 8,381,923 15,294,438 6,912,515
Infrastructure 2,004,046 2,636,769 632,723
Private Credit 1,914,808 2,257,082 342,274
Total Alternative Investments $ 16,481,569 $ 25,358,942 $ 8,877,373
Securities Lending
State regulations at 15 AAC 137.510 and APFC investment policy authorize the APFC to enter into securities lending
transactions on behalf of the Fund. Through a contract with the Bank of New York Mellon (the Bank), the Fund lends
marketable debt and equity securities to borrowers who are banks and broker-dealers. The loans are collateralized with cash or
certain marketable securities. Under APFC’s contract with the Bank, the Bank must mark the loaned securities and collateral to
the market daily, and the loan agreements require the borrowers to maintain the collateral at not less than 102 percent of the fair
value of the loaned securities for domestic securities (and non-domestic loaned securities denominated in U.S. dollars) and not
less than 105 percent of the fair value for other non-domestic loaned securities. The APFC can sell securities that are on loan. If
a borrower fails to return the loaned securities (borrower default), the Bank can use cash collateral (and the proceeds on the sale
of any non-cash collateral) to purchase replacement securities. Generally, the APFC is protected from credit risk associated
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STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
with the lending transactions through indemnification by the Bank against losses resulting from counterparty failure, the
reinvestment of cash collateral, default on collateral investments, or a borrower’s failure to return loaned securities.
Cash collateral received for loaned securities is reported on the Fund’s balance sheets and invested by the Bank on behalf of the
Fund. As of June 30, 2021, such investments were in overnight repurchase agreements that had a weighted-average-maturity of
one day. The average term of the loans was also one day. At June 30, 2021 the value of securities on loan is as follows (in
thousands):
Fair Value of Securities on Loan, Secured by Cash Collateral $ 4,249,447
Cash Collateral 4,348,802
Fair Value of Securities on Loan, Secured by Non-cash Collateral 7,445,378
Non-cash Collateral 8,230,657
The Fund receives 80 percent of earnings derived from securities lending transactions, and the Bank retains 20 percent. During
the year ended June 30, 2021, the Fund incurred no losses from securities lending transactions. The Fund received income of
$23.7 million from securities lending for the year ended June 30, 2021, which is recorded in real estate and other income on the
statements of revenues, expenditures and changes in fund balances.
Fair Value Measurement
Various inputs are used in valuing the investments held by the Fund. GAAP establishes a hierarchy of inputs used to value
investments emphasizing observable inputs and minimizing unobservable inputs. These input levels are summarized as follows:
Level | - Quoted prices for identical assets in an active market
Level 2 - Inputs, other than quoted prices, that are observable for the asset, either directly or indirectly
Level 3 - Unobservable inputs. Unobservable inputs should only be used to the extent that observable inputs are not available
for a particular asset.
Investments measured using NAV per share as a practical expedient to fair value are not categorized into input levels. The
input levels used to measure the Fund’s investments and derivative instruments at June 30, 2021 are summarized as follows (in
thousands):
Measured Using Input Levels Measured Using
Level | Level 2 Level 3 NAV Total
Marketable Debt Securities $ 3,023,565 $ 13,331,791 §$ 83,013 $ — $ 16,438,369
Preferred and Common Stock 30,189,384 27 40 282,342 30,471,793
Real Estate 944,679 — — 4,718,048 5,662,727
Absolute Return — — — 5,170,653 5,170,653
Private credit — — — 2,257,082 2,257,082
Private equity 162,245 — — 15,132,193 15,294,438
Infrastructure 227,887 — — 2,408,882 2,636,769
Total Investments $ 34,547,760 $ 13,331,818 §$ 83,053 $ 29,969,200 $ 77,931,831
Marketable debt securities and preferred and common stock classified as level 1 are valued using prices quoted in active
markets for those securities. Debt securities classified as level 2 are valued using matrix pricing. Pricing is sourced from various
sources. Marketable debt securities valued at level 3 are term loans.
Publicly traded real estate investment trusts are valued using prices quoted in active markets and are reported as level 1.
Directly owned real estate through ownership of interests in corporations, limited liability companies and partnerships that hold
title to real estate are reported at the NAV of the capital account balance nearest to the balance sheet date, adjusted for
subsequent contributions and distributions. The underlying directly owned real estate investments are subject to annual
appraisals and audits. American Homes 4 Rent II is reported at the NAV of the capital account balance nearest to the balance
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STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
sheet date, adjusted for subsequent contributions and distributions, and does not allow redemptions until the company is wound-
up and dissolved.
Absolute return investments are reported at NAV of the capital account balance nearest to the balance sheet date, adjusted for
subsequent contributions and distributions. Absolute return investments undergo annual independent financial statement audits.
The redemption notice period is from 1-91 days and the frequency of redemption is daily to quarterly.
Private equity investments are reported at NAV of the capital account balance nearest to the balance sheet date, adjusted for
subsequent contributions and distributions. Private equity investments undergo annual independent financial statement audits.
Redemptions are not allowed and the usual life of these investments is 10-12 years.
Publicly traded infrastructure investments are classified as level 1 and are valued using prices quoted in active markets for those
securities. The majority of infrastructure investments are reported at the NAV of the capital account balance nearest to the
balance sheet date, adjusted for subsequent contributions and distributions. Infrastructure investments undergo annual
independent financial statement audits. Redemptions are not allowed and the usual life of these investments is 5-7 years.
Private credit investments are reported at NAV of the capital account balance nearest to the balance sheet date, adjusted for
subsequent contributions and distributions. Private credit investments undergo annual independent financial statement audits.
Redemptions are not allowed and the usual life of these investments in 5-7 years.
Investment Income by Source
Investment income during the year ended June 30, 2021, is summarized as follows (in thousands):
Interest
Marketable Debt Securities $ 432,314
Short-term and Other 4,167
Total Interest $ 436,481
Dividends $ 558,073
Real Estate and Other Income
Directly Owned Real Estate Net Rental Income $ 75,271
Real Estate Investment Trust Dividends 22,613
Real Estate Fund and Notes, Net of Fees 8,110
Private Credit Interest Income, Net of Fees 80,094
Infrastructure Interest and Dividend Income, Net of Fees 16,021
Private Equity Dividend Income, Net of Fees 302,533
Class Action Litigation Income 1,160
Loaned Securities, Commission Recapture, and Other Income 24,375
Total Real Estate and Other Income $ 530,177
Foreign Exchange Contracts, Futures and Off-Balance Sheet Risk
Certain APFC external investment managers enter into foreign currency forward exchange contracts (FX forward contracts) to
buy and sell specified amounts of foreign currencies for the Fund at specified rates and future dates for the purpose of managing
or optimizing foreign currency exposure. The maturity periods for outstanding contracts at June 30, 2021 ranged between one
and 127 days.
The counterparties to the FX forward contracts consisted of a diversified group of financial institutions. The Fund is exposed to
credit risk to the extent of non-performance by these counterparties. The Fund’s market risk as of June 30, 2021 is limited to the
difference between contractual rates and forward market rates determined at the end of the fiscal year.
I - 84
STATE OF ALASKA NOTE 4
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Activity and balances related to FX forward contracts for FY 2021 are summarized as follows (in thousands):
Balances at June 30, 2021:
Face Value of FX Forward Contracts $ 5,895,569
Net Unrealized Holding Gains (losses) on FX Forward Contracts 24,695
Fair Value of FX Forward Contracts $ 5,920,264
Activity for Fiscal Year Ending June 30, 2021
Change in Unrealized Holding Gains $ 19,018
Realized Gains (losses) (87,693)
Net Increase (decrease) in Fair Value of FX Forward Contracts $ (68,675)
Certain APFC equity investment managers are permitted to trade in equity index futures for the Fund’s account, and the internal
fixed income management team trades U.S. Treasury index futures. Equity index futures are traded in both domestic and
non-domestic markets based on an underlying stock exchange value. Equity and fixed income index futures are settled with
cash for the net difference between the trade price and the settle price.
Activity and balances related to futures in equity accounts for FY 2021 are summarized as follows (in thousands):
Balances at June 30, 2021:
Face Value of Equity Index Futures $ 94,252
Net Unrealized Holding Gains on Futures 9,131
Fair Value of Equity Index Futures $ 103,383
Activity for Fiscal Year Ending June 30, 2021
Change in Unrealized Holding Gains $ 6,553
Realized Gains 41,577
Net Increase in Fair Value of Equity Index Futures $ 48,130
Activity and balances related to futures in fixed income accounts for FY 2021 is summarized as follows (in thousands):
Balances at June 30, 2021:
Face Value of U.S. Treasury Index Futures $ 106,178
Net Unrealized Holding Losses on Futures (5,717)
Fair Value of U.S. Treasury Index Futures $ 100,461
Activity for Fiscal Year Ending June 30, 2021
Change in Unrealized Holding Losses $ (5,015)
Realized Gains 14,405
Net Increase in Fair Value of U.S. Treasury Index Futures $ 9,390
The face value of FX forward contracts and futures shown in these schedules is not required to be included in the Fund’s
balance sheets. All other activity amounts shown above are included in the Fund’s financial statements in the Foreign currency
forward exchange contracts and futures line on the Statement of Revenues, Expenditures and Changes in Fund Balances.
NOTE 5 — CAPITAL ASSETS
PRIMARY GOVERNMENT
Capital assets, which include property, plant, equipment, and infrastructure items (highways, bridges, and similar items) are
reported in the applicable governmental and business-type activity columns of the government-wide financial statements.
Intangibles are reported separately in the notes to the financial statements; however, on the face of the financial statements,
intangibles are grouped with the asset class they most resemble. Easements and right of way are grouped with land, and
software is grouped with equipment.
I-85
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 5
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Capitalization policy and useful lives for capital assets are as follows:
Governmental Activities
Business-type Activities
Capital Asset Capitalize at Value Useful Life Capitalize At Value —- Useful Life
Land All Indefinite All Indefinite
Infrastructure $ 1,000,000 15-75 $ 100,000 5-40
Buildings 1,000,000 50 100,000 10-40
Intangible Assets and Computer Software 500,000 3-7
Building Improvements 100,000 15 All 5-40
Machinery/Equipment 100,000 3-60 5,000 5-10
Construction in Progress
When a proprietary or fiduciary fund has its own capitalization policy, capital assets will be capitalized under that policy rather
than in accordance with the above table.
State of Alaska art, library reserve, and museum collections that are considered inexhaustible, in that their value does not
diminish over time, are not capitalized. These assets are held for public exhibition, education, or research rather than financial
gain, and are protected, kept unencumbered, cared for, and preserved. Proceeds from the sale of collection items are used to
acquire other items for collections.
Capital asset activities for the fiscal year ended June 30, 2021, are as follows (in millions):
Beginning Ending
Governmental Activities Balance Additions Deletions Balance
Capital assets not being depreciated:
Intangible - Easements and Right-of-Way $ 688 §$ 10 $ — §$ 698
Land 380 3 — 383
Construction in progress 1,580 758 (846) 1,492
Total capital assets not being depreciated 2,648 771 (846) 2,573
Capital assets being depreciated:
Buildings 2,561 29 (4) 2,586
Intangible - Software 318 1 (1) 318
Equipment 1,058 280 (96) 1,242
Infrastructure 9,939 889 (63) 10,765
Total capital assets being depreciated 13,876 1,199 (164) 14,911
Less accumulated depreciation for:
Buildings (1,026) (78) 5 (1,099)
Intangible - Software (226) (30) — (256)
Equipment (640) (74) 34 (680)
Infrastructure (6,697) (439) 21 (7,115)
Total accumulated depreciation (8,589) (621) 60 (9,150)
Total capital assets being depreciated, net 5,287 578 (104) 5,761
Capital assets, net $ 7,935 $ 1,349 $ (950) $ 8,334
Internal service funds predominantly serve the governmental funds. Accordingly, capital assets for internal service funds are
included as part of the above schedule for governmental activities.
I - 86
STATE OF ALASKA NOTE 5
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Beginning Ending
Business-type Activities Balance Additions Deletions Balance
Capital assets not being depreciated:
Land $ 31 $ — §$ — §$ 31
Construction in Progress 14 34 (25) 23
Total capital assets not being depreciated 45 34 (25) 54
Capital assets being depreciated:
Buildings 1,136 5 (1) 1,140
Equipment 139 12 — 151
Infrastructure 1,105 9 — 1,114
Total capital assets being depreciated 2,380 26 (1) 2,405
Less accumulated depreciation for:
Buildings (536) (33) — (569)
Equipment (107) (7) — (114)
Infrastructure (598) (37) — (635)
Total accumulated depreciation (1,241) (77) — (1,318)
Total capital assets being depreciated, net 1,139 (51) (1) 1,087
Capital assets, net $ 1,184 § (17) $ (26) $ 1,141
The following relates to the land owned by the State:
The total state entitlement amounts to approximately 105.8 million acres, 102.6 million of which was received through the
Statehood Act. In accordance with the Alaska Statehood Act section 6(g), Alaska Native Claims Settlement Act, and the Alaska
National Interest Lands Conservation Act, section 906(c), 100.6 million acres have been patented or “tentatively approved.”
The State disposes of various land parcels through several programs. However, the State generally retains the subsurface rights
of the land upon disposal.
Depreciation expense was charged to the functions of the primary government as follows (in millions):
Governmental Activities: Amount
General Government $ 37
Education 17
Health and Human Services 25
Law and Justice 6
Natural Resources
Development
Public Protection 15
Transportation 486
Depreciation on capital assets held by the state's internal service funds is 30
charged to the various functions based on their use of the assets.
Total Depreciation Expense - Governmental Activities $ 621
Business-type Activities:
Enterprise $ 77
I - 87
STATE OF ALASKA NOTE 5
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
DISCRETELY PRESENTED COMPONENT UNITS
The estimated useful lives of capital assets range from 4 to 50 years. Intangibles are reported separately in the notes to the
financial statements; however, on the face of the financial statements, all intangibles are grouped with the asset class they most
resemble. Software and Right of Use are grouped with infrastructure. Easements and Right-of-Way are grouped with
Construction in Progress. The following table summarizes net capital assets reported by the discretely presented component
units at June 30, 2021 (in millions):
Beginning Ending
Balance Additions Deletions Balance
Capital assets not being depreciated:
Intangible - Easements and Right-of-Way $ 19 §$ 14 $ — §$ 33
Land 119 2 — 121
Museum Collections 7 — — 7
Construction in Progress 669 131 (498) 302
Total capital assets not being depreciated 814 147 (498) 463
Capital assets being depreciated/depleted:
Intangible - Software 2 — — 2
Intangible - Right of Use 21 — — 21
Land 4 — — 4
Library Books 56 — (2) 54
Buildings 2,499 303 — 2,802
Equipment 908 98 (6) 1,000
Infrastructure 1,857 113 — 1,970
Total capital assets being depreciated/depleted 5,347 514 (8) 5,853
Less accumulated depreciation/depletion for:
Intangible - Software (2) — — (2)
Intangible - Right of Use (10) (1) — (11)
Land (1) — — (1)
Library Books (49) (1) 2 (48)
Buildings (1,317) (84) — (1,401)
Equipment (597) (43) 4 (636)
Infrastructure (977) (64) — (1,041)
Total accumulated depreciation/depletion (2,953) (193) 6 (3,140)
Total capital assets being depreciated/depleted, net 2,394 321 (2) 2,713
Capital assets, net $ 3,208 $ 468 $ (500) $ 3,176
University of Alaska art and museum collections, which are capitalized but not depreciated, are held for public exhibition,
education, or research rather than financial gain, and are protected, kept unencumbered, cared for, and preserved. Proceeds from
the sale of collection items are used to acquire other items for collections.
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
NOTE 6 —- SHORT-TERM DEBT, BONDS PAYABLE AND OTHER LONG-TERM OBLIGATIONS
A. SUMMARY OF CHANGES
Short-Term Debt
Two enterprise funds, the Alaska Clean Water Fund and the Alaska Drinking Water Fund issued bond anticipation notes during
FY 2021 totaling $1,901 thousand and $2,200 thousand respectively. The proceeds were used to fund the State share of loan
distributions and administration costs. In accordance with the Environmental Protection Agency regulations, interest and
investment earnings were used to retire the bond anticipation notes.
Long-Term Liabilities
The following table summarizes changes in long-term liabilities for Governmental Activities for the fiscal year ended
June 30, 2021 (in thousands):
Beginning Ending Amounts Due
Governmental Activities Balance Increases Decreases Balance Within One Year
Revenue bonds payable $ 312,960 $ 1,819 $ 4,106 $ 310,673 $ —
General obligation debt 672,105 110,763 57,771 725,097 41,210
Notes from direct borrowings
and direct placements 6,563 74 2,778 3,859 2,770
Capital leases payable 229,730 3,561 22,126 211,165 21,748
Unearned revenue 1,219,849 1,767,559 2,359,954 627,454 374,294
Certificates of participation 24,341 — 2,244 22,097 2,227
Compensated absences 180,772 162,787 145,233 198,326 150,308
Claims and judgments 224,745 17,975 25,879 216,841 42,982
Pollution remediation 125,227 8,739 3,433 130,533 12,753
Other noncurrent liabilities 3,435 71,321 39,366 35,390 397
Net pension liability 4,615,517 440,512 29,464 5,026,565 —
Net OPEB liability 104,548 — 101,249 3,299 —
Total $ 7,719,792 $ 2,585,110 $ 2,793,603 $ 7,511,299 $§$ 648,689
Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for internal service funds
are included as part of the above totals for governmental activities.
The General Fund and special revenue funds in which the leases are recorded typically liquidate the capital lease obligations.
The compensated absence obligations are typically liquidated by the funds incurring the related salaries and wages. Claims and
judgments attributable to governmental activities will generally be liquidated by the General Fund, except for the payments by
Capital Project Funds for the rebate of arbitrage. Certain claims and judgment liquidations will receive proportional federal
reimbursement. Other non-current liabilities due within one year will be liquidated by the General Fund and those due after one
year will be liquidated by the Reclamation Bonding Pool, a special revenue fund.
The Internal Revenue Code and arbitrage regulations issued by the Internal Revenue Service require rebate to the federal
government of excess investment earnings on bond proceeds if the yield on those earnings exceeds the effective yield on the
related tax-exempt bonds issued. Arbitrage rebates payable are reported under claims and judgments.
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The following table summarizes changes in long-term liabilities for Business-type Activities for the fiscal year ended
June 30, 2021 (in thousands):
Beginning Ending Amounts Due
Business-type Activities Balance Increases Decreases Balance Within One Year
Revenue bonds payable $ 355,082 §$ — §$ 16,023 $ 339,059 §$ 14,640
Unearned revenue 36,093 8,162 18,988 25,267 25,267
Compensated absences 5,076 4,404 4,226 5,254 3,974
Pollution remediation 5,856 885 555 6,186 618
Other Noncurrent Liabilities 33,684 17,733 16,842 34,575 —
Net pension liability 60,221 3,288 80 63,429 —
Net OPEB liability 1,989 1 1,884 106 —
Total $ 498,001 §$ 34,473 $ 58,598 $ 473,876 $ 44,499
B. NET PENSION LIABILITY
Net Pension Liability is recorded in the schedule of long-term liabilities above. The PERS and TRS total pension liability for
the June 30, 2020 measurement date was determined by actuarial valuations as of June 30, 2019, which were rolled forward to
June 30, 2020. The JRS and NGNMRS total pension liability for the June 30, 2020 measurement date was determined by
actuarial valuations as of June 30, 2020. The actuarial valuations used the following actuarial assumptions, applied to all
periods included in the measurement:
Investment Rate of
System Return Inflation Rate Salary Scale Increases
PERS 7.38%, net of pension plan 2.5% Graded by service, from 7.75% to
investment expenses. This is based 2.75% for Peace Officer/Firefighter
on an average inflation of 2.50% and Graded by service from 6.75% to
a real return of 4.88% 2.75% for all others
TRS 7.38%, net of pension plan 2.5% Graded by service, from 6.75% to
investment expenses. This is based 2.75%
on an average inflation rate of 2.50%
and a real return of 4.88%
JRS 7.38%, net of pension plan 2.5% 0% for FY 2021 through FY 2024,
investment expenses. This is based 3.62% per year thereafter
on an average inflation rate of 2.50%
and a real rate of return 4.88%
NGNMRS 7%, net of pension plan investment 2.5% None
expenses. This is based on an average
inflation rate of 2.50% and a real rate
of return of 4.88%
PERS pre-commencement and post-commencement mortality rates were based upon the 2013-2017 actual mortality experience.
Pre-commencement mortality rates were based on 100 percent of the RP-2014 employee table, benefit-weighted, rolled back to
2006, and projected with MP-2017 generational improvement. Post-commencement mortality rates were based on 91 percent of
male and 96 percent of female rates of the RP-2014 health annuitant table, benefit-weighted, rolled back to 2006, and projected
with MP-2017 generational improvement. Disabilities are assumed to be occupational 75 percent of the time for Peace Officer/
Firefighters, 40 percent of the time for others. Post-disability mortality in accordance with the RP-2014 disabled table with
MP-2017 generational improvement. The actuarial assumptions used in the June 30, 2019 actuarial valuation were based on the
results of an actuarial experience study for the period July 1, 2013 to June 30, 2017. The assumptions used in the June 30, 2019
actuarial valuation are the same as those used in the June 30, 2018 valuation, except the amount included in the Normal Cost for
the administrative expenses was updated to reflect the most recent two years of actual administrative expenses paid from DB
Pension Plan assets.
TRS pre-commencement and post-commencement mortality rates were based upon the 2013-2017 actual mortality experience.
Pre-commencement mortality rates were based on 100 percent of the RP-2014 white-collar employee table, benefit-weighted,
rolled back to 2006, and projected with MP-2017 generational improvement. Post-commencement mortality rates were based
I-90
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
on 93 percent of male and 90 percent of female rates of the RP-2014 white-collar healthy annuitant table, benefit-weighted,
rolled back to 2006, and projected with MP-2017 generational improvement. Deaths are assumed to result from occupational
causes 15 percent of the time. Post-disability mortality in accordance with the RP-2014 disabled table, benefit-weighted, rolled
back to 2006, and projected with MP-2017 generational improvement. The actuarial assumptions used in the June 30, 2019
actuarial valuation were based on the results of an actuarial experience study for the period from July 1, 2013 to June 30, 2017.
The assumptions used in the June 30, 2019 actuarial valuation are the same as those used in the June 30, 2018 valuation, except
the amount included in the Normal Cost for administrative expenses was updated to reflect the most recent two years of actual
administrative expenses paid from DB Pension Plan assets.
JRS pre-commencement mortality rates were based on 100 percent of the RP-2014 white-collar employee table, benefit
weighted, rolled back to 2006, and projected with MP-2017 generational improvement. Post-commencement mortality rates
were based on 93 percent of male and 90 percent of female rates of the RP-2014 white-collar healthy annuitant table, benefit
weighted, rolled back to 2006, and projected with MP-2017 generational improvement. Post-disability mortality in accordance
with the RP-2014 disabled table, benefit-weighted, rolled back to 2006, and projected with MP-2017 generational
improvement. The actuarial assumption used in the June 30, 2020 actuarial valuation were based on the results of an actuarial
experience study for the period from July 1, 2013 to June 30, 2017. The assumptions used in the June 30, 2020 valuation are the
same as those used in the June 30, 2019 valuation, except (1) the salary increase assumption and the pensioner benefit increase
assumption were modified to be 0 percent per year for FY 2021 through FY 2024, and 3.62 percent per year thereafter based on
information provided by the Board, and (ii) the amount included in the Normal Cost for administrative expenses was updated to
reflect the most recent two years of actual administrative expenses paid from pension plan assets.
NGNMRS pre-commencement mortality rates were based on 100 percent of the RP-2014 employee table, benefit weighted,
rolled back to 2006, and projected with MP-2017 generational improvement. Post-commencement mortality rates were based
on 91 percent of male and 96 percent of female rates of the RP-2014 healthy annuitant table, benefit-weighted, rolled back to
2006, and projected with MP-2017 generational improvement. Disability mortality in accordance with the RP-2014 disabled
table, benefit-weighted, rolled back to 2006, and projected with MP-2017 generational improvement. The actuarial assumption
used in the June 30, 2020 valuation were based on the results of an actuarial experience study for the period from July 1, 2013
to June 30, 2017. The actuarial assumptions used in the June 30, 2020 valuation are the same as those used in the June 30, 2019
actuarial valuation, except the amount included in the Normal Cost for administrative expenses was updated to reflect the most
recent two years of actual administrative expenses paid from pension plan assets.
For PERS, TRS, JRS, and NGNMRS, the long-term expected rate of return on pension plan investments was determined using
a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension
plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the
long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage
and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the
pension plan's target asset allocation as of June 30, 2020 are summarized in the next table (note that the rates shown exclude the
inflation component):
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 6
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Long-term Expected Real
System Asset Class Rate of Return Allocation Range
PERS/TRS Broad Domestic Equity 6.24% 26.00% +/- 6%
Global Equity (non-U.S.) 6.67 18.00 +/-4
Fixed Income — 24.00 +/- 10
Aggregate Bonds (0.16) — —
Opportunistic 3.01 8.00 +/- 4
Real Assets 3.82 13.00 +/-7
Private Equity 10.00 11.00 +/- 6
Cash Equivalents (1.09) — —
JRS Domestic Equity 6.24 26.00 +/- 6
Global Equity (non-U.S.) 6.67 18.00 +/-4
Aggregate Bonds (0.16) — —
Fixed Income — 24.00 +/- 10
Opportunistic 3.01 8.00 +/- 4
Real Assets 3.82 13.00 +/-7
Private Equity 10.00 11.00 +/- 6
Cash Equivalents (1.09) — —
NGNMRS Domestic Equity 6.20 26.00 +/- 6
Global Equity (non-U.S.) 6.66 21.00 +/- 4
Fixed Income (0.16) 45.00 +/- 10
Opportunistic 3.01 8.00 +/- 5
Cash Equivalents (1.09) — +3
The discount rate used to measure the total pension liability was 7.38 percent for PERS, TRS and JRS which is no change from
the June 30, 2019 measurement. The discount rate used to measure the total pension liability was 7 percent for NGNMRS
which is no change from the June 30, 2019 measurement. The projection of cash flows used to determine the discount rate
assumed that employer and the nonemployer State contributions will continue to follow the current funding policy, which meets
State statutes. Based on those assumptions, the System Pension Plans' fiduciary net position was projected to be available to
make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on
pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. In the
event benefit payments are not covered by the plan's fiduciary net position, a municipal bond rate would be used to discount the
benefit payments not covered by the System Pension Plans' fiduciary net position. The S&P Municipal Bond 20-Year High
Grade Index rate was 2.66 percent as of June 30, 2020.
I-92
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 6
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The following presents the net pension liability/(asset) for each plan as of June 30, 2020, calculated using the discount rate, as
well as what the respective plans' net pension liability/(asset) would be if it were calculated using a discount rate that is one-
percentage-point lower or one-percentage-point higher than the current rate (in thousands):
1% Decrease
Discount Rate
1% Increase
6.38% 7.38% 8.38%
Primary Government's proportionate share of
the PERS net pension (asset) liability $ 3,766,226 §$ 2,896,625 $ 2,167,274
Discrete Component Units' proportionate
share of the PERS net pension (asset) liability 367,624 282,741 211,549
Primary Government's proportionate share of
the TRS net pension (asset) liability 18,630 13,276 8,773
Discrete Component Units' proportionate
share of the TRS net pension (asset) liability 40,416 28,801 19,032
Primary Government's JRS net pension (asset)
liability 45,212 21,898 2,242
1% Decrease
6%
Discount Rate
T%
1% Increase
8%
Primary Government's NGNMRS net pension
(asset) liability $
(18,016) $
(20,031) $
(21,768)
The State’s proportion of the net pension liability for the defined benefits multiple employer plans were based on projections of
the present value of the State’s long-term share of contributions to the pension plans relative to the projected contributions of all
participating employers from July 1, 2020 to a projected fully funded year of 2039. At June 30, 2020 the proportionate share of
the net pension liability attributed to the State was 53.88 percent (49.09 percent for the primary government and 4.79 percent
for the discrete component units) for the Public Employee’s Retirement System (PERS) and 2.07 percent (0.65 for the primary
government and 1.42 for the discrete component units) for the Teacher’s Retirement System (TRS). This was a decrease of
0.75 percent (0.63 percent decrease for the primary government and 0.12 percent decrease for the discrete component units) for
PERS and a decrease of 0.20 percent (0.02 percent decrease for the primary government and 0.18 percent decrease for the
discrete component units) for TRS from its proportion measured as of June 30, 2019.
For the year ended June 30, 2021, the State recognized pension expense of $377,249 thousand ($347,284 thousand for the
primary government and $29,965 thousand for the discrete component units) broken out by plan as follows (in thousands):
Systems
Public Employees’ Retirement System - Primary Government
Public Employees’ Retirement System - Discrete Component Units
Teachers’ Retirement System - Primary Government
Teachers’ Retirement System - Discrete Component Units
Judicial Retirement System - Primary Government
Pension Expense
$ 351,119
28,519
1,018
1,446
58
Alaska National Guard and Alaska Naval Militia Retirement System - Primary Government (4,911)
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 6
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
At June 30, 2021, the State reported deferred outflows of resources and deferred inflows of resources related to pension plans
from the following sources by plan (in thousands):
Deferred Deferred
Outflows of Inflows of
Resources Resources
PERS
Primary Government Difference Between Expected and Actual Experience $ 9,189 —
Difference Between Projected and Actual Investment Earnings 117,893 —
Changes in Proportions and Difference Between Employer
Contributions and Proportionate Share of Contributions 7,898
Changes in Assumptions — —_—
Contributions Subsequent to the Measurement Date 255,643 —
Discrete Component Difference Between Expected and Actual Experience 897 —
Units Difference Between Projected and Actual Investment Earnings 11,508 —
Changes in Proportion and Difference Between Employer
Contributions and Proportionate Share of Contributions — 1,360
Changes in Assumptions — —_—
Contributions Subsequent to the Measurement Date 21,861 —
TRS
Primary Government Difference Between Expected and Actual Experience 15 —
Difference Between Projected and Actual Investment Earnings 915 —
Changes in Proportion and Difference Between Employer
Contributions and Proportionate Share of Contributions — 55
Changes in Assumption — —
Contributions Subsequent to the Measurement Date 1,120 —
Discrete Component Difference Between Expected and Actual Experience 33 —
Units Difference Between Projected and Actual Investment Earnings 1,985 —
Changes in Proportion and Difference Between Employer
Contributions and Proportionate Share of Contributions — 1,275
Changes in Assumptions — —_—
Contributions Subsequent to the Measurement Date 907 —
JRS
Primary Government Difference Between Projected and Actual Investment Earnings 4,903 —
Difference Between Expected and Actual Experience 2,670 —
Changes in Assumptions — 24,903
Contributions Subsequent to the Measurement Date 12,108 —
NGNMRS
Primary Government Difference Between Projected and Actual Investment Earnings 930 —
Difference Between Expected and Actual Experiences — 2,464
Changes in Assumptions — 29
Contributions Subsequent to the Measurement Date
$291,639 thousand reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in fiscal year 2022 ($268,871 thousand for the
primary government and $22,768 thousand for discrete component units).
I-94
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be
recognized in pension expense for each plan as follows (in thousands):
PERS - TRS -
PERS - Discrete TRS - Discrete JRS - NGNMERS -
Year Ending Primary Component Primary Component Primary Primary
June 30 Government Units Government Units Government Government
2022 $ 3,375 $ (260) $ (30) $ (1,220) $ (11,476) $ (2,007)
2023 41,460 4,047 323 701 (8,844) 198
2024 43,821 4,277 344 746 1,759 108
2025 30,528 2,980 237 515 1,230 137
2026 — — — — — —
Thereafter — — — — — —
SPECIAL FUNDING SITUATION
Under Governmental Accounting Standards Board Statement No. 68, a special funding situation exists when a nonemployer
entity is legally responsible for making contributions directly to a pension plan that is used to provide pensions to the
employees of another entity or entities and either (1) the amount of contributions for which the nonemployer entity legally is
responsible is not dependent upon one or more events unrelated to pensions or (2) the nonemployer is the only entity with a
legal obligation to make contributions directly to a pension plan.
In an opinion dated August 3, 2015, the Department of Law advised that AS 39.35.280 and AS 14.25.085 did not create “legal
responsibility” in the State to make contributions for non-State PERS and TRS participating employers, and that a “special
funding situation” did not exist for purposes of GASB 68. The Department of Law further advised that the State should only
report on its balance sheet those net pension liabilities attributable to the State as a participating employer. That opinion is
incorporated by reference to this note.
On November 25, 2015, however, GASB staff advised the Department of Administration and the Department of Law that the
term “legally responsible” for purposes of GASB 68 should not be construed in a legally enforceable sense, and that the
reporting of net pension liability attributable to special funding situations on the State’s balance sheet does not mean that the
State is legally obligated for such underlying net pension liabilities. Rather, the reporting of such amounts merely reflects an
“economic reality” that the State is making state assistance payments on behalf of participating employers pursuant to
AS 39.35.280 and AS 14.25.085. Nevertheless, GASB staff advised that the existence of such statutes, irrespective of their
constitutional validity, required the State to report these amounts as liabilities on its balance sheet. Moreover, in a memo dated
December 16, 2015, the Division of Legislative Audit stated that the constitutional prohibition against dedicated revenue and
limitations on one legislature binding the appropriation power of a subsequent legislature are not permissible exceptions to this
accounting rule.
Accordingly, the State is reporting such amounts on its balance sheet, but the State affirmatively disclaims any and all legal
responsibility or obligation, in a legally enforceable sense, for the non-State employer GASB 68 net pension liabilities reported
as liabilities on the basic financial statements herein. The State acknowledges that municipalities and school districts have taken
the position that they are not claiming responsibility for liabilities beyond the obligations they report in their financial
statements.
The assumptions for the portion of the net pension liability attributed to the special funding situation for both the PERS and
TRS plans are the same as those previously listed. The proportionate share of the net pension liability attributed to the special
funding situation was based on a projection of the present value of the State’s long-term share of contributions to the pension
plans relative to the projected contributions of all participating employers from July 1, 2021 to a projected fully funded year of
2039.
1-95
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The following presents the State’s proportionate share of the net pension liability calculated using the discount rate, as well as
what the State’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is
l-percentage-point lower or l-percentage-point higher than the current rate for the special funding situation portion
(in thousands):
1% Decrease Discount Rate 1% Increase
6.38% 7.38% 8.38%
PERS net pension liability $ 1,140,053 $ 876,821 § 656,043
TRS net pension liability 1,798,166 1,281,372 846,749
At June 30, 2020 the proportionate share of the net pension liability attributed to the State for the special funding situation was
14.86 percent for the Public Employee’s Retirement System (PERS) and 63.02 percent for the Teacher’s Retirement System
(TRS), which was an increase of 0.58 percent and 3.69 percent from its proportion measured as of June 30, 2019 for PERS and
TRS respectively.
For the year ended June 30, 2021, the State recognized expenses of $397,951 thousand in relation to the special funding
situation broken out by plan as follows (in thousands):
Systems Pension Expense
Public Employees’ Retirement System $ 201,875
Teachers’ Retirement System 196,076
At June 30, 2021, the State reported deferred outflows of resources and deferred inflows of resources related to pension plans
for the special funding situation amounts from the following sources by plan (in thousands):
Deferred Deferred
Outflows of Inflows of
Resources Resources
PERS Difference Between Expected and Actual
Experience $ 2,781 $ —
Difference Between Projected and Actual
Investment Earnings 35,687 —
Changes in Proportion and Difference Between
Employer Contributions and Proportionate Share
of Contributions 10,999 —
Changes in Assumptions —_ —
Changes in Benefits —_ —
Contributions Subsequent to the Measurement
Date 101,383 —
TRS Difference Between Expected and Actual
Experience 1,459 —
Difference Between Projected and Actual
Investment Earnings 88,297 —
Changes in Proportion and Difference Between
Employer Contributions and Proportionate Share
of Contributions 28,568 —
Changes in Assumptions — —
Contributions Subsequent to the Measurement
Date 134,070 —
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
$235,453 thousand reported as deferred outflows of resources related to the special funding situation resulting from
contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in fiscal year
2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the special funding
situation will be recognized as expenses for each plan as follows (in thousands):
Year Ending June 30 PERS TRS
2022 $ 14,411 §$ 31,022
2023 12,550 31,190
2024 13,265 33,191
2025 9,241 22,922
2026 — —
Thereafter — —
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 6
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
STATE ADMINISTERED SINGLE EMPLOYER PLANS
The schedules of changes in plan net pension liability/(asset) for the JRS and NGNMRS defined benefit pension plan as of the
measurement date, June 30, 2020 are below (in thousands):
JRS
Balances at June 30, 2019
Changes for the year:
Service Cost
Interest
Differences between expected and actual
experience
Changes in assumptions
Contributions - employer
Contributions - employee
Net investment income
Benefit payments, including refunds of
employee contributions
Administrative expense
Net Changes
Balances at June 30, 2020
NGNMRS
Balances at June 30, 2019
Changes for the year:
Service Cost
Interest
Differences between expected and actual
experience
Contributions - employer
Net investment income
Benefit payments, including refunds of
employee contributions
Administrative expense
Net Changes
Balances at June 30, 2020
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability
(a) (b) (a)-(b)
$ 235,935 $ 184,626 $ 51,309
6,580 — 6,580
17,340 — 17,340
4,075 — 4,075
(38,010) — (38,010)
— 11,127 (11,127)
— 839 (839)
— 7,537 (7,537)
(14,178) (14,178) —
— (107) 107
(24,193) 5,218 (29,411)
$ 211,742. $ 189,844 $ 21,898
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Asset
(a) (b) (a)-(b)
$ 22,253 $ 40,965 $ (18,712)
508 — 508
1,532 — 1,532
(587) — (587)
— 861 (861)
— 2,142 (2,142)
(1,641) (1,641) —
— (231) 231
(188) 1,131 (1,319)
$ 22,065 $ 42,096 $ (20,031)
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
NON-STATE ADMINISTERED SINGLE EMPLOYER PLANS
The Alaska Railroad Corporation (ARRC) is a component unit of the State of Alaska. The ARRC has a single-employer defined
benefit pension plan administered by the Tax Deferred Savings and Pension Committee covering all regular represented and
nonrepresented employees who are not covered by the Civil Service Retirement System. The net pension liability was measured
as of December 31, 2020, and the total pension liability used to calculate the net pension liability was determined by an
actuarial valuation as of January 1, 2020. The actuarial valuation used the following actuarial assumptions:
Actuarial Assumption December 31, 2020
Inflation 2.8%
Salary increases 2.8% CPI plus merit based rates
Long term rate of return 7.25%
Cost of living allowance 1.4%
Retirement, disablement, and termination Based on 2010-2014 experience study
Administrative expenses 0.52% of payroll, based on current year actual expense
Mortality rates were based on the Society of Actuaries RP-2014 healthy annuitant mortality table adjusted 91 percent for males
and 96 percent for females and the Scale MP-2019 generational mortality improvement in longevity that management expects
to occur in the future.
The long-term expected rate of return on pension plan investments of 7.25 percent was determined by management using a
building-block method which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan
investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the
intermediate-term and long-term expected rates of return by weighting the expected future real rates of return by the target asset
allocation percentage and by adding expected inflation. The target allocation and best estimates of real rates of return for each
major asset class are summarized in the following table:
Intermediate-term Long-term
Target expected real rate expected real
Asset Class allocation of return rate of return
Cash —% —% —%
U.S. Treasury Inflation-Protected Securities (TIPS) 5.00 2.80 1.94
Total Return Bond 13.00 2.70 2.43
Global Bond 5.00 3.05 2.43
High Yield Bond 7.00 4.72 3.88
Domestic Large Cap 20.00 4.87 6.80
Domestic Mid Cap 12.00 5.60 7.77
Domestic Small Cap 8.00 5.85 8.74
International Equity 13.00 5.36 7.04
Commodities 2.00 4.62 1.46
Real Estate 15.00 5.11 4.61
Total —_ 100.00%
The discount rate used to measure the total pension liability was 7.25 percent. The projection of cash flows used to determine
the discount rate assumed that employee contributions will be made at the current contribution rate and the ARRC contributions
will be made based on the actuarially determined contribution rate. Based on those assumptions, the pension plan’s fiduciary
net position was projected to be available to make all projected future benefit payments of current active and inactive
employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected
benefit payments to determine the total pension liability.
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The following presents the net pension liability calculated using the discount rate of 7.25 percent as well as what the net
pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or higher than the current
rate (in thousands):
1% Decrease Current discount rate 1%
(6.25%) (7.25%) Increase (8.25%)
Net pension liability $ 54,807 $ 17,939 § (12,289)
For the year ended December 31, 2020, the ARRC recognized pension expense of $4.2 million and the following deferred
outflows and deferred inflows (in thousands):
Deferred
Outflows of | Deferred Inflows
Resources of Resources
Difference between expected and actual experience $ 13 $ 2,435
Changes in assumptions 9,482 3,090
Net difference between actual and projected earnings on investments — 10,033
Deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows (in thousands):
Amount
Year ending December 31,
2021 $ (1,087)
2022 1,023
2023 (3,929)
2024 (2,070)
2025 —
Thereafter —
$ (6,063)
I- 100
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 6
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Changes in the net pension liability are as follows (in thousands):
Balances at January 1, 2020
Changes for the year:
Service Cost
Interest
Change of benefit terms
Difference between expected and actual experience
Changes of assumptions
Contributions - employer
Contributions - employee
Net investment income
Benefit payments, including refunds of employee
contributions
Administrative expense
Net Changes
Balances at December 31, 2020
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Asset
(a) (b) (a)-(b)
$ 242,030 §$ 211,840 §$ 30,190
6,106 — 6,106
17,659 — 17,659
(1,502) — (1,502)
(3,929) — (3,929)
— 4,619 (4,619)
— 4,639 (4,639)
— 21,600 (21,600)
(9,116) (9,116) —
— (273) 273
9,218 21,469 (12,251)
$ 251,248 $ 233,309 $ 17,939
C. NET OTHER POST-EMPLOYMENT BENEFITS LIABILITY/ASSET
Net other post-employment benefits (OPEB) liability is recorded in the schedule of long-term liabilities above. The total OPEB
liability for the June 30, 2020 measurement date for all plans except JRS was determined by actuarial valuations as of June 30,
2019, which were rolled forward to June 30, 2020. The total OPEB liability for JRS was determined by actuarial valuations as
of June 30, 2020. Projections are based on an established pattern of practice. The actuarial valuations used the following
actuarial assumptions, applied to all periods included in the measurement:
Investment Rate of Inflation Healthcare Cost Trend
System Return Rate Salary Scale Increases Rates
PERS* 7.38%, net of postretirement 2.5% Graded by service, from Pre-65 medical; 7.0%
healthcare plan investment 7.75% to 2.75% for Peace grading down to 4.5%
expenses. This is based on an Officer/Firefighter. Graded — Post-65 medical; 5.4%
average inflation of 2.50% and a by service from 6.75% to grading down to 4.5%
real rate of return of 4.88% 2.75% for all others Prescription drugs/EGWP;
8.0% grading down to 4.5%
TRS* 7.38%, net of postretirement 2.5% Graded by service, from Pre-65 medical; 7.0%
healthcare plan investment 6.75% to 2.75% grading down to 4.5%
expenses. This is based on an Post-65 medical; 5.4%
average inflation rate of 2.50% grading down to 4.5%
and a real rate of return of 4.88% Prescription drugs/EGWP;
8.0% grading down to 4.5%
JRS 7.38%, net of postemployment 2.5% 0% for FY 2021 through Pre-65 Medical; 6.5 %
healthcare plan investment
expenses. This is based on an
average inflation rate of 2.50%
and a real rate of return of 4.88%
FY 2024, 3.62% per year
thereafter
grading down to 4.5%
Post-65 medical; 5.4%
grading down to 4.5%
Prescription drugs/EGWP;
7.5% grading down to 4.5%
* Healthcare Cost Trend Rates applicable to Alaska Retiree Healthcare Trust and Retiree Medical Plans within PERS and TRS
systems.
I- 101
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
PERS pre-commencement and post-commencement mortality rates were based upon the 2013-2017 actual mortality experience.
Post-commencement mortality rates were based on 91 percent of the male rates and 96 percent of the female rates of the
RP-2014 healthy annuitant table benefit-weighted, rolled back to 2006, and projected with MP-2017 generational improvement.
The rates for pre-commencement mortality were 100 percent of the RP-2014 employee, benefit-weighted, rolled back to 2006,
and projected table with MP-2017 generational improvement. Deaths are assumed to be occupational 75 percent of the time for
peace officers/firefighters, 40 percent of the time for all others. Disability mortality in accordance with the RP-2014 Disabled
Table, benefit-weighted, rolled back to 2006, and projected with MP-2017 generational improvement. The actuarial assumption
used in the June 30, 2019 actuarial valuations were based on the results of an actuarial experience study for the period July 1,
2013 to June 30, 2017. The assumptions used in the June 30, 2019 actuarial valuation are the same as those used in the June 30,
2018 valuation with the following exceptions: Per capita claims were updated to reflect current experience, retired member
contribution trend rates were updated, the Cadillac Tax was repealed, and the amount included in the Normal Cost for
administrative expenses was updated to reflect the most recent two years of actual administrative expenses paid from
postretirement healthcare plan assets.
TRS pre-commencement and post-commencement mortality rates were based upon the 2013-2017 actual mortality experience.
Pre-commencement mortality rates were based on 100 percent of the RP-2014 white-collar employee table, benefit-weighted,
rolled back to 2006, and projected with MP-2017 generational improvement. Post-commencement mortality rates were based
on 93 percent of male and 90 percent of female rates of the RP-2014 white-collar healthy annuitant table benefit-weighted,
rolled back to 2006, and projected with MP-2017 generational improvement. Deaths are assumed to be occupational 15 percent
of the time. Disability mortality in accordance with the RP-2014 disabled table, benefit-weighted, rolled back to 2006, and
projected with MP-2017 generational improvement. The actuarial assumption used in the June 30, 2019 actuarial valuation
were based on the results of an actuarial experience study for the period July 1, 2013 to June 30, 2017. The assumptions used in
the June 30, 2019 actuarial valuation are the same as those used in the June 30, 2018 valuation with the following exceptions:
Per capita claims cost were updated to reflect recent experience, retired member contribution trend rates were updated, the
Cadillac Tax was repealed, administrative expenses were updated.
JRS pre-commencement and post-commencement mortality rates were based upon the 2013-2017 actual mortality experience.
JRS pre-commencement mortality rates were based on 100 percent of the RP-2014 white-collar employee table, benefit-
weighted, rolled back to 2006, and projected with MP-2017 generational improvement. Post-commencement mortality rates
were based on 93 percent of male and 90 percent of female rates of the RP-2014 white-collar healthy annuitant table, benefit-
weighted, rolled back to 2006, and projected with MP-2017 generational improvement. Post-disability mortality in accordance
with the RP-2014 disabled table, benefit-weighted, rolled back to 2006, and projected with MP-2017 generational
improvement. The actuarial assumptions used in the June 30, 2020 actuarial valuation were based on the results of an actuarial
experience study for the period from July 1, 2013 to June 30, 2017. The assumptions used in the June 30, 2020 valuation are the
same as those in the June 30, 2019 valuation, except (i) the salary increase assumption and the pensioner benefit increase
assumption were modified to be 0 percent per year for FY 2021 through FY 2024, and 3.62 percent per year thereafter based on
information provided by the Board, (ii) the amount included in the Normal Cost for administrative expenses was updated to
reflect the most recent two years of actual administrative expenses paid from postretirement healthcare plan assets, (111) the
repeal of the Cadillac Tax reduced the plan's liabilities as of June 30, 2020 by approximately $0.2 million, and (iv) healthcare
claim costs are updated annually.
The long-term expected rate of return on plan investments for each plan was determined using a building-block method in
which best-estimate ranges of expected future real rates of return (expected returns, net of postretirement healthcare plan
investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-
term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and
adding expected inflation.
I- 102
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Best estimates of arithmetic rates of return for each major asset class included in the postretirement healthcare plans' target asset
allocation are summarized in the following table as of June 30, 2020 (note that the rates shown below exclude the inflation
component):
Long-term
Expected Real Rate
System Asset Class of Return Allocation Range
PERS/TRS Broad Domestic Equity 6.24% 26.00% +/- 6%
Global Equity ex-U.S. 6.67 18.00 +/- 4
Fixed Income — 24.00 +/-10
Aggregate Bonds (0.16) — —
Opportunistic 3.01 8.00 +/- 4
Real Assets 3.82 13.00 +/-7
Private Equity 10.00 11.00 +/- 6
Cash Equivalents (1.09) — —
JRS Domestic Equity 6.24 26.00 +/- 6%
Global Equity ex-U.S. 6.67 18.00 +/- 4
Aggregate Bonds (0.16) — —
Fixed Income — 24.00 +/-10
Opportunistic 3.01 8.00 +/- 4
Real Assets 3.82 13.00 +/-7
Private Equity 10.00 11.00 +/- 6
Cash Equivalents (1.09) — —
I - 103
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The discount rate used to measure the total OPEB liability/asset for each plan was 7.38 percent which is no change from the
June 30, 2019 measurement.The projection of cash flows used to determine the discount rate assumed that employer and state
contributions will continue to follow the current funding policy, which meets state statutes. Based on those assumptions, the
fiduciary net position for each plan was projected to be available to make all projected future benefit payments of current plan
members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit
payments to determine the total OPEB liability/asset. In the event benefit payments are not covered by the plan’s fiduciary net
position, a municipal bond rate would be used to discount the benefit payments not covered by the System Pension Plan’s
fiduciary net position. The S&P Municipal Bond 20-Year High Grade Index rate was 2.66 percent as of June 30, 2020. The
following presents the net OPEB liability/(asset) for each plan as of June 30, 2020, calculated using the discount rate, as well as
what the respective plans' net OPEB liability/(asset) would be if it were calculated using a discount rate that is one-percentage-
point lower or one-percentage-point higher than the current rate (in thousands):
1% Decrease Discount Rate 1% Increase
6.38% 7.38% 8.38%
Primary Government's proportionate share of the PERS Alaska
Retiree Healthcare Trust Plan net OPEB liability (asset) $ 232,029 $ (222,361) $ (598,731)
Discrete Component Units' proportionate share of the PERS
Alaska Retiree Healthcare Trust Plan net OPEB liability (asset) 22,633 (21,690) (58,402)
Primary Government's proportionate share of the PERS
Occupational Death and Disability net OPEB liability (asset) (12,492) (13,294) (13,935)
Discrete Component Units' proportionate share of the PERS
Occupational Death and Disability net OPEB liability (asset) (1,090) (1,160) (1,215)
Primary Government's proportionate share of the PERS Retiree
Medical Plan net OPEB liability (asset) 21,089 3,404 (9,983)
Discrete Component Units' proportionate share of the PERS
Retiree Medical Plan net OPEB liability (asset) 2,237 361 (1,059)
Primary Government's proportionate share of the TRS Alaska
Retiree Healthcare Trust Plan net OPEB liability (asset) (129) (2,335) (4,155)
Discrete Component Units' proportionate share of the TRS Alaska
Retiree Healthcare Trust Plan net OPEB liability (asset) (279) (5,054) (8,993)
Primary Government's proportionate share of the TRS (20) (20) (20)
Occupational Death and Disability net OPEB liability (asset)
Discrete Component Units' proportionate share of the TRS (99) (99) (99)
Occupational Death and Disability net OPEB liability (asset)
Primary Government's proportionate share of the TRS Retiree 2 (45) (80)
Medical Plan net OPEB liability (asset)
Discrete Component Units' proportionate share of the TRS
Retiree Medical Plan net OPEB liability (asset) 12 (227) (406)
Primary Government's JRS net OPEB (asset) liability (15,246) (17,273) (18,957)
I- 104
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The following presents the net OPEB liability/(asset) for each applicable plan as of June 30, 2020, calculated using the
healthcare cost trend rates as summarized in the actuarial valuation reports, as well as what the respective plans' net OPEB
liability would be if it were calculated using trend rates that are one-percentage-point lower or one-percentage-point higher than
the current healthcare cost trend rate (in thousands):
Current Trend
1% Decrease Rate 1% Increase
Primary Government's proportionate share of the PERS
Alaska Retiree Healthcare Trust Plan net OPEB liability
(asset) $ (642,860) $ (222,361) $ 286,838
Discrete Component Units' proportionate share of the PERS
Alaska Retiree Healthcare Trust Plan net OPEB liability
(asset) (62,706) (21,690) 27,979
Primary Government's proportionate share of the PERS
Retiree Medical Plan net OPEB liability (asset) (11,945) 3,404 24,282
Discrete Component Units' proportionate share of the PERS
Retiree Medical Plan net OPEB liability (asset) (1,267) 361 2,575
Primary Government's proportionate share of the TRS Alaska
Retiree Healthcare Trust Plan net OPEB liability (asset) (4,358) (2,335) 125
Discrete Component Units' proportionate share of the TRS
Alaska Retiree Healthcare Trust Plan net OPEB liability
(asset) (9,431) (5,054) 270
Primary Government's proportionate share of the TRS Retiree
Medical Plan net OPEB liability (asset) (85) (45) 11
Discrete Component Units' proportionate share of the TRS
Retiree Medical Plan net OPEB liability (asset) (430) (227) 53
Primary Government's JRS net OPEB (asset) liability (19,093) (17,273) (15,075)
T- 105
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The State’s proportion of the net OPEB liability for the Alaska Retiree Healthcare Trust plans were based on projections of the
present value of the State’s long-term share of contributions to the OPEB plan relative to the projected contributions of all
participating employers from July 1, 2021 to a projected fully funded year of 2039. The State's proportion of net OPEB
liability/asset for the Occupational Death and Disability and the Retiree Medical plans were based on employer retiree medical
contributions made during the measurement year. The following represents the proportionate share of the multiple employer net
OPEB liability/asset attributed to the state at June 30, 2020 and the associated change from its proportion measured as of June
30, 2019:
Increase/
2020 2021 (Decrease)
PERS Alaska Retiree Healthcare Trust Plan 54.64 % 53.89 % (0.75)%
Primary Government 49.73 49.10 (0.63)
Discrete Component Units 4.91 4.79 (0.12)
PERS Occupational Death and Disability Plan 53.45 53.02 (0.43)
Primary Government 49.15 48.77 (0.38)
Discrete Component Units 4.30 4.25 (0.05)
PERS Retiree Medical Plan 53.47 53.08 (0.39)
Primary Government 48.30 47.99 (0.31)
Discrete Component Units 5.17 5.09 (0.08)
TRS Alaska Retiree Healthcare Trust Plan 2.27 2.06 (0.21)
Primary Government 0.67 0.65 (0.02)
Discrete Component Units 1.60 1.41 (0.19)
TRS Occupational Death and Disability Plan 2.92 2.75 (0.17)
Primary Government 0.45 0.46 0.01
Discrete Component Units 2.47 2.29 (0.18)
TRS Retiree Medical Plan 2.91 2.76 (0.15)
Primary Government 0.45 0.46 0.01
Discrete Component Units 2.46 2.30 (0.16)
For the year ended June 30, 2021 the State recognized OPEB expense of ($150,028) thousand ($138,150 thousand for the
primary government and $11,878 thousand for the discrete component units) broken out by plan as follows (in thousands):
Systems OPEB Expense
PERS Alaska Retiree Healthcare Trust Plan - Primary Government $ (144,683)
PERS Alaska Retiree Heathcare Trust Plan - Discrete Component Units (10,634)
PERS Occupational Death and Disability Plan - Primary Government 919
PERS Occupational Death and Disability Plan - Discrete Component Units 61
PERS Retiree Medical Plan - Primary Government 8,241
PERS Retiree Medical Plan - Discrete Component Units 895
TRS Alaska Retiree Healthcare Trust Plan - Primary Government (1,375)
TRS Alaska Retiree Healthcare Trust Plan - Discrete Component Units (2,260)
TRS Occupational Death and Disability Plan - Primary Government —
TRS Occupational Death and Disability Plan - Discrete Component Units (1)
TRS Retiree Medical Plan - Primary Government 12
TRS Retiree Medical Plan - Discrete Component Units 61
Judicial Retirement System - Primary Government (1,264)
I- 106
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
At June 30, 2021 the State reported deferred outflows of resources and deferred inflows of resources related to OPEB plans
from the following sources by plan (in thousands):
Deferred Deferred
Outflows of Inflows of
Resources Resources
PERS Alaska Retiree Healthcare Trust Plan
Primary Government Difference Between Expected and Actual Experience $ — §$ 17,838
Difference Between Projected and Actual Investment Earnings 89,217 —
Changes in Proportions and Difference Between Employer __ 105
Contributions and Proportionate Share of Contributions
Changes in Assumptions — 154,999
Contributions Subsequent to the Measurement Date 34,183 —
Discrete Component Difference Between Expected and Actual Experience — 1,740
Units Difference Between Projected and Actual Investment Earnings 8,702 —
Changes in Proportion and Difference Between Employer 1.057 7
Contributions and Proportionate Share of Contributions °
Changes in Assumptions — 15,119
Contributions Subsequent to the Measurement Date 6,574 —
PERS Occupational Death and Disability Plan
Primary Government Difference Between Expected and Actual Experience — 4,460
Difference Between Projected and Actual Investment Earnings 456 —
Changes in Proportions and Difference Between Employer 309 82
Contributions and Proportionate Share of Contributions
Changes in Assumptions — 195
Contributions Subsequent to the Measurement Date 2,591 —
Discrete Component Difference Between Expected and Actual Experience —_ 389
Units Difference Between Projected and Actual Investment Earnings 40 —
Changes in Proportion and Difference Between Employer 44 129
Contributions and Proportionate Share of Contributions
Changes in Assumptions — 17
Contributions Subsequent to the Measurement Date 251 —
PERS Retiree Medical Plan
Primary Government Difference Between Expected and Actual Experience $ — §$ 732
Difference Between Projected and Actual Investment Earnings 1,524 —
Changes in Proportion and Difference Between Employer _ 204
Contributions and Proportionate Share of Contributions
Changes in Assumptions 4,781 8,801
Contributions Subsequent to the Measurement Date 8,914 —
Discrete Component Difference Between Expected and Actual Experience —_ 78
Units Difference Between Projected and Actual Investment Earnings 162 —_—
Changes in Proportion and Difference Between Employer 117 17
Contributions and Proportionate Share of Contributions
Changes in Assumptions 507 933
Contributions Subsequent to the Measurement Date 1,002 —
I- 107
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 6
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Deferred Deferred
Outflows of Inflows of
Resources Resources
TRS Alaska Retiree Healthcare Trust Plan
Primary Government Difference Between Expected and Actual Experience — 63
Difference Between Projected and Actual Investment Earnings 451 —_
Changes in Proportion and Difference Between Employer 17 __
Contributions and Proportionate Share of Contributions
Changes in Assumption — 735
Contributions Subsequent to the Measurement Date 210 —
Discrete Component Difference Between Expected and Actual Experience — 136
Units Difference Between Projected and Actual Investment Earnings 977 —
Changes in Proportion and Difference Between Employer 298 __
Contributions and Proportionate Share of Contributions
Changes in Assumptions — 1,590
Contributions Subsequent to the Measurement Date 1,107 —
TRS Occupational Death and Disability Plan
Changes in Proportion and Difference Between Employer 1 2
Primary Government Contributions and Proportionate Share of Contributions
Contributions Subsequent to the Measurement Date 2 —
Difference Between Expected and Actual Experience —_ 2
Discrete Component Difference Between Projected and Actual Investment Earnings 2 —
Units Difference Between Expected and Actual Experience — 11
Changes in Proportion and Difference Between Employer 6 5
Contributions and Proportionate Share of Contributions
Contributions Subsequent to the Measurement Date 9 —
TRS Retiree Medical Plan
Primary Government Difference Between Expected and Actual Experience 3
Difference Between Projected and Actual Investment Earnings —
Changes in Proportion and Difference Between Employer I 3
Contributions and Proportionate Share of Contributions
Changes in Assumption 7 39
Contributions Subsequent to the Measurement Date 22 —
Discrete Component Difference Between Expected and Actual Experience 48 17
Units Difference Between Projected and Actual Investment Earnings 26 —
Changes in Proportion and Difference Between Employer 6 6
Contributions and Proportionate Share of Contributions
Changes in Assumption 35 197
Contributions Subsequent to the Measurement Date 104 —
JRS Alaska Retiree Healthcare Trust Plan
Primary Government Difference Between Projected and Actual Investment Earnings 782 —_—
Difference Between Expected and Actual Experience 162 250
Changes in Assumptions 84 1,705
Contributions Subsequent to the Measurement Date 654 —
I - 108
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
$55,623 thousand reported as deferred outflows of resources related to OPEB resulting from contributions subsequent to the
measurement date will be recognized as a reduction of the net OPEB liability or increase of the net OPEB asset in fiscal year
2022 ($46,576 thousand for the primary government $9,047 thousand for discrete component units). Other amounts reported as
deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in OPEB expense for
each plan as follows (in thousands):
Year Ending June 30
2021 2022 2023 2024 2025 Thereafter
PERS Alaska Retiree Healthcare Trust Plan -
Primary Government $ (173,660) $ 31,756 $ 34,098 $ 24,081 $ — §$ —
PERS Alaska Retiree Healthcare Trust Plan -
Discrete Component Units (15,878) 3,098 3,326 2,349 — —
PERS Occupational Death and Disability Plan
- Primary Government (649) (540) (538) (574) (689) (979)
PERS Occupational Death and Disability Plan
- Discrete Component Units (76) (67) (67) (70) (80) (92)
PERS Retiree Medical Plan - Primary
Government (413) (109) (115) (231) (598) (1,947)
PERS Retiree Medical Plan - Discrete
Component Units (22) 10 9 (3) (42) (192)
TRS Alaska Retiree Healthcare Trust Plan -
Primary Government (782) 160 171 121 — —
TRS Alaska Retiree Healthcare Trust Plan -
Discrete Component Units (1,429) 347 371 262 — —
TRS Occupational Death and Disability Plan -
Primary Government —_ — —_ —_ — (1)
TRS Occupational Death and Disability Plan -
Discrete Component Units (1) (1) (1) (1) (2) (3)
TRS Retiree Medical Plan - Primary
Government (3) (2) (2) (2) (4) (11)
TRS Retiree Medical Plan - Discrete
Component Units (14) (8) (8) (10) (16) (48)
JRS - Primary Government (744) (329) (64) 210 — —
SPECIAL FUNDING SITUATION
Under Governmental Accounting Standards Board Statement No. 75, a special funding situation exists when a nonemployer
entity is legally responsible for providing certain forms of financial support for OPEB of the employees of another entity. Such
support is a special funding situation if either (1) the amount of contributions or benefits, as applicable, for which the
nonemployer entity legally is responsible is not dependent upon one or more events unrelated to OPEB or (2) the nonemployer
is the only entity with a legal obligation to make contributions directly to an OPEB plan or to make benefit payments as OPEB
comes due, as applicable.
As with net pension liability, the State is reporting such amounts on its balance sheet, but the State affirmatively disclaims any
and all legal responsibility or obligation, in a legally enforceable sense, for the non-State employer GASB 75 net OPEB
liabilities reported as liabilities on the basic financial statements herein. The State acknowledges that municipalities and school
districts have taken the position that they are not claiming responsibility for liabilities beyond the obligations they report in their
financial statements.
The assumptions for the portion of the net OPEB liability attributed to the special funding situation for both the PERS and TRS
plans are the same as those previously listed. The proportionate share of the net OPEB liability attributed to the special funding
situation was based on a present value of the State’s long-term share of contributions to the OPEB plan relative to the projected
contributions of all participating employers from July 1, 2021 to a projected fully funded year of 2039.
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STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The following presents the State’s proportionate share of the net OPEB liability/asset associated with the special funding
situation calculated using the discount rate, as well as what the State’s proportionate share of the net OPEB liability/asset would
be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate
for the special funding situation portion (in thousands):
1% Decrease Discount Rate 1% Increase
6.38% 7.38% 8.38%
PERS Alaska Retiree Healthcare Trust Plan $ 70,362 $ (67,431) $ (181,564)
TRS Alaska Retiree Healthcare Trust Plan (12,449) (225,823) (401,809)
The following presents the net OPEB liability/asset associated with the special funding situation for each applicable plan as of
June 30, 2020, calculated using the healthcare cost trend rates as summarized in the actuarial valuation reports, as well as what
the respective plans' net OPEB liability/asset would be if it were calculated using trend rates that are one-percentage-point
lower or one-percentage-point higher than the current healthcare cost trend rate (in thousands):
Current Trend
1% Decrease Rate 1% Increase
PERS Alaska Retiree Healthcare Trust Plan $ (194,946) $ (67,431) $ 86,983
TRS Alaska Retiree Healthcare Trust Plan (421,394) (225,823) 12,057
At June 30, 2020 the proportionate share of the net OPEB liability/asset attributed to the State for the special funding situation
was 14.89 percent for the Public Employee’s Retirement System (PERS) and 63.12 percent for the Teacher’s Retirement
System (TRS), which was an increase of 0.59 percent and an increase of 3.71 percent from its proportion measured as of
June 30, 2019 for PERS and TRS respectively.
For the year ended June 30, 2021, the State recognized expenses of $(204,964) thousand in relation to the special funding
situation broken out by plan as follows (in thousands):
Systems OPEB Expense
Public Employees’ Retirement System $ (50,836)
Teachers’ Retirement System (154,128)
I- 110
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
At June 30, 2021, the State reported deferred outflows of resources and deferred inflows of resources related to pension plans
for the special funding situation amounts from the following sources by plan (in thousands):
Deferred Deferred
Outflows of Inflows of
Resources Resources
PERS _ Difference Between Expected and Actual Experience $ — §$ 5,409
Difference Between Projected and Actual Investment Earnings 27,055 —
Changes in Proportion and Difference Between Employer __ 6.292
Contributions and Proportionate Share of Contributions ,
Changes in Assumptions — 47,003
TRS Difference Between Expected and Actual Experience — 6,056
Difference Between Projected and Actual Investment Earnings 43,648 —
Changes in Proportion and Difference Between Employer _ 5.953
Contributions and Proportionate Share of Contributions ,
Changes in Assumptions — 71,042
Amounts reported as deferred outflows of resources and deferred inflows of resources related to the special funding situation
will be recognized as expenses for each plan as follows (in thousands):
Year Ending June 30 PERS TRS
2021 $ (58,922) $ (83,159)
2022 9,630 15,491
2023 10,340 16,571
2024 7,372 11,694
2025 — —
Thereafter — —
T- 111
STATE OF ALASKA
NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
STATE ADMINISTERED SINGLE EMPLOYER PLANS
The schedules of changes in plan net OPEB asset for the JRS defined benefit OPEB plan as of the measurement date,
June 30, 2020 are below (in thousands):
Increase (Decrease)
Total OPEB Plan Net OPEB
Liability Fiduciary Net asset
(a) Position (b) (a)-(b)
Balances at June 30, 2019 $ 17,962 $ 33,092 §$ (15,130)
Changes for the year:
Service Cost 758 — 758
Interest 1,340 — 1,340
Difference between expected and actual experience 224 — 224
Changes of assumptions (2,361) — (2,361)
EGWP rebates 109 109 —
Pharmacy Rebates — 202 (202)
Other — 24 (24)
ASO fees — (45) 45
Contributions - employer — 730 (730)
Net investment income — 1,378 (1,378)
Benefit payments, including refunds of employee contributions (1,268) (1,425) 157
Administrative expense — (29) 29
Net Changes (1,198) 944 (2,142)
Balances at June 30, 2020 $ 16,764 $ 34,036 §$ (17,272)
NON-STATE ADMINISTERED SINGLE EMPLOYER PLANS
The Alaska Railroad Corporation (ARRC) is a component unit of the State of Alaska. The ARRC has a single-employer defined
benefit retiree health care plan administered by the Nonrepresented Tax Deferred Savings, 457 and Health Care Trust Plan
Committee covering nonrepresented and Alaska Railroad Workers represented employees, who became employed prior to
November 4, 2014. The plan also covers regular represented employees covered under the American Train Dispatchers
Association or other represented employees hired before March 4, 2016 for United Transportation Union; April 2, 2015 for
Carmen's Division of Transportation Communication International Union; and April 26, 2016 for International Brotherhood of
Teamsters 959, and June 28, 2019 for American Train Dispatchers Association as specified in the labor agreements.
The net OPEB asset was measured as of December 31, 2020, and the total OPEB liability used to calculate the net OPEB asset
was determined by an actuarial valuation as of January 1, 2020. The actuarial valuation used the following actuarial
assumptions:
Actuarial Assumption December 31, 2020
Discount Rate 6.75% Based on crossover test
Inflation 2.8%
Salary increases 2.8% CPI plus merit based rates
Retirement, disablement, and termination Based on 2010-2014 experience study
Administrative expenses 0.15% of payroll, based on current year actual expenses
Participation Rates Varies from 35% to 85%
Medical Trend
Non Medicare 7.25%, decreasing to an ultimate rate of 4.0% in 2076.
Medicare 6.3%, decreasing to an ultimate rate of 4.0% in 2076.
IT- 112
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Mortality rates were based on the Society of Actuaries RP-2014 healthy annuitant mortality table adjusted 91 percent for males
and 96 percent for females and the Scale MP-2019 generational mortality improvement in longevity that management expects
to occur in the future.
The long-term expected rate of return on OPEB plan investments of 6.75 percent was determined by management using a
building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan
investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the
intermediate-term and long-term expected rates of return by weighting the expected future real rates of return by the target asset
allocation percentage and by adding expected inflation. The target allocation and best estimates of geometric real rates of return
for each major asset class are summarized in the following table:
Long-term Long-term
Target expected real expected real
Asset Class allocation rate of return rate of return
Cash —% —% —%
U.S. Treasury Inflation-Protected Securities (TIPS) 5.00 2.80 1.94
Total Return Bond 30.00 2.70 2.43
Global Bond 5.00 3.05 2.43
High Yield Bond 10.00 4.72 3.88
Domestic Large Cap 15.00 4.87 6.80
Domestic Mid Cap 5.00 5.60 7.77
Domestic Small Cap 4.00 5.85 8.74
U.S. Healthcare (Equity) 5.00 5.26 7.28
International Equity 6.00 5.36 7.04
Real Estate 15.00 5.11 4.61
Total — 100.00%
The discount rate used to measure the total OPEB liability was 6.75 percent. The projection of cash flows used to determine the
discount rate assumed that employee contributions will be made at the current contribution rate, and contributions from
employers will be made based on the actuarially determined contribution rate. Based on those assumptions, the OPEB plan's
fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive
employees. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected
payments to determine the total OPEB liability.
The following presents the net OPEB liability/asset calculated as of December 31, 2020 using the discount rate of 6.75 percent,
as well as what the net OPEB liability/asset would be if it were calculated using a discount rate that is 1-percentage-point lower
or higher than the current rate (in thousands):
1% Current 1%
decrease discount rate Increase
5.75% 6.75% 7.75%
Net OPEB liability (asset) $§ (36,750) $ (39,152) $ (41,088)
The following presents the net OPEB liability/asset calculated using the medical cost trend rate of 7.25 percent (Non-Medicare)
and 6.3 percent (Medicare) beginning in 2021, decreasing to an ultimate rate of 4.0 percent in 2076+ as of December 31, 2020
as well as what the net OPEB liability/asset would be if it were calculated using a trend rate that is 1-percentage-point lower or
higher than the current rate (in thousands):
1% Medical Cost 1%
Decrease Trend Rate Increase
Net OPEB liability (asset) $§ (41,534) $ (39,152) $ (36,111)
IT- 113
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
For the year ended December 31, 2020, the ARRC recognized net OPEB income of $2.7 million and the following deferred
outflows and deferred inflows (in thousands):
Deferred
Outflows of | Deferred Inflows
Resources of Resources
Difference between expected and actual experience $ — $ 6,676
Changes in assumptions 2,597 315
Net difference between actual and projected earnings on investments — 879
Deferred outflows and inflows of resources related to OPEB will be recognized in OPEB expense or income as follows (in
thousands):
Amount
Year ending December 31,
2021 $ (813)
2022 (528)
2023 (1,346)
2024 (735)
2025 (603)
Thereafter (1,248)
$ (5,273)
IT- 114
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Changes in the net OPEB asset are as follows (in thousands):
Increase (Decrease)
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Asset
(a) (b) (a)-(b)
Balances at January 1, 2020 $ 15,681 §$ 50,914 §$ (35,233)
Changes for the year:
Service Cost 522 — 522
Interest 972 — 972
Change of benefit terms — — —
Difference between expected and actual
experience (1,205) — (1,205)
Changes in assumptions (353) — (353)
Contributions - employer — — —
Net investment income — 3,914 (3,914)
Benefit payments, net of retiree premiums (491) (491) —
Administrative expense — (59) 59
Net Changes (555) 3,364 (3,919)
Balances at December 31, 2020 $ 15,126 §$ 54,278 $ (39,152)
D. GENERAL OBLIGATION BONDS AND REVENUE BONDS AND OTHER LONG-TERM DEBT
GENERAL OBLIGATION BONDS
Under Article IX, Section 8 of the State Constitution and AS 37.15, the State Bonding Act, General Obligation Bonds must be
authorized by law and ratified by voters and generally must be issued for capital improvements. There is no statutory limit on
the amount of State General Obligation Bonds that may be authorized.
The full faith, credit, and resources of the State are pledged to secure payment of General Obligation Bonds. As of
June 30, 2021, the following were the General Obligation Bond debt outstanding (in millions):
Year Ending June 30, Principal Interest Total
2022 $ 41.1 §$ 32.6 $ 73.7
2023 42.9 30.6 73.5
2024 44.8 28.6 73.4
2025 41.9 26.5 68.4
2026 43.7 24.3 68.0
2027-2031 230.7 86.0 316.7
2032-2036 178.9 29.5 208.4
2037-2041 39.0 4.2 43.2
2042-2046 — — —
Total debt service requirements 663.0 $ 262.3 $§$ 925.3
Unamortized bond premium 62.1
Total principal outstanding $ 725.1
The General Obligation Bond Series 2009A Bonds were issued for the purpose of paying $165 million of the costs of State
transportation projects. The Series 2010 A and B Bonds were issued for the purpose of paying $164.57 million of the costs of
State education projects. The Series 2012A Bonds were issued for the purpose of refunding $191.41 million on the 2003A
Series Bonds resulting in an economic gain of $27.1 million and an aggregate difference in debt service of $33.0 million. The
Series 2013 A and B Bonds were issued for the purpose of paying $162.48 million of the costs of State education projects. The
T-115
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Series 2015B Bonds were issued for the purpose of refunding $100.62 million on the 2009A Series Bonds resulting in an
economic gain of $7.5 million and an aggregate difference in debt service of $8.8 million. The Series 2016A bonds were issued
for the purpose of long-term financing, over short-term financing, of $155.2 million of the costs of State transportation projects.
The Series 2016B bonds were issued for the purpose of paying $128.3 million of the costs of State transportation projects. The
Series 2020A bonds were issued for the purpose of paying $84.56 million of the costs of State transportation projects.
Federal subsidies related to the interest payments made during the year on the bonds were $4.9 million.
At June 30, 2021, the amount of General Obligation Bonds authorized was $1,015.7 million with $1,015.7 million issued.
REVENUE BONDS AND OTHER LONG-TERM DEBT
As of June 30, 2021, the following were the revenue bonds and other long-term debt outstanding (in millions):
Business-Type
Governmental Activities Activities
Notes from Direct
Borrowings and
Bonds Direct Placements Bonds
Year Ending June 30 Principal Interest Principal Interest Principal _ Interest
2022 $ — $ 142 § 2.8 §$ — $ 146 13.8
2023 2.9 14.2 1.0 — 17.4 12.9
2024 5.9 14.1 — — 16.2 12.0
2025 6.5 13.8 — — 16.9 11.2
2026 6.6 13.5 — — 17.7 10.4
2027-2031 41.2 62.0 — — 106.0 39.8
2032-2036 54.2 50.4 — — 130.6 17.8
2037-2041 71.2 35.3 — — — —
2042-2046 108.8 15.1 — — — —
2047-2051 — — — — — —
Total debt service requirements 297.3 $ 232.6 $ 3.8 $ — 319.4 $ 117.9
Unamortized bond (discounts)/ —
premiums (4.6) 19.6
Plus accreted value 17.9 —
Total principal outstanding $ 310.6 $ 339.0
Northern Tobacco Securitization Corporation Revenue Bonds
The governmental activities revenue bonds include bond issuances by the Northern Tobacco Securitization Corporation
(NTSC). The NTSC bonds were issued to purchase the right to a share of Tobacco Settlement Revenues (TSRs) received by the
State of Alaska. These revenue bonds are secured by and payable solely from the TSRs and investment earnings pledged under
the respective bond indentures and amounts established and held in accordance with those bond indentures. Neither Alaska
Housing Finance Corporation nor the State of Alaska is liable for any debt issued by NTSC. NTSC revenue bond total at June
30, 2021 includes $297.3 million in principal, $232.6 million in interest, $(4.6) million in unamortized discount, and $17.9
million in accreted value on the Series 2006B and Series 2006C Bonds. This debt is reported in the Governmental Activities
column of the Government-wide Statement of Net Position.
Alaska Sport Fishing Revenue Bonds
The State of Alaska Sport Fishing Revenue Bonds Series 2006 were issued under Article 5A of Chapter 15 of Title 37 of the
Alaska Statutes. The bonds were issued to provide a portion of the funds necessary to finance the construction and renovation
of fisheries rehabilitation, enhancement and development projects that benefit sport fishing. These revenue bonds are special,
limited obligations of the State secured by and payable from the sport fishing facilities surcharge imposed under AS 16.05.340
and from funds received from the federal government which by their terms are not restricted in use and legally available for the
I- 116
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
payment for debt service on Parity Bonds. The bonds are not general obligations of the State, and the State does not pledge its
full faith and credit to the payment of the bonds. On July 10, 2020, the State of Alaska used $1.8 million to optionally redeem
and pay accrued interest on 2011 Sport Fishing Revenue Bonds. This optional redemption resulted in the redemption of all
outstanding 2011 Sport Fishing Revenue Bonds.
Internal Service Fund Direct Borrowing
The Public Building Fund and the Information Service Fund both had direct borrowing activity. Both agreements state that if
there is an event of default, notwithstanding any return of the subject property, the agency shall pay upon demand all remaining
amounts due and anticipated to be due during the current fiscal year.
International Airports Revenue Bonds
The business activities revenue bonds include bond issuances by the International Airports Fund. Gross revenues derived from
the operation of the international airports at Anchorage and Fairbanks are pledged to secure the payment of principal and
interest on International Airports Revenue Bonds. This debt is reported in the Business-type Activities column of the
Government-wide Statement of Net Position. There are $23.2 million of bonds authorized by the Alaska Legislature that have
not been issued. During FY 2021 International Airports paid $13.9 million of bonds that had matured. At June 30, 2021 there
was no bond interest arbitrage rebate liability. Federal subsidies related to the interest payments made during the year on Build
American Bonds were $404.8 thousand. International Airports Revenue Bond total at year end includes $319.4 million in
principal, $117.9 million in interest and $19.6 million in unamortized premiums/discounts and deferred gains/losses.
E. CAPITAL AND OPERATING LEASES
A summary of noncancellable operating and capital lease commitments to maturity are (in millions):
Governmental Activities Operating Capital Leases
Year Ending June 30 Leases Principal Interest Total
2022 $ 33.5 $ 21.7 $ 9.9 § 31.6
2023 24.2 18.2 8.9 27.1
2024 21.5 16.9 8.1 25.0
2025 15.5 16.0 7.3 23.3
2026 12.8 16.4 6.5 22.9
2027-2031 38.0 87.6 18.8 106.4
2032-2036 74 34.4 1.8 36.2
2037-2041 1.7 — — —
2042-2046 0.3 — — —
2047-2051 0.3 — — —
2052-2056 0.3 — — —
2057-2061 0.3 — — —
2062-2066 0.3 — — —
2067-2071 1.6 — — —
Total $ 157.7, $ 211.2 $ 613 §$ 272.5
Leases at June 30, 2021 are reported by the State of Alaska within Governmental Activities and Business-Type Activities, as
applicable.
The State leases office facilities, office and computer equipment, and other assets under a variety of agreements. Although lease
terms vary, most leases are subject to appropriation from the state Legislature to continue the obligation. If the possibility of
receiving no funding from the Legislature is remote, leases are considered noncancelable for financial reporting purposes.
Leases that represent acquisitions are classified as capital leases, and the related assets and liabilities are recorded in the
financial records at the inception of the lease. Amortization of assets acquired under capital lease is included with depreciation
expense. Other leases are classified as operating leases with the lease payments recorded as expenditures or expenses during the
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STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
life of the lease. Certain operating leases are renewable for specified periods. In most cases, management expects that the leases
will be renewed or replaced by other leases.
Buildings and equipment under capital leases as of June 30, 2021 include the following (in thousands):
Governmental Business-Type
Activities Activities
Buildings $ 461,227 $ —
Equipment 15,893 —
Less: Accumulated Depreciation (161,422) —
$ 315,698 $ =
F. CERTIFICATES OF PARTICIPATION
The State has lease purchase agreements funded through certificates of participation (COPs). These leases are for the purchase
or construction of buildings. Third-party leasing companies assigned their interest in the lease to underwriters, which issued
certificates for the funding of these obligations. The COPs represent an ownership interest of the certificate holder in a lease
purchase agreement. While the State is liable for lease payments to the underwriters, the State is not liable for payments to
holders of the certificates.
The following schedule presents future minimum payments as of June 30, 2021 (in millions):
Governmental Activities Certificates of Participation
Year Ending June 30 Principal Interest Total
2022 $ 2.2 $ 10 $ 3.2
2023 2.5 0.8 3.3
2024 2.6 0.7 3.3
2025 2.7 0.6 3.3
2026 2.9 0.5 3.4
2027-2031 9.2 0.8 10.0
2032-2036 — — —
Total $ 22.1 $ 44 $ 26.5
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STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
G. DISCRETELY PRESENTED COMPONENT UNITS
Debt service requirements are (in millions):
Notes from Direct Borrowings
Bonds and Direct Placements
Year Ending June 30 Principal Interest Principal Interest
2022 $ 210.0 $ 122.6 §$ 3.0 §$ 0.8
2023 191.5 114.2 3.1 0.7
2024 196.8 118.7 2.1 0.6
2025 173.2 102.6 1.9 0.5
2026 160.1 95.9 1.9 0.5
2027-2031 1,025.1 374.3 9.6 1.4
2032-2036 781.4 190.9 2.9 0.1
2037-2041 458.0 89.3 — —
2042-2046 353.4 25.2 — —
2047-2051 183.5 2.1 — —
2052-2056 — — — —
Total debt service requirements 3,733.0 §$ 1,235.8 $ 245 § 4.6
Unamortized (discounts)/premiums 114.8
Unamortized swap termination
penalty (4.1)
Total principal outstanding $ 3,843.7
The preceding table does not include $390 thousand of Alaska Energy Authority bond arbitrage interest payable.
The preceding schedule excluded conduit debt of the Alaska Municipal Bond Bank Authority. Under the Coastal Energy Loan
Program, the Authority issued $5 million 1986 Series A Coastal Energy Bonds payable to the National Oceanic and
Atmospheric Administration (NOAA). The proceeds of the bonds were used to purchase port revenue bonds from the City of
Nome. The City of Nome entered into a tripartite agreement with NOAA and the Authority effective August 2, 1994 to defer
payment of the principal and accrual of interest for ten years. Effective January 29, 2009 a second amendment to the tripartite
agreement was executed. The amendment authorized the issuance of 2009A Bonds for the purpose of refunding by exchange
the outstanding City of Nome, Alaska, Port Revenue Bond 1986 Series A. As of June 30, 2021 the aggregate amount
outstanding for conduit debt obligations was $3.6 million.
The Alaska Municipal Bond Bank Authority issued $6.6 million 1987 Series A Coastal Energy Bonds payable to NOAA. The
proceeds of these bonds were used to purchase port revenue bonds from the City of St. Paul. The City of St. Paul entered into a
tripartite agreement with NOAA and the Authority effective December 14, 2000 to modify and defer payment. As of
June 30, 2021 the aggregate amount outstanding for the City of St. Paul conduit debt obligations was $6.0 million.
The preceding schedule excluded conduit debt of the Alaska Industrial Development and Export Authority. AIDEA has a
standalone revenue bond program wherein AIDEA acts as a conduit to facilitate a market financing transaction for facilities
owned by and paid for by third parties. At June 30, 2021 AIDEA had issued conduit revenue bonds for 321 projects (not
including bonds issued to refund other bonds). At June 30, 2021, the outstanding principal amount of conduit revenue bonds
issued after July 1, 1995 was $471.4 million. AIDEA is unable to determine the aggregate amount outstanding for the
remaining conduit revenue bonds, issued prior to July 1, 1995, but their original issue amounts totaled $616 million for a total
of $1.68 billion issued through June 30, 2021 (not including bonds issued to refund other bonds).
The preceding schedule excluded conduit debt of the Alaska Housing Finance Corporation. AHFC has issued debt to assist
private sector entities in the acquisition or construction of facilities that help the Corporation fulfill its mission of making
housing affordable for all Alaskans. The bonds are secured by the properties financed and are payable from rents, payments
received on the underlying mortgage loans, as well as tax credits, grants and other subsidy funding. Neither the Corporation nor
the State is obligated in any manner for repayment of the bonds. Accordingly, the bonds and any related assets are not reported
as assets or liabilities in the accompanying financial statements.
I- 119
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
A summary of the all AHFC conduit debt as of June 30, 2021 follows (in thousands):
Remaining
Maximum Balance as of Authority as of
Issue Amount June 30,2021 June 30, 2021
Revenue bonds, 2021 (Spenard East Phase I Project) $ 7,500 $ 50 $ 7,450
Revenue bonds, 2021 (Jewel Lake Apt Project) 19,000 19,000 —
Revenue bonds, 2020 (Old Mat Phase I Project) 3,800 50 3,750
Revenue bonds, 2020 (West 32nd Ave Project) 3,500 2,866 634
Revenue bonds, 2020 (Spruce View Apt Project) 9,500 6,837 2,663
Total $ 43,300 $ 28,803 $ 14,497
H. ALASKA HOUSING FINANCE CORPORATION DERIVATIVES
The Alaska Housing Finance Corporations (AHFC) entered into derivatives to reduce the overall cost of borrowing long-term
capital and protect against the risk of rising interest rates. AHFC’s derivatives consist of interest rate swap agreements entered
into in connection with its long-term variable rate bonds. The interest rate swaps are pay-fixed, receive-variable agreements,
and were entered into at a cost less than what AHFC would have paid to issue conventional fixed-rate debt.
The swaps are recorded and disclosed as either hedging derivatives or investment derivatives. The synthetic instrument method
was used to determine whether or not the derivatives constitute effective hedges. The fair values of the hedgeable derivatives
and investment derivatives are presented in the Statement of Net Position, either as a derivative liability (negative fair value
amount) or as a derivative asset (positive fair value amount). If a swap changes from a hedgeable derivative to an investment
derivative, the hedge is considered terminated and the accumulated change in fair value is no longer deferred but recognized as
a revenue item.
AHFC categorizes its fair value measurements within the fair value hierarchy established by Generally Accepted Accounting
Principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted
prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant
unobservable inputs.
The fair value amounts, obtained from mark to market statements from the respective counterparties and reconciled to present
value calculations done by AHFC, represent mid-market valuations that approximate the current economic value using market
averages, reference rates, and/or mathematical models. These measurements are Level 2 inputs. Actual trade prices may vary
significantly from these estimates as a result of various factors, which may include (but are not limited to) portfolio
composition, current trading intentions, prevailing credit spreads, market liquidity, hedging costs and risks, position size,
transaction and financing costs, and the use of capital profit. The fair value represents the current price to settle swap assets or
liabilities in the marketplace if a swap were to be terminated.
AHFC’s interest rate swaps require that if the ratings on the associated bonds fall to "BBB+/Baal", AHFC would have to post
collateral of up to 100 percent of the swap’s fair value. As of June 30, 2021, AHFC had not posted any collateral and was not
required to post any collateral.
I- 120
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
HEDGING DERIVATIVES
The significant terms and credit ratings of AHFC’s hedging derivatives as of June 30, 2021, are shown below:
Related Fixed Swap
Bond Effective Rate Variable Rate Termination Counterparty
Issue Date Paid Received Date Credit Rating’
GPOIA' = 12/1/2008 + 2.4530% 67% of 1M LIBOR* 12/1/2030 BBB+/A3
GP01B 8/2/2001 4.1427% 67% of IM LIBOR 12/1/2030 AA/Aa3
E021A1* — 10/9/2008 + 2.9800% 70% of 3M LIBOR® 6/1/2032 AA-/Aa2
SCO2C* 12/5/2002 4.3030% SIFMA% +0.115% 7/1/2022 At+/Aal
E071AB = 5/31/2007 3.7345% 70% of 3M LIBOR 12/1/2041 AA-/Aa2
E071BD = 5/31/2007 3.7200% 70% of 3M LIBOR 12/1/2041 At/Aal
E091A 5/28/2009 3.7610% 70% of 3M LIBOR 12/1/2040 At+/Aal
E091B —_5/28/2009-3.7610% 70% of 3M LIBOR 12/1/2040 AA-/Aa2
EO91ABD 5/28/2009 3.7400% 70% of 3M LIBOR 12/1/2040 At/Aal
SC14C 6/1/2019 3..2220% =100% of IM LIBOR 12/1/2029 AA-/Aa2
' Governmental Purpose Bonds
* Home Mortgage Revenue Bonds
> State Capital Project Bonds (1/ID)
* London Interbank Offered Rate ("LIBOR") | month
° London Interbank Offered Rate 3 Month
° Securities Industry and Financial Markets Municipal Swap Index
7 Standard & Poor's/Moody's
The change in fair value and ending balance of AHFC’s hedging derivatives as of June 30, 2021, is shown below (in
thousands). The fair value is reported as a deferred outflow/inflow of resources in the Statement of Net Position.
Related Fair Values Fair Values Change in
Bond Notional June 30, June 30, Fair
Issue Amounts Present Values 2021 2020 Value
GPO1A $ 34,935 §$ 38,115 $ (3,180) $ (4,745) $ 1,565
GPO1B 42,690 50,270 (7,580) (10,355) 2,775
E021A1 30,690 34,598 (3,908) (5,630) 1,722
SC02C 10,350 10,566 (216) (695) 479
E071AB 128,964 166,739 (37,775) (51,628) 13,853
E071AD 85,976 111,277 (25,301) (34,198) 8,897
E091A 69,717 89,696 (19,979) (27,363) 7,384
E091B 69,717 89,466 (19,749) (26,920) 7,171
E091ABD 92,956 119,324 (26,368) (35,591) 9,223
SC14C 140,000 163,038 (23,038) (35,421) 12,383
$ 705,995 $ 873,089 $ (167,094) $ (232,546) $ 65,452
Investment
__Issue
SCO2B $ 14,555 §$ 15,711 $ (1,156) $ (1,735) 579
Total $ 720,550 $ 888,800 §$ (168,250) $ (234,281) $ 66,031
T- 121
STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
As of June 30, 2021, debt service requirements of AHFC’s outstanding variable-rate debt and net swap payments are displayed
in the following schedule (in thousands). As interest rates vary, variable-rate bond interest payments and net swap payments
will also vary.
Outstanding Outstanding
Variable-Rate Variable-Rate
Debt Debt Swap Total
Year Ending June 30 Principal Interest Net Payment Payment
2022 $ 29,230 §$ 987 $ 24,275 §$ 54,492
2023 27,175 978 23,199 51,352
2024 24,750 971 22,296 48,017
2025 25,920 964 21,428 48,312
2026 27,115 956 20,519 48,590
2027-2031 291,010 3,412 80,834 375,256
2032-2036 125,585 320 40,987 166,892
2037-2041 146,970 124 16,007 163,101
2042-2046 8,240 2 149 8,391
$ 705,995 $ 8,714 $ 249,694 $ 964,403
Interest Rate Risk
AHFC is exposed to interest rate risk on all of its interest rate swaps. As the London Interbank Offered Rate (LIBOR) or the
Securities Industry and Financial Markets Association (SIFMA) index decreases, AHFC’s net payment on the swaps increases.
Credit Risk
As of June 30, 2021, AHFC is not exposed to credit risk on any of the swaps because the swaps all have negative fair values. If
interest rates rise and the fair value of the swaps becomes positive, AHFC would be exposed to credit risk in the amount of the
swaps’ fair value. The swap agreements contain varying collateral agreements with the counterparties and require full
collateralization of the fair value amount of the swap should the counterparty’s rating fall to BBB+/Baal. AHFC currently has
swap agreements with six separate counterparties. Approximately 32.5 percent of the total notional amount of the swaps is held
with one counterparty rated AA-/Aa2. Another 26.8 percent of the total notional amount of the swaps is held with another
counterparty rated A+/Aal and 19.8% of the total notional amount of swaps is held with another counterparty rated AA-/Aa2.
Of the remaining swaps, the counterparties are rated A+/Aal, AA/Aa3, and BBB+/A3, approximating 9.9 percent, 6.0 percent,
and 4.9 percent respectively, of the total notional amount of the swaps.
Basis Risk
All of AHFC’s variable-rate bond interest payments related to interest rate swaps are based on the tax exempt SIFMA index.
Therefore, AHFC is exposed to basis risk on swaps where the variable payment received on the swaps is based on a taxable
LIBOR index and does not fully offset the variable rate paid on the bonds. The SC02C swap is based on the SIFMA index and
thus is not exposed to any basis risk. As of June 30, 2021, SIFMA was 0.03 percent and 1 month LIBOR was 0.10 percent,
resulting in a SIFMA/LIBOR ratio of 29.85 percent. The 3 month LIBOR was 0.15 percent resulting in a SIFMA/LIBOR ratio
of 20.58 percent. The SIFMA/LIBOR ratios have fluctuated since the agreements became effective but the anticipated cost
savings from the swaps increases as the ratios decrease.
Termination Risk
Termination risk is the risk of an unscheduled termination of a swap prior to its planned maturity. If any of the swaps are
terminated, the associated floating rate bonds would no longer carry synthetic fixed interest rates and AHFC would be exposed
to interest rate risk on the bond. This risk is mitigated by the fact that the termination payment could be used to enter into an
identical swap at the termination date of the existing swap. Further, if any of the swaps have a negative fair value at termination,
AHFC would be liable to the counterparty for payments equal to the swaps’ fair value. AHFC or the counterparty may
terminate any of the swaps if the other party fails to perform under the terms of the agreement, including downgrades and
events of default.
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STATE OF ALASKA NOTE 6
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Rollover Risk
Rollover risk occurs when there is a mismatch in the amortization of the swap versus the amortization of the floating rate bonds.
AHFC has structured the swaps to amortize at the same rate as scheduled or anticipated reductions in the associated floating
rate bonds outstanding. The Home Mortgage Revenue Bonds, 2002 Series A swaps were set up in several tranches of various
sizes that can be cancelled to parallel the redemption of debt from mortgage prepayments.
INVESTMENT DERIVATIVE
The State Capital Project Bonds, 2002 Series B, were fully redeemed in fiscal year 2009, so the associated interest rate swap
was no longer a hedging derivative and is accounted for as an investment derivative.
The significant terms and credit ratings of AHFC’s investment derivatives as of June 30, 2021, are shown below:
Related Fixed SWAP
Bond Effective Rate Variable Rate Termination Counterparty
Issue Dates Paid Received Date Credit Rating
SC02B 12/5/2002 3.77% 70% of IM LIBOR 7/1/2024 At+/Aal
The change in fair value of the investment derivatives as of June 30, 2021, is shown below (in thousands) and is presented on
the net change of hedge termination line in the Statement of Revenues, Expenses, and Changes in Net Position.
Related Fair Values Fair Values Changes in
Bond Notional Present June 30, June 30, Fair
Issue Amounts Values 2021 2020 Value
SC02B $ 14,555 §$ 15,711 $ (1,156) $ (1,735) $ 579
Credit Risk
As of June 30, 2021, AHFC was not exposed to credit risk on this outstanding swap because the swap had a negative fair value.
If interest rates rise and the fair value of the swap becomes positive, AHFC would be exposed to credit risk in the amount of the
swaps’ fair value. The swap agreement requires the counterparty to fully collateralize the fair value amount of the swap should
the counterparty’s rating fall to BBB+/Baal. The counterparty on this swap is rated A+/Aal.
I - 123
STATE OF ALASKA NOTE 7
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
NOTE 7 —- DEFINED BENEFIT PENSION PLANS
DESCRIPTION OF PLANS
The Public Employees’ Retirement System - Defined Benefit (PERS-DB)
PERS-DB is a defined benefit, cost-sharing, multiple-employer public employee retirement plan established and administered
by the State to provide pension and postemployment healthcare benefits for eligible State and local government public
employees and public organizations. Benefit and contribution provisions are established by Chapter 35 of Alaska Statute Title
39, and may be amended only by the state legislature. The 24" Alaska State Legislature enacted into law Senate Bill 141, which
closed the PERS-DB to new members effective July 1, 2006, and created a Public Employees’ Retirement System Defined
Contribution Retirement Plan (PERS-DCR). Information regarding PERS-DCR is disclosed in Note 8.
Prior to July 1, 2008, PERS was a defined benefit, agent, multiple-employer public employee retirement plan. The Alaska
Legislature passed Senate Bill 125, which was signed by the Governor on April 2, 2008. This law converted the PERS to a
cost-sharing plan under which the unfunded liability will be shared among all employers. This legislation also established a
uniform contribution rate of 22 percent of participating employees’ covered payroll.
Prior to July 1, 1997, postemployment healthcare benefits were provided by the payment of premiums to an insurance
company. Beginning July 1, 1997, the Retiree Health Fund (RHF), another agency enterprise fund of the State, was established.
The RHF is self-funded and originally provided major medical, dental, vision, audio, and long-term care coverage to retirees of
the PERS-DB, the Teacher’s Retirement System - Defined Benefit (TRS-DB), and the Judicial Retirement System (JRS) plans.
Due to the establishment of the Alaska Retiree Healthcare Trust (ARHCT) effective July 1, 2007, the RHF now provides major
medical coverage to those retirees and their dependents not eligible to participate in the ARHCT, along with optional dental,
vision, audio, and voluntary long-term care insurance coverage to all retirees and their dependents in these plans. The plan
retains the risk of loss of allowable claims. The RHF issues a financial report that may be obtained from the Division of
Retirement and Benefits, P.O. Box 110203, Juneau, AK 99811-0203.
The PERS-DB Plan is a plan within the Public Employees’ Retirement System (PERS). PERS is a component unit of the State
of Alaska financial reporting entity. PERS includes the PERS-DB and ARHCT. Senate Bill 123 was passed during the 2007
legislative session and created the ARHCT. ARHCT is self-funded and provides major medical coverage to retirees of PERS.
PERS retains the risk of loss of allowable claims for eligible members. ARHCT began paying member healthcare claims on
March 1, 2008. Prior to that time, healthcare claims were paid for by the RHF.
The PERS component unit is comprised of the PERS-DB, PERS-DCR Plans, and the ARHCT. PERS issues a separate stand-
alone financial report that includes financial statements and required supplementary information. PERS is also reported as a
pension (and other employee benefit) trust fund by the State. Participants should refer to the plan agreement for more complete
information. Copies of the audited financial statements and reports listing "Information Required Under Governmental
Accounting Standards Board Statement Nos. 68 and 75 as of June 30, 2021", may be obtained from the Division of Retirement
and Benefits, P.O. Box 110203, Juneau, AK 99811-0203 or from their website at http://doa.alaska.gov/drb/.
For purposes of measuring the net pension liability, net other post employment benefit liability (OPEB), deferred outflows of
resources and deferred inflows of resources related to pensions and OPEB liability, and pension and OPEB expense,
information about the fiduciary net position of the PERS defined benefits plans (the Plans) and additions to/deductions from the
Plans’ fiduciary net position have been determined on the same basis as they are reported by the Plans. Contributions are due to
the Plans when employee services have been performed and paid. Contributions are recognized as revenues when due pursuant
to statutory requirements. Benefits and refunds are recognized when due and payable and expenses are recorded when the
corresponding liabilities are incurred, regardless of when contributions are received, or payment is made. The Plans own shares
in various investment pools that are administered by the State of Alaska, Department of Revenue, Division of Treasury
(Treasury). The Plans’ investment in the pools, except for the Short-term Fixed Income Pool, is reported at fair value based on
the net asset value reported by the Treasury. The Short-term Fixed Income Pool maintains a share price of $1. Each participant
owns shares in the pool, the number of which fluctuates daily with contributions and withdrawals. Additional information about
the Plans’ fiduciary net position can be found in the Plans’ audited financial statements.
I- 124
STATE OF ALASKA NOTE 7
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
As of June 30, 2021, the number of PERS participating employers were:
State of Alaska 1
Municipalities 72
School Districts 52
Other 25
Total Employers 150
Members hired prior to July 1, 1986, with five or more paid-up years of credited service, are entitled to monthly pension
benefits beginning at normal retirement age, 55, or early retirement age, 50. For members hired after June 30, 1986, the normal
and early retirement ages are 60 and 55, respectively. Members with 30 or more years of credited service (20 years for peace
officers and firefighters) may retire at any age and receive a normal benefit.
The normal monthly pension benefit is based on years of service and average monthly compensation. For members hired prior
to July 1, 1996, and all peace officers and firefighters, the average monthly compensation is based upon the member’s three
highest, consecutive years’ salaries. For all other members hired after June 30, 1996, average monthly compensation is based
upon the members’ five highest consecutive years’ salaries.
The benefit related to all years of service prior to July 1, 1986, and for years of service through a total of 10 years for general
members is equal to 2 percent of the member’s average monthly compensation for each year of service. The benefit for each
year over 10 years of service subsequent to June 30, 1986, is equal to 2.25 percent of the member’s average monthly
compensation for the second 10 years and 2.5 percent for all remaining years of service. For peace officers and firefighters, the
benefit for years of service through a total of 10 years is equal to 2 percent of the member’s average monthly compensation and
2.5 percent for all remaining years of service.
PERS-DB has two types of postretirement pension adjustment (PRPA). The automatic PRPA is issued annually to all eligible
benefit recipients when the cost of living increases in the previous calendar year. The automatic PRPA increase is paid
beginning July 1 of each year. The discretionary PRPA may be granted to eligible recipients by the PERS-DB Plan’s
Administrator if the funding ratio of the PERS-DB Plan meets or exceeds 105 percent. If both an automatic and discretionary
PRPA are granted, and a retiree is eligible for both adjustments, the one that provides the retiree the greater increase will be
paid.
PERS-DB employee contribution rates are 6.75 percent of compensation (7.5 percent for peace officers and firefighters and
9.6 percent for some school district employees). Employee contributions are deducted before federal income tax is withheld.
The PERS-DB funding policy provides for periodic employer contributions at actuarially determined rates that, expressed as
percentages of annual-covered payroll, are sufficient to accumulate assets to pay both pension and postemployment healthcare
benefits when due. Employer contributions are accumulated in both the pension and the healthcare funds based on the approved
contribution rate for the fiscal year. The employer rate for the State of Alaska for the year ended June 30, 2021, was capped at
22 percent of compensation.
The State’s employer contributions to PERS-DB for the fiscal years ended June 30, 2021, 2020, and 2019 were $215.8. $213.9,
and $221.8 million respectively for the year. For the FY 2021 contributions, $175.3 million ($155.0 million for the primary
government and $20.3 million for the discretely presented component units) was for pensions and $40.5 million ($34.5 million
for the primary government and $5.9 million for the discretely presented component units) was for postemployment benefits.
The contributions were equal to the required contributions in FY 2021.
Alaska Statute 39.35.280 requires that additional state contributions are to be paid each July | or as soon after July 1 as funds
become available for the ensuing fiscal year that when combined with the total employer contributions is sufficient to pay the
PERS-DB past service liability at the contribution rate adopted by the Alaska Retirement Management Board (ARMB) for that
fiscal year. Additionally, there is a Defined Benefit Unfunded Liability (DBUL) amount levied against the Defined
Contribution Retirement Pension Plan payroll. The DBUL amount is computed as the difference between:
A. The amount calculated for the statutory employer effective contribution rate of 22 percent on eligible salary less
B. The total of the employer contributions for:
a. The defined contribution employer matching amount;
b. Major medical;
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STATE OF ALASKA NOTE 7
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
c. Occupational death and disability; and
d. Health reimbursement arrangement.
The difference is deposited based on an actuarial allocation into the DB Plan’s pension and healthcare funds. For FY 2021, the
DBUL is allocated 100 percent to the DB Pension Plan and 0 percent to the DB ARHCT Plan.
The 31st Alaska State Legislature, HB205 2020 Section 41(a) appropriated $203.6 million from the General Fund to PERS-
DB as an additional state contribution for FY 2021. The portion of this payment attributable to State of Alaska employers is
$114.2 million ($102.2 million for the primary government as an employer contribution and $12.0 million for the discretely
presented component units as nonemployer contributions) for pensions.
Postemployment healthcare benefits are provided to retirees and their surviving spouses without premium cost for all
employees first hired before July 1, 1986, and employees who are disabled, regardless of initial hire dates. Employees first
hired on or after July 1, 1986, and their surviving spouses with five years of credited service (or 10 years of credited service for
those first hired after July 1, 1996) must pay the full monthly premium if they are under age 60, and receive benefits at no
premium cost if they are over age 60. Members hired on or after June 30, 1996 with between 5 and 10 years of credited service
must pay the full monthly premium regardless of their age. Members hired after June 30, 1986 with less than five years of
credited service are not eligible for postemployment healthcare benefits. Members hired after June 30, 1986, but before June 30,
1996, who are receiving a conditional benefit, and are age eligible, are eligible for postemployment healthcare benefits. Peace
officers and their surviving spouses with 25 years of membership and all other employees and their surviving spouses with 30
years of membership service also receive benefits at no premium cost, regardless of their age or date of hire. Peace officers who
are disabled between 20 and 25 years must pay the full monthly premium.
The components of the net pension liability/(asset) of the participating employers at June 30, 2021, were as follows (in
thousands):
Total Pension Liability $15,580,808
Plan Fiduciary Net Position (11,912,309)
Employers’ Net Pension Liability (Asset) $ 3,668,499
Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 76.46 %
The components of the net OPEB liability/(asset) of the participating employers at June 30, 2021, were as follows (in
thousands):
Total OPEB Liability $ 7,218,787
Plan Fiduciary Net Position (9,784,141)
Employers' Net OPEB Liability (Asset) $ (2,565,354)
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 135.54 %
The Teachers’ Retirement System - Defined Benefit (TRS-DB)
TRS-DB is a defined benefit, cost-sharing, multiple-employer public employee retirement plan established and administered by
the State to provide pension and postemployment healthcare benefits for teachers and other eligible participants. Benefit and
contribution provisions are established by Chapter 25 of Alaska Statute Title 14 and may be amended only by the state
legislature. TRS-DB provides for normal pension benefits, as well as death, disability, and postemployment healthcare benefits.
The 24" Alaska State Legislature enacted into law Senate Bill 141, which closed the TRS-DB to new members effective
July 1, 2006, and created a Teachers’ Retirement System Defined Contribution Retirement Plan (TRS-DCR). Information
regarding TRS-DCR is disclosed in Note 8.
Prior to July 1, 1997, postemployment healthcare benefits were provided by the payment of premiums to an insurance
company. Beginning July 1, 1997, the RHF, an other agency enterprise fund of the State, was established. The RHF is self-
funded and originally provided major medical, dental, vision, audio, and long-term care coverage to retirees of the PERS-DB,
TRS-DB, and JRS plans. Due to the establishment of the ARHCT, effective July 1, 2007, the RHF now provides major medical
I - 126
STATE OF ALASKA NOTE 7
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
coverage to those retirees and their dependents not eligible to participate in the ARHCT, along with optional dental, vision,
audio, and voluntary long-term care insurance coverage to all retirees and their dependents in these plans. The plan retains the
risk of loss of allowable claims. The RHF issues a financial report that may be obtained from the Division of Retirement and
Benefits, P.O. Box 110203, Juneau, AK 99811-0203.
The TRS-DB Plan is a plan within the Teachers’ Retirement System (TRS). TRS is a component unit of the State of Alaska
financial reporting entity. TRS includes the TRS-DB and the ARHCT Fund. Senate Bill 123 was passed during the 2007
legislative session and created the ARHCT. ARHCT is self-funded and provides major medical coverage to retirees of TRS.
TRS retains the risk of loss of allowable claims for eligible members. ARHCT began paying member healthcare claims on
March 1, 2008. Prior to that time, healthcare claims were paid for by the RHF.
The TRS component unit is comprised of the TRS-DB, TRS-DCR plans, and ARHCT. TRS issues a separate stand-alone
financial report that includes financial statements and required supplementary information. TRS is also reported as a pension
(and other employee benefit) trust fund by the State. Participants should refer to the plan agreement for more complete
information. Copies of the audited financial statements and reports listing "Information Required Under Governmental
Accounting Standards Board Statement Nos. 68 and 75 as of June 30, 2021", may be obtained from the Division of Retirement
and Benefits, P.O. Box 110203, Juneau, AK 99811-0203 or from their website at http://doa.alaska.gov/drb/.
For purposes of measuring the net pension liability, net OPEB liability, deferred outflows of resources and deferred inflows of
resources related to pensions and OPEB liability, and pension and OPEB expense, information about the fiduciary net position
of the TRS defined benefits plans (the Plans) and additions to/deductions from the Plans’ fiduciary net position have been
determined on the same basis as they are reported by the Plans. Contributions are due to the Plans when employee services have
been performed and paid. Contributions are recognized as revenues when due pursuant to statutory requirements. Benefits and
refunds are recognized when due and payable and expenses are recorded when the corresponding liabilities are incurred,
regardless of when contributions are received, or payment is made. The Plans own shares in various investment pools that are
administered by the State of Alaska, Department of Revenue, Treasury. The Plans’ investment in the pools, except for the
Short-term Fixed Income Pool, is reported at fair value based on the net asset value reported by the Treasury. The Short-term
Fixed Income Pool maintains a share price of $1. Each participant owns shares in the pool, the number of which fluctuates daily
with contributions and withdrawals. Additional information about the Plans' fiduciary net position can be found in the Plans'
audited financial statements.
As of June 30, 2021, the number of participating employers were:
State of Alaska 1
School Districts 53
Other 3
Total Employers 57
Vested members hired prior to July 1, 1990, are entitled to pension benefits beginning at normal retirement age, 55, or early
retirement age, 50. For members hired after June 30, 1990, the normal and early retirement ages are 60 and 55, respectively.
Members may also retire at any age and receive a normal benefit when they accumulate the required credited service.
The normal annual pension benefit is based on years of service and average base salary. The average base salary is based upon
the member’s three highest contract years’ salaries.
The benefit related to all years of credited service prior to July 1, 1990, and for years of service through a total of 20 years equal
to 2 percent of the employee’s average base salary. The benefit for each year over 20 years of service subsequent to
June 30, 1990, is equal to 2.5 percent of the employee’s base salary.
TRS-DB has two types of postretirement pension adjustment (PRPA). The automatic PRPA is issued annually to all eligible
benefit recipients, when the cost of living increases in the previous calendar year. The automatic PRPA increase is paid
beginning July 1 of each year. The discretionary PRPA may be granted to eligible recipients by the TRS-DB Plan’s
administrator if the funding ratio of the TRS-DB Plan meets or exceeds 105 percent. If both an automatic and discretionary
PRPA are granted, and a retiree is eligible for both adjustments, the one that provides the retiree the greater increase will be
paid.
TRS-DB Plan members contribute 8.65 percent of their base salary, as required by statute. The employee contributions are
deducted before federal income tax is withheld.
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STATE OF ALASKA NOTE 7
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The TRS funding policy provides for periodic employer contributions at actuarially determined rates that, expressed as
percentages of annual-covered payroll, as an amount that, when combined, is expected to finance the costs of benefits earned by
plan members during the year, with an additional amount to finance any unfunded accrued liability. The employer rate for the
State of Alaska for the year ended June 30, 2021, was 12.56 percent of compensation. Employer contributions are accumulated
in both the pension and healthcare funds based on the approved contribution rate for the fiscal year. Additionally, there is a
Defined Benefit Unfunded Liability amount levied against the Defined Contributions Retirement Pension Plan payroll.
The State’s employer contributions to TRS-DB for the fiscal years ended June 30, 2021, 2020, and 2019 were $2.7, $2.8, and
$3.1 million respectively, equal to the required contributions for each year. For the FY 2021 contributions, $1.4 million
($0.2 million for the primary government and $1.2 million for the discretely presented component units) was for pensions and
$1.3 million was for postemployment benefits ($0.2 million for the primary government and $1.1 million for the discretely
presented component units). The contributions were equal to the required contributions in FY 2021.
Alaska Statute 14.25.085 requires that additional state contributions are to be paid each July | or as soon after July 1 as funds
become available for the ensuing fiscal year that when combined with the total employer contributions is sufficient to pay the
TRS-DB past service liability at the contribution rate adopted by the ARMB for that fiscal year.
The 31st Alaska State Legislature, HB205 2020 Section 41(b) appropriated $135.0 million from the General Fund to the TRS-
DB as an additional state contribution for FY 2021. The portion of this payment attributable to State of Alaska employers is
$5.4 million ($0.9 million for the primary government as an employer contribution and $4.5 million for the discretely presented
component units as nonemployer contributions) for pensions.
Postemployment healthcare benefits are provided when pension benefits begin, without cost to all employees first hired before
July 1, 1990, employees hired after July 1, 1990, with 25 years of membership service, and employees who are disabled or age
60 or older, regardless of initial hire dates. Employees first hired after June 30, 1990, may receive postemployment healthcare
benefits prior to age 60 by paying premiums.
The components of the net pension liability/(asset) of the participating employers at June 30, 2021, were as follows (in
thousands):
Total Pension Liability $ 7,527,454
Plan Fiduciary Net Position (6,731,481)
Employers' Net Pension Liability (Asset) $ 795,973
Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 89.43 %
The component of the net OPEB liability/(asset) of the participating employers at June 30, 2021, were as follows (in
thousands):
Total OPEB Liability $ 2,560,350
Plan Fiduciary Net Position (3,723,031)
Employers' Net OPEB Liability (Asset) $ (1,162,681)
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 145.41 %
The Judicial Retirement System (JRS)
JRS is a defined benefit, single-employer retirement plan established and administered by the State to provide pension and
postemployment healthcare benefits for eligible state judges and justices.
Prior to July 1, 1997, postemployment healthcare benefits were provided by the payment of premiums to an insurance
company. Beginning July 1, 1997, the RHF, an other agency enterprise fund of the State, was established. The RHF is self-
funded and originally provided major medical, dental, vision, audio, and long-term care coverage to retirees of the PERS-DB,
TRS-DB, and JRS Plans. Due to the establishment of the ARHCT, effective July 1, 2007, the RHF now provides major medical
coverage to those retirees and their dependents not eligible to participate in the ARHCT, along with optional dental, vision,
audio, and voluntary long-term care insurance coverage to all retirees and their dependents in these plans. The plan retains the
risk of loss of allowable claims. The RHF issues a financial report that may be obtained from the Division of Retirement and
Benefits, P.O. Box 110203, Juneau, AK 99811-0203.
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STATE OF ALASKA NOTE 7
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Senate Bill 123 was passed during the 2007 legislative session and which created the ARHCT beginning July 1, 2007. The
ARHCT is self-funded and provides major medical coverage to retirees of the JRS. JRS retains the risk of loss of allowable
claims for eligible members. ARHCT began paying member healthcare claims on March 1, 2008. Prior to that time, healthcare
claims were paid for by the RHF.
JRS is considered a component unit of the State of Alaska financial reporting entity. JRS issues a separate stand-alone financial
report that includes financial statements and required supplementary information. JRS is also reported as a pension (and other
employee benefit) trust fund by the State. Copies of the audited financial statements may be obtained from the Division of
Retirement and Benefits, P.O. Box 110203, Juneau, AK 99811-0203 or from their website at http://doa.alaska.gov/drb/.
For purposes of measuring the net pension liability, net OPEB liability, deferred outflows of resources and deferred inflows of
resources related to pensions and OPEB liability, and pension and OPEB expense, information about the fiduciary net position
of the JRS defined benefits plans (the Plans) and additions to/deductions from the Plans’ fiduciary net position have been
determined on the same basis as they are reported by the Plans. Contributions are due to the Plan when employee services have
been performed and paid. Contributions are recognized as revenue when due pursuant to statutory requirements. Benefits are
recognized when due and payable and expenses are recorded when corresponding liabilities are incurred, regardless of when
contributions are received, or payment is made. The Plans own shares in various investment pools that are administered by the
State of Alaska, Department of Revenue, Treasury. The Plans’ investment in the pools, except for the Short-term Fixed Income
Pool, is reported at fair value based on the net asset value reported by the Treasury. The Short-term Fixed Income Pool
maintains a share price of $1. Each participant owns shares in the pool, the number of which fluctuates daily with contributions
and withdrawals. Additional information about the Plans’ fiduciary net position can be found in the Plans’ audited financial
statements.
Benefit and contribution provisions are established by Chapter 25 of Alaska Statute Title 22 and may be amended only by the
state legislature. JRS provides for normal pension benefits, as well as death, disability, and postemployment healthcare benefits.
Members with five or more paid-up years of credited service are entitled to annual pension benefits beginning at normal
retirement at age 60 or early retirement at age 55. Members who are under age 60 and have 20 or more years of credited service
may retire at any age and receive an actuarially reduced benefit.
The normal monthly pension benefit is based on the member’s years of service and the current authorized salary for the position
from which they retired. The pension benefit is equal to 5 percent for each year of service up to a maximum of 75 percent of the
current base salary for an active judge in the month the benefit is paid. In the event of salary increases for active judges, the
monthly pension benefit for retired judges also increases.
Upon the death of a member who has served for at least two years, the surviving spouse is entitled to receive monthly benefits
equal to one-half of the monthly retirement pay the member would have been entitled to receive if retired at the time of death. If
the member was not eligible to retire or would have been entitled to less than 60 percent of the monthly authorized salary, the
spouse is entitled to monthly benefits not less than 30 percent of the authorized salary. The benefits continue until the surviving
spouse dies.
If there is no eligible surviving spouse, the member’s surviving dependent child(ren) are entitled to receive a benefit equal to
50 percent of the above survivor’s benefit. Each child will receive an equal share of the benefit while they are dependent. If
there is no surviving spouse or dependent child(ren), the member’s beneficiary(ies) shall receive the difference between
contributions made and interest accrued in the Plan less benefits paid by the Plan.
Members who are involuntarily retired for incapacity and have a minimum of five years of service at the time of retirement for
incapacity are eligible for pension benefits.
Members contribute seven percent of their compensation to JRS, as required by statute. The contributions are deducted before
federal income tax is withheld. Contributions are not required after members have made contributions for 15 years, or from
members first appointed before July 1, 1978.
The JRS funding policy provides for periodic employer contributions at actuarially determined rates that, expressed as
percentages of annual-covered payroll, an amount that, when combined, is expected to finance the costs of both pension and
postemployment healthcare benefits earned by plan members during the year. The employer rate for the State of Alaska for the
year ended June 30, 2021, was 83.94 percent of compensation. Total employer contributions for FY 2021 were $7.0 millionfor
pensions, and $0.7 million for postemployment benefits. Included in the total employer contribution amounts is $5.1 million
appropriated in the 31st Alaska State Legislature, HB205 2020 Section 41(c) from the General Fund to JRS as an additional
state contribution for the purpose of funding the retirement system.
I- 129
STATE OF ALASKA NOTE 7
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The schedule of funding progress, presented as required supplementary information following the notes to the financial
statements, presents multiyear trend information about whether the actuarial values of plan assets are increasing or decreasing
over time relative to the actuarial accrued liabilities for benefits.
The components of the net pension liability/(asset) at June 30, 2021, were as follows (in thousands):
Total Pension Liability $ 218,717
Plan Fiduciary Net Position (245,048)
Employers’ Net Pension Liability (Asset) $ (26,331)
Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 112.04 %
The components of the net OPEB liability/(asset) at June 30, 2021, were as follows (in thousands):
Total OPEB Liability $ 17,920
Plan Fiduciary Net Position (43,173)
Employers’ Net OPEB Liability (Asset) $ (25,253)
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 240.91 %
The Alaska National Guard and Alaska Naval Militia Retirement System (NGNMRS)
NGNMRS is a defined benefit, single-employer retirement plan established and administered by the State to provide pension
benefits for eligible members of the Alaska National Guard and Alaska Naval Militia.
NGNMRS is considered a component unit of the State of Alaska financial reporting entity. NGNMRS issues a separate stand-
alone financial report that includes financial statements and required supplementary information. The plan is also reported as a
pension (and other employee benefit) trust fund by the State. Additional information on the NGNMRS plan may be obtained
from the Division of Retirement and Benefits, P.O. Box 110203, Juneau, AK 99811-0203.
For purposes of measuring the net pension asset, deferred outflows of resources and deferred inflows of resources related to the
pension asset and pension expense, information about the fiduciary net position of the NGNMRS defined benefits plan (the
Plan) and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are
reported by the Plan. Contributions are recognized as revenue when due pursuant to statutory requirements. Benefits and
refunds are recognized when due and payable and expenses are recorded when the corresponding liabilities are incurred,
regardless of when contributions are received or when payment is made. The Plan owns shares in various investment pools that
are administered by the State of Alaska, Department of Revenue, Treasury. The Plan’s investment in the pools, except for the
Short-term Fixed Income Pool, is reported at fair value based on the net asset value reported by the Treasury. The Short-term
Fixed Income Pool maintains a share price of $1. Each participant owns shares in the pool, the number of which fluctuates daily
with contributions and withdrawals.
Benefit and contribution provisions are established by Chapter 5 of Alaska Statute Title 26 and may be amended only by the
state legislature. NGNMRS provides for normal pension benefits and death benefits. Postemployment healthcare benefits are
not provided.
Members who voluntarily retire from the Alaska National Guard or Alaska Naval Militia after at least five years of Alaska
Guard service and a total of at least 20 years of U.S. military service or members who involuntarily leave the Alaska Guard
service due to federal standards imposed on the Alaska Guard, regardless of length of service, are eligible for a retirement
pension. The retirement pension is $100 per month for each month of Alaska Guard service and may be paid to the member
monthly or in a one-time lump sum.
Upon the death of an eligible member, as previously described, the member’s designated beneficiary is entitled to a lump-sum
benefit equal to the original pension amount less any payments already paid to the member.
No contributions are required from plan members. NGNMRS’s funding policy provides for periodic contributions by Alaska
Department of Military and Veterans’ Affairs at actuarially determined amounts that are sufficient to accumulate assets to pay
benefits when due. State contributions are determined using the entry age normal actuarial cost method.
I- 130
STATE OF ALASKA NOTE 7
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The 31st Alaska State Legislature, did not appropriate funds to the NGNMRS for FY 2021.
The components of the net pension liability/(asset) at June 30, 2021, were as follows (in thousands):
Total Pension Liability $ 22,655
Plan Fiduciary Net Position (49,813)
Employers’ Net Pension Liability (Asset) $ (27,158)
Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 219.88 %
ASSET VALUATION
See Note 4 for information on pension funds’ deposits and investments risk categories. The table below discloses the fair value
of each pension plan’s cash and investments. All amounts are in thousands.
Systems Fair Value
Public Employees’ Retirement System $ 21,772,904
Teachers’ Retirement System 10,488,147
Judicial Retirement System 286,774
Alaska National Guard and Alaska Naval Militia Retirement System 50,045
PERS and TRS valuation of assets: The actuarial asset value was reinitialized to equal fair value of assets as of June 30, 2014.
Beginning in FY 2015, the asset value method recognizes 20 percent of the gain or loss each year, for a period of five years. All
assets are fair value. Assets are accounted for on an accrued basis and are taken from financial statements.
JRS and NGNMRS valuation of assets: The actuarial asset value was reinitialized to equal fair value of assets as of June 30,
2006. Beginning in FY 2007, the asset value method recognizes 20 percent of the gain or loss each year, for a period of five
years. All assets are valued at fair value. Assets are accounted for on an accrued basis and are taken directly from financial
statements. Valuation assets are constrained to a range of 80 percent to 120 percent of the fair value of assets.
PLAN MEMBERSHIPS
The table below includes the plan membership counts from the separately issued financial statements for the various plans.
PERS TRS JRS = NGNMRS
Inactive plan members or beneficiaries
currently receiving benefits 36,704 13,225 144 708
Inactive plan members entitled to but
not yet receiving benefits 5,112 741 3 649
Inactive plan members not entitled to benefits 10,366 1,678 — —
Active plan members 10,066 3,492 72 3,934
Total 62,248 19,136 219 5,291
ACTUARIAL METHODS AND ASSUMPTIONS
PERS, TRS and JRS use the Entry Age Normal actuarial cost method which amortizes funding surpluses or unfunded actuarial
accrued liabilities (UAAL) over future years. The UAAL is the excess of the Actuarial Accrued Liability over the actuarial
value of plan assets measured on the valuation date. Under this method, experience gains or losses, i.e., decreases or increases
in accrued liabilities attributable to deviations in experience from the actuarial assumptions, adjust the UAAL.
Amortization occurs over a closed 25-year period as required by Alaska statutes. The closed 25-year period was originally
established effective June 30, 2014. Effective June 30, 2018, the Alaska Retirement Management Board (ARMB) adopted a
layered UAAL amortization method for PERS and TRS:
« Layer | equals the sum of the UAAL at June 30, 2018, based on the 2017 valuation plus the FY 2018 experience gain/
loss. It is amortized over the remainder of the closed 25-year period that was established in 2014.
T- 131
STATE OF ALASKA
NOTES TO THE BASIC FINANCIAL STATEMENTS
NOTE 7
FOR THE FISCAL YEAR ENDED JUNE 30, 2021
¢ Layer 2 equals the change in UAAL at June 30, 2018, due to the experience study and implementation of the Employer
Group Waiver Plan. It is amortized over a separate closed 25-year period starting in 2018.
¢ Future layers will be created each year based on the difference between actual and expected UAAL occurring that
year, and will be amortized over separate closed 25-year periods.
The UAAL amortization continues to be on a level percent of pay basis. The compensation used to determine required
contributions is the total compensation of all active members, including those hired after July 1, 2006, who are members of the
Defined benefits and Defined contribution retirement plans. The funding objective is to pay required contributions that remain
level as a percent of total compensation. This objective is currently being met and is projected to continue to be met. Absent
future gains/losses, actuarially determined contributions are expected to remain level as a percent of pay and the overall funded
status is expected to increase to 100 percent in FY 2038 for PERS, FY 2035 for TRS, and after 25 years for JRS.
The following main assumptions were used in the actuarial valuation.
Investment Equivalent Single
Rate of Actuarial Cost Amortization Amortization Valuation
System Return Method Method Period Salary Scale Increase Date
PERS 7.38% (netof Entry age Level layered periods of For Peace Officer/ 6/30/2020
investment normal; level percentage of 25 years Firefighter, increases
expenses), percentage of pay; closed range from 7.75% to
Inflation 2.50%, pay normal 2.75% based on service.
Real Return cost basis For all others, increases
4.88% range from 6.75% to
2.75% based on service.
TRS 7.38% (net of Entry age Level layered periods of Graded by service, from 6/30/2020
investment normal; level percentage of 25 years 6.75% to 2.75%
expenses), percentage of pay, closed
Inflation 2.50%, pay normal
Real Return cost basis
4.88%
JRS 7.38% (netof Entry age Level 25 years 0% per year for FY 6/30/2020
investment normal; level percentage of 2021 through FY 2024,
expenses), percent of pay expected thereafter 3.62%
Inflation 2.50%, payroll, closed
Real Return
4.88%
NGNMRS 7% (net of Entry age Level dollar, 20 years less None 6/30/2020
pension plan normal open average military
investment service of active
expenses) members
Inflation at 2.50%
Effective January 1, 2019, an enhanced Employer Group Waiver Plan (EGWP) was implemented for all Medicare-eligible
members receiving healthcare benefits. This arrangement replaced the Retiree Drug Subsidy (RDS) under Medicare Part D and
resulted in larger projected subsidies to offset the cost of prescription drug coverage. The Plans received $70.9 million from the
Center of Medicare and Medicaid Services for fiscal year 2021.
Health Care Cost Trend Rates
Medical Pre-65 Medical Post-65 Rx/EGWP
For PERS/TRS/JRS FY 2021 6.5% 5.4% 7.5%
FY 2022 6.3% 5.4% 71%
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the
probability of occurrence of events far into the future. Actuarially determined amounts are subject to continual revisions as
actual results are compared with past expectations and new estimates are made about the future. The schedule of funding
progress in the Required Supplementary Information presents multi-year trend information about whether the actuarial values
of plan assets are increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
I - 132
STATE OF ALASKA NOTE 8
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
NOTE 8 — DEFINED CONTRIBUTION PENSION PLANS
STATE ADMINISTERED PLANS
DESCRIPTION OF PLANS
A. The Public Employees’ Retirement System - Defined Contribution Retirement Plan (PERS-DCR)
PERS-DCR is a defined contribution, multiple-employer public employee retirement plan established by the State to provide
pension and postemployment healthcare benefits for eligible state and local government employees. Benefit and contribution
provisions are established by state law and may be amended only by the State Legislature. The 24" Alaska Legislature enacted
into law Senate Bill 141, which created PERS-DCR effective July 1, 2006. The PERS-DCR Plan savings are accumulated in an
individual retirement account for exclusive benefit of the members or beneficiaries.
The PERS-DCR Plan is a plan within the Public Employees’ Retirement System (PERS). PERS is a component unit of the State
of Alaska financial reporting entity. The PERS component unit is comprised of the PERS-DB (see note 7), PERS-DCR Plans,
and the PERS Retiree Medical Plan (RMP) and Healthcare Reimbursement Arrangement Plan (HRA), and Occupational Death
and Disability (OD&D). PERS is reported as a pension (and other employee benefit) trust fund by the State. PERS separately
issued financial statements are prepared using the economic resources measurement focus and accrual basis of accounting.
Participants should refer to the plan agreement for more complete information. Copies of the audited financial statements and
required supplementary information may be obtained from the Division of Retirement and Benefits, P.O. Box 110203, Juneau,
AK 99811-0203 or from their website at http://doa.alaska.gov/drb/.
As of June 30, 2021, there were 151 employers participating in PERS-DCR. There were 24,487 members, of which 22,129 are
general employees and 2,358 are peace officers and firefighters.
A participating member is immediately and fully vested in that member’s contributions and related earnings (losses). A member
shall be fully vested in the employer contributions made on that member’s behalf, and related earnings (losses), after five years
of service. A member is partially vested in the employer contributions made on that member’s behalf, and the related earnings,
in the ratio of (a) 25 percent with two years of service; (b) 50 percent with three years of service; (c) 75 percent with four years
of service; and (d) 100 percent with five years of service. Any forfeited employer contributions are used to reduce pension
expense in the the fiscal year it is forfeited.
PERS-DCR pension contribution rates are eight percent for PERS-DCR members, as required by statute. The employer shall
deduct the contribution from the member’s compensation at the end of each payroll period, and the contribution shall be
credited by the plan to the member’s individual account. The contributions shall be deducted from the member’s compensation
before the computation of applicable federal taxes. An employer shall contribute to each member’s individual pension account
an amount equal to five percent of the member’s compensation. Participant accounts under the PERS-DCR Plan are self-
directed with respect to investment options.
The PERS-DCR pension contributions for the year ended June 30, 2021 by the State of Alaska employees were
$62,368 thousand and the State of Alaska employers were $35,887 thousand. The State of Alaska PERS other postemployment
contributions for the year ended June 30, 2021 were $36,749 thousand ($2,843 thousand for OD&D, $23,990 thousand for
HRA, and $9,916 thousand for RMP).
See note 4 for information on pension funds’ deposit and investment risk categories. The fair value of the PERS-DCR, RMP,
HRA, and OD&D cash and investments as of June 30, 2021 is $2,916,017 thousand. PERS-DCR investments in collective
investment funds, held in trust, are stated at fair value based on the unit value as reported by the Trustees multiplied by the
number of units held by PERS-DCR. The unit value is determined by the Trustees based on the fair value of the underlying
assets. Purchases and sales of securities are recorded on a trade-date basis.
For the year ended June 30, 2021 the State of Alaska recognized $39,198 thousand in pension expense for the PERS-DCR as an
employer. Forfeitures of $154 thousand are reflected in the pension expense amount.
On July 1, 2006, three other postemployment benefit trust funds were created within PERS; RMP, HRA, and OD&D. RMP
allows eligible members who retire directly from the plan to obtain medical benefits. The HRA allows medical care expenses to
be reimbursed from individual savings accounts established for eligible persons. OD&D provides death benefits for
I - 133
STATE OF ALASKA NOTE 8
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
beneficiaries of plan participants and long-term disability benefits to all active members within the system. PERS-DCR
participants are eligible members of RMP and HRA and their postemployment healthcare benefits are paid out of these funds.
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to
OPEB liability, OPEB expense, information about the fiduciary net position of the PERS defined contribution OD&D, HRA,
and RMP plans (the Plans) and additions to/deductions from the Plans’ fiduciary net position have been determined on the same
basis as they are reported by the Plans. Contributions are recognized in the period in which they are due. Benefits and refunds
are recognized when due and payable. The Plans own shares in various investment pools that are administered by the State of
Alaska, Department of Revenue, Treasury. The Plans' investment in the pools, except for the Short-term Fixed Income Pool, is
reported at fair value based on the net asset value reported by the Treasury. The Short-term Fixed Income Pool maintains a
share price of $1. Each participant owns shares in the pool, the number of which fluctuates daily with contributions and
withdrawals. Additional information about the Plans' fiduciary net position can be found in the Plans' audited financial
statements.
The employer RMP contribution rate for FY 2021 for each member’s compensation was 1.27 percent for medical coverage and
0.31 percent for death and disability (0.70 percent for peace officers and firefighters). HRA is $179.92 per month for full time
employees and $1.38 per hour for part time employees.
Members in the HRA Plan consisted of the following at June 30, 2021:
Inactive Plan Members or Beneficiaries Currently Receiving Benefits 113
Inactive Plan Members Entitled to But Not Yet Receiving Benefits 2,082
Inactive Plan Members Not Entitled to Benefits 16,249
Active Plan Members 24,481
The components of the net OPEB liability (asset) of the participating employers for the OD&D Plan at June 30, 2021, were as
follows (in thousands):
Total OPEB Liability $ 16,072
Plan Fiduciary Net Position (60,146)
Employers' Net OPEB Liability/(Asset) $ (44,074)
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 374.23 %
Members in the OD&D Plan consisted of the following at June 30, 2021:
Active Plan Members 24,481
Participating Employers 151
Open Claims 14
The components of the net OPEB liability (asset) of the participating employers for the RMP at June 30, 2021, were as follows
(in thousands):
Total OPEB Liability $ = 177,713
Plan Fiduciary Net Position (204,555)
Employers' Net OPEB Liability (Asset) $ (26,842)
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 115.1%
I - 134
STATE OF ALASKA NOTE 8
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Members in the RMP consisted of the following at June 30, 2021:
Inactive Plan Members or Beneficiaries Currently Receiving Benefits 67
Inactive Plan Members Entitled to But Not Yet Receiving Benefits 2,082
Inactive Plan Members Not Entitled to Benefits 16,249
Active Plan Members 24,481
The total OPEB liability for each plan was determined by actuarial valuations as of June 30, 2020, using the following actuarial
assumptions, applied to all periods in the measurement, and rolled forward to the measurement date of June 30, 2021:
Inflation 2.5% per year
Salary Increases Graded by service, from 7.75% to 2.75% for peace officer/firefighter. Graded by service, from
6.75% to 2.75% for all others
Investment Rate of 7.38% net of postretirement healthcare plan investment expenses. This is based on an average
Return inflation rate of 2.50% and a real return of 4.88%
Healthcare Cost Pre-65 medical: 6.5% grading down to 4.5% Post-65 medical: 5.4% grading down to 4.5% RX:
Trend Rates(RMP) 7.5% grading down to 4.5% EGWP: 7.5% grading down to 4.5%
Mortality Pre-Commencement and post-commencement mortality rates were based upon the 2013-2017
(ODD,RMP) actual mortality experience. Pre-commencement mortality rate were based on 100% of the
RP-2014 employee table, benefit-weighted, rolled back to 2006, and projected with MP-2017
generational improvement. Post-commencement mortality rates were on 91% of male and 96% of
female rates of the RP-2014 healthy annuitant table, benefit weighted, rolled back to 2006, and
projected with MP-2017 generational improvement. Deaths are assumed to be occupational 75%
of the time for peace officer/firefighters, 40% of the time for all others.
B. The Teachers’ Retirement System - Defined Contribution Retirement Plan (TRS-DCR)
TRS-DCR is a defined contribution, multiple-employer public employee retirement plan established by the State to provide
pension and postemployment healthcare benefits for teachers and other eligible members. Benefit and contribution provisions
are established by state law and may be amended only by the State Legislature. The 24" Alaska Legislature enacted into law
Senate Bill 141, which created TRS-DCR effective July 1, 2006. TRS-DCR Plan savings are accumulated by an individual
retirement account for exclusive benefit of the members or beneficiaries.
The TRS-DCR Plan is a plan within the Teachers’ Retirement System (TRS). TRS is a component unit of the State of Alaska
financial reporting entity. The TRS component unit is comprised of the TRS-DB (see note 7), TRS-DCR Plans, TRS Retiree
Medical Plan (RMP) and Healthcare Reimbursement Arrangement Plan (HRA), and Occupational Death and Disability
(OD&D). TRS is reported as a pension (and other employee benefit) trust fund by the State. TRS separately issued financial
statements are prepared using the economic resources measurement focus and accrual basis of accounting. Participants should
refer to the plan agreement for more complete information. Copies of the audited financial statements and required
supplementary information may be obtained from the Division of Retirement and Benefits, P.O. Box 110203, Juneau, AK
99811-0203 or from their website at http://doa.alaska.gov/drb/.
As of June 30, 2021, there were 57 employers participating in TRS-DCR. There were 6,009 active members.
A participating member is immediately and fully vested in that member’s contributions and related earnings (losses). A member
shall be fully vested in the employer contributions made on that member’s behalf, and related earnings (losses), after five years
of service. A member is partially vested in the employer contributions made on that member’s behalf, and the related earnings,
in the ratio of (a) 25 percent with two years of service; (b) 50 percent with three years of service; (c) 75 percent with four years
of service; and (d) 100 percent with five years of service. Any forfeited employer contributions are used to reduce pension
expense in the the fiscal year it is forfeited.
TRS-DCR pension contribution rates are eight percent for TRS-DCR members, as required by statute. The employer shall
deduct the contribution from the member’s compensation at the end of each payroll period, and the contribution shall be
credited by the plan to the member’s individual account. The contributions shall be deducted from the member’s compensation
before the computation of applicable federal taxes. An employer shall contribute to each member’s individual pension account
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STATE OF ALASKA NOTE 8
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
an amount equal to seven percent of the member’s compensation. Participant accounts under the TRS-DCR Plan are self-
directed with respect to investment options.
The TRS-DCR pension contributions for the year ended June 30, 2021 by the employees were $1,076 thousand and the State of
Alaska employers were $898 thousand. The State of Alaska TRS other postemployment contributions for the year ended
June 30, 2021 were $457 thousand ($11 thousand for ODD, $320 thousand for HRA and $126 thousand for RMP).
See note 4 for information on pension funds’ deposit and investment risk categories. The fair value of the TRS-DCR, RMP,
HRA, and OD&D cash and investments as of June 30, 2021 is $1,088,289 thousand. TRS-DCR investments in collective
investment funds, held in trust, are stated at fair value based on the unit value as reported by the Trustees multiplied by the
number of units held by TRS-DCR. The unit value is determined by the Trustees based on the fair value of the underlying
assets. Purchases and sales of securities are recorded on a trade-date basis.
For the year ended June 30, 2021 the State of Alaska recognized $943 thousand in pension expense for the TRS-DCR as an
employer. No forfeitures are reflected in the pension expense amount.
On July 1, 2006, two other postemployment benefit trust funds were created in TRS, the RMP and HRA. The TRS OD&D
other postemployment benefit trust fund was created on July 1, 2007. RMP allows eligible members who retire directly from
the plan to obtain medical benefits. The HRA allows medical care expenses to be reimbursed from individual savings accounts
established for eligible persons. OD&D provides death benefits for beneficiaries and long-term disability benefits to all active
members within the system. TRS-DCR participants are eligible members of RMP and HRA and their postemployment
healthcare benefits are paid out of these funds. The employer RMP contribution rate for FY 2021 for each member’s
compensation was 0.93 percent for medical coverage and 0.08 percent for death and disability. HRA is $179.92 per month for
full-time employees while part-time employees are based on the contract percentage worked multiplied by the full-time
employee rate.
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to
OPEB liability, OPEB expense, information about the fiduciary net position of the TRS defined contribution OD&D, HRA, and
RMP plans (the Plans) and additions to/deductions from the Plans’ fiduciary net position have been determined on the same
basis as they are reported by the Plans. Contributions are recognized in the period in which they are due. Benefits and refunds
are recognized when due and payable. The Plans own shares in various investment pools that are administered by the State of
Alaska, Department of Revenue, Treasury. The Plans' investment in the pools, except for the Short-term Fixed Income Pool, is
reported at fair value based on the net asset value reported by the Treasury. The Short-term Fixed Income Pool maintains a
share price of $1. Each participant owns shares in the pool, the number of which fluctuates daily with contributions and
withdrawals. Additional information about the Plans' fiduciary net position can be found in the Plans' audited financial
statements.
Members in the HRA Plan consisted of the following at June 30, 2021:
Inactive Plan Members or Beneficiaries Currently Receiving Benefits 29
Inactive Plan Members Entitled to But Not Yet Receiving Benefits 832
Inactive Plan Members Not Entitled to Benefits 2,848
Active Plan Members 6,009
The components of the net OPEB liability (asset) of the participating employers for the OD&D Plan at June 30, 2021, were as
follows (in thousands):
Total OPEB Liability $ 528
Plan Fiduciary Net Position (6,623)
Employers' Net OPEB Liability (Asset) $ (6,095)
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 1,254.36 %
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STATE OF ALASKA NOTE 8
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Members in the OD&D Plan consisted of the following at June 30, 2021:
Active Plan Members 6,009
Participating Employers 57
Open Claims 1
The components of the net OPEB liability (asset) of the participating employers for the RMP at June 30, 2021, were as follows
(in thousands):
Total OPEB Liability $ 47,198
Plan Fiduciary Net Position (67,278)
Employers' Net OPEB Liability (Asset) $ (20,080)
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 142.54 %
Members in the RMP consisted of the following at June 30, 2021:
Inactive Plan Members or Beneficiaries Currently Receiving Benefits 20
Inactive Plan Members Entitled to But Not Yet Receiving Benefits 832
Inactive Plan Members Not Entitled to Benefits 2,848
Active Plan Members 6,009
The total OPEB liability for each plan was determined by actuarial valuations as of June 30, 2020, using the following actuarial
assumptions, applied to all periods in the measurement, and rolled forward to the measurement date of June 30, 2021:
Inflation 2.5% per year
Salary Increases Graded by service, from 6.75% to 2.75%
Investment Rate of 7.38% net of postretirement healthcare plan investment expenses. This is based on an average
Return inflation rate of 2.50% and a real return of 4.88%
Healthcare Cost Pre-65 medical: 6.5% grading down to 4.5% Post-65 medical: 5.4% grading down to 4.5% RX:
Trend Rates(RMP) 7.5% grading down to 4.5% EGWP: 7.5% grading down to 4.5%
Mortality Pre-Commencement and post-commencement mortality rates were based upon the 2013-2017
actual mortality experience. Pre-commencement mortality rates were based on 100% of the
RP-2014 white collar employee table, benefit-weighted, rolled back to 2006, and projected with
MP-2017 generational improvement. Post-commencement mortality rates were based on 93% of
male and 90% of female rates of the RP-2014 white-collar healthy annuitant table, benefit
weighted, rolled back to 2006, and projected with MP-2017 generational improvement. Deaths
are assumed to result from occupational causes 15 % of the time.
C. Supplemental Benefits System
In addition to the pension plans (note 7) and deferred compensation plan (note 9), all state employees, as well as employees of
political subdivisions which have elected to participate in the program, are covered under the Alaska Supplemental Benefits
System (SBS). SBS is comprised of the Supplemental Annuity Plan and the Supplemental Benefits Cafeteria Plan. The
Supplemental Annuity Plan is a defined contribution plan that was created under Alaska statutes effective January 1, 1980, to
provide benefits in lieu of those provided by the federal Social Security System (Social Security). All State employees, who
would have participated in Social Security if the State had not withdrawn, participate in SBS. Other employers whose
employees participate in the State Public Employees’ Retirement System and meet other requirements are eligible to have their
employees participate in SBS as provided by Alaska Statute. As of June 30, 2021, there were 21 employers participating in
SBS. There were 49,552 participants in the Plan.
The Division of Retirement and Benefits is responsible for administration and record keeping. Through September 30, 2005, the
Alaska State Pension Investment Board (ASPIB) was responsible for the specific investment of monies in SBS. Effective
October 1, 2005, ASPIB was disbanded and their duties were assumed by the Alaska Retirement Management Board.
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STATE OF ALASKA NOTE 8
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
SBS is considered a component unit of the State financial reporting entity. SBS issues a separate stand-alone financial report
that includes financial statements and required supplementary information, and SBS is also reported as a pension (and other
employee benefit) trust fund by the State. Copies of the audited financial statements may be obtained from the Division of
Retirement and Benefits, P.O. Box 110203, Juneau, AK 99811-0203 or from their website at http://doa.alaska.gov/drb/.
Mandatory contributions are made to the Supplemental Annuity Plan and voluntary contributions to the Supplemental Benefits
Cafeteria Plan. Participating employees are vested at all times. Supplemental Annuity Plan contributions are made in lieu of
contributions to Social Security. The State and other participating employers are required to contribute 12.26 percent of an
employee’s wages up to the taxable wage base in effect under Social Security regulations. Each employee is considered to have
agreed to a wage reduction equal to one-half the contribution made on the employee’s behalf. The State’s mandatory
contributions for the year ended June 30, 2021, were $154,118 thousand of that amount contributed by employees were
$77,059 thousand. The State’s covered payroll was $1,257,079 thousand. For the year ended June 30, 2021 the State of Alaska
recognized $77,059 thousand in pension expense for the SBS as an employer.
Supplemental Benefits Cafeteria Plan contributions are voluntary based upon the optional benefits elected by each employee
enrolled in SBS. Each employee agrees to a wage reduction based upon the benefit options selected. The benefit amounts are
deducted from each employee’s wages and remitted by the employer to SBS third party administrator (TPA) on the employee’s
behalf. Effective January 1, 2020 the administration of the voluntary supplemental benefits was transferred to a TPA. The State
employee voluntary contributions for the year ended June 30, 2021, were 3,693 thousand.
Employees are eligible to withdraw from the Supplemental Annuity Plan 60 days after termination. Benefits are payable in the
form of a lump sum or a periodic payment option, unless the participant elects to defer commencement of benefits. Various
annuities can also be purchased from an insurance carrier, which are excluded from Plan assets. The SBS administrator issues
lump-sum payments through its contracted record keeper. Employees may request a hardship withdrawal for an unforeseeable
emergency, within the definition allowed by the Internal Revenue Code. Hardship withdrawals are disbursed as lump sums and
must be approved by the plan administrator.
Benefits available under the Supplemental Benefits Cafeteria Plan include life, accidental death, disability, and critical illness
insurance. Selection of these benefits is at the discretion of the employee, with certain restrictions, and may be amended and/or
changed on an annual basis or in conjunction with an employee change in status.
Supplemental annuity contributions were deposited with investment managers under contract with SBS for the year ended
June 30, 2021. Participant accounts under the Supplemental Annuity Plan are self-directed with respect to investment options.
Each participant designates how their contribution is to be allocated among the investment options. Each participant’s account
is credited with the participants contributions, adjusted for the appreciation or depreciation in unit value for the investment
funds, and reduced for administrative fees.
D. University of Alaska Optional Retirement Plan - Defined Contribution (ORP)
The ORP is an employer funded defined contribution plan which operates in conjunction with a companion mandatory tax-
deferred annuity plan. The ORP is comprised of three layers of participants: the original ORP, or ORP Tier 1, which was
created for participants hired prior to July 1, 2005; ORP Tier 2, which was created for participants hired between July 1, 2005
and June 30, 2006; and ORP Tier 3, which was created for participants hired on or after July 1, 2006. For ORP Tier 1 and ORP
Tier 2, faculty classified as regular and certain administrators made a one-time election to participate in the ORP as an
alternative to participation in the defined benefit plans, PERS-DB or TRS-DB. The ORP Tier 2 plan was available for new ORP
benefit-eligible employees hired in fiscal year 2006. As of July 1, 2006, the ORP Tier 2 plan was no longer available to newly-
hired ORP benefit-eligible employees. For ORP Tier 3, each new eligible employee was able to make a one-time election to
participate in the University of Alaska Retirement Program (includes ORP Tier 3 and the University of Alaska Pension Plan) as
an alternative to participation in the State of Alaska defined contribution plans, PERS-DC or TRS-DC. Beginning July 1, 2015
the ORP was closed to new hired regular staff, but is still available for faculty and certain administrators.
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STATE OF ALASKA NOTE 8
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
University contributions are remitted to the plan's authorized employee-selected annuity providers or investment managers. The
contribution rates and amounts for fiscal year 2021 were as follows (in thousands):
ORP Tier 1 ORP Tier 2 ORP Tier 3
Employee Contribution Rates 8.65% 8.65% 8.00%
University Contribution Rates 14.00% 12.00% 12.00%
Covered Payroll $28,312 $2,328 $102,524
University Contributions $3,964 $279 $12,303
At June 30, 2021, plan assets (participants' accounts attributable to employer contributions) for ORP Tier 1, Tier 2, and Tier 3
had a net value to $477.9 million. ORP Tier 1 and ORP Tier 2 participants are 100 percent vested at all times. University
contributions for ORP Tier 3 participants are 100 percent vested after three years of service.
University of Alaska Pension Plan
In addition to the other retirement plans, substantially all regular employees (hired before July 1, 2006) and certain faculty
classified as temporary, participate in the Pension plan which was established January 1, 1982, when the University withdrew
from the federal social security program. Eligible employees, hired on or after July 1, 2006, who elected to participate in the
University of Alaska Retirement Program also participate in the Pension plan.
For fiscal year 2021, employer contributions for regular employees were 7.65 percent of covered wages up to $42.0 thousand.
For certain faculty classified as temporary, the employer contributions were 7.65 percent of covered wages up to
$142.8 thousand. The plan provides for employer contributions to be invested in accordance with participant-directed
investment elections. Participants hired before July 1, 2006 are 100 percent vested at all times. University contributions for
participants hired on or after July 1, 2006 are 100 percent vested after three years of service. Regular staff hired on or after
July 1, 2015 are also 100 percent vested after three years of service of the employer contributions of the pension plan.
The University's total covered payroll for the Pension plan was $146.2 million. The University's gross costs to fund and
administer the plan totaled $11.2 million for the year ended June 30, 2021. At June 30, 2021, plan assets (participants' accounts)
had a net value of $549.1 million.
NOTE 9 — DEFERRED COMPENSATION PLAN
The State of Alaska Deferred Compensation Plan was created by Alaska statutes issued May 31, 1974 and was most recently
amended effective August 30, 2021. It is a deferred compensation plan under Section 457 of the Internal Revenue Code and is
available to all permanent and long-term non-permanent employees and elected officials of the State and members of State
boards and commissions. Participants authorize the State to reduce their current salary or compensation so that they can receive
the amount deferred at a later date. The deferred compensation is not available to participants until termination, retirement,
death, or unforeseeable emergency, within the definition allowed by the applicable Internal Revenue Code. All amounts
deferred are held in a trust for the exclusive benefit of employees and beneficiaries. Additionally, participants may also have
their contributions directed as a ROTH contribution. Those amounts are post-tax contributions and earnings on ROTH
contributions are not taxable when properly withdrawn from the plan. As of June 30, 2021 the Deferred Compensation Plan had
12,454 participants.
The Division of Retirement and Benefits is responsible for Deferred Compensation Plan administration and record-keeping.
The Alaska Retirement Management Board is responsible for the specific investment of monies in the Deferred Compensation
Plan.
Participant accounts are self-directed with respect to investment options. Each participant designates how their contributions are
to be allocated among the investment options. Each participant’s account is credited with the participant’s contributions and the
appreciation or depreciation in unit value for the investment funds and deductions for administrative fees.
Deferred Compensation Plan net position as of June 30, 2021 was $1,223,745 thousand. The Deferred Compensation Plan is
reported in the accompanying financial statements as a pension (and other employee benefit) trust fund.
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STATE OF ALASKA NOTE 10
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
NOTE 10 —- INTERFUND TRANSACTIONS
The following schedules summarize individual interfund receivable and payable balances at June 30, 2021, and interfund
transfers for the year then ended (in thousands):
INTERFUND RECEIVABLE / PAYABLE BALANCES
Due from Other Funds
Alaska Nonmajor Nonmajor Internal
Due to Other General Permanent Governmental International Unemployment Enterprise Service Fiduciary
Funds Fund Fund Funds Airports Compensation Funds Funds Funds Other Total
General Fund $ — $ 35,689 $ 5,823 $ 1,730 $ 66,176 $ 661 $ 16,238 $ 42,933 $ 10,500 $179,750
Alaska
Permanent
Fund 50,116 — — — — — — — — 50,116
Nonmajor
Governmental
Funds 4,917 — — — — — — — — 4,917
International
Airports 2,591 — — — — — — — — 2,591
Unemployment
Compensation 37 — — _— — — _— — — 37
Nonmajor
Enterprise
Funds 456 —_— — —_— —_— —_— —_— —_— — 456
Internal Service
Funds 1,807 — — — — — — — — 1,807
Fiduciary
Funds 36,100 — — — — — — — — 36,100
Total $ 96,024 $ 35,689 $ 5,823 $ 1,730 $ 66,176 $ 661 $ 16,238 $ 42,933 $ 10,500 $275,774
The $10.5 million reported in the Other column consists of transfers from the General Fund to the Alaska Permanent Fund that
were not included in the Alaska Permanent Fund outside audit. The amount is immaterial to the Alaska Permanent Fund's
audited financial statements thus the audit was not restated.
INTERFUND TRANSFERS
Transfers to
Nonmajor Internal
General Governmental Unemployment Nonmajor Service
Transfers From Fund Funds Compensation Enterprise Funds Funds Total
General Fund $ — $ 77,844 $ 66,745 $ — $ 31,900 $ 176,489
Alaska Permanent Fund 3,141,609 — — — 3,141,609
Nonmajor Governmental Funds 29,774 2,446 —_— —_— 32,220
Nonmajor Enterprise Funds 1,075 — — — 1,075
Total $ 3,172,458 $ 80,290 $ 66,745 $ — $ 31,900 $ 3,351,393
The general purpose for transfers is to move monies from funds required by statute to collect them to the funds required by
statute or budget to expend them, to move receipts restricted to debt service from the funds collecting the receipts to the Debt
Service Fund as debt service payments come due, and transfer accumulated surpluses from “Other” funds to the General Fund.
The transfer from the Alaska Permanent Fund to the General Fund includes a $3.09 billion transfer for payment of the
Permanent Fund dividends and for administrative and associated costs of the dividend program and a $50.12 million transfer to
the Alaska Capital Income Fund.
NOTE 11 — RELATED PARTY ACTIVITY
Based on understandings and board-approved agreements between the Alaska Industrial Development and Export Authority
(AIDEA) and Alaska Energy Authority (AEA), AIDEA provides administrative, personnel, data processing, communications
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STATE OF ALASKA NOTE 11
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019
and other services to AEA. AIDEA recognized revenue totaling $5.3 million for providing these services during FY 2021.
On June 30, 2021, AIDEA had $5.07 million receivable from AEA for services and short-term borrowings.
In December 2020, AEA borrowed $17 million from AIDEA to acquire an approximately 39.3-mile 115 kV electricity
transmission line system between the Sterling Substation and Quartz Creek Substation ("SSQ Line") from Homer Electric
Association and to incorporate it as part of the Bradley Lake Hydroelectric Project. The loan, bearing interest at 3.5%, requires
semiannual interest and annual principal payments with a final maturity date of July 2040. The first principal payment is
scheduled for July 2022.
On September 30, 2010, pursuant to legislation and an agreement, AIDEA purchased 37 loans from AEA with an outstanding
balance of $24.25 million, plus accrued interest, for $20.63 million. Under the agreement, at AIDEA’s request, AEA is required
to repurchase any loan upon a payment default. The current loan outstanding balance at June 30, 2021 is $8.93 million.
The Department of Transportation and Public Facilities (DOTPF) provides administrative and technical services benefiting all
of Alaska’s airports and aircraft bases. Related costs are allocated based upon budgetary estimates of the pro rata portion which
should be borne by the various facilities as set forth in the annual appropriation and budget document of the State. Costs
allocated to the International Airport Fund (IAF) as operating expenses totaled $3.37 million for the year ended June 30, 2021.
Capital project management services are performed by DOTPF personnel and are capitalized to [AF construction in progress.
These costs totaled $1.84 million during the year ended June 30, 2021.
NOTE 12 —- COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS
A. SICK LEAVE
The cost of state employee sick leave is charged against agency appropriations when leave is used rather than when leave is
earned. There is no recorded liability for sick leave in the financial records of the State. Accordingly, the statements in this
report do not include an estimate of this obligation as either a liability or a reserve.
The estimated amount of unused accumulated sick leave as of June 30, 2021, is $10.06 million. This amount was calculated
using the base pay on file for each employee as of June 30, 2021. It does not include an estimate of the cost of fringe benefits
(supplemental benefits, retirement, group insurance, etc.) which can vary depending on the status of the employee when leave is
taken.
B. SCHOOL DEBT
Under a program enacted in 1970 (AS 14.11.100), the State may reimburse municipalities up to 60, 70, 80, 90, or 100 percent
of debt service on bonds issued to finance school construction. The percentage depends on the year in which the costs are
incurred. The 60 percent limitation, enacted in 2002, applies to fiscal years after June 30, 1999.
Although the statute provides that the State may reimburse school districts 60, 70, 80, 90, or 100 percent of construction costs,
the actual funding for the program is dependent on annual legislative appropriations to the school construction account. When
amounts in the account are insufficient, the available funds are allocated pro rata among the eligible school districts. There is
no contractual commitment by the State to make these payments. The amount for FY 2021 expended for school debt was zero,
due to the program not being funded. The total debt requirement, assuming the State makes full payment of its share of school
debt service, would be approximately $656.67 million. The State has in the past and did appropriate less than the full amount to
which the municipalities are entitled under statute in FY 2021.
C. RISK MANAGEMENT AND SELF-INSURANCE
PRIMARY GOVERNMENT
The State maintains a risk management program that is administered by the Department of Administration, Division of Risk
Management. The Division of Risk Management’s objective is to protect the financial assets and operations of the State of
Alaska from accidental loss through a comprehensive self-insurance program for normal and expected property and casualty
claims of high frequency and low severity, combined with high-limit, broad-form excess insurance protection for catastrophic
loss exposures.
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STATE OF ALASKA NOTE 12
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Risk Management acts as the insurance carrier for each state agency, funding all sudden and accidental property and casualty
claims. The annual premiums allocated by Risk Management are the maximum each agency is called upon to pay. This
planning for known and catastrophic losses forestalls the need for the affected agency to request a supplemental appropriation
or disrupt vital state services after a major property loss, adverse civil jury award, or significant workers’ compensation claim.
By effectively managing the State’s property and liability exposures through a comprehensive self-insurance program, Risk
Management expends less public funds than would be paid to private insurance companies, while at the same time providing
streamlined claims services utilizing professional adjusting firms located throughout Alaska.
Property insurance with all-risk (including earthquake and flood) coverage is provided on a replacement cost basis for all state-
owned or leased property; buildings (including contents, museum fine arts, etc.), aircraft, and watercraft (Alaska Marine
Highway System ferries and other agency vessels).
Casualty coverages protect each state agency and their personnel from third-party civil (tort) liability claims alleged to have
arisen from combined liability - general (premises/operations), automobile, professional (errors and omissions), medical
malpractice, aviation (aircraft and airport), or marine (passenger injuries).
Additional specialty coverage includes blanket public employee faithful performance and custom bonding, accidental death and
disability (including medical expenses) for volunteers, computer fraud and foreign liability, etc. These insurance programs
continually evolve, responding to new activities and special projects undertaken by each state agency. The State has not
incurred a loss in excess of its insurance program.
In FY 2021, the State completely self-insured all statutory workers’ compensation claims, general (premises and operations)
and professional liability, automobile, property and aircraft liability. The State had Self-Insured Retention (SIR) levels of $400
thousand for marine risks and $250 thousand per incident for airport liability exposures. Limits of excess insurance vary by
risk: $1 billion per occurrence for marine, $125 million for fine arts, and $500 million for airport.
Both domestic and international insurance companies and various Lloyd’s of London underwriting syndicates participate in the
State of Alaska’s excess insurance program. Independent brokers provide marketing. The State obtains an annual independent
actuarial assessment of the state insurance program as required by AS 37.05.287(b) which calculates unfunded claims and
allocated loss adjustment expenses (ALAE).
An unconstrained audit of the State of Alaska’s overall property and casualty insurance program performed by an independent
risk management consultant found the retention levels and excess insurance coverage purchased are appropriate.
Risk Management’s budget is funded entirely through interagency receipts annually billed to each agency through a “Cost of
Risk” premium allocation system. The Risk Management information system generates the annual cost of risk allocation to
each agency, reflecting their proportionate share of the State’s overall cost of risk. Designed to achieve equitable distribution of
the self-insurance program costs, it factors exposure values subject to loss and considers the past five years actual claims
experience incurred by each department.
For most cost of risk allocations, 80 percent of the premium billing is based on the average of the past five years actual claims
experience. This provides a direct fiscal incentive to each agency to reduce or control their claim costs.
The program compiles a property inventory schedule of all owned or leased buildings used or occupied by state agencies, listing
age and type of building construction, occupancy, fire protection services and sprinkler systems, and projected replacement cost
value. Individual premiums are then determined and, in cases of multiple occupancy, allocated to each department on the basis
of their square foot use.
The “Cost of Risk” premium is collected through two methods from individual state agency operating budgets. Reimbursable
service agreements (RSAs) are used for all categories of insurance other than Workers’ Compensation and Combined Liability
(general, auto, and professional), which are assessed on a rate per $100 payroll applied monthly to each agency’s actual payroll
until the allocated premium is paid.
The table below presents changes in policy claim liabilities for the fiscal years ending June 30, 2020, and June 30, 2021, (in
thousands). The State records its related liability using discounted amounts provided by actuaries. The amount of unpaid claim
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STATE OF ALASKA NOTE 12
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
liabilities for Risk Management are presented at their present value using a 3.0 percent discount interest rate for FY 2020 and
for FY 2021. Claims payment amounts include allocated loss adjustment expenses (legal and adjusting).
Fiscal Beginning Current Year Claims and Claim Ending
Year Balance Changes in Estimates Payments Balance
2020 $ 150,723 $ 32,591 §$ (35,635) $ 147,679
2021 147,679 17,975 (23,198) 142,456
The Group Health and Life Fund is an Internal Service Fund of the State of Alaska, the plan is self-insured for all benefits. The
plan’s funding policy provides for the collection of insurance premiums from employees, if applicable, and the State. Insurance
premium amounts are actuarially determined on an annual basis and adjusted as necessary. The State retains the risk of loss of
allowable claims.
The liability for claims incurred but not reported (IBNR) represents the estimated amounts necessary to settle all outstanding
claims as of the balance sheet date. The plan’s reserve estimate for IBNR are based primarily on historical development patterns
adjusted for current trends that would modify past experience. Claims are re-evaluated periodically to consider the effect on
inflation, claims settlement trends, and other economic factors. The process of establishing loss reserves is subject to
uncertainties that are normal, recurring and inherent in the healthcare business.
Changes in the balances of claims liabilities during the years ended June 30, 2021 and 2020 were as follows (in thousands):
Fiscal Year Beginning Balance Heath care Benefits Benefits paid Ending Balance
2020 $ 13,261 $ 128,071 § (126,267) $ 15,065
2021 15,065 138,181 (137,358) 15,888
UNIVERSITY OF ALASKA
The University is exposed to a wide variety of risks including property loss, bodily and personal injury, intellectual property,
errors and omissions, cyber-attacks, aviation and marine. Exposures are handled with a combination of self-insurance and
commercial insurance.
The University is self-insured up the maximum of $2.0 million per occurrence for casualty claims and $250 thousand for
property claims. Commercial carriers provide coverage in excess of these amounts. Health care, workers’ compensation and
unemployment claims are fully self-insured. Liabilities have been established using actuarial analysis to cover estimates for
specific reported losses, estimates for unreported losses based upon past experience modified for current trends, and estimates
of expenses for investigating and settling claims. Settled claims have not exceeded the coverages for any of the past three years.
Changes in applicable self-insured liability amounts follow (in thousands):
Balance July 1, 2020 Provision for Claims Claims Payments Balance June 30, 2021
Health $ 5,317 $ 50,568 $ (50,636) $ 5,249
General Liability 4,550 110 — 4,660
Workers' Compensation 3,873 975 (1,179) 3,669
Unemployment 54 914 (869) 99
$ 13,794 $ 52,567 $ (52,684) $ 13,677
D. LITIGATION AND ADMINISTRATIVE APPEALS
The State is involved in a number of legal actions. The Department of Law estimates the probable maximum liability for the
cases associated with the governmental fund types to be approximately $73.9 million, with an additional possible liability of
$195.37 million. The probable loss amount has been reported as long-term debt obligations.
The amount of revenue recognized by the Northern Tobacco Securitization Corporation could be adversely impacted by certain
third party litigation involving tobacco companies and others.
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STATE OF ALASKA NOTE 12
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
The Division of Retirement and Benefits is a defendant in a class action lawsuit against the State alleging that the passage of
Senate Bill (SB) 141 violated the Alaska Constitution by extinguishing a former member’s ability to re-enter the PERS/TRS
defined benefits plan. According to SB 141, a PERS/TRS defined benefit former member would have to re-employ into an
eligible defined benefit position by June 30, 2010 or lose that former member’s status (tier standing). If that former member re-
entered the workforce in a valid PERS/TRS position but after June 30, 2010, that person would become a defined contribution
retirement plan member, rather than reinstated into their prior defined benefit status (tier standing). The lawsuit challenged the
effect of SB 141 as an unconstitutional diminishment of a promised defined benefit.
In April 2021, the Alaska Supreme Court found that a former member’s ability to reinstate PERS/TRS status is an accrued
benefit protected by Article XII, Section 7 of the Alaska Constitution. The Court held that not allowing former members to buy
back into PERS/TRS defined benefit status resulted in an unconstitutional diminishment. The decision could lead to an increase
in the number of employees previously believed to be ineligible for the defined benefit plan by operation of SB 141 for PERS/
TRS. The case was returned to the Superior Court and the Department of Law filed a motion for final judgement. The class
action group opposes the execution of final judgement and seeks to further litigate the specifics of the implementation of the
Supreme Court’s decision. The issue is currently under advisement by the Superior Court.
The Division is determining the impact of the Metcalfe decision on PERS and TRS. However, the Division has not
implemented results from this decision as final judgement has not been entered. At this time, it is unclear exactly how many
former members will seek to reinstate to the defined benefits plan or the precise impact the reintroduction of those former
members to the defined benefits plan will cost .
The Department of Revenue Tax Division’s Oil and Gas Production Tax Audit Group performs periodic audits of oil and gas
companies that file Alaska’s oil and gas production tax returns. The audits mostly result in additional tax assessments and
associated interest. The companies sometimes choose to pay the additional assessment “under protest” to avoid accruing
interest. Because these prepayments are deposited in the Constitutional Budget Reserve Fund (CBRF) but are still under
dispute, the tax assessment revenues recognized in the CBRF could be adversely affected by a potential refund resulting from a
decision issued by the Department of Revenue Tax Division’s Appeals Group, by the Department of Administration’s Office of
Administrative Hearings, by an Alaska Superior Court ruling, or by an Alaska Supreme Court ruling. As of the end of fiscal
year June 30, 2021, there are no pending prepayments or payments made “under protest”. If there were, we would not be able
to estimate the amount of potential refund.
The Department of Natural Resource’s Division of Oil and Gas performs periodic audits of oil and gas companies that file
Alaska’s oil and gas Royalty and Net Profit Share (NPS) reports. The audits mostly result in additional royalty and NPS
payments and associated interest. The companies sometimes pay the additional assessment “under protest” to avoid accruing
interest. Per Alaska Statutes 37.14.150 and 37.13.010, royalty payments are split between the Constitutional Budget Reserve
Fund, Public School Trust Fund, and the Alaska Permanent Fund. Since the royalty and NPS revenues are still under dispute the
funds could be adversely affected by a potential refund resulting from a decision issued by the Department of Natural
Resource’s Commissioner, by an Alaska Superior Court ruling, or by an Alaska Supreme Court ruling. As of the end of fiscal
year June 30, 2021, there were pending prepayments or payments made “under protest”, however, we are not be able to
estimate the amount of potential refund.
In August of 2018, the U.S. Department of Health & Human Services (USDHHS), Office of Inspector General (OIG) released
audit report number A-04-17-08059, in which the OIG found that the Children’s Health Insurance Program Reauthorization Act
of 2009 (CHIPRA) over payed the State of Alaska an estimated $8.9 million in bonus payments due to the State including
individuals that did not qualify because of their basis-of-eligibility category. The State of Alaska disagrees with this finding and
joined several other states by entering into the formal appeals process through the USDHHS Department of Appeals Board
(DAB) based on the states following the statutory criteria for the CHIPRA bonus payments and preparing current enrollment
numbers in accordance with Centers for Medicare & Medicaid Services (CMS) guidance.
During FY21, USDHHS DAB issued a preliminary decision that required additional action by both the State and CMS.
According to USDHHS DAB, the previous methodology used for determining the bonus awards was invalid; therefore, CMS
could not pursue collecting the estimated overpayments. However, the decision allowed CMS the opportunity to recalculate the
baseline year (2007) for determining eligibility and pursue an overpayment collection in accordance with this new calculation.
As of June 30, 2021, the amount potentially to be repaid is unknown.
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STATE OF ALASKA NOTE 12
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
E. FEDERAL GRANTS
The State has received federal grants for specific purposes that are subject to review and audit by the grantor agencies.
Although such audits could generate expenditure disallowance under terms of the grants, it is believed that any required
reimbursements will not be material.
F. DISASTER RELIEF FUND
The State may be liable to reimburse communities for expenditures related to disasters in excess of the amount allocated by the
State.
G. FUTURE LOAN COMMITMENTS
As of June 30, 2021, the Alaska Clean Water and the Alaska Drinking Water Funds are committed to funding loans for which
they have entered into agreements for communities but funds have not yet been disbursed. The total amounts to be disbursed
under these agreements are uncertain as not all of the loans are expected to be fully drawn and some loans may increase with
changes in scope of the underlying projects; accordingly, they are not included in the financial statements for these funds. As of
June 30, 2021, the Alaska Clean Water and the Alaska Drinking Water Funds have entered into binding commitments, as
evidenced by signed loan agreements, for which funds remain to be disbursed totaling $74.87 million and $45.33 million
respectively.
As of June 30, 2021, the Department of Commerce, Community and Economic Development identified outstanding loan
commitments. Agreements have been entered into, but funds have not yet been disbursed. The open loan commitments include
the Alaska Commercial Fishing Revolving Loan Fund for $3.19 million and the Alaska Fisheries Enhancement Revolving Loan
Fund for $7.52 million.
As of June 30, 2021, the Alaska Energy Authority (AEA) had Power Project Fund loan commitments of $5.15 million.
As of June 30, 2021, the Alaska Industrial Development and Export Authority (AIDEA) had extended loan participation
purchase commitments to be funded by the Revolving Fund of $1.2 million and pending applications of $6.4 million, as well as
loan guarantees of $4.5 million.
AIDEA has also entered into funding agreements with Ambler Metals, LLC to support Ambler Access Project, developing an
industrial road to the Ambler Mining District. The agreements entail Interim Funding Agreement and Full Funding Agreement
and through each agreement, AIDEA will provide funds up to $1 million and $35 million, respectively.
AIDEA had also extended commitments to fund a loan to the Interior Gas Utility not to exceed $139 million from the
Sustainable Energy Transmission and Supply Development Fund for the Interior Energy Project. As of June 30, 2021, AIDEA
had funded approximately $137.5 million, resulting in a remaining commitment of approximately $1.5 million.
H. POTENTIAL DEVELOPMENT PROJECTS
Exclusive of the Alaska LNG Project, and regarding the development of a proposed in-state natural gas pipeline from the North
Slope to Cook Inlet (Bullet Line), the Alaska Gasline Development Corporation (AGDC) entered into a 2010 agreement where
$4.66 million would become due and payable when (a) the State awards permits, work product, and other results of a Bullet
Line Preliminary Development Project to a qualified builder (other than a public corporation owned by the State); or (b) the
State determines it will construct the Bullet Line itself, either through a public corporation owned by the State or otherwise, and
(1) the Legislature of the State of Alaska appropriates some or all of the funding for the Bullet Line development and
construction expenses, or (ii) bonds are issued by the State or a public corporation owned by the State intended to finance some
or all of the Bullet Line development and construction expenses.
I. INVESTMENT COMMITMENTS
As of June 30, 2021, the APFC, on behalf of the Fund, had outstanding future funding commitments of: $100 million for
absolute return; $5.1 billion for private equity; $1.9 billion for infrastructure; and $1.3 billion for private credit investments.
Many alternative investments have liquidity constraints and may not be available for cash withdrawal until a specified period of
time has elapsed.
T- 145
STATE OF ALASKA NOTE 12
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
As of June 30, 2021, the APFC, on behalf of the Fund, had outstanding future funding commitments of $400 million for real
estate fund investments.
The Alaska Retirement Management Board (ARMB) has entered into agreements with external investment managers to provide
funding for future pension fund investments. As of June 30, 2021, ARMB’s unfunded commitments were as follows
(in thousands):
Investment Type
Alternative Fixed Income $ 120,521
Energy 28,453
Private Equity 1,218,942
Real Estate 183,906
$ 1,551,822
J. POLLUTION REMEDIATION
Governmental Accounting Standards Board Statement (GASBS) 49 provides guidance for state and local governments in
estimating and reporting the potential costs of pollution remediation. While GASBS 49 does not require the State to search for
pollution, it does require the State to reasonably estimate and report a remediation liability when an obligating event occurs.
According to AS 46.03.010, it is the policy of the State to conserve, improve, and protect its natural resources and environment
and control water, land, and air pollution, in order to enhance the health, safety, and welfare of the people of the State and their
overall economic and social well-being. It is also the policy of the State to improve and coordinate the environmental plans,
functions, powers, and programs of the State, in cooperation with the federal government, local governments, other public and
private organizations, and concerned individuals, and to develop and manage the basic resources of water, land, and air to the
end that the State may fulfill its responsibility as trustee of the environment for the present and future generations.
The State has the knowledge and expertise to estimate the remediation obligations presented in the statements based on prior
experience in identifying and funding similar remediation activities. GASBS 49 requires the State to calculate pollution
remediation liabilities using the expected cash flow technique. Where the State cannot reasonably estimate a pollution
remediation obligation, it does not report a liability.
The remediation obligation estimates that appear in this report are subject to change over time. Cost may vary due to price
fluctuations, changes in technology, changes in potential responsible parties, results of environmental studies, changes to
statutes or regulations or other factors. Prospective recoveries from responsible parties may reduce the State’s obligation.
At July 1, 2020, the General Fund had pollution remediation obligations of $125,227 thousand. As of June 30, 2021, the State
had an increase to the obligations of $8,739 thousand and recognized a decrease of $3,433 thousand, for an ending balance of
$130,533 thousand in pollution remediation obligation related activities. The State has an estimated potential recovery of
$8 thousand from other responsible parties.
Additionally, the International Airports Fund (IAF) reported pollution remediation liabilities for which IAF is in whole or in
part a responsible party. The liabilities were valued using the estimated mean of the future cash flows of costs and recovery
associated with identified sites, measured at current value. Amounts recorded as current and long-term portions of these
estimated liabilities were respectively $619 thousand and $5,568 thousand in 2021 and $1,477 thousand and $4,379 thousand in
2020.
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STATE OF ALASKA NOTE 12
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
Kk. ENCUMBRANCES
The State of Alaska utilizes encumbrance accounting to identify fund obligations. The following shows encumbrances within
the governmental funds for the fiscal year ended June 30, 2021:
Amount (in thousands)
General Fund $ 462,167
Special Revenue Funds 42,565
Capital Project Funds 3,543
Total Encumbrances $ 508,275
A review of the appropriations with encumbrance balances over $5 million were identified and analyzed below:
The Department of Commerce, Community and Economic Development, Department of Administration, and Governor's Office
all have projects related to the COVID-19 pandemic which total $31.66 million. These projects are funded by general funds.
The Department of Education and Early Development had several school construction and renovation projects underway that
total $83 million. These projects are funded by general funds.
The Department of Commerce, Community and Economic Development administers a grant for the Exxon Valdez Oil Spill
funded "EVOSTC" of the Prince William Sound Science Center and Technology Institute Facilities replacement for
$11.7 million. This is funded by the Exxon Valdez Settlement Trust Fund.
The Department of Commerce, Community and Economic Development administers a grant for the Alaska Impact Grant
Program for $10.29 million. This is funded by the National Petroleum Reserve Fund.
The Department of Commerce, Community and Economic Development administers the Alaska Reinsurance Program which
was established under AS 21.55 to stabilize the health insurance market in Alaska. The program provides a reinsurance
mechanism for insurers issuing policies that cover certain high-risk individuals through the Comprehensive Health Insurance
Association. The program has $53.5 million remaining obligated in the Alaska Comprehensive Health Insurance Fund from
revenues collected under Title 21 of the Alaska Statutes.
The Department of Transportation and Public Facilities has several projects for road work in Kake and Petersburg for a total of
$16.62 million. These projects are funded by general funds. There was also $8.84 million in Federal-Aid state match, which is
in the Constitutional Budget Reserve (CBR) Fund.
The Department of Health and Social Services had several specialized contracts required for its Medical Assistance program,
including some specific to information technology operation and maintenance. A total of $18.90 million of these contracts are
funded by general funds with additional funding from federal grant awards.
The Department of Corrections had a project for $11.8 million to provide constitutionally and statutorily required essential
medical services for the inmate population. This project is funded by general funds.
The Department of Military and Veteran Affairs had numerous Program Worksheets (Public Assistance) and Project
Worksheets (Hazard Mitigation) totaling $17.0 million for the November 2018 earthquake that are funded with 75 percent
Federal and 25 percent State Disaster Relief funds.
The Department of Military and Veteran Affairs had a project for the Alaska Land Mobile Radio Site Refresh for a total of
$6.5 million, which is funded by general funds.
I - 147
STATE OF ALASKA NOTE 12
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
L. MEDICAID
The Department of Health and Social Services uses two Medicaid Management Information Systems, Alaska Health Enterprise
(AHE) and Optum Behavioral Health System (OBHS) FACETS, to process Medicaid and Children’s Health Insurance Program
medical claims submitted by service providers. Some claims are suspended during normal processing for reasons including
third party insurance verification, verification of medical necessity, and provider claim submission errors. Due to the
complexity of claim processing, the cost of settling the suspended claims cannot be reasonably estimated.
M. OIL AND GAS TAX CREDITS
Producers or explorers of oil and gas can apply for a tax credit for certain qualifying losses and expenditures under
AS 43.55.023 and AS 43.55.025. As of June 30, 2021, the Department of Revenue has received tax credit applications totaling
$772 thousand, which have not been accrued as a liability in the general fund financial statements. Due to the complexity of the
approval process, the amount of the tax credit that will ultimately be issued or denied cannot be estimated.
N. CONCENTRATIONS
In FY 2021, the most significant sources of revenues were federal, taxes, and rents and royalties; which make up 92.0 percent
of total revenues. With the majority of total revenues coming from federal sources (68.1 percent), a large decrease in federal
funding could impact the stability of the State. Additionally, with the continued decline in petroleum related revenues, taxes,
and rents and royalties continue to be a significant concern for the State of Alaska
O. COVID-19
During FY 2020, the World Health Organization declared the spread of Coronavirus Disease (COVID-19) a worldwide
pandemic. The COVID-19 pandemic continues to have significant effects on global markets, supply chains, governments,
businesses, and communities. Specific to the State of Alaska, COVID-19 may impact various parts of its 2022 operations and
financial results, including, but not limited to, declines in tax revenues, costs for increased use of technology, costs related to
providing public health services and delivering of vaccines. Management believes the State of Alaska is taking appropriate
actions to mitigate the negative impact. However, the full impact of COVID-19 is unknown and cannot be reasonably estimated
as these events are still developing.
NOTE 13 —- SUBSEQUENT EVENTS
A. ALASKA MUNICIPAL BOND BANK AUTHORITY
On June 16, 2021, the Alaska Municipal Bond Bank Authority (AMBBA) priced $5.73 million in general obligation refunding
bonds through a forward delivery bond issue, the 2021 Series Three (AMT), with interest rate yields ranging between 1.75%
and 1.98% and a coupon rate of 5%. The forward delivery bond issue closed in fiscal year 2022, on December 2, 2021.
AMBBA utilized the forward delivery bond issue to refund the $7.05 million in outstanding 2015-2B general obligation bonds
with an interest rate yield of 3.81% and coupon rate of 5%. The forward delivery bond issue is anticipated to reduce total debt
service payments over the next 12 year by approximately $1.9 million. This is anticipated to produce an economic gain
(difference between the present values of the debt service payments on the old and net debt) of approximately $1.6 million.
B. ALASKA CLEAN WATER FUND
Pursuant to legislative authorization obtained during the 2021 session of the Alaska Legislature, Series A Revenue Bond
Anticipation Notes for FY 2021 were issued on November 10, 2021 in the amount of $1.90 million. The borrowing is secured
by interest earnings of the Alaska Clean Water Fund.
C. ALASKA DRINKING WATER FUND
Pursuant to legislative authorization obtained during the 2021 session of the Alaska Legislature, Series A Revenue Bond
Anticipation Notes for FY 2021 were issued on November 10, 2021 in the amount of $2.20 million. The borrowing is secured
by interest earnings of the Alaska Drinking Water Fund.
D. ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
In August 2021, the AIDEA Board passed a resolution authorizing the AIDEA executive director to start the sale process for
the Mustang project.
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STATE OF ALASKA NOTE 13
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
In January 2022, the AIDEA board passed Resolution G22-03 approving $15.4 million to advance pre-development work for
the 2022 field season for the Ambler Access Project to be matched by $15.4 million from Ambler Metals under the terms of the
Ambler Access Development Agreement.
E. ALASKA MENTAL HEALTH TRUST AUTHORITY
Since 2005, the Trust and the United States Forest Service (USFS) have been working on a transfer to the USFS of Trust land
surrounding seven Southeast Alaska communities in exchange for federal land that could create revenue to the Trust in support
of its mission. The exchange of land was not to be based on acres, rather be based on land of equal value. In FY 2021,
appraisals of the land were completed. The majority of the land exchange was completed August 30, 2021 with the transfer of
17,980.19 acres of Trust land, valued at $20.66 million for 18,491.96 acres of federal land, valued at $20.69 million. The Trust
Land Office paid $35,408.81 to the USFS to equalize the values of land exchanged. Subsequent to August 30, 2021, all
outstanding easements were exchanged between the Trust and the USFS totaling about 45 miles of permanent access on
January 13, 2022, concluding the main items of the Land Exchange.
In August 2021, the Board of Trustees authorized an irrevocable transfer of $26.3 million in spendable earnings to the Trust
principal. The transfer was made in September 2021, to offset erosions of the purchasing power of the Trust's cash corpus
attributed to inflation.
F. NORTHERN TOBACCO SECURITIZATION CORPORATION
On July 1, 2021, the Corporation issued $282.48 million of its Tobacco Settlement Asset-Backed Bonds, 2021 Series A, B and
C. Proceeds of the sale were used to fully refund the Corporation's outstanding Tobacco Settlement Asset-Backed Bonds, Series
2006. Pursuant to the terms of the 2021 Bond Indenture, proceeds from the sale in the amount of $18.99 million will be used to
fund additional capital projects as appropriated by the Alaska State Legislature.
G. AIRPORTS
In August 2021, AIAS issued $85.5 million of Series 2021 refunding bonds, which in conjunction with the contribution of
$40.0 million of cash and prior debt service funds on hand, defeased/refunded $154.4 million of par of then outstanding AIAS
revenue bonds. The transaction resulted in a $68.9 million reduction of outstanding bonds payable and an estimated $81.8
million reduction in scheduled debt service payments between FY 2022 and FY 2036. The refunding portion of the transaction
provided an estimated net present value savings of approximately $24.9 million.
H. ALASKA HOUSING FINANCE CORPORATION
The Corporation delivered its $122,795,000 General Mortgage Revenue Bonds II, 2022 Series A and B, on January 12, 2022.
The 2022 Bonds are the first two series of Social Bonds designated under the Corporation's General Mortgage Revenue Bonds
II indenture. The $39,065,000 Series A Bonds are tax-exempt general obligations of the Corporation having a final maturity of
June 1, 2051, and bearing interest at fixed rates ranging from 0.15% to 3.00%. The $83,730,000 Series B Bonds are tax-exempt
general obligations of the Corporation having a final maturity of June 1, 2036, and bearing interest at fixed rates ranging from
1.65% to 5.00%. Interest on the Series A and B Bonds is payable on June 1, 2022, and semiannually on each June | and
December | thereafter until maturity or redemption. Proceeds of the Series A Bonds were used to purchase mortgage loans and
to pay certain costs of issuance. Proceeds of the Series B Bonds were used to refund certain outstanding obligations of the
Corporation.
I. STATE OF ALASKA
On December 1, 2021 the State of Alaska entered into a settlement agreement for prior year oil and gas royalty payments as a
result of the administrative and judicial appeals process. The settlement resulted in a $66.4 million liability to the State of
Alaska. Per Alaska Statutes 37.14.150 and 37.13.010, royalty payments are split between the General Fund, Public School Trust
Fund and the Alaska Permanent Fund. As a result, a settlement liability was booked in the General Fund for $32.9 million and
in the Public School Trust Fund for $332 thousand. The Alaska Permanent Fund is managed by the Alaska Permanent Fund
Corporation (APFC) which issues separate financial statements that are incorporated as a blended component unit of the State.
The settlement was reached after the APFC financial statement audit opinion date therefore the $33.2 million liability was not
recorded by the Alaska Permanent Fund.
I - 149
STATE OF ALASKA NOTE 14
NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2021
NOTE 14 —- PRIOR PERIOD ADJUSTMENTS AND RESTATED BEGINNING NET POSITION
PRIOR PERIOD ADJUSTMENT
Alaska Industrial Development and Export Authority
AIDEA determined a reserve account and the corresponding liability of $23.0 million should have been reported in the prior
year which resulted in cash and liabilities to be understated as of June 30, 2020. Accordingly, the amount reported for the cash
and liabilities have been restated as of June 30, 2020.
Office of Information Technology
During the process of collecting FY 2021 information for the Information Services Fund, it was identified that Alaska Land
Mobile Radio had an appropriation that existed in another department for FY 2020 and had expenses totaling $6.0 million that
was not reported as contributed capital in the prior year. As a result, contributed capital and net position were understated by
$6.0 million as of June 30, 2020.
RESTATED BEGINNING NET POSITION
Alaska Energy Authority
Beginning net position/fund balance was restated for an increase of $7.39 million to record revised amounts related to the
sweep activity in the due to the State of Alaska. Beginning net position/fund balance was restated for an increase of $2.24
million to record revised amounts related to the general activity in the due to funds managed by Treasury. The following table
shows the changes to the beginning net position/fund balance as of July 1, 2020, for the following:
Major Special Statement of
Revenue Fund Activities
Fund balance/net position at June 30, 2020, as previously reported $ 39,891 §$ 39,891
Correction of the due to State of Alaska-sweep activity 7,388 7,388
Correction of the due to funds managed by Treasury 2,239 2,239
Fund balance/net position at July 1, 2020, as restated $ 49,518 $ 49,518
Governmental Accounting Standards Board Statement No. 84
In 2017, the Governmental Accounting Standards Board (GASB) issued Statement No. 84, Fiduciary Activities. This statement
establishes criteria for identifying and classifying fiduciary activities of state and local governments. It describes four fiduciary
funds that should be reported, if applicable: 1) pension (and other employee benefit) trust funds, 2) investment trust funds, 3)
private-purpose trust funds, and 4) custodial funds, which generally should report fiduciary activities that are not required to be
reported in pension trust funds, investment trust funds, or private-purpose trust funds. Several fund changes reflected below
were necessary to present the funds within the state's reporting entity according to the requirements of GASB 84.
The State of Alaska and its component units adopted the provisions of Statement 84 during FY 2021. The effects of adopting
Statement 84 are reported as a restated beginning net position due to a change in accounting principle. The following funds had
an effect on the beginning net position due to this change as follows (in thousands):
Fund Statements - Fiduciary Funds Custodial Investment Trust Totals
Net Positions June 30, 2020 as reported
in the 2020 ACFR — — —
Implementation of GASB 84 105,340 188,428 293,768
Net positions July 1, 2020 as restated 105,340 188,428 293,768
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Required
Supplementary
Information
T- 151
STATE OF ALASKA
Budgetary Comparison Schedule
General Fund
For the Fiscal Year Ended June 30, 2021
(Stated in Thousands)
STATEMENT 2.01
REVENUES
Unrestricted:
Taxes
Licenses and Permits
Charges for Services
Fines and Forfeitures
Rents and Royalties
Premiums and Contributions
Interest and Investment Income
Payments In from Component Units
Other Revenues
Restricted:
Federal Grants in Aid
Interagency
Payments In from Component Units
Other Revenues
Total Revenues
EXPENDITURES
Current:
General Government
Alaska Permanent Fund Dividend
Education
University
Health and Human Services
Law and Justice
Public Protection
Natural Resources
Development
Transportation
Intergovernmental Revenue Sharing
Debt Service:
Principal
Interest and Other Charges
Total Expenditures
Excess (Deficiency) of Revenues Over Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In from Other Funds
Transfers (Out to) Other Funds
Total Other Financing Sources and Uses
Excess (Deficiency) of Revenues, Expenditures, Other Financing
Sources, Special and Extraordinary Items, Budgetary Basis
RECONCILIATION OF BUDGETARY / GAAP REPORTING:
Adjust Expenditures for Encumbrances
Basis Difference
Excess (Deficiency) of Revenues, Expenditures, Other Financing
Sources, Special and Extraordinary Items, GAAP Basis
Fund Balances - Beginning of Year
Fund Balances - End of Year
Original Final Variance with
Budget Budget Actual Final Budget
$ 762,506 $ 762,131 $§$ 907,277 $ (145,146)
112,777 113,903 134,710 (20,807)
443,120 403,174 149,556 253,618
22,499 21,191 23,293 (2,102)
478,060 476,181 711,952 (235,771)
1,112 676 20,313 (19,637)
34,323 34,323 124,764 (90,441)
183,759 186,758 43,328 143,430
101,057 96,743 76,956 19,787
12,486,381 12,988,888 4,676,378 8,312,510
626,453 1,061,474 727,013 334,461
100,762 100,123 _— 100,123
_ _ 5,089 (5,089)
15,352,809 16,245,565 7,600,629 8,644,936
1,113,896 1,134,465 894,414 240,051
634,759 634,759 631,807 2,952
2,340,437 2,466,060 2,038,744 427,316
867,787 868,291 331,919 536,372
5,350,961 4,969,495 3,628,659 1,340,836
304,320 312,504 277,218 35,286
1,066,029 1,341,552 977,853 363,699
511,792 546,193 294,506 251,687
1,744,887 2,283,407 1,493,440 789,967
7,529,242 6,943,089 1,421,540 5,521,549
86,690 93,790 91,422 2,368
24,057 24,057 23,695 362
11,971 11,971 11,971 _—
21,586,828 21,629,633 12,117,188 9,512,445
(6,234,019) (5,384,068) (4,516,559) (867,509)
6,913,424 6,913,424 6,913,424 _—
(3,879,562) (3,879,562) (3,879,562) _
3,033,862 3,033,862 3,033,862 _
$ (3,200,157) $ (2,350,206) (1,482,697) $ (867,509)
111,461
57,164
(1,314,072)
3,982,854
$ 2,668,782
T- 152
Note to Required Supplementary Information - Budgetary Reporting
For the Fiscal Year Ended June 30, 2021
The Budgetary Comparison Schedule - General Fund presents comparisons of the original and final adopted budget with actual
data on a budgetary basis. The State issues a separate legal basis budgetary report, which demonstrates legal compliance with
the budget. A copy of this report may be obtained by contacting the State of Alaska, Department of Administration, Division of
Finance, P.O. Box 110204, Juneau, AK 99811-0204, or may be viewed online at http://doa.alaska.gov/dof/reports/
annualreport.html.
The legislature's legal authorization (appropriations) to incur obligations is enacted on a basis inconsistent with Generally
Accepted Accounting Principles (GAAP). The reconciliation of the budgetary basis to GAAP is shown directly on the
Budgetary Comparison Schedule - General Fund. Both the annual operating budget and the net continuing total budget are
included.
The types of differences are as follows:
¢« Encumbrances are included for total authorized expenditures, although for GAAP purposes they are excluded.
¢ There was financial activity related to reimbursable services agreements (RSA) and interfund transactions that were
recorded in the general fund and in other funds. For budgetary purposes, that activity was left in the general fund, but for
GAAP purposes it was eliminated from the general fund.
¢ Basis differences arise when the budgetary basis of accounting differs from the basis of accounting applicable to fund type
when reporting on operations in accordance with GAAP. This difference is comprised of the following in the general fund
(in thousands):
Petroleum Severance Taxes and Royalties $ 94,278
Medical Assistance Program (36,311)
Tobacco Tax 372
Alcohol Tax 277
Tire Tax 9
Vehicle Rental Tax 1,558
Marijuana Tax (592)
Working Reserve (2,427)
Total General Fund Basis Difference $ 57,164
T- 153
STATE OF ALASKA
Proportionate Share of the Net Pension Liability Schedule
Public Employees' Retirement System - Pension
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.10
2021 2020 2019 2018 2017
Primary government's proportion of the
net pension liability 49.09 % 49.72 % 49.53 % 50.62 % 51.87 %
Component unit's proportion of the net
pension liability 4.79 % 4.91 % 5.15 % 4.74 % 5.79 %
Nonemployer contributing state's
proportion of the net pension liability 14.86 % 14.28 % 11.33 % 13.40 % 5.38 %
Primary government's proportionate
share of the net pension liability $ 2,896,625 $ 2,721,623 $ 2,461,037 2,616,648 $ 2,899,139
Component unit's proportionate share of
the net pension liability $ 282,741 §$ 268,783 $ 255,967 244,871 §$ 323,541
Nonemployer contributing state's share
of the net pension liability $ 876,821 §$ 781,773 $ 562,886 692,476 §$ 300,921
Primary government's covered payroll $ 1,276,521 $ 1,102,180 $ 1,093,705 1,092,504 $ 1,090,607
Component unit's covered payroll $ 102,596 $ 116,162 $ 119,018 128,050 $ 140,886
Primary government's proportionate
share of the net pension liability as a
percentage of its covered payroll 226.92 % 246.93 % 225.02 % 239.51 % 265.83 %
Component unit's proportionate share of
the net pension liability as a
percentage of its covered payroll 275.59 % 231.39 % 215.07 % 191.23 % 229.65 %
Plan fiduciary net position as a
percentage of the total pension liability 61.61 % 63.42 % 65.19 % 63.37 % 59.55 %
I - 154
This schedule continued on next page.
STATE OF ALASKA
Proportionate Share of the Net Pension Liability Schedule
Public Employees' Retirement System - Pension
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.10
2016 2015 2014
Primary government's proportion of the
net pension liability 50.75 % 52.23 % 51.60 %
Component unit's proportion of the net
pension liability 5.52 % 4.44 % 4.43 %
Nonemployer contributing state's
proportion of the net pension liability 10.40 % 21.86 % 22.87 %
Primary government's proportionate
share of the net pension liability $ 2,461,215 2,436,220 $ 2,709,520
Component unit's proportionate share of
the net pension liability $ 267,632 207,090 $ 232,515
Nonemployer contributing state's share
of the net pension liability $ 504,300 1,019,583 $ 1,201,055
Primary government's covered payroll $ 1,148,502 1,136,811 $ 1,094,801
Component unit's covered payroll $ 150,562 143,205 $ 145,495
Primary government's proportionate
share of the net pension liability as a
percentage of its covered payroll 214.30 % 214.30 % 247.49 %
Component unit's proportionate share of
the net pension liability as a
percentage of its covered payroll 177.76 % 144.61 % 159.81 %
Plan fiduciary net position as a
percentage of the total pension liability 63.96 % 62.37 % 56.04 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
T- 155
STATE OF ALASKA
Employer Contributions Schedule
Public Employees' Retirement System - Pension
Last Ten Fiscal Years
(Stated in Thousands)
STATEMENT 2.11
2021 2020 2019 2018 2017
Primary Government
Statutorily required contribution $ 254,597 $ 200,767 $ 188,809 $ 181,720 $ 170,247
Contributions in relation to the statutorily
required contribution 255,643 212,693 207,815 183,334 179,742
Contribution deficiency (excess) $ (1,046) $ (11,926) $ (19,006) $ (1,614) §$ (9,495)
Covered payroll $ 1,140,501 $ 1,276,521 $ 1,102,180 $ 1,093,885 $ 1,092,504
Contributions as a percentage of covered
payroll 22.41 % 16.66 % 18.85 % 16.76 % 16.45 %
Component Units
Statutorily required contribution $ 13,890 $ 16,074 $ 17,626 $ 20,590 $ 19,693
Contributions in relation to the statutorily
required contribution 21,861 19,763 17,718 20,590 19,693
Contribution deficiency (excess) $ (7,971) $ (3,689) $ (92) §$ — $ —
Covered payroll $ 91,176 §$ 102,596 $ 116,162 §$ 119,018 §$ 128,050
Contributions as a percentage of covered
payroll 23.98 % 19.26 % 15.25 % 17.30 % 15.38 %
Primary Government Nonemployer
Contribution
Statutorily required contribution $ 102,429 $ 69,067 $ 67,433 $ 36,399 $ 40,360
Contributions in relation to the statutorily
required contribution 101,383 79,486 67,857 36,770 50,027
Contribution deficiency (excess) $ 1,046 $ (10,419) §$ (424) $ (371) §$ (9,667)
I- 156
This schedule continued on next page.
STATE OF ALASKA
Employer Contributions Schedule
Public Employees' Retirement System - Pension
Last Ten Fiscal Years
(Stated in Thousands)
STATEMENT 2.11
2016 2015 2014 2013
Primary Government
Statutorily required contribution $ 164,533 $ 285,769 §$ 200,076 177,375
Contributions in relation to the statutorily
required contribution $ 164,533 636,865 200,076 177,375
Contribution deficiency (excess) $ — $ (351,096) $ — —
Covered payroll $ 1,090,607 $ 1,148,502 $ 1,136,811 1,094,801
Contributions as a percentage of covered
payroll 15.09 % 55.45 % 17.60 % 16.20 %
Component Units
Statutorily required contribution $ 17,969 $ 18,561 $ 17,313 15,819
Contributions in relation to the statutorily
required contribution 17,969 18,561 17,313 15,819
Contribution deficiency (excess) $ — §$ — §$ — —
Covered payroll $ 140,886 $ 150,562 $ 143,205 145,495
Contributions as a percentage of covered
payroll 12.75 % 12.33 % 12.09 % 10.87 %
Primary Government Nonemployer
Contribution
Statutorily required contribution $ 43,535 $ 153,622 $ 82,554 77,689
Contributions in relation to the statutorily
required contribution 43,535 479,750 82,554 77,689
Contribution deficiency (excess) $ — $ (326,128) $ — —
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
In FY 2015 the legislature appropriated $1.0 billion to the Public Employee's Retirement System's retirement funds from the
Constitutional Budget Reserve Fund to help with the net pension liability.
I- 157
STATE OF ALASKA
Proportionate Share of the Net OPEB Liability Schedule
STATEMENT 2.12
Public Employees' Retirement System - Alaska Retiree Healthcare Trust Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
2021 2020 2019 2018
Primary government's proportion of the
net OPEB liability or asset 49.10 % 49.73 % 49.54 % 50.64 %
Component unit's proportion of the net
OPEB liability or asset 4.79 % 4.91 % 5.15 % 4.74 %
Nonemployer contributing state's
proportion of the net OPEB liability or
asset 14.89 % 14.30 % 11.35 % 13.41 %
Primary government's proportionate share
of the net OPEB liability or (asset) $ (222,361) $ 73,794 §$ 508,456 $ 427,754
Component unit's proportionate share of
the net OPEB liability or (asset) $ (21,690) $ 7,285 §$ 52,106 §$ 39,552
Nonemployer contributing state's share of
the net OPEB liability or (asset) $ (67,431) §$ 21,218 §$ 116,512 §$ 113,255
Primary government's covered payroll $ 1,276,521 $ 1,102,180 $ 1,093,705 $ 1,092,504
Component unit's covered payroll $ 110,704 $ 116,162 $ 119,018 $ 128,050
Primary government's proportionate share
of the net OPEB liability or asset as a
percentage of its covered payroll 17.42 % 6.70 % 46.49 % 39.15 %
Component unit's proportionate share of
the net OPEB liability or asset as a
percentage of its covered payroll 19.59 % 6.27 % 43.78 % 30.89 %
Plan fiduciary net position as a
percentage of the total OPEB liability 106.15 % 98.13 % 93.13 % 89.7 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I- 158
STATE OF ALASKA
Employer Contributions Schedule
Public Employees’ Retirement System - Alaska Retiree Healthcare Trust Plan
Last Ten Fiscal Years
(Stated in Thousands)
STATEMENT 2.13
Primary Government
Statutorily required contribution
Contributions in relation to the statutorily
required contribution
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of covered
payroll
Component Units
Statutorily required contribution
Contributions in relation to the statutorily
required contribution
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of covered
payroll
Primary Government Nonemployer
Contribution
Statutorily required contribution
Contributions in relation to the statutorily
required contribution
Contribution deficiency (excess)
2021 2020 2019 2018
34,183 $ 64,223 $ 87,606 $ 44,192
34,183 53,167 50,848 41,929
— $ 14,056 $ 36,758 $ 2,263
1,140,501 $ 1,276,521 $ 1,102,180 $ 1,093,885
3.00 % 4.16 % 4.61% 3.83 %
7,015 $ 6,073 $ 6,825 $ 6,060
6,574 8,142 6,614 6,060
441. $ (2,069) $ 211. $ =
100,856 $ 110,704 $ 116,162 $ 119,018
6.52 % 7.35 % 5.69 % 5.09 %
— $ 114,289 $ 11,137 $ 2,316
— $ 14,289 $ 11,137. $ 2,316
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
T- 159
STATE OF ALASKA
Proportionate Share of the Collective Net OPEB Liability Schedule
Public Employees' Retirement System - Occupational Death & Disability Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.14
Primary government's proportion of the
collective net OPEB liability or asset
Component unit's proportion of the
collective net OPEB liability or asset
Primary government's proportionate
share of the collective net OPEB
liability or (asset)
Component unit's proportionate share of
the collective net OPEB liability or
(asset)
Primary government's covered payroll
Component unit's covered payroll
Primary government's proportionate
share of the collective net OPEB
liability or asset as a percentage of its
covered payroll
Component unit's proportionate share of
the collective net OPEB liability or
asset as a percentage of its covered
payroll
Plan fiduciary net position as a
percentage of the total OPEB liability
2021 2020 2019 2018
48.77 % 49.15 % 48.37 % 49.14 %
4.25 % 4.30 % 4.58 % 4.03 %
$ (13,294) $ (11,917) $ (9,395) (6,972)
(1,160) $ (164) $ (140) (103)
$ 1,276,521 $ 1,102,180 $ 1,093,705 508,805
$ 89410 $ 116162 $ 119,018 65,874
1.04 % 1.08 % 0.86 % 1.37 %
1.30 % 0.14% 0.12% 0.16 %
283.80 % —% —% —%
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I - 160
STATE OF ALASKA
Employer Contributions Schedule
Public Employees' Retirement System - Occupational Death & Disability Plan
Last Ten Fiscal Years
(Stated in Thousands)
SCHEDULE 2.15
Primary Government
Statutorily required contribution
Contributions in relation to the
statutorily required contribution
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of
covered payroll
Component Units
Statutorily required contribution
Contributions in relation to the
statutorily required contribution
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of
covered payroll
2021 2020 2019 2018
1,823 $ 1,432 2,599 1,088
2,591 2,137 2,008 1,088
(768) $ (705) 591 =
1,140,501 $ 1,276,521 1,102,180 547,669
0.23 % 0.17 % 0.18 % 0.20 %
300 $ 181 246 85
251 188 175 85
49 _ $ (7) 71 —
93,463 $ 89,410 116,162 65,276
0.27 % 0.21 % 0.15 % 0.13 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
I- 161
STATE OF ALASKA
Proportionate Share of the Collective Net OPEB Liability Schedule
Public Employees' Retirement System - Retiree Medical Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
SCHEDULE 2.16
2021
2020
2019
2018
Primary government's proportion of
the collective net OPEB liability 47.99 %
Component unit's proportion of the
collective net OPEB liability 5.09 %
Primary government's proportionate
share of the collective net OPEB
liability $ 3,404 §$
Component unit's proportionate
share of the collective net OPEB
liability $ 361 §$
Primary government's covered
payroll $ 809,874 $
84,255 $
AF
Component unit's covered payroll
Primary government's proportionate
share of the collective net OPEB
liability as a percentage of its
covered payroll 0.42 %
Component unit's proportionate
share of the collective net OPEB
liability as a percentage of its
covered payroll 0.43 %
Plan fiduciary net position as a
percentage of the total OPEB
liability 95.23 %
48.37 %
5.17 %
11,556
1,236
599,129
116,162
1.93 %
1.06 %
83.17 %
48.37 %
4.58 %
6,156
582
547,669
65,276
1.12 %
0.89 %
88.17 %
49.14 %
4.03 %
2,563
210
508,805
65,874
0.50 %
0.32 %
94.00 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I- 162
STATE OF ALASKA STATEMENT 2.17
Employer Contributions Schedule
Public Employees' Retirement System - Retiree Medical Plan
Last Ten Fiscal Years
(Stated in Thousands)
2021 2020 2019 2018
Primary Government
Statutorily required contribution $ 8914 $ 8555 §$ 6,156 $ 5,641
Contributions in relation to the statutorily
required contribution 8,914 8,555 5,670 5,641
Contribution deficiency (excess) $ — §$ — §$ 486 $ —
Covered payroll $ 680,616 §$ 809,874 §$ 599,129 §$ 547,669
Contributions as a percentage of covered
payroll 1.31 % 1.06 % 0.95 % 1.03 %
Component Units
Statutorily required contribution $ 894 §$ 896 §$ 582 §$ 532
Contributions in relation to the statutorily
required contribution 1,002 914 604 532
Contribution deficiency (excess) $ (108) $ (18) $ (22) §$ —
Covered payroll $ 88,707 $ 84,255 §$ 116,162 §$ 65,276
Contributions as a percentage of covered
payroll 1.13 % 1.08 % 0.52 % 0.82 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
I - 163
STATE OF ALASKA
Proportionate Share of the Net Pension Liability Schedule
Teachers' Retirement System - Pension
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.20
2021 2020 2019 2018 2017
Primary government's proportion of the
net pension liability 0.65 % 0.67 % 0.67 % 0.67 % 0.75 %
Component unit's proportion of the net
pension liability 1.42 % 1.60 % 1.68 % 1.61 % 2.14 %
Nonemployer contributing state's
proportion of the net pension liability 63.02 % 59.33 % 59.39 % 63.14 % 53.90 %
Primary government's proportionate
share of the net pension liability $ 13,276 $ 12,438 $ 12,807 $ 13,601 $ 17,047
Component unit's proportionate share of
the net pension liability $ 28,801 §$ 29,951 §$ 32,065 $ 32,661 $ 48,846
Nonemployer contributing state's share
of the net pension liability $ 1,281,372 $ 1,108,594 $ 1,136,829 $ 1,279,682 $ 1,230,776
Primary government's covered payroll $ 5,143 §$ 5,312 §$ 4,768 $ 4,853 $ 5,388
Component unit's covered payroll $ 18,249 $ 20,625 $ 20,625 $ 22,128 $ 25,212
Primary government's proportionate
share of the net pension liability as a
percentage of its covered payroll 258.14 % 234.15 % 268.60 % 280.26 % 316.39 %
Component unit's proportionate share of
the net pension liability as a
percentage of its covered payroll 157.82 % 145.22 % 155.47 % 147.60 % 193.74 %
Plan fiduciary net position as a
percentage of the total pension liability 72.81 % 74.68 % 74.1% 12.4 % 68.4 %
I- 164
This schedule continued on next page.
STATE OF ALASKA
Proportionate Share of the Net Pension Liability Schedule
Teachers' Retirement System - Pension
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.20
2016 2015 2014
Primary government's proportion of the
net pension liability 0.78 % 0.79 % 0.78 %
Component unit's proportion of the net
pension liability 2.03 % 0.97 % 1.02 %
Nonemployer contributing state's
proportion of the net pension liability 61.03 % 84.10 % 83.41 %
Primary government's proportionate
share of the net pension liability $ 14,501 $ 23,739 $ 25,930
Component unit's proportionate share of
the net pension liability $ 37,680 §$ 29,024 §$ 33,771
Nonemployer contributing state's share
of the net pension liability $ 1,135,514 $ 2,522,174 $ 2,761,123
Primary government's covered payroll $ 5,620 $ 5,920 $ 5,834
Component unit's covered payroll $ 31,575 §$ 34,497 §$ 36,150
Primary government's proportionate
share of the net pension liability as a
percentage of its covered payroll 258.02 % 401.00 % 444.46 %
Component unit's proportionate share of
the net pension liability as a
percentage of its covered payroll 119.33 % 84.13 % 93.42 %
Plan fiduciary net position as a
percentage of the total pension liability 73.82 % 55.7 % 49.76 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I- 165
STATE OF ALASKA STATEMENT 2.21
Employer Contributions Schedule
Teachers' Retirement System - Pension
Last Ten Fiscal Years
(Stated in Thousands)
2021 2020 2019 2018 2017
Primary Government
Statutorily required contribution $ 1,120 $ 1,097 $ 1,086 $ 989 $ 872
Contributions in relation to the statutorily
required contribution 1,120 1,184 1,095 1,004 1,003
Contribution deficiency (excess) $ — $ (87) §$ (9) $ (15) $ (131)
Covered payroll $ 5,349 §$ 5,143 §$ 5,312 §$ 4,768 §$ 4,853
Contributions as a percentage of covered
payroll 20.94 % 23.02 % 20.61 % 21.06 % 20.67 %
Component Units
Statutorily required contribution $ 907 $ 1465 $ 1,830 $ 1,859 $ 2,003
Contributions in relation to the statutorily
required contribution 907 1,735 1,735 1,859 2,003
Contribution deficiency (excess) $ — §$ (270) $ 95 $ — §$ —
Covered payroll $ 16,049 §$ 18,249 §$ 20,625 §$ 22,128 §$ 25,212
Contributions as a percentage of covered
payroll 5.65 % 9.51 % 8.41 % 8.40 % 7.94 %
Primary Government Nonemployer Contribution
Statutorily required contribution $ 134,070 $ 126,831 $ 127,371 $ 105,888 $ 94,775
Contributions in relation to the statutorily
required contribution 134,070 140,219 127,365 111,042 115,980
Contribution deficiency (excess) $ — $ (13,388) $ 6 $ (5,154) $ (21,205)
This schedule continued on next page.
I - 166
STATE OF ALASKA
Employer Contributions Schedule
Teachers' Retirement System - Pension
Last Ten Fiscal Years
(Stated in Thousands)
STATEMENT 2.21
Primary Government
Statutorily required contribution
Contributions in relation to the statutorily
required contribution
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of covered
payroll
Component Units
Statutorily required contribution
Contributions in relation to the statutorily
required contribution
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of covered
payroll
2016
2015
2014
2013
925
925
$ 2,644
12,500
1,951
1,951
1,836
1,836
$ (9,856)
5,388
17.17 %
1,973
1,973
$ 5,620
222.42 %
$ 2,314
2,314
5,920
32.96 %
2,385
2,385
5,834
31.47 %
2,390
2,390
27,848
7.08 %
Primary Government Nonemployer Contribution
Statutorily required contribution
Contributions in relation to the statutorily
required contribution
Contribution deficiency (excess)
89,957
89,957
$ 31,575
7.33 %
$ 315,279
1,650,517
34,497
6.91 %
207,271
207,271
36,150
6.61 %
195,435
195,435
$ (1,335,238)
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
In FY 2015 the legislature appropriated $2.0 billion to the Teacher's Retirement System's retirement funds from the
Constitutional Budget Reserve Fund to help with the net pension liability.
I - 167
STATE OF ALASKA
Proportionate Share of the Collective Net OPEB Liability Schedule
Teachers' Retirement System - Alaska Retiree Healthcare Trust Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.22
2021 2020
2019
2018
Primary government's proportion of the
collective net OPEB liability or asset 0.65 % 0.67 %
Component unit's proportion of the
collective net OPEB liability or asset 1.41 % 1.60 %
Nonemployer contributing state's
proportion of the collective net OPEB
liability or asset 63.12 % 59.41 %
Primary government's proportionate
share of the collective net OPEB
liability or (asset) $ (2,335) $ (1,017)
Component unit's proportionate share of
the collective net OPEB liability or
(asset) $ (5,054) $ (2,444)
Nonemployer contributing state's share
of the collective net OPEB liability or
(asset) $ (225,823) $ (90,788)
AF
5,312
20,625
Primary government's covered payroll $ 5,143
AF
Component unit's covered payroll $ 18,249
Primary government's proportionate
share of the collective net OPEB
liability or asset as a percentage of its
covered payroll 45.40 % 19.15 %
Component unit's proportionate share of
the collective net OPEB liability or
asset as a percentage of its covered
payroll 27.69 % 11.85 %
Plan fiduciary net position as a
percentage of the total OPEB liability 113.78 % 105.50 %
0.67 %
1.67 %
59.47 %
2,080
5,196
184,929
4,768
20,625
43.62 %
25.19 %
—%
0.67 %
1.61 %
63.26 %
1,234
2,955
116,351
4,853
22,128
25.43 %
13.35 %
93.80 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I - 168
STATE OF ALASKA STATEMENT 2.23
Employer Contributions Schedule
Teachers' Retirement System - Alaska Retiree Healthcare Trust Plan
Last Ten Fiscal Years
(Stated in Thousands)
2021 2020 2019 2018
Primary Government
Statutorily required contribution $ 210 §$ 241 §$ 141. §$ 186
Contributions in relation to the statutorily
required contribution 210 154 141 153
Contribution deficiency (excess) $ — $ 87 $ — §$ 33
Covered payroll $ 5,349 $ 5,143 §$ 5,312 §$ 4,768
Contributions as a percentage of covered
payroll 3.93 % 2.99 % 2.65 % 3.21 %
Component Units
Statutorily required contribution $ 1,109 §$ 827 §$ 856 §$ 921
Contributions in relation to the statutorily
required contribution 1,107 860 856 921
Contribution deficiency (excess) $ 2 $ (33) $ — §$ —_—
Covered payroll $ 16,049 §$ 18,249 §$ 20,625 §$ 22,128
Contributions as a percentage of covered
payroll 6.90 % 4.71 % 4.15 % 4.16 %
Primary Government Nonemployer
Contribution
Statutorily required contribution $ — §$ 13,388 $ — §$ 5,154
Contributions in relation to the statutorily
required contribution — — — —
Contribution deficiency (excess) $ — $ 13,388 §$ — §$ 5,154
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
I - 169
STATE OF ALASKA
Proportionate Share of the Collective Net OPEB Liability Schedule
Teachers' Retirement System - Occupational Death & Disability Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.24
2021
2020
2019
2018
Primary government's proportion of the
collective net OPEB liability or asset 0.46 %
Component unit's proportion of the
collective net OPEB liability or asset 2.29 %
Primary government's proportionate
share of the collective net OPEB
liability or (asset) $ (20)
Component unit's proportionate share of
the collective net OPEB liability or
(asset) $ (99)
Primary government's covered payroll $ 5,143
Component unit's covered payroll $ 9,766
Primary government's proportionate
share of the collective net OPEB
liability or asset as a percentage of its
covered payroll 0.39 %
Component unit's proportionate share of
the collective net OPEB liability or
asset as a percentage of its covered
payroll 1.01 %
Plan fiduciary net position as a
percentage of the total OPEB liability 931.08 %
0.45 %
247 %
$ (18)
$ (99)
AF
5,312
9,654
AF
0.34 %
1.03 %
1,409.77 %
$
$
AA
0.40 %
2.28 %
(14)
(80)
4,768
9,654
0.29 %
0.83 %
—%
AA
0.36 %
2.30 %
(12)
(75)
1,246
8,200
0.96 %
0.91 %
—%
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
1-170
STATE OF ALASKA
Employer Contributions Schedule
Teachers' Retirement System - Occupational Death & Disability Plan
Last Ten Fiscal Years
(Stated in Thousands)
STATEMENT 2.25
2021 2020 2019 2018
Primary Government
Statutorily required contribution $ 2 $ 1 — §$ —
Contributions in relation to the statutorily
required contribution 2 1 1 —
Contribution deficiency (excess) $ — $ — (1) $ —
Covered payroll $ 5,349 §$ 5,143 5,312 $ 1,328
Contributions as a percentage of covered
payroll 0.04 % 0.02 % 0.02 % —%
Component Units
Statutorily required contribution $ 9 $ 8 — §$ —
Contributions in relation to the statutorily
required contribution 9 8 8 —
Contribution deficiency (excess) $ — $ — (8) $ —
Covered payroll $ 11,145 §$ 9,766 9,654 §$ 8,200
Contributions as a percentage of covered
payroll 0.08 % 0.08 % 0.08 % —%
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
I- 171
STATE OF ALASKA
Proportionate Share of the Collective Net OPEB Liability Schedule
Teachers' Retirement System - Retiree Medical Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.26
2021 2020
2019
2018
Primary government's proportion of the
collective net OPEB liability or asset 0.46 %
Component unit's proportion of the
collective net OPEB liability or asset 2.30 %
Primary government's proportionate
share of the collective net OPEB
liability or (asset) $ (45) $
Component unit's proportionate share of
the collective net OPEB liability or
(asset) $ (227) $
AF
Primary government's covered payroll $ 1,782
AF
Component unit's covered payroll $ 9,766
Primary government's proportionate
share of the collective net OPEB
liability or asset as a percentage of its
covered payroll 2.53 %
Component unit's proportionate share of
the collective net OPEB liability or
asset as a percentage of its covered
payroll 2.32 %
Plan fiduciary net position as a
0.45 %
2.46 %
(17)
(94)
1,738
9,654
0.98 %
0.97 %
percentage of the total OPEB liability 125.59 % 110.03 %
$
$
PAHA7
0.40 %
2.28 %
(13)
(73)
1,314
9,654
0.99 %
0.76 %
—%
PAHA7
0.36 %
2.30 %
(17)
(109)
1,246
8,200
1.36 %
1.33 %
—%
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I- 172
STATE OF ALASKA
Employer Contributions Schedule
Teachers' Retirement System - Retiree Medical Plan
Last Ten Fiscal Years
(Stated in Thousands)
STATEMENT 2.27
Primary Government
Statutorily required contribution
Contributions in relation to the statutorily
required contribution
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of covered
payroll
Component Units
Statutorily required contribution
Contributions in relation to the statutorily
required contribution
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of covered
payroll
2021
2020
2019
2018
22
22
20
14
14
13
13
2,307
0.95 %
104
104
$ 1,782
1.12 %
$ 106
103
1,738
0.81 %
76
76
$
1,328
0.98 %
75
75
11,145
0.93 %
$ 9,766
1.05 %
9,654
0.79 %
$
8,200
0.91 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
1-173
STATE OF ALASKA
Changes in the Net Pension Liability and Related Ratios Schedule
Judicial Retirement System - Pension
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.30
Total pension liability
Service cost
Interest
Differences between expected and
actual experience
Changes of assumptions
Benefit payments, including refunds of
employee contributions
Net change in total pension liability
Total pension liability - beginning
Total pension liability - ending (a)
Plan fiduciary net position
Contributions - employer
Contributions - employee
Net investment income
Other income
Benefit payments, including refunds of
employee contributions
Administrative expenses
Net change in plan fiduciary net
position
Plan fiduciary net position - beginning
Plan fiduciary net position - ending (b)
State's net pension liability - ending
(a) - (b)
Plan fiduciary net position as a
percentage of the total pension liability
Covered payroll
State's net pension liability as a
percentage of covered payroll
2021 2020 2019 2018 2017
$ 6,580 $ 6,351 $ 6,452 $ 6,227 $ 6,025
17,340 16,653 17,331 16,449 16,417
4,075 — (12,076) — (10,791)
(38,010) — 10,344 _— _
(14,178) (13,628) (12,126) (11,589) (11,228)
(24,193) 9,376 9,925 11,087 423
235,935 226,560 216,635 205,548 205,125
211,742 235,936 226,560 216,635 205,548
11,127 10,257 10,528 11,086 11,710
839 813 833 886 802
7,537 10,448 13,590 18,910 (567)
_ _— _— — 2
(14,178) (13,628) (12,126) (11,589) (11,228)
(107) (59) (63) (79) (60)
5,218 7,831 12,762 19,214 659
184,626 176,795 164,033 144,819 144,160
189,844 184,626 176,795 164,033 144,819
$ 21,898 $ 51,310 $ 49,765 $ 52,602 $ 60,729
89.66 % 78.25 % 78.03 % 75.72 % 70.46 %
$ 13,527 $ 13,393 $ 14,599 $ 14,089 $ 13,597
161.88 % 383.11 % 340.88 % 373.36 % 446.64 %
This statement continued on next page.
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
1-174
STATE OF ALASKA STATEMENT 2.30
Changes in the Net Pension Liability and Related Ratios Schedule
Judicial Retirement System - Pension
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
2016 2015
Total pension liability
Service cost $ 5,814 $ 5,186
Interest 15,564 15,320
Differences between expected and
actual experience _— (3,741)
Changes of assumptions — 1,407
Benefit payments, including refunds of
employee contributions (10,684) (10,578)
Net change in total pension liability 10,694 7,594
Total pension liability - beginning 194,431 186,837
Total pension liability - ending (a) 205,125 194,431
Plan fiduciary net position
Contributions - employer 10,222 8,862
Contributions - employee 811 780
Net investment income 4,349 21,845
Other income — —
Benefit payments, including refunds of
employee contributions (10,684) (10,578)
Administrative expenses (86) (66)
Net change in plan fiduciary net
position 4,612 20,843
Plan fiduciary net position - beginning 139,548 118,705
Plan fiduciary net position - ending (b) 144,160 139,548
State's net pension liability - ending
(a) - (b) $ 60,965 §$ 54,883
Plan fiduciary net position as a
percentage of the total pension liability 70.28 % 71.77 %
Covered payroll $ 13,507 $ 13,731
State's net pension liability as a
percentage of covered payroll 451.36 % 399.70 %
T- 175
STATE OF ALASKA
Employer Contributions Schedule
Judicial Retirement System - Pension
Last Ten Fiscal Years
(Stated in Thousands)
STATEMENT 2.31
2021 2020 2019 2018 2017
Actuarially determined contribution $ 10,239 $ 9,388 §$ 9454 $ 10,632 $ 10,471
Contributions in relation to the actuarially determined
contribution 12,108 11,127 10,257 10,286 11,086
Contribution deficiency (excess) $ (1,869) $ (1,739) $ (803) $ 346 §$ (615)
Covered payroll $ 13,945 $ 13,527 $ 13,393 $ 14599 $ 14,089
Contributions as a percentage of covered payroll 86.83 % 82.26 % 76.58 % 70.46 % 78.69 %
I- 176
This statement continued on next page.
STATE OF ALASKA STATEMENT 2.31
Employer Contributions Schedule
Judicial Retirement System - Pension
Last Ten Fiscal Years
(Stated in Thousands)
2016 2015 2014 2013 2012
Actuarially determined contribution $ 11,183 $ 10,329 $ 9156 §$ 8,367 $ 5,052
Contributions in relation to the actuarially
determined contribution 11,710 10,222 8,862 8,094 5,419
Contribution deficiency (excess) $ (527) $ 107. $ 294 §$ 273 $ (367)
Covered payroll $ 13,996 $ 13,507 §$ 13,731 §$ 13,289 §$ 11,803
Contributions as a percentage of covered
payroll 83.67 % 75.68 % 64.54 % 60.91 % 45.91 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
1-177
STATE OF ALASKA
Changes in the Net OPEB Liability and Related Ratios Schedule
Judicial Retirement System - Alaska Retiree Healthcare Trust Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.32
2021 2020 2019 2018
Total OPEB liability
Service cost $ 758 = §$ 801 §$ 690 $ 734
Interest 1,340 1,270 1,391 1,318
Differences between expected and
actual experience 224 (73) (1,865) 83
Changes of assumptions (2,361) _— 710 _—
Retiree Drug Subsidy — 74 21 64
Pharmacy Rebates 109 22 — 62
Benefit payments, including refunds of
employee contributions (1,268) (979) (1,576) (1,031)
Net change in total OPEB liability (1,198) 1,115 (629) 1,230
Total OPEB liability - beginning 17,962 16,847 17,476 16,246
Total OPEB liability - ending (a) 16,764 17,962 16,847 17,476
Plan fiduciary net position
Contributions - employer 730 591 621 628
Net investment income 1,378 1,901 2,455 3,470
Other income 290 99 21 127
Benefit payments, including refunds of
employee contributions (1,425) (978) (1,576) (1,031)
Administrative expenses (29) (18) (15) (51)
Net change in plan fiduciary net
position 944 1,595 1,506 3,143
Plan fiduciary net position - beginning 33,092 31,497 29,991 26,848
Plan fiduciary net position - ending (b) 34,036 33,092 31,497 29,991
State's net OPEB liability - ending (a) -
(b) $__(17,272) $ (15,130) $ (14,650) $ (12,515)
Plan fiduciary net position as a
percentage of the total OPEB liability 203.03 % 184.23 % 186.96 % 171.61 %
Covered payroll $ 13,527 $ 13,393 §$ 14,599 §$ 14,089
State's net OPEB liability or asset as a
percentage of covered payroll 127.69 % 112.97 % 100.35 % 88.83 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I- 178
(Intentionally left blank)
I - 179
STATE OF ALASKA STATEMENT 2.33
Employer Contributions Schedule
Judicial Retirement System - Alaska Retiree Healthcare Trust Plan
Last Ten Fiscal Years
(Stated in Thousands)
2021 2020 2019 2018 2017
Actuarially determined contribution $ 805 §$ 579 §$ 599 §$ 632 §$ 631
Contributions in relation to the actuarially
determined contribution 654 730 591 594 628
Contribution deficiency (excess) $ 151. $ (151) $ 8 §$ 38 §$ 3
Covered payroll $ 13,945 §$ 13,527 §$ 13,393 §$ 14,599 §$ 14,089
Contributions as a percentage of covered
payroll 4.69 % 5.40 % 4.41 % 4.07 % 4.46 %
This statement continued on next page.
I- 180
STATE OF ALASKA STATEMENT 2.33
Employer Contributions Schedule
Judicial Retirement System - Alaska Retiree Healthcare Trust Plan
Last Ten Fiscal Years
(Stated in Thousands)
2016 2015 2014 2013 2012
Actuarially determined contribution $ 501 $ 313 $ 1,094 $ 723 « $ 1,433
Contributions in relation to the actuarially
determined contribution 508 520 882 834 599
Contribution deficiency (excess) $ (7) $ (207) $ 212 §$ (111) $ 834
Covered payroll $ 13,996 §$ 13,507 $ 13,731 $ 13,289 §$ 11,803
Contributions as a percentage of covered
payroll 3.63 % 3.85 % 6.42 % 6.28 % 5.07 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I- 181
STATE OF ALASKA STATEMENT 2.40
Changes in the Net Pension Liability and Related Ratios Schedule
Alaska National Guard and Alaska Naval Militia Retirement System
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
2021 2020 2019 2018 2017
Total pension liability
Service cost $ 508 $ 496 $ 611 611 603
Interest 1,532 1,497 2,266 2,170 2,660
Differences between expected and
actual experience (587) — (12,218) — (8,659)
Changes of assumptions — — (174) — —
Benefit payments, including refunds of
employee contributions (1,641) (1,344) (1,360) (1,485) (1,729)
Net change in total pension liability (188) 649 (10,875) 1,296 (7,125)
Total pension liability - beginning 22,253 21,604 32,480 31,184 38,309
Total pension liability - ending (a) 22,065 22,253 21,605 32,480 31,184
Plan fiduciary net position
Contributions - employer 861 852 907 866 735
Net investment income 2,142 2,321 1,965 3,182 182
Benefit payments, including refunds of
employee contributions (1,641) (1,344) (1,360) (1,485) (1,729)
Administrative expenses (231) (282) (226) (257) (242)
Net change in plan fiduciary net
position 1,131 1,547 1,286 2,306 (1,054)
Plan fiduciary net position - beginning 40,965 39,418 38,132 35,826 36,880
Plan fiduciary net position - ending (b) 42,096 40,965 39,418 38,132 35,826
State's net pension liability (asset) -
ending (a) - (b) $ (20,031) $ (18,712) $ (17,813) (5,652) (4,642)
Plan fiduciary net position as a
percentage of the total pension liability 190.78 % 184.09 % 182.45 % 117.40 % 114.89 %
Covered payroll N/A N/A N/A N/A N/A
State's net pension liability or asset as a
percentage of covered payroll N/A N/A N/A N/A N/A
I- 182
This statement continued on next page.
STATE OF ALASKA STATEMENT 2.40
Changes in the Net Pension Liability and Related Ratios Schedule
Alaska National Guard and Alaska Naval Militia Retirement System
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
2016 2015
Total pension liability
Service cost $ 604 §$ 632
Interest 2,554 2,363
Differences between expected and
actual experience — 241
Changes of assumptions — 27
Benefit payments, including refunds of
employee contributions (1,564) (1,611)
Net change in total pension liability 1,594 1,652
Total pension liability - beginning 36,715 35,063
Total pension liability - ending (a) 38,309 36,715
Plan fiduciary net position
Contributions - employer 628 740
Net investment income 590 4,528
Benefit payments, including refunds of
employee contributions (1,564) (1,611)
Administrative expenses (241) (223)
Net change in plan fiduciary net
position (587) 3,434
Plan fiduciary net position - beginning 37,467 34,033
Plan fiduciary net position - ending (b) 36,880 37,467
State's net pension liability (asset) -
ending (a) - (b) $ 1,429 $ (752)
Plan fiduciary net position as a
percentage of the total pension liability 96.27 % 102.05 %
Covered payroll N/A N/A
State's net pension liability or asset as a
percentage of covered payroll N/A N/A
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I - 183
STATE OF ALASKA
Employer Contributions Schedule
Alaska National Guard and Alaska Naval Militia Retirement System
Last Ten Fiscal Years
(Stated in Thousands)
STATEMENT 2.41
Actuarially determined contribution
Contributions in relation to the actuarially
determined contribution
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of covered
payroll
2021
2020
2019
2018 2017
861
861
852
852
907 $ 867
907 867
N/A
N/A
I - 184
N/A
N/A
N/A
N/A
N/A N/A
N/A N/A
This statement continued on next page.
STATE OF ALASKA STATEMENT 2.41
Employer Contributions Schedule
Alaska National Guard and Alaska Naval Militia Retirement System
Last Ten Fiscal Years
(Stated in Thousands)
2016 2015 2014 2013 2012
Actuarially determined contribution $ 735 = §$ 627 $ 475 $ 431 §$ 896
Contributions in relation to the actuarially
determined contribution 735 627 740 739 896
Contribution deficiency (excess) $ — $ — §$ (265) $ (308) $ —
Covered payroll N/A N/A N/A N/A N/A
Contributions as a percentage of covered
payroll N/A N/A N/A N/A N/A
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
T- 185
STATE OF ALASKA
Changes in the Net Pension Liability and Related Ratios Schedule
Alaska Railroad Corporation Defined Benefits Pension Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.50
Total pension liability
Service cost
Interest
Changes of benefits terms
Differences between expected and
actual experience
Changes of assumptions
Benefit payments, including refunds of
employee contributions
Net change in total pension liability
Total pension liability - beginning
Total pension liability - ending (a)
Plan fiduciary net position
Contributions - employer
Contributions - employee
Net investment income
Benefit payments, including refunds of
employee contributions
Administrative expenses
Net change in plan fiduciary net
position
Plan fiduciary net position - beginning
Plan fiduciary net position - ending (b)
State's net pension liability - ending
(a) - (b)
Plan fiduciary net position as a
percentage of the total pension liability
Covered payroll
State's net pension liability as a
percentage of covered payroll
2021 2020 2019 2018 2017
6,106 $ 5,835 $ 5,676 $ 5,777 5,853
17,659 16,059 15,221 14,230 13,244
— — — 154 —
(1,502) (496) (2,321) (482) 6,368
(3,929) 16,396 — 272 —
(9,116) (8,086) (7,062) (6,197) (5,541)
9,218 29,708 11,514 13,754 19,924
242,030 212,322 200,808 187,054 167,130
251,248 242,030 212,322 200,808 187,054
4,619 5,220 3,555 4,051 4,163
4,639 4,477 4,341 4,302 4,383
21,600 32,628 (8,075) 22,088 11,774
(9,116) (8,086) (7,062) (6,197) (5,541)
(273) (269) (312) (409) (593)
21,469 33,970 (7,553) 23,835 14,186
211,840 177,870 185,423 161,588 147,402
233,309 211,840 177,870 185,423 161,588
17,939 $ 30,190 $ 34,452 $ 15,385 25,466
92.86 % 87.53 % 83.77 % 92.34 % 86.39 %
49,739 $ 48,228 $ 48,228 $ 47,804 48,705
36.07 % 62.60 % 71.44 % 32.18 % 52.29 %
I- 186
This statement continued on next page.
STATE OF ALASKA STATEMENT 2.50
Changes in the Net Pension Liability and Related Ratios Schedule
Alaska Railroad Corporation Defined Benefits Pension Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
2016
Total pension liability
Service cost $ 5,834
Interest 11,832
Changes of benefits terms —
Differences between expected and
actual experience —
Changes of assumptions —
Benefit payments, including refunds
of employee contributions (4,920)
Net change in total pension liability 12,746
Total pension liability - beginning 154,384
Total pension liability - ending (a) 167,130
Plan fiduciary net position
Contributions - employer 3,571
Contributions - employee 4,290
Net investment income (199)
Benefit payments, including refunds
of employee contributions (4,920)
Administrative expenses (550)
Net change in plan fiduciary net
position 2,192
Plan fiduciary net position - beginning 145,210
Plan fiduciary net position - ending (b) 147,402
State's net pension liability - ending
(a) - (b) $ 19,728
Plan fiduciary net position as a
percentage of the total pension liability 88.20 %
Covered payroll $ 47,660
State's net pension liability as a
percentage of covered payroll 41.39 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
I - 187
STATE OF ALASKA STATEMENT 2.51
Employer Contributions Schedule
Alaska Railroad Corporation Defined Benefits Pension Plan
Last Ten Fiscal Years
(Stated in Thousands)
2021 2020 2019 2018 2017
Actuarially determined contribution $ 4619 $ 5,220 $ 3,555 §$ 4,051 $ 4,163
Contributions in relation to the actuarially
determined contribution 4,619 5,220 3,555 4,051 4,163
Contribution deficiency (excess) $ — §$ — §$ — $ — $ —
Covered payroll 51,559 49,739 48,288 47,804 48,705
Contributions as a percentage of covered
payroll 8.96 % 10.49 % 7.36 % 8.47 % 8.55 %
This statement continued on next page.
I- 188
STATE OF ALASKA
Employer Contributions Schedule
Alaska Railroad Corporation Defined Benefits Pension Plan
Last Ten Fiscal Years
(Stated in Thousands)
STATEMENT 2.51
2016
Actuarially determined contribution $ 3,571
Contributions in relation to the actuarially
determined contribution 3,571
Contribution deficiency (excess) $ —
Covered payroll 47,660
Contributions as a percentage of covered
payroll 749 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
I- 189
STATE OF ALASKA
Changes in the Net OPEB Liability and Related Ratios Schedule
Alaska Railroad Corporation Defined Benefits Postretirement Medical Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
STATEMENT 2.52
2021 2020 2019 2018 2017
Total OPEB liability
Service cost $ 522 $ 529 $ 599 §$ 700 §$ 699
Interest 972 1,003 981 1,095 985
Changes of benefits terms — — — 526 —
Differences between expected and
actual experience (1,205) (1,998) (4,511) (165) (1,832)
Changes of assumptions (353) 1,186 1,461 _— 1,442
Benefit payments, net of Retiree
Premiums (491) (371) (350) (331) (506)
Net change in total OPEB liability (555) 349 (1,820) 1,825 788
Total OPEB liability - beginning 15,681 15,332 17,152 15,327 14,539
Total OPEB liability - ending (a) 15,126 15,681 15,332 17,152 15,327
Plan fiduciary net position
Contributions - employer — — — — —
Net investment income 3,914 6,096 (958) 4,295 2,670
Benefit payments, net of Retiree
Premiums (491) (371) (350) (331) (506)
Administrative expenses (59) (59) (71) (77) (66)
Net change in plan fiduciary net
position 3,364 5,666 (1,379) 3,887 2,098
Plan fiduciary net position - beginning 50,914 45,248 46,627 42,740 40,642
Plan fiduciary net position - ending (b) 54,278 50,914 45,248 46,627 42,740
State's net OPEB liability (asset) -
ending (a) - (b) $ (39,152) $ (35,233) $ (29,916) $ (29,475) $ (27,413)
Plan fiduciary net position as a
percentage of the total OPEB liability 358.84 % 324.69 % 295.12 % 271.85 % 278.85 %
Covered payroll $ 32,154 $ 33,444 §$ 33,444 § 35,292 $ 46,941
State's net OPEB liability or asset as a
percentage of covered payroll 121.76 % 105.35 % 89.45 % 83.52 % 58.40 %
I- 190
This statement continued on next page.
STATE OF ALASKA STATEMENT 2.52
Changes in the Net OPEB Liability and Related Ratios Schedule
Alaska Railroad Corporation Defined Benefits Postretirement Medical Plan
Last Ten Fiscal Years
As of Measurement Date
(Stated in Thousands)
2016
Total OPEB liability
Service cost $ 633
Interest 1,021
Changes of benefits terms —
Differences between expected and
actual experience —
Changes of assumptions —
Benefit payments, net of Retiree
Premiums ee 1)
Net change in total OPEB liability 1,461
Total OPEB liability - beginning 13,078
Total OPEB liability - ending (a) 14,539
Plan fiduciary net position
Contributions - employer —
Net investment income (384)
Benefit payments, net of Retiree
Premiums (193)
Administrative expenses (48)
Net change in plan fiduciary net
position (625)
Plan fiduciary net position - beginning 41,267
Plan fiduciary net position - ending (b) 40,642
State's net OPEB liability (asset) -
ending (a) - (b) $ (26,103)
Plan fiduciary net position as a
percentage of the total OPEB liability 279.54 %
Covered payroll $ 47,660
State's net OPEB liability or asset as a
percentage of covered payroll 54.77 %
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
T- 191
STATE OF ALASKA STATEMENT 2.53
Employer Contributions Schedule
Alaska Railroad Corporation Defined Benefits Postretirement Medical Plan
Last Ten Fiscal Years
(Stated in Thousands)
2021 2020 2019 2018 2017
Actuarially determined contribution $ — §$ — §$ — § — $ —
Contributions in relation to the
actuarially determined contribution — — — — —
Contribution deficiency (excess) $ — $ — $ — $ — $ —_
Covered payroll 32,015 32,154 33,444 35,292 46,941
Contributions as a percentage of
covered payroll —% —% —% —% —%
This statement continued on next page.
I- 192
STATE OF ALASKA STATEMENT 2.53
Employer Contributions Schedule
Alaska Railroad Corporation Defined Benefits Postretirement Medical Plan
Last Ten Fiscal Years
(Stated in Thousands)
2016
Actuarially determined contribution $ —
Contributions in relation to the actuarially
determined contribution —
Contribution deficiency (excess) $ —
Covered payroll 47,660
Contributions as a percentage of covered
payroll —%
This schedule is intended to present information for ten years. Additional years will be displayed as they become available.
Notes to required schedule
Significant methods and assumptions used in calculating the actuarially determined contribution are presented in Note 6.
I - 193
(Intentionally left blank)
I - 194
SECTION II - FINDINGS AND QUESTIONED COSTS
INTRODUCTION
The findings and questioned costs have been organized by department. The specific status of
prior year findings is presented in the introduction of each department.
Generally, the status of prior year findings fall into one of five categories:
x Resolved by the department.
x Resolved by the department, yet the finding was again identified in the current year.
x Not fully resolved by the department and reiterated with its current status in this report.
x Not fully resolved by the department, yet the current year effects were not a significant
audit issue; therefore, it is not reiterated in this report.
x State compliance findings not resolved, yet not reiterated.
ALASKA STATE LEGISLATURE II - 1 DIVISION OF LEGISLATIVE AUDIT
(Intentionally left blank)
ALASKA STATE LEGISLATURE II - 2 DIVISION OF LEGISLATIVE AUDIT
SUMMARY OF FINDINGS
For the Fiscal Year Ended June 30, 2021
--------------------Control Deficiencies--------------------
Basic Financial Statements Federal Programs
State Material Significant Material Significant Federal Other State
Department Weakness Deficiency Weakness Deficiency Compliance Issues
GOV
2021-001,
2021-002,
2021-003,
2021-004,
2021-005,
2021-006,
2021-007,
2021-009, 2021-008,
2021-010, 2021-014,
2021-011, 2021-015,
2021-012, 2021-016,
DOA 2021-008 2021-013 2021-017
LAW 2021-018
2021-019,
DOR 2021-019 2021-020 2021-021
2021-022,
2021-023,
DEED 2021-024 2021-023 2021-025
2021-029,
2021-030,
2021-032,
2021-033,
2021-034,
2021-029,
2021-035,
2021-030,
2021-036,
2021-031,
2021-037,
2021-033, 2021-038,
2021-034, 2021-039,
2021-035, 2021-040,
2021-039, 2021-041,
2021-040, 2021-042,
2021-032, 2021-041, 2021-043,
2021-036, 2021-042, 2021-045,
2021-037, 2021-043, 2021-046,
2021-026, 2021-038, 2021-044, 2021-047,
2021-027, 2021-045, 2021-047, 2021-048,
DHSS 2021-028 2021-046 2021-048 2021-049 2021-050
ALASKA STATE LEGISLATURE II - 3 DIVISION OF LEGISLATIVE AUDIT
SUMMARY OF FINDINGS
For the Fiscal Year Ended June 30, 2021
(continued)
--------------------Control Deficiencies--------------------
Basic Financial Statements Federal Programs
State Material Significant Material Significant Federal Other State
Department Weakness Deficiency Weakness Deficiency Compliance Issues
2021-052,
DLWD 2021-051 2021-052 2021-053 2021-053 2021-054
DCCED 2021-055 2021-056 2021-056
2021-058, 2021-058,
2021-059, 2021-060,
2021-060, 2021-061,
DMVA 2021-057 2021-061 2021-062
2021-063,
2021-063, 2021-064,
DNR 2021-064 2021-065 2021-066
DFG
DPS
DEC 2021-067
DOC
2021-068,
DOTPF 2021-069
Court
System
2021-072,
2021-073, 2021-073,
Component 2021-070, 2021-074, 2021-074,
Units 2021-071 2021-072 2021-075 2021-075
Alaska State
Legislature
ALASKA STATE LEGISLATURE II - 4 DIVISION OF LEGISLATIVE AUDIT
Findings and Recommendations
Table of Contents
Office of the Governor....................................................................................................II – 7
Department of Administration ........................................................................................II – 9
Department of Law .........................................................................................................II – 29
Department of Revenue ..................................................................................................II – 31
Department of Education and Early Development .........................................................II – 37
Department of Health and Social Services .....................................................................II – 45
Department of Labor and Workforce Development .......................................................II – 85
Department of Commerce, Community, and Economic Development ..........................II – 91
Department of Military and Veterans’ Affairs ...............................................................II – 95
Department of Natural Resources ...................................................................................II – 107
Department of Fish and Game ........................................................................................II – 115
Department of Public Safety ...........................................................................................II – 117
Department of Environmental Conservation ..................................................................II – 119
Department of Corrections..............................................................................................II – 121
Department of Transportation and Public Facilities .......................................................II – 123
Alaska Court System ......................................................................................................II – 127
Component Units ............................................................................................................II – 129
Alaska State Legislature .................................................................................................II – 137
ALASKA STATE LEGISLATURE II - 5 DIVISION OF LEGISLATIVE AUDIT
(Intentionally left blank)
ALASKA STATE LEGISLATURE II - 6 DIVISION OF LEGISLATIVE AUDIT
OFFICE OF THE GOVERNOR
No findings were issued to the Office of the Governor in the State of Alaska, Single Audit for
the Fiscal Year Ended June 30, 2020.
No new findings have been issued during the FY 21 statewide single audit.
ALASKA STATE LEGISLATURE II - 7 DIVISION OF LEGISLATIVE AUDIT
(Intentionally left blank)
ALASKA STATE LEGISLATURE II - 8 DIVISION OF LEGISLATIVE AUDIT
DEPARTMENT OF ADMINISTRATION (DOA)
Seventeen findings were issued to DOA in the State of Alaska, Single Audit for the Fiscal
Year Ended June 30, 2020. Prior year Finding Nos. 2020-008 through 2020-011, 2020-014,
2020-016 and 2020-017 are resolved. Prior year Finding Nos. 2020-001 through 2020-007,
2020-012, 2020-013, and 2020-015 are not resolved and are reiterated in this report as Finding
Nos. 2021-001 through 2021-007, and 2021-014 through 2021-016, respectively.
Seven new findings have been issued during the FY 21 statewide single audit and are included
as Finding Nos. 2021-008 through 2021-013, and 2021-017.
The views of responsible officials and management’s corrective action plan are included in
Section IV – Corrective Action Plan.
ALASKA STATE LEGISLATURE II - 9 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-001
Prior Year Finding: 2020-001
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
Testing of the FY 21 draft Annual Comprehensive Financial Report (ACFR) identified that
the year-end financial reporting of activity between the Constitutional Budget Reserve Fund
(CBRF) and the general fund was not accurately calculated, including the presentation of the
repayment required by Article IX, Section 17(d) of the Alaska Constitution.
Context:
Inaccurate FY 21 financial reporting resulted from the following:
x Year-end entries to adjust general fund borrowing were not accurate;
x The nonspendable fund balance in the draw calculation was not accurate; and
x The interfund balance did not include all expenditures of appropriations funded directly
from the CBRF.
Cause:
Division of Finance (DOF) procedures lacked sufficient details for determining the year-end
activity between the CBRF and general fund.
Criteria:
Codification of Governmental Accounting and Financial Reporting Standards,
Section 1600.116, requires that governmental funds be reported using the modified accrual
basis of accounting, under which expenditures and transfers are recognized when measurable
and when the related liability is incurred.
Effect:
The year-end balance of the interfund activity between the CBRF and the general fund was
understated by $523.5 million in the FY 21 draft ACFR. The noted errors were corrected via
audit adjustments and the activity was properly reported in the final FY 21 ACFR.
Recommendation:
DOA’s state accountant should strengthen procedures to accurately report financial activity
between the CBRF and the general fund, including recognition of expenditures appropriated
directly from the CBRF.
ALASKA STATE LEGISLATURE II - 10 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-002
Prior Year Finding: 2020-002
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
The configuration management policy for the State’s reporting system (ALDER) was not
consistently followed.
Context:
The details related to this control weakness and relevant audit criteria are being withheld from
this report to prevent the weakness from being exploited. Pertinent details have been
communicated to agency management in a separate confidential document.
Cause:
The details related to this control weakness and relevant audit criteria are being withheld from
this report to prevent the weakness from being exploited. Pertinent details have been
communicated to agency management in a separate confidential document.
Criteria:
National Institute of Standards and Technology (NIST) Special Publication 800-53r4 provides
specific criteria related to the identified deficiencies.
Effect:
The internal control weakness increased the risk of inappropriate system changes, causing
noncompliance with State and federal regulations, financial misstatements, and/or loss of
productivity through service disruptions.
Recommendation:
DOF’s director should ensure ALDER system configuration management controls are
followed.
Finding No. 2021-003
Prior Year Finding: 2020-003
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
An evaluation of DOA’s State payroll system controls identified significant internal control
weaknesses.
ALASKA STATE LEGISLATURE II - 11 DIVISION OF LEGISLATIVE AUDIT
Context:
The details related to this control weakness and relevant audit criteria are being withheld from
this report to prevent the weakness from being exploited. Pertinent details have been
communicated to agency management in a separate confidential document.
Each pay period a verification report is created, which reconciles payroll system totals
interfaced with the State’s accounting system. No follow-up was completed by DOF staff
regarding a variance identified for the payroll period ending July 12, 2020, until DOF
management was notified of the variance by auditors.
Cause:
Cost concerns, competing priorities, and lack of resources contributed to the control weakness.
Criteria:
State of Alaska (SOA) Information Security Policies (ISP) provide specific criteria related to
the identified deficiencies.
Effect:
The internal control weaknesses increase the risk of noncompliance with state and federal
regulations, financial statement misstatements, and abuse or exposure of confidential or
sensitive information.
Recommendation:
DOF’s director should provide training to staff and request sufficient resources to address the
deficiencies.
Finding No. 2021-004
Prior Year Finding: 2020-004
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
Internal control weaknesses were identified over logical access to DOA’s State accounting
system, IRIS.
Context:
The details related to this control weakness and relevant audit criteria are being withheld from
this report to prevent the weakness from being exploited. Pertinent details have been
communicated to agency management in a separate confidential document.
ALASKA STATE LEGISLATURE II - 12 DIVISION OF LEGISLATIVE AUDIT
Cause:
The weaknesses were attributed to inadequate training and deficiencies in the design of
internal controls.
Criteria:
SOA ISPs provide specific criteria related to the identified deficiencies.
Effect:
The control weaknesses increase the risk of financial misstatements and potential misuse of
confidential or sensitive information.
Recommendation:
DOF’s director should strengthen controls over logical access to the accounting system.
Finding No. 2021-005
Prior Year Finding: 2020-005
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
DOF’s director does not require the IRIS contractor to provide an independent annual
assurance review of internal controls and processing.
Context:
DOF has a professional services agreement with a contractor, which provides for the daily
operation of IRIS. The contractor’s duties include, but are not limited to, payroll processing,
code releases, and configuration changes. DOF relies on the services of the contractor without
sufficient assurance that internal controls are in place and operating effectively.
Cause:
The current contract with the vendor does not require an assurance review. Negotiations are
in progress to include the requirement in future contracts.
Criteria:
ISP 162 5.1.1 states that executive management must ensure that the capacity and performance
of information systems are monitored to assure the confidentiality, integrity, and availability
of information. Per NIST control SA-9, third party service providers should be subject to the
same information system security and privacy requirements of the supported organization and
employ agency-defined controls.
Additionally, Section 3.11 of DOA’s Office of Procurement and Property Management
standard Request for Proposal form requires that contracts with third party service providers
ALASKA STATE LEGISLATURE II - 13 DIVISION OF LEGISLATIVE AUDIT
include a provision for an annual Statement of Attestation Engagement Report covering the
provider’s internal control structure and processes.
Effect:
Without adequate assurance that the contractor’s internal controls are properly designed and
operating effectively, there is an increased risk of financial misstatements, loss or
manipulation of data, and misuse of information.
Recommendation:
DOF’s director should amend DOF’s agreement with the IRIS contractor to require the
contractor provide an annual independent report on internal controls consistent with best
practices. Additionally, the director should develop internal control procedures to evaluate the
results of the internal control report.
Finding No. 2021-006
Prior Year Finding: 2020-006
Type: Basic Financial Statement
Impact: Significant Deficiency
Condition:
Government-wide governmental activities revenues in the draft FY 21 ACFR Statement of
Activities contained several classification errors.
Context:
Government-wide governmental activities revenues are classified by DOF accountants
utilizing a process that classifies revenues as program or general revenues. The classification
methodology has resulted in significant errors since FY 16.
Cause:
DOF accountants did not correctly incorporate prior year audit adjustments into the FY 21
revenue classification work. Additionally, DOF accountants did not consistently apply
changes to appropriations throughout the revenue classification process. DOF’s revenue
classification procedures were insufficient to prevent, or detect and correct, revenue
classification errors.
Criteria:
Codification of Governmental Accounting and Financial Reporting Standards,
Sections 1800.142ʊ.143 require revenues to be classified as program revenues or general
revenues. Program revenues are derived directly from the program itself and classified
between charges for services, operating grants and contributions, and capital grants and
contributions. General revenues include all other revenues not meeting the definition of
program revenues and taxes must be reported by the different tax types.
ALASKA STATE LEGISLATURE II - 14 DIVISION OF LEGISLATIVE AUDIT
Effect:
Government-wide governmental activities revenues on the Statement of Activities in the
FY 21 draft ACFR were misclassified by $273.6 million. After identification by auditors,
errors were corrected via audit adjustments and properly reported in the FY 21 ACFR.
Recommendation:
DOA’s state accountant should improve procedures to ensure government-wide revenues are
consistently and accurately classified.
Finding No. 2021-007
Prior Year Finding: 2020-007
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
The capital asset accounts on the draft FY 21 government-wide governmental activities
Statement of Net Position and related ACFR footnote five contained significant errors.
Context:
IRIS is used to track, report, and depreciate capital assets. DOA DOF accountants are
responsible for monitoring departmental capital asset entries in IRIS, and compiling and
calculating amounts to be reported in the FY 21 ACFR.
During FY 21, the Department of Transportation and Public Facilities (DOTPF) incorrectly
cancelled a significant number of Construction in Progress (CIP) fixed assets in IRIS. DOTPF
also had several instances where multiple existing related capital assets were incorrectly
combined to create single assets. Additionally, there were several fixed assets created in IRIS
that either had an incorrect fund or were excluded erroneously from financial reporting.
Significant capital asset errors were also identified during the FY 19 and FY 20 audits.
Cause:
The draft FY 21 capital asset amounts were misstated because DOF accountants did not
adequately monitor FY 21 IRIS fixed asset departmental transactions to ensure agencies were
correctly updating asset values and transferring completed assets to depreciable asset
classifications as necessary. Additionally, DOF accountants did not manually adjust for or fix
assets that were erroneously not depreciated in IRIS.
The draft FY 21 capital asset footnote five was incorrect because DOF’s procedures for the
manual calculation of asset additions and deletions, and depreciation additions and deletions,
were insufficient to accurately represent FY 21 asset or depreciation additions and deletions
when assets were cancelled in IRIS and/or combined with other assets.
ALASKA STATE LEGISLATURE II - 15 DIVISION OF LEGISLATIVE AUDIT
Criteria:
Codification of Governmental Accounting and Financial Reporting Standards,
Sections 1400.102ʊ.104 require capital assets to be reported at historical cost and include all
tangible or intangible assets used in the operations that have initial useful lives extending
beyond a single reporting period and to be depreciated over their useful lives.
Alaska Statute 37.05.210 requires DOA to file a report of financial transactions of the
preceding fiscal year, and the financial condition of the State as of the end of that year,
prepared in accordance with generally accepted accounting principles.
Effect:
Multiple errors were identified in the FY 21 draft ACFR government-wide governmental
activities Statement of Net Position capital asset accounts, which may have been detected and
corrected if DOF had adequate capital asset monitoring procedures. The errors include:
x Infrastructure, net of depreciation overstated $17.5 million
x Buildings, net of depreciation understated $0.6 million
x Equipment, net of depreciation understated $0.2 million
x CIP understated $159.3 million
Additionally, DOF staff’s calculation of asset additions/deletions and depreciation
additions/deletions for footnote five resulted in errors in CIP and Infrastructure accounts:
x Asset additions overstated $94.7 million
x Asset deletions overstated $94.7 million
x Depreciation additions overstated $7.5 million
x Depreciation deletions overstated $7.5 million
Once identified by auditors, the errors were corrected and properly reported in the FY 21
ACFR.
Recommendation:
DOA’s state accountant should improve procedures to ensure accurate reporting of capital
assets in the ACFR. Procedures should include monitoring agency capital asset transactions
throughout the fiscal year and during ACFR preparation to identify and correct inaccurate or
missing entries. Additionally, DOF ACFR preparation procedures should be updated to ensure
the proper classification of capital asset activity in ACFR footnote five.
DOA’s state accountant should consider creating a capital asset reference guide for agencies
to utilize when inputting capital asset information in IRIS and providing capital asset training
to agencies.
ALASKA STATE LEGISLATURE II - 16 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-008
Type: Basic Financial Statements
Impact: Material Weakness, Other State Issue
Condition:
Testing of the FY 21 draft ACFR identified that the year-end financial reporting of general
fund assigned fund balance was materially misstated.
Context:
Generally accepted accounting principles state that the fund balance of governmental funds
should be reported in classifications that comprise a hierarchy primarily based on the extent
to which a government is bound to honor constraints. Fund balance classifications, in order of
most constrictive to least constrictive, are as follows:
x Nonspendable fund balance includes items that cannot be spent, such as fund balance
associated with inventories and prepaid items.
x Restricted fund balance includes amounts that can be spent only for specific purposes
stipulated by a constitution, external resource providers, or through enabling
legislation.
x Committed fund balance includes amounts that can be used only for the specific
purposes determined by a formal action of the government’s highest level of decision
making authority.
x Assigned fund balance includes amounts intended to be used by the government for
specific purposes, but do not meet the criteria to be classified as restricted or
committed.
x Unassigned fund balance is the residual classification for the government’s general
fund and includes all spendable amounts not contained in the other classifications.
Historically, none of the general fund’s fund balance was classified as assigned. When
preparing the FY 21 draft ACFR, DOF accountants reported assigned fund balance for select
general fund subfunds based on guidance from the attorney general and the governor. The
assignment was intended to prevent the fund balances of the subfunds from being swept into
the CBRF.
Cause:
The FY 22 operating budget (House Bill (HB) 69) was passed by the state legislature on
June 28, 2021, with an effective date of July 1, 2021, and signed by the governor on
June 30, 2021. The budget included several appropriations that were dependent on the
successful passage of the “reverse sweep.” The sweep refers to a constitutional requirement to
transfer available fund balance from the general fund (including its subfunds) to the CBRF as
repayment of amounts borrowed from the CBRF at the end of each fiscal year. The reverse
sweep essentially reverses the subfund sweep by appropriating the swept amounts back to the
subfunds. The sweep occurs June 30th each year and the reverse sweep was to be effective
ALASKA STATE LEGISLATURE II - 17 DIVISION OF LEGISLATIVE AUDIT
July 1, 2021. The reverse sweep component of the operating budget was not approved, which
essentially unfunded appropriations funded by subfunds that were swept into the CBRF on
June 30th.
As a workaround, the attorney general argued that, since HB 69 was signed by the governor
prior to July 1, 2021, the appropriations were effectively “enacted.” Therefore, fund balance
for the specific subfunds that would have been swept as of June 30th were validly committed
by the legislature to some purpose as of the date HB 69 was signed by the governor and, as
such, the balances were not available to be swept. Based on guidance from the attorney
general, the governor directed the Office of Management and Budget and DOF to “effectuate
expenditure of appropriations made in the general appropriations bill on the date it was
enacted,” which essentially directed the agencies to consider the effective date of the
operating budget as June 30th. Accordingly, DOF accountants assigned fund balance for
approximately 20 subfunds and did not sweep the funds to repay the CBRF. The amount
“assigned” was calculated as the projected budgetary subfund deficit in the subsequent year’s
budgets.
The legislative auditor engaged the Legislative Division of Legal Services (Legislative Legal)
to evaluate the attorney general’s position and provide guidance. Legislative Legal identified
that, because AS 01.10.070(f)(3) defines the date a bill becomes effective as the date it
becomes applicable, the FY 22 appropriations at issue were not enforceable or applicable until
July 1 and the subfund balances were not available to fund FY 22 appropriations because the
balances must be transferred into the CBRF at the end of FY 21 in accordance with the
requirements of the constitution.
Criteria:
The Alaska Constitution, Article IV, Section 17(d) provides that the amount of money in the
general fund available for appropriation at the end of each succeeding fiscal year shall be
deposited in the budget reserve fund until the amount appropriated is repaid.
Per AS 01.10.070(f)(3), “becomes effective” means becomes applicable. “Effective date” does
not mean date of enactment (or date of becoming law), although the two will coincide when a
bill, which has an immediate-effective-date provision, is allowed to become law without the
governor's signature.
Per Codification of Governmental Accounting and Financial Reporting Standards,
Section 1800.177, unassigned fund balance is the residual classification for the general fund.
This classification represents fund balance that has not been assigned to other funds and that
has not been restricted, committed, or assigned to specific purposes within the general fund.
Effect:
The FY 21 year-end general fund assigned fund balance was overstated by $108.6 million and
unassigned balance was understated by the same amount. In addition, the total amount
appropriated from the CBRF year-end balance in footnote two of the FY 21 ACFR was
ALASKA STATE LEGISLATURE II - 18 DIVISION OF LEGISLATIVE AUDIT
overstated by the $108.6 million, as the funds were not transferred from the general fund to
the CBRF.
Recommendation:
The state accountant should ensure amounts are swept into the CBRF in compliance with the
state constitution and that the sweep is correctly reported in the ACFR.
Finding No. 2021-009
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
Documentation was not retained, supporting the close out and roll forward of FY 18 and
FY 19 financial information in IRIS.
Context:
Through a process initiated by DOF staff, fiscal years in IRIS are closed and balance sheet
amounts rolled forward to the subsequent year. DOF staff follow procedures that include steps
to ensure the IRIS fiscal year data is carried forward correctly. Once the close out process is
completed in IRIS, the fiscal year is unavailable for document posting.
Cause:
Procedures over the fiscal year close process were inadequate to ensure DOF staff retained
documentation of the fiscal year close process.
Criteria:
AAM Chapter 5, Section 130 states that documentation involves preserving evidence that
substantiates a decision, event, transaction or system. Documentation should be complete,
accurate and clearly written. At a minimum documentation should be retained for key policies,
procedures and processes.
Effect:
Auditors were unable to evaluate evidence supporting the year-end close out process to gain
assurance that the close out procedures were performed correctly.
Recommendation:
DOF’s director should amend fiscal year-end closing procedures to retain sufficient
documentation.
ALASKA STATE LEGISLATURE II - 19 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-010
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
The FY 21 draft ACFR underreported general fund expenditures and liabilities for amounts
owed to the Alaska Housing Finance Corporation (AHFC).
Context:
AHFC was authorized by the governor and legislature as the recipient of $164.6 million
federal Emergency Rental Assistance (ERA). The funds were to be disbursed to Alaskans
negatively impacted by COVID-19 and in need of rental assistance. DOA’s state accountant
assisted AHFC with the federal ERA application. As a result of a misunderstanding during the
application process, the State of Alaska received the ERA federal funds that should have been
provided directly to AHFC. Upon receipt, the State of Alaska elected to disburse the funds
over several months per an AHFC provided disbursement schedule. At the end of FY 21, $49.6
million of ERA funds received by the State of Alaska had not been disbursed to AHFC.
To ensure the $164.6 million of AHFC ERA receipts were not reported in the State’s general
fund, DOF accountants processed an adjusting entry to remove the $164.6 million of ERA
revenues and to reduce expenditures in the same amount. However, since all $164.6 million
had not been disbursed to AHFC in FY 21, the adjustment resulted in negative expenditures
in the general fund in the amount of $49.6 million. Additionally, DOF accountants did not
record a liability for the remaining amounts due to AHFC.
Cause:
The State of Alaska received ERA funds that should have been provided directly or
immediately upon receipt to AHFC. DOF ACFR preparation procedures were insufficient to
prevent or detect and correct the error.
Criteria:
Codification of Governmental Accounting and Financial Reporting Standards,
Section 1600.116 states most expenditures and transfers out are measurable and should be
reported when the related liability is incurred. Additionally, Codification of Governmental
Accounting and Financial Reporting Standards, Section 1500.106 states current liabilities
should include obligations that are due on demand or will be due within one year from the
date of the financial statements.
Effect:
The FY 21 draft ACFR General Fund Balance Sheet Due to Component Units account was
understated $49.6 million and Statement of Revenue, Expenditures, and Changes in Fund
Balances Expenditures: Development account was understated by the same amount. These
errors were also present in the Governmental Activities Government-Wide Statement of Net
ALASKA STATE LEGISLATURE II - 20 DIVISION OF LEGISLATIVE AUDIT
Position and Statement of Activities. After being identified by auditors, the errors were
corrected via an audit adjustment and the activity was properly reported in the FY 21 ACFR.
Recommendation:
DOA’s state accountant should strengthen procedures to ensure financial information is
properly classified in the ACFR.
Finding No. 2021-011
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
Material errors were identified in all accounts of the ACFR General Fund Budgetary
Comparison Schedule (Stmt 2.01), including errors in expenditure and revenue original
budgets, final budgets, and actual amounts.
Context:
The Governmental Accounting Standards Board (GASB) requires the representation of
budgetary comparisons for the general fund and for each major special revenue fund that has
a legally adopted annual budget. These budgetary comparisons are considered by GASB to be
required supplementary information (RSI) and included in the ACFR. DOA’s DOF
accountants are responsible for the compilation and presentation of the ACFR, including RSI.
Supporting workbooks created by DOF accountants to calculate expenditure budgets included
erroneous negative budgets and fund only adjustments, which did not include budgetary
impact, resulting in misstatements of both original and final budgets. Workbooks for revenues
incorrectly netted capital and converted capital budgets, and failed to reduce capital budgets
for revenues received in previous years. Additionally, adjustments to budget and actuals for
both revenue and expenditures were incorrectly input into the workbooks.
Cause:
Outdated procedures and inadequate training contributed to the inaccurate preparation of
Stmt. 2.01. Additionally, ALDER reports used to prepare supporting workbooks had formula
errors and other limitations. Time constraint also inhibited the effectiveness of management
review.
Criteria:
Codification of Governmental Accounting and Financial Reporting Standards,
Section 2400.102 states in part that:
The budgetary comparison schedule should present both (a) the original and (b)
the final appropriated budgets for the reporting period as well as (c) actual
ALASKA STATE LEGISLATURE II - 21 DIVISION OF LEGISLATIVE AUDIT
inflows, outflows, and balances stated on the government’s budgetary basis. A
separate column to report the variance between the final budget and actual
amounts is encouraged, but not required.
(a) The original budget is the first complete appropriated budget. The original
budget may be adjusted by reserves, transfers, allocations, supplemental
appropriations, and other legally authorized legislative and executive
changes before the beginning of the fiscal year. The original budget should
also include actual appropriation amounts automatically carried over from
the prior years by law.
(b) The final budget is the original budget adjusted by all reserves, transfers,
allocations, supplemental appropriations, and other legally authorized
legislative and executive changes applicable to the fiscal year, whenever
signed into law or otherwise legally authorized.
Effect:
Errors in the General Fund Budgetary Comparison Schedule may impair financial statement
users’ and management’s ability to make informed decisions.
Recommendation:
The state accountant should ensure procedures and ALDER reports used to prepare Stmt 2.01
are updated and training is provided to staff. Additionally, adequate review should be
performed over the draft ACFR Stmt 2.01.
Finding No. 2021-012
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
The audit of the Alaska National Guard and Alaska Naval Militia Retirement System
(NGNMRS) FY 21 financial statements could not be completed by an independent auditor.
Additionally, FY 21 financial statement audits for the Retiree Health Fund and the Group
Health and Group Life Fund were issued on December 2, 2021, approximately seven weeks
after the agreed upon deadline.
Context:
The three audits are performed by an independent auditor. The audit process requires
cooperation between DOA’s Division of Retirement and Benefits (DRB) accountants, the
plans’ third party administrator, and the division’s actuary. To allow for timely completion of
the ACFR, DOF accountants require outside audits of funds and accounts to be submitted to
DOF by October 15 for inclusion in the ACFR.
ALASKA STATE LEGISLATURE II - 22 DIVISION OF LEGISLATIVE AUDIT
Cause:
According to DRB’s chief financial officer, the Retiree Health and Group Health and Group
Life audits were delayed due to challenges in working with the funds’ external actuary. The
NGNMRS audit was not completed because data needed for the audit was not maintained by
the Department of Military and Veterans’ Affairs (DMVA). Specifically, dates people entered
the National Guard and dates people entered the Alaska National Guard were needed by
auditors when testing actuarial information; however, the data was not obtained by DMVA.
Criteria:
Per Codification of Governmental Accounting and Financial Reporting Standards,
Section 1300.103, governments should report governmental, proprietary, and fiduciary funds
to the extent activities meet the criteria for using those funds.
Effect:
Untimely draft ACFR information may delay the issuance of the ACFR, which may negatively
impact decision-making by report users.
Recommendation:
DRB’s chief financial officer should improve procedures to ensure financial statement audits
are performed timely.
Finding No. 2021-013
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
The FY 21 draft Schedule of Expenditures of Federal Awards (SEFA) included errors
associated with three departments, which understated federal expenditures by a net total of
$244 million and understated subrecipient amounts by a net total of $258 million. Specifically,
x One department inaccurately reported federal expenditures for three federal programs
(one program was overstated by $102 million and two programs were understated by
a combined total of $338 million). The same department also inaccurately reported a
subrecipient amount totaling $2 million for one program.
x One department did not include a federal program resulting in an understatement
totaling $21 million in expenditures.
x Another department inaccurately overstated federal expenditures by $13 million for
one federal program and inaccurately reported subrecipient amounts totaling $258
million.
ALASKA STATE LEGISLATURE II - 23 DIVISION OF LEGISLATIVE AUDIT
Context:
DOA’s DOF is responsible for compiling the statewide SEFA. As part of DOF’s procedures,
a letter is sent out each year to departments with instructions for preparing the SEFA that
includes a checklist for agencies to follow when submitting the SEFA to DOF. Additionally,
it has been DOF’s standard practice to hold an annual SEFA meeting to provide an overview
of the SEFA preparation process to department staff and to answer questions.
Cause:
According to department management, errors were caused by a lack of understanding due to
turnover, inadequate DOF written procedures, and misunderstanding of DOF’s SEFA
template and DOF’s instructions related to reporting amounts transferred between State
agencies. Additionally, the audit noted that DOF lacks review procedures to identify common
errors prior to submission for audit.
Criteria:
Per Title 2 CFR 200.508(b), the State must prepare appropriate financial statements, including
the SEFA, in accordance with federal regulation. Furthermore, per Title 2 CFR 200.303, the
State is responsible for establishing effective internal controls.
Effect:
Inaccurate SEFA reporting increases the risk of financial reporting errors. Additionally,
because the SEFA is used to determine major programs, inaccurate SEFA reporting
increases the risk of noncompliance with federal audit and reporting requirements.
Noncompliance with federal regulations may result in the federal award agencies imposing
additional conditions or taking corrective action, including additional reporting requirements
or withholding/terminating funding.
Recommendation:
The state accountant should strengthen review procedures and provide additional training and
technical assistance to agency staff to ensure the SEFA is accurate, complete, and supported
by the accounting records prior to submission for audit.
Finding No. 2021-014
Prior Year Finding: 2020-012
Type: Other State Issue
Impact: Noncompliance
Condition:
DOA's Office of Information Technology (OIT) accounting staff have not reconciled the
Information Services Fund (ISF) asset tracking system to IRIS.
ALASKA STATE LEGISLATURE II - 24 DIVISION OF LEGISLATIVE AUDIT
Context:
During FY 11, DOA staff implemented an asset tracking system, FASGov, which appeared
adequate to meet basic asset tracking needs. Although the system improved asset tracking,
historical data input into the new system was unreliable, as the information was never
reconciled to information in IRIS. Furthermore, no physical inventory was completed for ISF
capital assets. No progress was made during FY 12 through FY 15 to address the finding.
During FY 16 through FY 20, OIT staff periodically, but unsuccessfully, attempted to
complete a comprehensive inventory of ISF assets. Through FY 21 asset data within FASGov
continued to be unreliable. At FY 21 year-end, a documented difference of $10.8 million
existed between the ISF assets recorded in IRIS and the FASGov total assets report. A
documented difference of $9.6 million existed between the ISF accumulated depreciation
account in IRIS and the FASGov total assets report. No progress was made in FY 21 to identify
the difference.
Cause
According to OIT management, OIT staff were unable to complete a comprehensive inventory
of ISF assets due to competing priorities and limited staffing resources. COVID-19 restrictions
on travel also impacted the ability to take inventory of the assets in various locations across
the State.
Criteria:
Codification of Governmental Accounting and Financial Reporting Standards,
Sections 1400.102ʊ.104 states that capital assets should be reported at historical cost and
depreciated over their estimated useful lives. Generally accepted accounting principles also
require the ISF, an internal service fund, to be operated on a cost reimbursement basis,
including recovering the cost of capital assets.
Effect:
Inaccurate or incomplete ISF asset records limit the State's ability to accurately report capital
assets in the financial statements and may impair the accuracy of OIT reimbursement rates.
Recommendation:
DOA's OIT chief information officer should allocate staff resources to properly account for
capital assets owned by the ISF.
Finding No. 2021-015
Prior Year Finding: 2020-013
Type: Other State Issues
Impact: Noncompliance
ALASKA STATE LEGISLATURE II - 25 DIVISION OF LEGISLATIVE AUDIT
Condition:
During FY 21, DOF management did not provide adequate training to support State agencies'
use of the ALDER 2.0 system.
Context:
ALDER 2.0 is a statewide reporting system designed to integrate data from multiple systems
into a unified environment for simple and effective reporting. With the implementation of
IRIS, which has limited reporting capabilities, ALDER 2.0 became critical for querying and
summarizing the State's accounting data.
As of March 2022, no formalized training classes and limited reference materials have been
provided to ALDER users since IRIS went live in July 2015.
Cause:
Since IRIS went live, DOF has experienced employee turnover and competing priorities,
which hampered its ability to develop ALDER 2.0 training classes and related reference
materials. During FY 21, DOF’s limited resources were further consumed by the IRIS system
upgrade, which went live February 2022.
Criteria:
An effective internal control system requires management to communicate quality information
to enable personnel to achieve management's objectives. Per GAO-14-704G 14.03 "Standards
for Internal Control in the Federal Government," issued by the comptroller general of the
United States, quality information is appropriate, current, complete, accurate, accessible, and
provided on a timely basis.
Effect:
The lack of formal training may adversely impact agency fiscal personnel's ability to perform
duties, including the timely and accurate recording of transactions in IRIS.
Recommendation:
DOF’s director should develop and implement ALDER 2.0 training classes and reference
materials to ensure State agencies’ fiscal personnel using ALDER 2.0 are properly trained.
Finding No. 2021-016
Prior Year Finding: 2020-015
Type: Other State Issues
Impact: Noncompliance
Condition:
DOA DOF completed the FY 21 draft ACFR on November 18, 2021.
ALASKA STATE LEGISLATURE II - 26 DIVISION OF LEGISLATIVE AUDIT
Context:
DOF staff are responsible for creating the State’s financial statements, which are incorporated
into the ACFR. The draft ACFR must be provided to the Division of Legislative Audit, the
State’s independent auditor, by October 31 in order to meet the statutory deadline for issuing
an opinion.
Cause:
Per management, a combination of several issues contributed to the delay. This included late
receipt of outside audited financial statements, late receipt of information from departmental
contacts, departmental turnover, budget restraints, and a lack of training.
Criteria:
Per AS 37.05.210(a)(1), DOA shall file with the governor and with the legislative auditor,
before December 16, a report of the financial transactions of the preceding fiscal year and of
the financial condition of the state as of the end of that year, prepared in accordance with
generally accepted accounting principles and audited by the legislative auditor in accordance
with generally accepted audit standards.
Effect:
Untimely draft ACFR statements delay the issuance of the audited ACFR, which may
negatively impact the decision-making of report users and may also lead to a delay in issuing
the single audit.
Recommendation:
DOF’s director should ensure DOF accountants are adequately trained in governmental
accounting as defined by the Codification of Governmental Accounting and Financial
Reporting Standards published by GASB. Additionally, the DOF director should ensure
ACFR deadlines are clearly communicated to departmental contacts and outside auditors to
facilitate timely completion of the draft ACFR.
Finding No. 2021-017
Type: Other State Issues
Impact: Noncompliance
Condition:
An evaluation of DOA’s State financial system controls identified noncompliance.
Context:
The details related to this issue and relevant audit criteria are being withheld from this report
to prevent the weakness from being exploited. Pertinent details have been communicated to
agency management in a separate confidential document.
ALASKA STATE LEGISLATURE II - 27 DIVISION OF LEGISLATIVE AUDIT
Cause:
Cost concerns, competing priorities, and lack of resources contributed to the issue.
Criteria:
SOA ISPs provide specific criteria related to the identified deficiencies.
Effect:
The noncompliance increases the risk of abuse or exposure of confidential or sensitive
information.
Recommendation:
DOF’s director should ensure the State’s financial system complies with State ISPs.
ALASKA STATE LEGISLATURE II - 28 DIVISION OF LEGISLATIVE AUDIT
DEPARTMENT OF LAW (LAW)
One finding was issued to LAW in the State of Alaska, Single Audit for the Fiscal Year Ended
June 30, 2020. Prior year Finding No. 2020-018 is resolved.
One new finding has been issued during the FY 21 statewide single audit and is included as
Finding No. 2021-018.
The views of responsible officials and management’s corrective action plan are included in
Section IV – Corrective Action Plan.
ALASKA STATE LEGISLATURE II - 29 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-018
Type: Other State Issues
Impact: Noncompliance
Condition:
One potential LAW shortfall was identified for FY 21.
Context:
The potential shortfall was identified in the FY 20 single audit and still outstanding as of
March 2022 in the following amount:
Appropriation Appropriation Title Amount
WADM (BFY 2020) Administration and Support $450,772
Cause:
LAW management asserted that the potential shortfall was initially caused by an unusual and
unanticipated change in available funding sources related to the Coronavirus Aid, Relief, and
Economic Security Act, which occurred at the end of the 2020 reappropriation period (July 1st
through August 31st). As a result, the agency could not finalize billings in a timely manner
and revise the internal agreement with the Department of Administration related to this
appropriation.
In FY 21 LAW management planned to address the shortfall with lapsing general funds.
However, some transactions were not fully processed by the end of the reappropriation period,
which led to uncertainty as to the amount of lapse available to absorb the shortfall.
Criteria:
The State Budget Act provides that if actual collections fall short of the appropriated program
receipts, an agency is required to reduce its budget by the estimated reduction in collections.
Effect:
As a result of the potential shortfall, unauthorized general funds may have been expended.
Recommendation:
LAW’s finance officer should take measures to resolve the shortfall, including collecting any
remaining revenue if possible and requesting a supplemental appropriation if necessary.
Additionally, LAW’s finance officer should improve billing procedures to prevent future
shortfalls.
ALASKA STATE LEGISLATURE II - 30 DIVISION OF LEGISLATIVE AUDIT
DEPARTMENT OF REVENUE (DOR)
Four findings were issued to DOR in the State of Alaska, Single Audit for the Fiscal Year
Ended June 30, 2020. Prior year Finding No. 2020-022 is resolved. Prior year Finding Nos.
2020-019 and 2020-021 are not resolved and are reiterated in this report as Finding Nos.
2021-019 and 2021-020, respectively. Prior year Finding No. 2020-020 was not a significant
issue in the current year and is not reiterated in this report.
One new finding has been issued during the FY 21 statewide single audit and is included as
Finding No. 2021-021.
The views of responsible officials and management’s corrective action plan are included in
Section IV – Corrective Action Plan.
ALASKA STATE LEGISLATURE II - 31 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-019
Prior Year Finding: 2020-019
Type: Basic Financial Statements, Other State Issues
Impact: Material Weakness, Material Noncompliance
Condition:
Revenues eligible for transfer to the Constitutional Budget Reserve Fund (CBRF) were not
transferred during fiscal years 2018 through 2021. Further, revenues that should have
remained in the CBRF were moved to the general fund.
Context:
DOR administers the regulation, collection, auditing, and proper reporting of taxes on oil and
gas produced in the state. The oil and gas severance taxes are based on the net value of oil and
gas, which is the value at the point of production, less all qualified capital and operating
expenditures. Operating expenditures represent the cost associated with the production
process, including tariffs paid for the use of the Trans-Alaska Pipeline.
Pipeline tariff rates are regulated by the Federal Energy and Regulatory Commission (FERC).
In two of its more recent decisions, issued on April 21, 2016, and February 28, 2018, the FERC
reduced tariff rates for production periods occurring after 2009. DOR oil and gas taxpayers
were required to amend prior period tax returns by retroactively applying the newly approved
tariff rates. As a result of the change, DOR collected an estimated $201.5 million of tax and
interest revenues, including $113.5 million collected in FY 18, $73.7 million collected in
FY 19, and $14.3 million collected in FY 20. There were no additional FERC-related revenues
collected in 2021. Historically, taxes received as a result of FERC decisions were deposited
into the CBRF. Based on guidance from the attorney general and the governor's Office of
Management and Budget, DOR staff did not deposit the eligible revenues into the CBRF and
the monies remained in the general fund during fiscal years 2018 through 2021.
Cause
Prior to FY 18, DOR staff deposited FERC-related tax revenues into the CBRF. That practice
changed during FY 18 in response to legal guidance provided by the Department of Law's
attorney general and remained in place throughout FY 21. The guidance concluded that FERC
proceedings could not be considered an administrative action or litigation for CBRF purposes
because FERC had no jurisdiction over State taxes or royalties. Additionally, the attorney
general advised that prior year FERC-related receipts deposited in the CBRF should have
remained in the general fund.
Auditors engaged the Legislative Division of Legal Services (Legislative Legal) to advise
whether the taxes and royalties received as a result of FERC's decisions regarding
the 2009-2015 Trans-Alaska Pipeline System (TAPS) tariff rates should have been deposited
into the CBRF. Legislative Legal reviewed the facts of the TAPS case and concluded that the
ALASKA STATE LEGISLATURE II - 32 DIVISION OF LEGISLATIVE AUDIT
TAPS case met the constitutional requirement for deposit into the CBRF because it was a
settlement of litigation and the case involved taxes and royalties.
The Legislative Legal opinion concluded that the State was a party to the TAPS case. As a
party to the litigation, the State asserted that the TAPS tariff rates were too high, resulting in
reduced royalty and tax obligations by the shippers that utilize TAPS. The overall settlement
includes settlement of litigation before the State Regulatory Commission of Alaska (RCA)
and FERC. The State was a signer of both RCA and FERC settlement agreements. As part of
the settlement agreements, the commissioners of DOR and the Department of Natural
Resources (DNR) were each required to submit a letter acknowledging that the settlement
addressed the tax and royalty concerns. These facts help support Legislative Legal's opinion
that the FERC TAPS case did "involve" taxes and royalties. Consequently, the windfall of
royalty and tax monies received by DOR and DNR as a result of the FERC TAPS decision
should have been deposited into the CBRF.
Criteria:
Article 17(a) of the Alaska Constitution states that "except for money deposited into the
permanent fund under section 15 of this article, all money received by the State after
July 1, 1990, as a result of the termination, through settlement or otherwise, of an
administrative proceeding or of litigation in a state or federal court involving mineral lease
bonuses, rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments or
bonuses, or involving taxes imposed on mineral income, production, or property, shall be
deposited in the budget reserve fund." [Emphasis added]
Effect:
After the attorney general opinion was issued in FY 18, the Department of Administration's
(DOA) Division of Finance (DOF) transferred $923.8 million of DOR tax revenues from the
CBRF to the general fund. When combined with the $113.5 million of FERC-related receipts
collected in FY 18, the $73.7 million collected in FY 19 and the $14.3 million collected in
FY 20, the CBRF year-end balances shown on footnote two of the FY 21 Annual
Comprehensive Financial Report (ACFR) are cumulatively understated an estimated $1.1
billion. These unadjusted errors contributed to a qualified FY 21 ACFR financial opinion.
Additionally, $69.2 million of FERC-related revenues, which should have been deposited into
the CBRF, were instead offset to tax credits.
Recommendation:
DOR's commissioner should ensure all CBRF-eligible revenues are transferred to the CBRF.
Finding No. 2021-020
Prior Year Finding: 2020-021
Type: Basic Financial Statements
Impact: Significant Deficiency
ALASKA STATE LEGISLATURE II - 33 DIVISION OF LEGISLATIVE AUDIT
Condition:
DOR staff preparing the FY 21 Schedule of Expenditures of Federal Awards (SEFA) did not
identify all federal programs for inclusion in DOR’s FY 21 SEFA. Consequently, $21.2
million for Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds
(SLFRF) was not included on DOR's FY 21 draft SEFA.
Context:
Prior to FY 18, DOR staff did not have written procedures for preparing the SEFA. During
FY 18, staff developed written procedures; however, the written procedures contained
reporting parameters that incorrectly limited expenditures to the budget fiscal year. The
procedures were not updated in FY 19 or FY 20. In FY 21, DOR staff updated procedures and
report parameters to correct the prior year finding. However, DOR procedures did not include
steps for identifying new federal awards.
Cause:
DOR’s SEFA procedures did not include procedures for identifying new federal awards. DOR
accounting staff preparing the SEFA were not aware the SLFRF monies appropriated to DOR
and expended during FY 21 should be reported on the SEFA. Additionally, a lack of
communication between staff with the State’s Office of Management and Budget, DOA’s
DOF, and DOR’s Division of Administrative Services (DAS) contributed to the deficiency.
Criteria:
Per Title 2 CFR 200.508(b), the State must prepare appropriate financial statements, including
the SEFA, in accordance with federal regulation. Furthermore, per Title 2 CFR 200.303, the
State is responsible for establishing effective internal controls.
Effect:
Inadequate SEFA preparation and review procedures increase the risk of financial
reporting errors. The SEFA serves as the primary basis for determining major programs as
required by federal regulation. Inaccuracies in the amount of expenditures reported in the
SEFA increase the risk of noncompliance with federal audit and reporting requirements.
Noncompliance with federal regulations may result in the federal awarding agency imposing
additional conditions or taking corrective actions, including additional reporting requirements
or withholding/terminating funding. Federal expenditures were understated on the draft SEFA
by $21.2 million. Once identified by auditors, the discrepancy was corrected by agency staff
and accurately presented in the FY 21 SEFA. Although the FY 21 SEFA was corrected,
incorrect procedures increase the risk of material errors in the future.
Recommendation:
DOR's DAS director should revise written procedures for preparing the SEFA to include
procedures for identifying new federal awards.
ALASKA STATE LEGISLATURE II - 34 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-021
Type: Other State Issues
Impact: Noncompliance
Condition:
One potential DOR shortfall was identified for FY 21.
Context:
The potential shortfall was identified in the FY 20 single audit and still outstanding as of
March 2022 in the following amount:
Appropriation Appropriation Title Amount
R200 (BFY 2019) Child Support Services $1,558,937
Cause:
According to management, appropriation R200 was potentially in shortfall partly because
during FY 18 and the FY 19 re-appropriation period (July 1, 2019 through August 31, 2019)
departmental accounting staff were incorrectly told to apply collected revenues against the
oldest receivables first. This caused appropriation R200 BFY 2018 to over-record revenues
and R200 BFY2019 to under-record receivables. Additionally, receivables were not reduced
when expenditures were determined to be ineligible for federal reimbursement, resulting in
overstated receivables and related revenues. The process to reconcile prior revenues to the
correct BFY is time consuming and was not completed during FY 21 due to competing
priorities.
Criteria:
The State Budget Act provides that if actual collections fall short of the appropriated program
receipts, an agency is required to reduce its budget by the estimated reduction in collections.
Effect:
As a result of the potential shortfall, unauthorized general funds may have been expended.
Recommendation:
DOR’s finance officer should take measures to resolve the shortfall, including collecting any
remaining revenue if possible and requesting a supplemental appropriation if necessary.
Additionally, the finance officer should improve procedures for billing and monitoring
revenue collections to prevent future revenue shortfalls.
ALASKA STATE LEGISLATURE II - 35 DIVISION OF LEGISLATIVE AUDIT
(Intentionally left blank)
ALASKA STATE LEGISLATURE II - 36 DIVISION OF LEGISLATIVE AUDIT
DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT (DEED)
Two findings were issued to DEED in the State of Alaska, Single Audit for the Fiscal Year
Ended June 30, 2020. Prior year Finding No. 2020-024 is resolved. Prior year Finding No.
2020-023 is not resolved and is reiterated in this report as Finding No. 2021-022.
Three new findings have been issued during the FY 21 statewide single audit and are included
as Findings Nos. 2021-023 through 2021-025.
The views of responsible officials and management’s corrective action plan are included in
Section IV – Corrective Action Plan.
ALASKA STATE LEGISLATURE II - 37 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-022
Prior Year Finding: 2020-023
Federal Awarding Agency: U.S. Department of Education (USED)
Impact: Significant Deficiency
AL Number and Title: 84.425C Governor’s Emergency Education
Relief (GEER) Fund – COVID-19
84.425D Elementary and Secondary School
Emergency Relief (ESSER) Fund – COVID-19
Federal Award Number: S425C200011; S425D200020; S425D210020
Applicable Compliance Requirement: Allowable Costs/Cost Principles
Condition:
Testing of 28 new user roles added to the Grants Management System (GMS) in FY 21
identified three user roles added prior to a user access agreement form being completed.
Additionally, one user access agreement form was completed after auditors requested the
form.
Context:
DEED uses the web-based GMS to administer several federal programs, such as Assistance
Listing 84.425 Education Stabilization Fund (ESF), and programs authorized under the
Elementary and Secondary Education Act of 1965 (ESEA). DEED is responsible for managing
GMS, which is utilized by employees at State agencies and local educational agencies (LEA).
LEA employees submit grant applications, receive grant award notifications, and submit
reimbursement requests through GMS. State employees view, modify, and approve LEA grant
awards and reimbursements through GMS.
Cause:
According to DEED management, staff did not follow GMS access control procedures due to
competing priorities. The control deficiency was not followed up timely due to insufficient
monitoring of GMS user access.
Criteria:
Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over
the federal award that provides reasonable assurance that the State is managing the federal
awards in compliance with federal statutes, regulations, and terms and conditions of the grant
awards.
Section 171, 5.4.1 of the State of Alaska (SOA) Information Security Policies (ISP) requires
management to use a formal request process for all access requests (e.g. additions, changes,
or deletions) to SOA computers, networks, or applications.
ISP-171, 5.4.4 requires management to ensure that all user accounts for SOA computers,
networks, or applications meet the following criteria:
ALASKA STATE LEGISLATURE II - 38 DIVISION OF LEGISLATIVE AUDIT
x be authorized by a designated data owner;
x be based on a business need related to the user’s duties; and
x be supported by a written statement of job responsibilities and conditions of access.
Effect:
The absence of signed and approved user access forms prior to granting access to GMS
increases the risk of unnecessary access, which could result in the manipulation or loss of data.
Questioned Costs:
None
Recommendation:
DEED’s Finance and Support Services (FSS) director should improve GMS access monitoring
controls to ensure all user accounts are established using DEED’s formal request process, only
authorized individuals have access to the system, and access is based on a valid business need.
Finding No. 2021-023
Federal Awarding Agency: USED
Impact: Significant Deficiency, Noncompliance
AL Number and Title: 84.425C GEER Fund – COVID-19
84.425D ESSER Fund – COVID-19
Federal Award Number: S425C200011; S425D200020; S425D210020
Applicable Compliance Requirement: Reporting
Condition:
The audit identified multiple errors in FY 21 Federal Funding Accountability and
Transparency Act (FFATA) subaward reporting. Four of 10 tested subawards were not
reported and three contained inaccurate data elements. Of the subawards with incorrect data
elements, one reported an incorrect subaward amount and two had inaccurate Data Universal
Numbering System (DUNS) numbers.
Context:
FFATA requires information on federal awards be made available to the public via a single
searchable website (www.usaspending.gov). The FFATA Subaward Reporting System
(FSRS) is the reporting tool federal awardees, such as the State of Alaska, use to capture and
report subaward and executive compensation data regarding first-tier subawards. According
to DEED procedures, on a monthly basis DEED staff prepares a submission to FSRS, which
is reviewed before submission. Once entered into FSRS the information is compared to an
FSRS printout to verify the data was accurately captured. Auditors determined DEED did not
retain documentation of the input to FSRS or verify the input was accurate.
ALASKA STATE LEGISLATURE II - 39 DIVISION OF LEGISLATIVE AUDIT
The audit tested 10 subawards totaling $79,135,819 that were issued to six of the 49 total
subrecipients that received ESF subawards. Of the 10 subawards tested, four were not
reported. Of the six reported subawards, one was overstated by $138,335,039 and two did not
report the correct DUNS numbers.
Testing of FY 21 FFATA Reporting
Overall Noncompliance Summary
Subaward Subaward
Transactions Subaward not Report not amount missing key
tested reported timely incorrect elements
10 4 0 1 2
Dollar amount Subaward Subaward
of tested Subaward not Report not amount missing key
transactions reported timely incorrect elements
$79,135,819 $13,916,509 $0 $12,069,484 $2,927,497
Cause:
The FFATA procedures that ensure the submission to FSRS is input accurately were not
followed due to documentation difficulties associated with teleworking during the pandemic.
Additionally, according to DEED staff the FSRS system is difficult to use and frequently
requires manual data inputs, increasing the potential for entry errors.
Criteria:
Title 2 CFR 200.303 requires the State to establish and maintain effective internal control over
the federal award that provides reasonable assurance that the State is managing the federal
awards in compliance with federal statutes, regulations, and terms and conditions of the grant
awards.
Title 2 CFR 170 states federal award recipients are required to report each subaward that
obligates $25,000 ($30,000 effective November 12, 2020) or more in federal funds. This
information must be reported no later than the end of the month following the month in which
the obligation was made; include information about each obligating action in accordance with
submission instructions; and include the names and total compensation of each of the
subrecipient’s five most highly compensated executives if revenue thresholds are met and the
executive compensation is not available to the public.
Effect:
Failure to comply with FFATA reporting requirements reduces transparency, impairs
decision-making, and may potentially jeopardize future federal funding.
Questioned Costs:
None
ALASKA STATE LEGISLATURE II - 40 DIVISION OF LEGISLATIVE AUDIT
Recommendation:
DEED’s FSS director should strengthen procedures to ensure data elements comply with
federal reporting requirements and all subawards subject to FFATA reporting are entered into
the FSRS.
Finding No. 2021-024
Federal Awarding Agency: USED
Impact: Significant Deficiency
AL Number and Title: 84.425C GEER Fund – COVID-19
84.425D ESSER Fund – COVID-19
Federal Award Number: S425C200011; S425D200020
Applicable Compliance Requirement: Subrecipient Monitoring
Condition:
A review of DEED’s FY 21 subrecipient monitoring risk assessments found that DEED staff
did not document risk assessments for non-LEA subrecipients. Additionally, DEED’s risk
determinations did not affect the monitoring process.
Context:
DEED issued ESF subawards to 67 subrecipients, of which 14 were non-LEAs that received
approximately $632 thousand. The majority1 of the non-LEA subawards were competitive
grants funded by the GEER fund portion of the ESF program. The purpose of the GEER fund
is to provide LEAs, institutions of higher learning, and other education-related entities with
emergency assistance as a result of the COVID-19 pandemic. According to DEED staff, risk
assessments for GEER competitive grants were performed during the application review
process. However, these assessments were not documented. DEED staff considered all non-
LEA subrecipients as “high risk” due to the grantees’ lack of experience with the grants, the
speed at which the grants were expected to be disbursed, and the changing guidance from
USED.
The 53 LEA subrecipients were issued subawards under either or both GEER and ESSER.
The purpose of ESSER is to provide the State and LEAs with emergency relief funds to
address the impact of the COVID-19 pandemic on elementary and secondary schools. The
State has allocated approximately $34.5 million in ESSER funds under the Coronavirus Aid,
Relief, and Economic Security Act to LEAs.
DEED staff did not conduct ESF specific risk assessments for LEAs. Instead, DEED staff
relied on risk assessments already performed for ESEA programs. Monitoring procedures
performed by DEED staff were the same for all ESF subrecipients and consisted of reviewing
1
Thirteen GEER and one ESSER.
ALASKA STATE LEGISLATURE II - 41 DIVISION OF LEGISLATIVE AUDIT
and approving program budgets and periodic reimbursement requests, and providing support
and technical assistance via webinars and newsletters.
Cause:
Risk assessments were not performed for non-LEA subrecipients because DEED utilized a
risk assessment created for a different federal program, which only made grants to LEAs. As
a result non-LEA subrecipients were not included in the risk assessment. Monitoring
procedures performed by DEED staff were the same for all ESF subrecipients regardless of
risk, because procedures were not customized to address the risks associated with a new
program.
Criteria:
Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal control
over the federal award that provides reasonable assurance that the State is managing the federal
awards in compliance with federal statutes, regulations, and terms and conditions of the grant
awards.
Title 2 CFR 200.332(b) requires the State to evaluate each subrecipient’s risk of
noncompliance with federal statutes, regulations, and the terms and conditions of the subaward
for purposes of determining appropriate subrecipient monitoring.
Effect:
Not performing risk assessments for all subrecipients and not designing monitoring tools
based on the risk determination could potentially result in higher risk subrecipients not being
sufficiently monitored, inefficient program administration, and increased risk of inappropriate
use of federal awards.
Questioned Costs:
None
Recommendation:
DEED’s FSS director should update risk assessment procedures to ensure the risk assessment
process includes non-LEAs and is used in determining the appropriate level of monitoring.
Finding No. 2021-025
Type: Other State Issues
Impact: Noncompliance
Condition:
An evaluation of FY 21 GMS access controls identified that access for three users was not
terminated timely.
ALASKA STATE LEGISLATURE II - 42 DIVISION OF LEGISLATIVE AUDIT
Context:
LEAs within Alaska utilize GMS to submit grant applications, receive grant award
notifications, and submit reimbursement requests for DEED-administered grants. DEED staff
utilize GMS to view, modify, and approve LEA grant awards and reimbursements.
At the time of testing, there were 39 active DEED employee user accounts. Auditors found
two of the accounts were for DEED employees that had ended employment over three months
prior to testing. Additionally, auditors reviewed the timeliness of two GMS accounts that had
been terminated by DEED staff during FY 21 and found GMS access for one of the two was
terminated 17 days after employment ended. One of the three accounts found to be terminated
untimely had view-only access.
Cause:
According to DEED management, formal access control policies for GMS users with view-
only access rights were not fully developed, as access with read-only rights was considered a
low risk.
Criteria:
Section 131, 5.3.3 of SOA ISP notes an Information Security Officer must establish a formal
process, covering personnel and third parties, to ensure that the access rights of terminated
individuals are promptly disabled and removed. Personnel tasked with managing access
controls must promptly change access rights to reflect the termination, maintain a record of
the changes, and regularly review that such changes have been appropriately made.
Effect:
Untimely termination of access rights increases the risk of unauthorized access of State
information and misuse of State data.
Recommendation:
DEED’s FSS Division director should implement procedures to ensure GMS access is
removed promptly for all employees that no longer have a business need for access.
ALASKA STATE LEGISLATURE II - 43 DIVISION OF LEGISLATIVE AUDIT
(Intentionally left blank)
ALASKA STATE LEGISLATURE II - 44 DIVISION OF LEGISLATIVE AUDIT
DEPARTMENT OF HEALTH AND SOCIAL SERVICES (DHSS)
Thirty-two findings were issued to DHSS in the State of Alaska, Single Audit for the Fiscal
Year Ended June 30, 2020. Prior year Finding Nos. 2020-027, 2020-029, 2020-031, 2020-038,
2020-039, 2020-041, 2020-043, 2020-050 through 2020-052, 2020-054, and 2020-056 are
resolved. Prior year Finding Nos. 2020-025, 2020-026, 2020-030, 2020-032 through
2020-036, 2020-044 through 2020-047, and 2020-049 are not resolved and are reiterated in
this report as Finding Nos. 2021-026, 2021-028, 2021-030 through 2021-035, and 2021-044
through 2021-048, respectively. Prior year Finding No. 2020-037 is not resolved and the issues
identified are included in new current year Finding Nos. 2021-036 and 2021-037 noted below.
Prior year Finding Nos. 2020-028, 2020-040, 2020-042, 2020-048, 2020-053, and 2020-055
were not significant issues in the current year and are not reiterated in this report.
Twelve new findings have been issued during the FY 21 statewide single audit and are included
as Finding Nos. 2021-027, 2021-029, 2021-036 through 2021-043, 2021-049, and 2021-050.
The views of responsible officials and management’s corrective action plan are included in
Section IV – Corrective Action Plan.
ALASKA STATE LEGISLATURE II - 45 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-026
Prior Year Finding: 2020-025
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
During FY 21, DHSS’s Division of Finance and Management Services (DFMS) accountants
did not collect or liquidate $30.5 million of federal receivables in a timely manner and did not
provide adequate evidence to show the amounts were collectible.
Context:
This finding was first reported as part of the FY 19 single audit. The $30.5 million is materially
composed of one receivable recorded by DHSS management on September 1, 2017. During
FY 17, DHSS management identified that the automated billing process had not occurred as
expected because a population of federal expenditures was not correctly reported in the State
accounting system. DHSS accountants processed one cumulative receivable revenue
transaction to account for the population of transactions that should have created receivables.
As of August 31, 2021, the outstanding balance of this receivable was $22.3 million2 (net of
an $8.6 million typographical error when the receivable transaction was entered). The other
$8.2 million was comprised of one federal receivable with an open balance of more than two
years.
Receivables due from other governments are current assets of the State, which are expected to
be realized within one year. DHSS has not identified specific expenditures that qualify for
federal reimbursement to support the open receivable balances, diminishing the likelihood
revenues will be collected.
Cause:
According to DHSS management, limited staffing due to turnover and retirements impacted
the availability of resources to complete the reconciliation process necessary to collect or
liquidate the older federal receivables.
Criteria:
Codification of Governmental Accounting and Financial Reporting Standards,
Section 1800.109 states that for accounting and financial reporting purpose, the term current
assets is used to designate cash and other assets or resources commonly identified as those
that are reasonably expected to be realized in cash or sold or consumed within a year.
Therefore, current assets generally include such resources as … (d) receivables from
taxpayers, other governments, vendors, customers, beneficiaries, and employees, if collectible
within a year.
2
Original receivable balance created on September 1, 2017, was $39.4 million. As of August 31, 2021, $8.5 million
of the receivable was liquidated.
ALASKA STATE LEGISLATURE II - 46 DIVISION OF LEGISLATIVE AUDIT
Effect:
DHSS’s untimely collection of federal revenue resulted in prioritizing the use of general funds
over federal funds and lost interest on the uncollected federal funds.
Audit adjustments were processed to reduce the general fund federal receivables and
offset revenues by $30.5 million. Although the corrections were made for the Annual
Comprehensive Financial Report (ACFR), the receivable balances continued to be reported at
the appropriation level in the State’s accounting system (IRIS), increasing the risk of an
appropriation shortfall.
Recommendation:
DFMS’s director should ensure the outstanding federal receivables are reconciled with eligible
federal expenditures and collect all revenues due to the State.
Finding No. 2021-027
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
DHSS’s DFMS staff cancelled FY 21 expenditures in the wrong fiscal year.
Context:
Auditors evaluated 14 DHSS transactions recorded between July 1, 2021, and August 31, 2021
(reappropriation period), and identified three transactions that recorded general fund
expenditures to FY 21, which were erroneously cancelled in FY 22. Subsequently, transactions
to correct the related expenditures were coded to FY 21, thereby doubling FY 21 expenditure
activity. Additionally, automated revenue billings were generated for the erroneous
transactions.3
Cause:
IRIS automatically defaults the fiscal year of transactions to the “current” fiscal year, in this
case FY 22, unless manually changed. DHSS accounting procedures and training were
insufficient to prevent the error, or identify and correct the error.
Criteria:
Codification of Governmental Accounting and Financial reporting Standards,
Section 1600.116 states, “The measurement focus of governmental fund financial statements
3
The largest error was a $31.5 million Medicaid drug rebate transaction. This transaction allocated negative drug
rebate expenditures to applicable expenditure accounts resulting in a zero net expenditure effect. However, the
correcting entry resulted in over-allocating negative expenditures to federally reimbursable accounts and led to an
understatement of federal grants in aid revenue of $24.6 million.
ALASKA STATE LEGISLATURE II - 47 DIVISION OF LEGISLATIVE AUDIT
is on expendituresʊdecreases in net financial resourcesʊrather than expenses. Most
expenditures and transfers out are measurable and should be reported when the related liability
is incurred.”
Effect:
FY 21 general fund expenditures, and accounts payable and accrued liabilities, were overstated
by $5.2 million. Additionally, due from other governments were understated by $25.1 million,
federal grant in aid revenues were understated by $24.9 million, deferred inflows were
understated by $226.2 thousand, and fund balance was understated by $30.1 million. After the
errors were identified by auditors, adjusting entries were posted to correct the balances and
the activity was correctly reported in the FY 21 ACFR.
Recommendation:
DFMS’s director should improve training and procedures to ensure financial transactions are
recorded to the correct fiscal year.
Finding No. 2021-028
Prior Year Finding: 2020-026
Type Basic Financial Statements
Impact: Significant Deficiency
Condition:
DHSS inaccurately reported federal expenditures on the FY 21 draft Schedule of Expenditures
of Federal Awards (SEFA) for three programs, collectively understating federal expenditures
by approximately $235.4 million.
Context:
The FY 21 errors identified by auditors impacted three separate federal programs. Once
identified, the errors were corrected by agency staff and accurately presented in the FY 21
statewide SEFA.
Cause:
The misstatements were due to human error and inaccurate coding in the State’s accounting
system, IRIS. Additionally, according to management, one error was due to inconsistent
formulas in the Department of Administration (DOA), Division of Finance’s SEFA template
used by DHSS to prepare the SEFA. Errors in the SEFA were also attributed to turnover in
the department’s finance officer position and inadequate training. DHSS’s SEFA review
procedures were insufficient to identify and correct the errors.
ALASKA STATE LEGISLATURE II - 48 DIVISION OF LEGISLATIVE AUDIT
Criteria:
Per 45 CFR 75.510(b), the auditee must prepare appropriate financial statements, including
the SEFA, in accordance with federal regulation. Furthermore, per 45 CFR 75.303(a), the
auditee is responsible for establishing effective internal controls over federal awards.
Effect:
Inadequate SEFA preparation and review procedures increase the risk of financial reporting
errors. The SEFA serves as the primary basis for the determination of major programs as
required by federal regulation. Inaccuracies in the amount of expenditures reported on the
SEFA increase the risk of noncompliance with federal audit and reporting requirements.
Noncompliance with federal regulations may result in the federal awarding agency imposing
additional conditions or taking corrective action, including additional reporting requirements
or withholding/terminating funding.
Recommendation:
DHSS’s DFMS director should improve written procedures for the preparation and review of
the SEFA to ensure it is accurate, complete, and supported.
Finding No. 2021-029
Federal Awarding Agency: United States Department of the Treasury
(USTreasury)
Impact: Significant Deficiency, Noncompliance
AL Number and Title: 21.019 Coronavirus Relief Fund (CRF) -
COVID-19
Federal Award Number: SLT0031, SLT0073
Applicable Compliance Requirement: Reporting
Condition:
DHSS staff used inconsistent methods of accounting when reporting federal expenditures for
the CRF program on FY 21 quarterly financial progress reports. As such, amounts reported
were inaccurate.
Context:
Each prime recipient of the CRF is required by USTreasury to submit quarterly financial
progress reports that identify COVID-19 related costs incurred during the reported period. The
progress reports detail the total amount of CRF payments the prime recipient received from
USTreasury; the amount of funds received that were expended or obligated for each project
or activity; all projects and activities for which funds were expended or obligated; and
information on any loans issued, contracts and grants awards, transfers made to other
government entities, and direct payments made by the prime recipient in excess of $50,000.
Aggregated information was required for direct payments made by the prime recipients that
ALASKA STATE LEGISLATURE II - 49 DIVISION OF LEGISLATIVE AUDIT
were less than $50,000. Reports must be submitted through the federal GrantSolutions portal
and be supported by the accounting records.
The CRF program was primarily administered for the State of Alaska by the Department of
Commerce, Community, and Economic Development (DCCED) and DHSS. DCCED
administered the Small Business Relief Program and Direct Municipal Relief Program
projects with assistance from the State’s Office of Management and Budget (OMB). OMB
collected CRF expenditure data via monthly spending reports from municipalities and
prepared DCCED’s reporting data for submission. The State OMB reported CRF expenditures
on the quarterly financial progress reports using the modified accrual basis of accounting.
CRFs administered by DHSS included issuing awards to subrecipients for nonprofit support,
transfers to other State agencies, and other initiatives related to the public health emergency.
Subawards and transfers were issued as advances and were not reimbursement based. DHSS’s
reporting data was prepared for submission by its DFMS staff. When ready for submission,
the complete reports were certified by DOA’s state accountant. DHSS reported CRF
expenditures on either the cash or modified accrual basis, depending upon the activity being
reported. For example, DHSS used the modified accrual basis to report DHSS’s public health
related expenditures, but used the cash basis to report CRF monies it transferred to other State
agencies and monies provided to subrecipients. Using the cash basis of accounting resulted in
DHSS staff reporting the amount of CRF monies advanced instead of the amount expended
on allowable activities.
Cause:
Expenditures were misreported due to a misunderstanding of CRF reporting requirements.
DHSS review procedures were insufficient to ensure the accuracy and consistency of the
information prior to inclusion in the State’s overall quarterly report.
Criteria:
Per USTreasury’s Office of Inspector General Memo OIG-CA-20-028, Department of the
Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked Questions
Related to Reporting and Recordkeeping (Revised), Frequently Asked Question #32, prime
recipients must report CRF expenditures on the accrual basis, unless the prime recipient’s
traditional practice is to report on a cash basis for all its financial reporting. Alaska uses the
modified accrual basis for financial reporting.
Effect:
Inaccurate federal reporting reduces transparency and may impair the federal oversight
agency's ability to properly oversee the program.
Questioned Costs:
None
ALASKA STATE LEGISLATURE II - 50 DIVISION OF LEGISLATIVE AUDIT
Recommendation:
DHSS's DFMS director should improve training and strengthen procedures to ensure federal
reports are accurate and prepared using the appropriate basis of accounting.
Finding No. 2021-030
Prior Year Finding: 2020-030
Federal Awarding Agency: U.S. Department of Health and Human Services
(USDHHS)
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 93.558 Temporary Assistance for Needy Families
(TANF)
Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF
Applicable Compliance Requirement: Allowable Costs/ Cost Principles
Condition:
Testing of 45 TANF benefit payments identified eight payments made incorrectly due to
missing documentation or reports of change not being entered into TANF’s eligibility system,
EIS, in a timely manner.
Context:
The State is required to ensure only financially needy families consisting of a minor child
living with a parent or other caretaker relatives receive TANF assistance. TANF monthly
benefit amounts are calculated based on various program eligibility requirements, including
monthly income, household composition, and other factors. According to the Division of
Public Assistance’s (DPA) Alaska Temporary Assistance manual, caseworkers have 10 days
to report TANF beneficiary requirement changes to DPA. Once the information is reviewed,
eligibility technicians (ET) enter the information into the Eligibility Information System (EIS).
EIS automatically calculates the monthly benefit amount based on the eligibility factors
entered. If changes are not entered in a timely manner, or are not entered accurately, benefit
payments are paid incorrectly.
DPA’s Administrative Procedures Manual requires that all public assistance cases have
documentation that supports the benefit-level determinations.
At the beginning of the COVID-19 pandemic, Administration for Children and Families
(ACF) issued TANF Program Instruction No. TANF-ACF-PI-2020-01, which provided
flexibility in administering the TANF program. States were instructed to seek ACF guidance
to determine whether a TANF program change was allowable and to amend the state plan for
program changes not specifically mentioned in the instructions. After making a change, a state
had 30 days to submit a TANF plan amendment.
ALASKA STATE LEGISLATURE II - 51 DIVISION OF LEGISLATIVE AUDIT
During the COVID-19 pandemic, DPA staff transitioned to remote working and DPA
management implemented a new electronic case file system to accommodate the remote
working environment.
Cause:
During FY 20, DPA management misinterpreted ACF program instructions and directed ETs
not to reduce benefits or close cases in response to reports of change. A State plan amendment
was not submitted for the program change during FY 20 or FY 21. Missing documentation
was due to implementation of an electronic documentation system and the failure to scan all
necessary documentation into the new system.
Criteria:
Title 45 CFR 75.2 defines improper payments to include payments that were made in an
incorrect amount under statutory, contractual, administrative, or other legally applicable
requirements.
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Title IV-A of the Social Security Act, Section 402(b) requires the State to submit a TANF plan
amendment within 30 days of a program change.
Effect:
TANF benefit payments were calculated incorrectly or unsupported, resulting in
overpayments.
Questioned Costs:
$25,283
Recommendation:
DPA’s director should improve monitoring of benefit payments to ensure reports of change
are acted upon timely. DPA should also improve records retention procedures to ensure
complete TANF case files are uploaded to the electronic case file system.
ALASKA STATE LEGISLATURE II - 52 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-031
Prior Year Finding: 2020-032
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency
AL Number and Title: 93.558 TANF
93.775, 93.777, 93.778 Medicaid Cluster
Federal Award Number: 1701AKTANF, 1801AKTANF, 1901AKTANF
2001AKTANF, 2101AKTANF, 2005AKMAP
2105AKMAP
Applicable Compliance Requirement: Eligibility
Condition:
DHSS’s information technology (IT) staff did not properly limit user access to DPA’s EIS
during FY 21.
Context:
The details related to this control weakness and the relevant audit criteria are being withheld
from this report to prevent the weakness from being exploited. Pertinent details have been
communicated to agency management in a separate confidential document.
Cause:
Limited resources and competing priorities contributed to the finding. Further, DHSS relied
on information from other sources that is no longer provided or not provided timely.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control
over the federal award that provides reasonable assurance that the State is managing the federal
award in compliance with federal statutes, regulations, and the terms and conditions of the
grant award.
State of Alaska Information Security Policies provide specific criteria related to the identified
deficiencies.
Effect:
Lack of adequate internal controls increases the risk of unauthorized system use, including
data manipulation, which may result in ineligible benefit recipients or unallowable costs.
Questioned Costs:
None
Recommendation:
DFMS’s director should work with DPA’s director to improve controls over the eligibility
system.
ALASKA STATE LEGISLATURE II - 53 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-032
Prior Year Finding: 2020-033
Federal Awarding Agency: USDHHS
Impact: Material Weakness, Material Noncompliance
AL Number and Title: 93.558 TANF
Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF
Applicable Compliance Requirement: Eligibility, Special Tests and Provisions
Condition:
Thirteen of 45 TANF recipient case files tested lacked documentation supporting the request
and use of income and benefit information through the Income Eligibility and Verification
System (IEVS), and other data exchanges necessary for determining eligibility and benefits.
Further, the following eligibility errors were identified in eight cases:
x Five TANF applications were not reviewed within 30 days of receipt.
x One application did not include shelter cost verification.
x Two applicants either did not fill out the felony convictions portion of the application
or the section was illegible.
x Two recipients reported additional income, but the additional income was not evaluated
in a timely manner to determine whether the recipients exceeded income or resource
limits.
x One adult not included case did not have support showing relationship of the relative
caregiver to the child. The case file was also missing date of birth documentation for
the child.
x Three cases did not have an eligibility redetermination within the federally required 12
months.
Auditors also identified that eligibility was not redetermined within 12 months for all TANF
recipients.
Context:
The State is required to ensure only financially needy families consisting of a minor child
living with a parent or other caretaker relatives receive TANF assistance. DPA employs ETs
who review applications, identify income and financial resources, and make a determination
whether a family is eligible to receive benefits, including the amount of the benefits. As part
of verifying TANF eligibility, the State is required to coordinate data exchanges when making
eligibility determinations, including, but not limited to: wage information from the State Wage
Information Collection Agency, unemployment compensation information from the
Department of Labor, all available information from the Social Security Administration, and
information from the United States Citizenship and Immigration Services.
DPA’s Administrative Procedures Manual, Section 109 requires that all public assistance
cases have documentation that supports eligibility, ineligibility, and benefit-level
ALASKA STATE LEGISLATURE II - 54 DIVISION OF LEGISLATIVE AUDIT
determinations. The documentation must be in sufficient detail to allow a reader or reviewer
to determine the reasonableness of each action taken, verification used, and contacts made
using the online case note screen in EIS or on a Report of Contact sheet maintained in the hard
copy case files.
At the beginning of the COVID-19 pandemic, ACF issued TANF Program Instruction No.
TANF-ACF-PI-2020-01, which provided flexibility in administering the TANF program. For
example, the program instructions allowed for eligibility redeterminations to take place
telephonically, or by other digital means, in order to reduce face-to-face contact. Changes that
were not specifically mentioned in the program instructions required an amendment to an
approved state plan. While the request for a plan amendment did not need to be submitted
before making program changes, ACF instructed states to seek guidance from ACF on whether
a program change was allowable under program requirements. A state had 30 days to submit
a TANF plan amendment.
Cause:
Inadequate training, quality control staffing shortages, and staff working remotely
contributed to ETs not performing and/or documenting all required components of eligibility
determinations. Further, DPA management misinterpreted ACF Program Instructions and
automatically rolled forward recipient eligibility determinations during FY 21, regardless of
the need for an eligibility recertification, and did not submit a TANF plan amendment to ACF
for the changes made.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control
over the federal award that provides reasonable assurance that the State is managing the federal
award in compliance with federal statutes, regulations, and the terms and conditions of the
grant award.
Title 45 CFR 206.10(a)(3)(i) requires that a decision be made promptly on applications,
pursuant to reasonable State-established time standards not in excess of 45 days. Per
Section 4.1 of the Alaska State Plan for TANF, dated December 31, 2019, applications are
required to be processed within 30 days of receipt.
Title 45 CFR 205.55 requires the State to coordinate data exchanges with other federally
assisted benefits programs, and to request and use income and benefit information when
making eligibility determinations.
Pursuant to Title 45 CFR 206.10, DPA’s federally approved TANF State Plan outlines specific
State requirements for applications and eligibility determinations, including:
x Section 4.1 Application – Program applicants must complete an application form in
writing. To be considered complete, the application must provide all requested
information and be supported by documentation the department determines necessary
to establish eligibility.
ALASKA STATE LEGISLATURE II - 55 DIVISION OF LEGISLATIVE AUDIT
x Section 4.3 Reporting Requirements – Participants must also take part in periodic
reviews of the family’s situation. DPA redetermines eligibility and benefit amount
based on the information provided during the reviews and any other changes that are
reported between reviews.
x Section 13 Family Need – The department establishes whether a child is financially
needy. Financial need is determined to exist if the family resources and income are
below the need standards set by the department.
Title 45 CFR 206.10(a)(9)(iii) requires that at least one face-to-face redetermination be
conducted for each case once every 12 months. However, TANF Program Instruction No.
TANF-ACF-PI-2020-01 allowed for telephonic or other virtual/electronic communication
platforms to be used during the COVID-19 pandemic.
Title IV-A of the Social Security Act, Section 402(b) requires the State to submit a TANF plan
amendment within 30 days of program changes.
Effect:
The State may be penalized for up to two percent of the federal grant award for failure to
participate in IEVS.
As a result of not redetermining eligibility during FY 21 and the other errors identified,
ineligible recipients may have received benefits.
Questioned Costs:
Indeterminate
Recommendation:
DPA’s director should improve training, ensure quality control staff vacancies are filled in a
timely manner, and adequately monitor staff working remotely to ensure eligibility and
document retention procedures are followed.
Finding No. 2021-033
Prior Year Finding: 2020-034
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 93.558 TANF
Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF
Applicable Compliance Requirement: Matching, Level of Effort, Earmarking
Condition:
Auditors could not obtain reliable evidence to verify compliance with TANF’s earmarking
requirement.
ALASKA STATE LEGISLATURE II - 56 DIVISION OF LEGISLATIVE AUDIT
Context:
DHSS staff monitors compliance with TANF’s earmarking requirement through compiling
Monthly Caseload and Benefit Summary reports from EIS data. The summary reports identify
the number of TANF recipients that have received more than 60 months of benefit payments.
According to DPA management, the monthly report is reviewed for accuracy.
The monthly EIS data is also compiled as part of the ACF-199 that includes the number of
countable months TANF recipients used assistance. Testing of ACF-199 data found the EIS
data reported in the ACF-199 report was not supported by a manual count of monthly benefit
payments for 63 of 90 cases tested (70 percent). Based on this testing, auditors concluded the
EIS monthly caseload data was not reliable.
Cause:
DHSS staff review of the Monthly Caseload and Benefit Summary reports was insufficient to
identify the data was not supported. In addition, there was a system programming error in EIS
causing the compilation of countable monthly benefit payments to return incorrect data.
Criteria:
Title 45 CFR 264.1 states that subject to exceptions, no state may use any of its federal TANF
funds to provide assistance to a family that includes an adult head-of-household or a spouse
of the head-of-household who has received federal assistance for a total of five years (60
cumulative months, whether or not consecutive).
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of grant
awards.
Effect:
Unreliable data impedes DPA staff’s ability to monitor compliance with federal requirements.
Title 45 CFR 264.2 states TANF funding may be reduced by five percent for exceeding
the 60-month limit on benefits.
Questioned Costs:
None
Recommendation:
DPA’s director should develop procedures to ensure the monthly benefit count in EIS is
accurate. Additionally, DHSS’s commissioner should allocate resources to correct the
programming error within EIS that causes the incorrect number of countable monthly TANF
benefit payments.
ALASKA STATE LEGISLATURE II - 57 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-034
Prior Year Finding: 2020-035
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
AL Number and Title: 93.558 TANF
Federal Award Number: 2001AKTANF, 2101AKTANF
Applicable Compliance Requirement: Reporting
Condition:
The ACF-196R4 TANF financial report for the FFY 20 grant award misreported expenditures
for the quarter ending September 30, 2020. Expenditures totaling $2,320,073 were reported
on the filed ACF-196R report as federal expenditures, on line 6a, but should have been
reported as state maintenance of effort expenditures on the same line.
Further, the ACF-196R TANF financial report for the FFY 21 grant award misreported
expenditures for the quarter ending March 31, 2021. Federal expenditures totaling $335,096
were excluded on the filed ACF-196R report.
Context:
The State is required to file ACF-196R quarterly reports containing expenditure data on the
TANF program. The report is compiled based on classification of expenditures in the
accounting system. The erred expenditures were allowable for the federal program, but the
nature of the expenditures was incorrectly reported or excluded in the ACF-196R report.
Cause:
Expenditures were misreported due to an input error and supervisory review of the report prior
to submission was insufficient to identify the error.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain internal controls over the
federal award that provides reasonable assurance that the State is managing the federal award
in compliance with federal statutes, regulations, and the terms and conditions of the grant
award.
Additionally, Title 45 CFR 265.3(c)(1) requires the State to file quarterly expenditure data on
the State’s use of federal TANF funds.
Effect:
Inaccurate federal reporting may impair the federal oversight agency’s ability to properly
oversee the program.
4
OMB Control No. 0970-0446.
ALASKA STATE LEGISLATURE II - 58 DIVISION OF LEGISLATIVE AUDIT
Questioned Costs:
None
Recommendation:
DHSS’s DFMS director should strengthen review procedures to ensure expenditures are
accurately reported on federal reports.
Finding No. 2021-035
Prior Year Finding: 2020-036
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 93.558 TANF
Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF
Applicable Compliance Requirement: Reporting
Condition:
Thirty-five of 45 TANF cases tested (78 percent) had inaccurate information reported in the
ACF-199 data file.
Context:
The quarterly ACF-199 report is compiled monthly from information that is either entered in
the EIS by an ET or interfaced into EIS through the case management system (CMS). The
information is transmitted to ACF in a data file. ACF uses the transmitted data to determine
whether states have met the required work participation rates and to confirm the State is
meeting the earmarking requirement that no more than 20 percent of families received more
than 60 months of TANF assistance.
Review by auditors found several key line items for family-level and person-level data that
were not reported accurately in the data file that was transmitted for the ACF-199 reports for
the quarters ended September 2020, December 2020, and March 2021 (see table below).
Summary of ACF-199 Errors
Number of Number of Line item
Quarter end cases errors numbers in error
September 2020 10 17 28, 44, 49
December 2020 9 11 44, 49
March 2021 16 25 17, 28, 44, 49
Total 35 53
ALASKA STATE LEGISLATURE II - 59 DIVISION OF LEGISLATIVE AUDIT
Cause:
DPA management lacked procedures for ensuring the accuracy of the information queried
from EIS, which supports the ACF-199 report. The completed ACF-199 report was not
reviewed for accuracy before being transmitted to ACF. According to DPA management, there
was a system programming error in EIS that caused the compilation of countable monthly
benefit payments to return incorrect data (line item 44: number of months countable toward
the federal time limit). DPA management could not explain the cause of the other inaccurate
data (items 17, 28, 44, 49).5
Criteria:
Title 45 CFR 265.3(a)(1) requires the State to collect on a monthly basis, and file on a quarterly
basis, the data specified in the ACF-199 report. Title 45 CFR 265.7(a) and 45 CFR 265.4
further specify the State’s quarterly ACF-199 must be complete, accurate, and filed within 45
days, or be subject to a penalty.
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Effect:
In accordance with 45 CFR 262.1(a)(3), the State could be subject to a penalty of four percent
of the federal grant award for each quarter the State fails to submit an accurate, complete, and
timely required report. Further, reporting incorrect data may impair the federal oversight
agency’s ability to properly oversee the program.
Questioned Costs:
None
Recommendation:
DPA’s director should implement procedures to ensure data reported on the ACF-199 is
complete and accurate. Additionally, DHSS’s Commissioner should allocate resources to
correct the EIS programming error that causes the incorrect number of countable monthly
TANF benefit payments.
Finding No. 2021-036
Federal Awarding Agency: USDHHS
Impact: Material Weakness, Material Noncompliance
Assistance Listing Number and Title: 93.558 TANF
Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF
Applicable Compliance Requirement: Special Tests and Provisions
5
Line item 17 reports whether families received subsidized child care; line item 28 reports whether families are exempt
from the federal time limit provision; and line item 49 reports work participation status data.
ALASKA STATE LEGISLATURE II - 60 DIVISION OF LEGISLATIVE AUDIT
Condition:
Six of 12 child support noncooperation alerts tested (50 percent) were not assessed a penalty
to reduce benefits when determined necessary.
Context:
Department of Revenue, Child Support Services Division sends DPA a weekly listing of
public assistance clients that are not cooperating with establishing paternity, or in establishing,
modifying, or enforcing a support order with respect to a child. The weekly listing is used to
create an alert for each client in EIS. When an alert is received by an ET, DPA procedures
require that the ET assess a benefit penalty, enter a case note within EIS, and print a notice for
the client. The alerts are not retained in EIS after this process has been completed. DPA does
not maintain a log or tracking sheet of the weekly alerts to confirm alerts are processed timely
and accurately.
At the beginning of the COVID-19 pandemic, ACF issued TANF Program Instruction No.
TANF-ACF-PI-2020-01, which provided flexibility in administering the TANF program.
States were instructed to seek ACF guidance to determine whether a TANF program change
was allowable and to amend the state plan for program changes not specifically mentioned in
the instructions. After making a change, a state had 30 days to submit a TANF plan
amendment. During FY 20, DPA management suspended child support noncooperation
penalties due to the COVID-19 pandemic. The suspension ended September 2020; however,
auditors found evidence that penalties continued to be waived after September.
Cause:
DPA’s management misinterpreted the ACF Program Instructions and directed staff to
suspend child support noncooperation penalties, did not seek ACF guidance regarding the
change, and did not submit a TANF plan amendment. Additionally, DPA management lacked
adequate monitoring procedures to ensure alerts were processed. Further, DPA management
stated that staff working remotely contributed to the errors.
Criteria:
Title 45 CFR 264.30 requires the State to deduct from the assistance that would otherwise be
provided to the family of the individual not cooperating with the child support enforcement
requirements an amount equal to but not less than 25 percent of the amount of such assistance,
or deny the family any assistance under the program.
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of grant
awards.
Title IV-A of the Social Security Act, Section 402(b) requires the State to submit a TANF plan
amendment within 30 days of program changes.
ALASKA STATE LEGISLATURE II - 61 DIVISION OF LEGISLATIVE AUDIT
Effect:
Delays in assessing, or failure to assess, child support noncooperation penalties resulted in
clients receiving unallowable benefits.
Questioned Costs:
$8,913
Recommendation:
DPA’s director should develop and implement procedures to monitor processing of child
support noncooperation alerts to ensure notices and penalties are processed timely.
Finding No. 2021-037
Federal Awarding Agency: USDHHS
Impact: Material Weakness, Material Noncompliance
Assistance Listing Number and Title: 93.558 TANF
Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF
Applicable Compliance Requirement: Special Tests and Provisions
Condition:
Thirty-seven of the 45 cases tested (82 percent) reported work activities that were inaccurate,
unsupported, or unverified.
Context:
DPA reports the work verification data through the quarterly ACF-199 reports. The ACF-199
reports are compiled from information that is either entered in EIS by ETs or through
interfacing with the CMS. The information is electronically captured through a data file and
transmitted to ACF. The data transmitted for the ACF-199 report allows ACF to determine
whether the State has met the required work participation rates under the TANF work
verification plan.
Cause:
DPA lacked internal control procedures to ensure work activities reported via CMS were
verified, supported by documentation in the case file, and accurate. According to DPA
management, a majority of the support for the cases tested was retained in CMS and was
unavailable due to a cyberattack.
Criteria:
Title 45 CFR 261.60(a) requires a state to report the actual hours that an individual
participates in an activity. Furthermore, in section 45 CFR 261.61(a), a state must support
each individual’s hours of participation through documentation in the case file and 45
CFR 261.62(a)(2) requires a state to ensure the accuracy of the reporting by establishing and
employing procedures for determining how to count and verify reported work activities.
ALASKA STATE LEGISLATURE II - 62 DIVISION OF LEGISLATIVE AUDIT
Additionally, 45 CFR 261.62(a)(4) requires a state to establish and employ internal controls
to ensure compliance with procedures.
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of grant
awards.
Effect:
Per Title 45 CFR 261.65, the State could be subject to a penalty equal to not less than one
percent and not more than five percent of the federal grant award for not maintaining adequate
work participation support.
Questioned Costs:
None
Recommendation:
DPA’s director should implement procedures to ensure work activity documentation is
retained and accurately entered into CMS. Further, DHSS’s commissioner should strengthen
procedures to ensure continuity of business processes in the event information systems do not
function.
Finding No. 2021-038
Federal Awarding Agency: USDHHS
Impact: Material Weakness, Material Noncompliance
Assistance Listing Number and Title: 93.558 TANF
Federal Award Number: 1901AKTANF, 2001AKTANF, 2101AKTANF
Applicable Compliance Requirement: Special Tests and Provisions
Condition:
The audit reviewed 15 FY 21 TANF case files for clients that were not engaged in work
activities and did not have a good cause exemption. Of the 15 cases, four were assessed a
penalty, eight were not assessed a penalty even though documentation showed that a penalty
should have been assessed, and three cases lacked sufficient documentation to determine
whether a penalty should have been assessed.
Context:
The goal of the TANF program is to transition TANF recipients into jobs or other work
activities to support families. To attain this goal, the TANF program uses the "work first"
approach. TANF recipients are required to look for paid employment. Individuals who cannot
find immediate paid employment participate in activities that focus on gaining skills and
experiences that lead directly to employment and increase the family’s self-sufficiency.
ALASKA STATE LEGISLATURE II - 63 DIVISION OF LEGISLATIVE AUDIT
To comply with the work first goal, DPA staff, with the assistance of contracted case
managers, identify work activities for TANF recipients to help move toward obtaining
employment. TANF recipients must take part in assigned work activities. TANF recipients
who fail to take part in assigned work activities incur a penalty that reduces the assistance
payment.
Per federal guidance, states can establish good cause or other exemptions for TANF recipients
not engaging in work activities. Alaska Temporary Assistance Manual, section 730-2, outlines
the following good cause exemptions: caretaker of a baby, caretaker of a disabled child or
parent, medical reasons, family hardship, lack of child care, no child care funds, or no
transportation funds.
At the beginning of the COVID-19 pandemic, ACF issued TANF Program Instruction No.
TANF-ACF-PI-2020-01, which provided flexibility in administering the TANF program.
States were instructed to seek ACF guidance to determine whether a TANF program change
was allowable and to amend the state plan for program changes not specifically mentioned in
the instructions. The program instructions included additional good cause exemptions for
work requirements to include: if clients are ill, caring for a child whose school or daycare is
closed due to the pandemic, or because the work or training site is closed. After making a
change, a state had 30 days to submit a TANF plan amendment. During FY 20, DPA
management suspended penalties for refusal to work or engage in work activities. The
suspension ended September 2020; however, auditors found evidence that penalties continued
to be waived after September.
Cause:
During FY 20, DPA management misinterpreted the ACF Program Instructions and directed
staff to suspend work services penalties without establishing good cause exemption criteria
and did not submit a TANF plan amendment. DPA management lacked adequate monitoring
procedures to ensure staff working remotely assessed penalties as federally required.
Additionally, DPA uses CMS in conjunction with hard copy case management files to track
the work activities for TANF recipients. According to DPA management, support for work
activities retained in CMS was unavailable due to a cyberattack.
Criteria:
Title 45 CFR 261.14 requires the State to reduce or terminate the amount of public assistance
to families of individuals who refuse to engage in work.
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of grant
awards.
Effect:
The State could be subject to a penalty equal to not less than one percent and not more than
five percent of the federal grant award for failing to assess refusal to work penalties.
ALASKA STATE LEGISLATURE II - 64 DIVISION OF LEGISLATIVE AUDIT
Questioned Costs:
None
Recommendation:
DPA’s director should implement monitoring procedures to ensure TANF recipients’ refusal
to work penalties are processed. Further, DPA’s director should strengthen procedures to
ensure continuity of business processes in the event information systems do not function.
Finding No. 2021-039
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 93.575, 93.596 Child Care and Development
Fund (CCDF) Cluster
Federal Award Number: 2001AKCCDF, 2101AKCCDF
Applicable Compliance Requirement: Allowable Costs/Cost Principles
Condition:
Testing of 60 FY 21 CCDF provider transactions identified 11 transactions that did not have
supporting documentation and one transaction that did not improve the quality of care as
defined by federal program guidelines.
Context:
Providers enrolled in the CCDF program submit payment requests to DPA’s Child Care
Program Office (CCPO) for child care services provided to eligible families and for
reimbursement of expenses to improve child care quality under the Child Care Grant (CCG)
program. The request forms are processed by CCPO staff who check calculations for accuracy,
ensure children are authorized, and verify CCG reimbursements are adequately supported and
allowed.
Cause:
Per DPA management, pandemic related office closures and community mandates made it
difficult for CCPO supervisors to ensure established procedures for digital file naming
conventions were followed. Transaction support could not be located due to inaccurate file
names. Monitoring procedures were insufficient to identify the errors.
Criteria:
Title 45 CFR 98.67 requires lead agencies to implement fiscal controls and accounting
procedures that are sufficient to permit the tracing of CCDF funds to a level of expenditure
adequate to establish that such funds have not been used in violation of the provisions of this
part. In addition, Title 45 CFR 98.90(d) requires lead agencies and subgrantees to retain
all CCDF records and any other records of lead agencies and subgrantees that are needed to
substantiate compliance with CCDF requirements.
ALASKA STATE LEGISLATURE II - 65 DIVISION OF LEGISLATIVE AUDIT
Per Title 45 CFR 75.403, to be allowable under federal awards, costs must be necessary,
reasonable, and adequately documented.
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control
over the federal award that provides reasonable assurance that the State is managing the federal
award in compliance with federal statutes, regulations, and the terms and conditions of the
grant award.
Effect:
Auditors were unable to verify the accuracy and allowability for $8,219 of costs charged to
the CCDF program. Based on the sample error rate and population size, the projected likely
questioned costs totaled $1.27 million. Inadequate supervision increases the risk of improper
payments.
Questioned Costs:
Assistance Listing 93.575: $2,292
Assistance Listing 93.596: $5,927
Recommendation:
DPA’s director should improve monitoring procedures to ensure expenditure documentation
procedures are followed.
Finding No. 2021-040
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 93.575, 93.596 CCDF Cluster
Federal Award Number: 2001AKCCDF, 2101AKCCDF
Applicable Compliance Requirement: Eligibility
Condition:
Testing of 91 eligibility case files identified eight errors in calculating family income and
contribution amounts due to subrecipient staff using incorrect earned income conversion
factors or incorrect pay information.
Context:
DPA provides grants to subrecipients to determine eligibility for the Child Care Assistance
Program (CCAP). Subrecipients are responsible for adhering to program procedures and the
CCPO provides guidance to subrecipients as needed.
A family’s monthly income is used to determine eligibility and the monthly child care
contribution. Earned income is calculated based on the average earnings received per pay
ALASKA STATE LEGISLATURE II - 66 DIVISION OF LEGISLATIVE AUDIT
period multiplied by a conversion factor dependent upon the frequency of pay (weekly,
bi-monthly, bi-weekly, or monthly).
Cause:
Per DPA management, procedures that subrecipients are required to follow regarding the use
of conversion factors in calculating income for eligible families were not descriptive enough
to ensure income was calculated correctly. In addition, management stated human error
contributed to the discrepancies. Auditors noted subrecipient monitoring procedures were not
sufficient to identify and correct the calculation issues.
Criteria:
Title 45 CFR 98.13(c) requires the State to provide a CCDF Plan. Title 45 CFR 98.16(k)
requires the State Plan for CCDF to contain a description of the sliding fee scale for cost-
sharing by the families that receive child care services for which assistance is provided under
the CCDF.
Title 45 CFR 98.45(k) requires the State to establish a sliding fee scale for families that receive
CCDF child care services that is based on income and the size of the family to provide for an
affordable family co-payment.
Per the federally approved State Plan section 3.4, family contributions are based on a sliding
fee scale established by the State.
Alaska Statute 47.25.031 requires the department to determine the eligibility of families for
day care benefits. In addition, AS 47.25.041 requires the department to develop a sliding fee
scale for the purposes of determining the amount to be contributed by the parent or guardian
for child care. Section 4080 of the CCAP Policies and Procedures Manual details the process
for calculating a family’s monthly income, including the conversion factors to be used.
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal control
over the federal award that provides reasonable assurance that the State is managing the federal
award in compliance with federal statutes, regulations, and the terms and conditions of the
grant award.
Effect:
Incorrect family income and contribution calculations increase the risk of improper eligibility
and family contribution determinations for participating families, which may lead to
unallowable costs.
Questioned Costs:
Indeterminate
ALASKA STATE LEGISLATURE II - 67 DIVISION OF LEGISLATIVE AUDIT
Recommendation:
DPA’s director should revise CCPO procedures to help ensure income calculations are
performed correctly by subrecipients. In addition, DPA’s director should improve subrecipient
monitoring to ensure compliance with program guidelines.
Finding No. 2021-041
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
AL Number and Title: 93.575, 93.596 CCDF Cluster
Federal Award Number: 2001AKCCDF, 2101AKCCDF
Applicable Compliance Requirement: Reporting
Condition:
Two of five CCDF FY 21 subawards tested subject to Federal Funding Accountability and
Transparency Act (FFATA) requirements were not reported to the FFATA Subaward
Reporting System (FSRS).
Context:
FFATA requires information on federal awards be made available to the public via a single
website (www.usaspending.gov). FSRS is the reporting tool federal awardees, such as the
State of Alaska, use to capture and report subaward and executive compensation data regarding
first-tier subawards. According to DHSS procedures, staff prepare a monthly FFATA
submission and, once entered into FSRS, print and retain a hard copy from the system for each
subaward reported. However, no supervisory review was required to be performed on the
information prior to or after submission to FSRS to ensure completeness.
The audit tested five subawards totaling $4,259,662 that were issued to four CCDF
subrecipients.6 Of the five subawards tested, two were not reported to FSRS. DHSS staff
attempted to report the two subawards, but FSRS returned an error message indicating the
Federal Award Identification Number and Assistance Listing combination was not valid.
DHSS did not sufficiently follow up with the federal FSRS oversight agency to determine the
corrective action necessary to enter the subawards into the system.
6
Testing covered 100 percent of CCDF subrecipients.
ALASKA STATE LEGISLATURE II - 68 DIVISION OF LEGISLATIVE AUDIT
Testing of FY 21 FFATA Reporting
Overall Noncompliance Summary
Subaward Subaward
Transactions Subaward not Report not amount missing key
tested reported timely incorrect elements
5 2 0 0 0
Dollar amount Subaward Subaward
of tested Subaward not Report not amount missing key
transactions reported timely incorrect elements
$4,259,662 $2,535,913 $0 $0 $0
Cause:
According to the DHSS staff, competing priorities and inadequate staffing contributed to the
finding. Further, DHSS’s FFATA procedures did not provide for supervisory review of
subaward data prior to or after submission to FSRS to ensure the accuracy and completeness
of the information being reported.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Title 2 CFR 170 states federal award recipients are required to report each subaward that
obligates $25,000 ($30,000 effective November 12, 2020) or more in federal funds. This
information must be reported no later than the end of the month following the month in which
the obligation was made; include information about each obligating action in accordance with
submission instructions; and include the names and total compensation of each of the
subrecipient’s five most highly compensated executives if revenue thresholds are met and the
executive compensation is not available to the public.
Effect:
Failure to comply with FFATA reporting requirements reduces transparency, impairs
decision-making, and may potentially jeopardize future federal funding.
Questioned Costs:
None
Recommendation:
DHSS’s DFMS director should strengthen procedures for FFATA reporting to include a
review process to ensure FFATA reporting is accurate and complete.
ALASKA STATE LEGISLATURE II - 69 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-042
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency
Assistance Listing Number and Title: 93.767 Children’s Health Insurance Program
(CHIP)
Federal Award Number: 2005AK5021, 2105AK5021
Applicable Compliance Requirement: Allowable Costs/Cost Principles
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster
Federal Award Number: 2005AKMAP, 2105AKMAP
Applicable Compliance Requirement: Allowable Costs/Cost Principles
Condition:
A Medicaid Management Information System (MMIS) processed and paid claims with invalid
procedure code and modifier combinations.
Context:
Senate Bill 74 (SLA 2016) directed DHSS to apply for a Section 1115 waiver under 42
U.S.C. 1315(a) to establish one or more demonstration projects focused on improving the
State’s behavioral health system for medical assistance recipients. As part of the Centers for
Medicare and Medicaid Services’ approval of Alaska’s waiver application, DHSS contracted
with an Administrative Services Organization (ASO) to provide administrative support,
process claims, and manage data. DHSS and the ASO implemented the OptumHealth
Behavioral Services Facets MMIS in February 2020. The processing of behavioral health
claims was fully transitioned from the Alaska Health Enterprise (AHE) MMIS to the new
Facets MMIS during FY 21.
Review of a judgmental sample of six procedure codes for claims processed in the Facets
MMIS identified one procedure code for which claims were inaccurately priced due to a
system defect. Division of Behavioral Health (DBH) staff conducted an analysis of all affected
claims to identify overpayments by the federal government after auditors brought the error to
management’s attention. Auditors reviewed DBH staff’s analysis and determined the
overpayment amount to be reasonable. DBH management reported that the defect was fixed
during FY 22.
Cause:
Errors were caused by a system defect in the new Facets MMIS. DHSS’s monitoring of ASO
activities and behavioral health expenditures was inadequate to detect the system error.
ALASKA STATE LEGISLATURE II - 70 DIVISION OF LEGISLATIVE AUDIT
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Title 45 CFR 75.403(a) requires that costs must be necessary and reasonable for the
performance of the federal award.
Effect:
The system defect led to unallowable federal expenditures.
Questioned Costs:
Assistance Listing 93.767: None
Assistance Listing 93.778: $148,808
Recommendation:
DBH’s director should continue to work with the ASO to improve system controls to ensure
only valid procedure codes and modifiers are paid by the system. DBH’s director should
improve monitoring of ASO activities and behavioral health expenditures to ensure system
defects are identified and corrected.
Finding No. 2021-043
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency
Assistance Listing Number and Title: 93.767 CHIP
Federal Award Number: 2005AK5021, 2105AK5021
Applicable Compliance Requirement: Allowable Costs/Cost Principles
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster
Federal Award Number: 2005AKMAP, 2105AKMAP
Applicable Compliance Requirement: Allowable Costs/Cost Principles
Condition:
Review of FY 21 behavioral health claims determined DHSS did not maintain adequate
internal controls over behavioral health expenditures. The following errors, when considered
together, indicate a significant deficiency in internal controls:
x Testing of 40 claims identified four (10 percent) paid in error. In two instances the
system paid a provider that did not bill for or rendered the services. The other two
ALASKA STATE LEGISLATURE II - 71 DIVISION OF LEGISLATIVE AUDIT
errors involved providers that were not enrolled in the Medicaid program at the time
medical services were rendered.
x Analysis of providers and claims data identified that the system incorrectly reimbursed
claims rendered by an individual who was not enrolled as a Medicaid provider at the
time the services were rendered.
x Three of 78 newly enrolled autism behavior technicians tested (4 percent) had expired
or inactive certifications and the providers continued to remain active in the system.
No claims were paid for services provided by the three individuals during FY 21.
Context:
During FY 21 the department transitioned the processing of behavioral health claims from
the AHE MMIS to the new Facets MMIS. Medicaid provider enrollment records continued to
be maintained in the AHE MMIS. A report containing provider data was transmitted to the
Facets MMIS weekly.
Cause:
Errors were due to flaws in system logic used in the processing of provider enrollment data
shared between the two systems. Additionally, DHSS staff did not have procedures to ensure
claims were denied in the Facets MMIS for providers with expired or inactive certifications.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Title 45 CFR 75.403(a) requires that costs must be necessary and reasonable for the
performance of the federal award.
Effect:
Inadequate controls led to an unknown amount of payments to ineligible providers.
Questioned Costs:
Assistance Listing 93.767: None
Assistance Listing 93.778: $12,358
Recommendation:
DBH’s director should work with the ASO to correct the system deficiencies and strengthen
internal controls over behavioral health expenditures processed in the Facets MMIS.
ALASKA STATE LEGISLATURE II - 72 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-044
Prior Year Finding: 2020-044
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency
Assistance Listing Number and Title: 93.767 CHIP
93.775, 93.777, 93.778 Medicaid Cluster
Federal Award Number: 2005AK5021, 2105AK5201
2005AKMAP, 2105AKMAP
Applicable Compliance Requirement: Eligibility
Condition:
An evaluation of the Alaska Resource for Integrated Eligibility Services (ARIES) system
during FY 21 identified significant internal control deficiencies.
Details related to the control weaknesses and the relevant audit criteria are being withheld
from this report to prevent the weaknesses from being exploited. Pertinent details have been
communicated to agency management in a separate confidential document.
Context:
ARIES is an eligibility system developed in multiple phases by DHSS. The Modified Adjusted
Gross Income (MAGI) methodology was implemented in Phase 1 and is used for eligibility
determinations for the Medicaid and CHIP programs.
Cause:
According to management, additional work created by the COVID-19 pandemic and a 2021
cybersecurity incident adversely impacted DHSS’s IT resources, limiting DHSS’s ability to
resolve the control deficiencies that had been identified in previous years. Management also
stated that inadequate training and a lack of resources contributed to the finding.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over the federal award that provides reasonable assurance that the State is managing the federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Per Title 42 CFR 435.912(b), consistent with guidance issued by the Secretary, the agency
must establish in its State plan timeliness and performance standards for, promptly and without
undue delay – (1) determining eligibility for Medicaid for individuals who submit
applications to the single State agency or its designee. According to MAGI Medicaid
Eligibility Manual 806-2 A, if an application cannot be worked right away, the agency must
process the application within 45 days.
ALASKA STATE LEGISLATURE II - 73 DIVISION OF LEGISLATIVE AUDIT
Effect:
The internal control weaknesses increase the risk of noncompliance with state and federal
regulations, unauthorized system use (including data manipulation), and incorrect eligibility
determinations, which may result in ineligible recipients receiving benefits.
Questioned Costs:
None
Recommendation:
DPA’s director should dedicate resources to resolve ARIES system defects.
Finding No. 2021-045
Prior Year Finding: 2020-045
Federal Awarding Agency: USDHHS
Impact: Material Weakness, Material Noncompliance
Assistance Listing Number and Title: 93.767 CHIP
93.775, 93.777, 93.778 Medicaid Cluster
Federal Award Number: 2005AK5021, 2105AK5201
2005AKMAP, 2105AKMAP
Applicable Compliance Requirement: Eligibility
Condition:
Forty Medicaid and 25 CHIP recipients with paid medical claims during FY 21 were randomly
selected for eligibility testing. Auditors found DPA staff did not process applications in a
timely manner or redetermine eligibility when required for 32.5 percent of Medicaid cases
tested and 72 percent of CHIP cases tested.
Specifically, the errors included the following:
x Ten Medicaid cases and 16 CHIP cases were due to have eligibility redetermined;
however, no information was submitted to DPA for review and DPA staff did not
independently conduct a redetermination. For recipients following the MAGI
methodology, DPA staff should have attempted to redetermine eligibility through
electronic interfaces.
x Eligibility determinations for one Medicaid case and one CHIP case were not processed
in a timely manner. The delays in completing the review were 62 days and 124 days
respectively.
x Renewal applications for two Medicaid cases and a new application for one CHIP case
were not reviewed nor acted upon by DPA staff.
ALASKA STATE LEGISLATURE II - 74 DIVISION OF LEGISLATIVE AUDIT
Context:
The State is required to ensure applications are reviewed and eligibility determinations are
made timely for Medicaid and CHIP recipients, and eligibility is redetermined at least
every 12 months or when new information is received from the recipient.
The State is required to ensure only financially needy individuals receive Medicaid or CHIP
assistance. DPA employs ETs who review applications, identify income and financial
resources, and make determinations of whether individuals are eligible to receive benefits.
Cause:
Due to human error and inadequate training, applications were not consistently uploaded to
the workflow management system and were therefore not worked. Due to a system deficiency,
cases were also incorrectly excluded from ARIES-generated reports used to track and process
renewals.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over the federal award that provides reasonable assurance that the State is managing the federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Title 42 CFR 435.912(c) states the determination of eligibility for any application may not
exceed 90 days for applicants who apply for Medicaid on the basis of disability and 45 days
for all other applicants.
Title 42 CFR 435.916 requires the State to periodically renew Medicaid eligibility. For
renewals based on MAGI, a redetermination is required once every 12 months, and no more
frequently than once every 12 months. Similarly, for non-MAGI beneficiaries the State is
required to make a redetermination of eligibility at least every 12 months. The State is required
to take action on information about changes between regular eligibility renewals and promptly
redetermine eligibility.
Title 42 CFR 435.916(a)(2) states that the agency must make a redetermination of eligibility
without requiring information from the individual if able to do so based on reliable information
contained in the individual’s account or other more current information available to the
agency, including but not limited to information accessed through any databases accessed by
the agency.
Title 42 CFR 457.340 and Title 42 CFR 457.343 require the timely determination of eligibility
and renewal procedures for Medicaid apply equally in administering CHIP.
Effect:
Failure to determine Medicaid and CHIP eligibility determination timely increases the risk
that ineligible beneficiaries receive Medicaid and CHIP benefits.
ALASKA STATE LEGISLATURE II - 75 DIVISION OF LEGISLATIVE AUDIT
Questioned Costs:
Assistance Listing 93.767: $18,900
Assistance Listing 93.778: $81,382
Recommendation:
DPA’s director should improve employee training and dedicate adequate resources to
determine Medicaid and CHIP eligibility in a timely manner.
Finding No. 2021-046
Prior Year Finding: 2020-046
Federal Awarding Agency: USDHHS
Impact: Material Weakness, Material Noncompliance
Assistance Listing Number and Title: 93.767 CHIP
93.775, 93.777, 93.778 Medicaid Cluster
Federal Award Number: 2005AK5021, 2105AK5201
2005AKMAP, 2105AKMAP
Applicable Compliance Requirement: Eligibility
Condition:
Forty Medicaid and 25 CHIP recipients with paid medical claims during FY 21 were randomly
selected for eligibility testing. Auditors found inaccurate eligibility determinations by DPA
staff for 20 percent of Medicaid cases tested and eight percent of CHIP cases tested.
Specifically, for Medicaid cases:
x Applications for two cases could not be located by DPA.
x Four cases had insufficient documentation to support eligibility determinations.
x One case had income incorrectly calculated.
x DPA staff did not obtain nor verify the applicant had a valid social security number for
one case.
For CHIP cases:
x One case had eligibility incorrectly determined.
x DPA staff did not obtain nor verify the applicant had a valid social security number for
one case.
Context:
The State is required to ensure only financially needy individuals receive Medicaid or CHIP
assistance. DPA is the primary division within DHSS responsible for determining Medicaid
and CHIP eligibility. DPA employs ETs who review applications, identify income and
ALASKA STATE LEGISLATURE II - 76 DIVISION OF LEGISLATIVE AUDIT
financial resources, obtain social security numbers and verify the numbers through a federal
database, and make determinations whether the individuals are eligible to receive benefits.
DPA has established internal control procedures to help staff determine eligibility in
accordance with federal regulations and the State plan. Procedures are documented in the DPA
Administrative Procedures Manual and the MAGI Medicaid Eligibility Manual. At the end of
FY 20 DPA also implemented an electronic document system as a central document
depository. This system stores all the documents that DPA obtained to verify eligibility in
FY 21.
Cause:
According to DPA management, the errors were caused by inadequate training for application
review following the MAGI eligibility methodology. Management also stated the missing case
file documents occurred before the agency implemented an electronic documentation
management system and the agency is working on adding older files to the system.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Title 42 CFR 435.914(a) states the agency must include in each application’s case record facts
to support the agency’s decision.
Title 42 CFR 435.407 requires states to obtain a social security number and perform a data
match with the Social Security Administration.
Title 42 CFR 435.603(c) requires the agency to determine financial eligibility for Medicaid
based on “household income”. Title 42 CFR 435.948 requires the State to verify financial
information includes wages, net earnings from self-employment, unearned income and
resources and to use available electronic services if available.
Title 42 CFR 457.343 requires the renewal procedures for Medicaid apply equally in
administering CHIP.
Effect:
Failure to accurately determine eligibility and maintain complete case records for Medicaid
and CHIP increases the risk that ineligible recipients receive Medicaid and CHIP benefits.
Questioned Costs:
Assistance Listing 93.767: $193
Assistance Listing 93.778: $14,774
ALASKA STATE LEGISLATURE II - 77 DIVISION OF LEGISLATIVE AUDIT
Recommendation:
DPA’s director should improve eligibility training, ensure procedures are followed for
determining Medicaid and CHIP eligibility, and ensure the electronic document management
system includes all relevant documentation supporting eligibility decisions.
Finding No. 2021-047
Prior Year Finding: 2020-047
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster
Federal Award Number: 2005AKMAP, 2105AKMAP
Applicable Compliance Requirement: Eligibility
Condition:
Seven of 40 (17.5 percent) Medicaid recipients tested were sent written eligibility notices that
contained inconsistent or incorrect information regarding the eligibility period.
Context:
Notices for Medicaid eligibility decisions are created through DHSS’s two eligibility systems,
ARIES and EIS. DPA procedures state that approval notices must include information about
the level of benefits and approved services. The notices must also include the date eligibility
is set to begin and end.
ARIES is programmed to automatically generate system notices; however, due to system
defects the notices do not always contain correct information. As a workaround the ETs can
manually enter the correct information in the “additional information” section of the notice.
Cause:
According to DPA staff, incorrect or incomplete notices were due to inaccurate ARIES system
logic and human error. Additionally, procedures did not require DPA staff to monitor the
accuracy and completeness of the notices.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Title 42 CFR 435.917 requires the State to provide all Medicaid applicants and beneficiaries
with timely and adequate written notice of any decision affecting their eligibility. Additionally,
such notices must contain clear information, including the basis and effective date of the
ALASKA STATE LEGISLATURE II - 78 DIVISION OF LEGISLATIVE AUDIT
eligibility and the circumstances in which the individual must report any changes that may
affect the individual’s eligibility.
Effect:
Due to inconsistent or incorrect information within eligibility notices, Medicaid beneficiaries
were misinformed regarding the coverage of the medical benefits.
Questioned Costs:
None
Recommendation:
DPA’s director should implement procedures to monitor the accuracy and sufficiency of
Medicaid eligibility notices. Additionally, DPA’s director should dedicate resources to fix the
ARIES system logic that created the incorrect notices.
Finding No. 2021-048
Prior Year Finding: 2020-049
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency
Assistance Listing Number and Title: 93.767 CHIP
Federal Award Number: 2005AK5021, 2105AK5021
Applicable Compliance Requirement: Special Tests and Provisions
Prior Year Finding: 2020-049
Federal Awarding Agency: USDHHS
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster
Federal Award Number: 2005AKMAP, 2105AKMAP
Applicable Compliance Requirement: Special Tests and Provisions
Condition:
Certain behavioral health providers were not screened and enrolled in accordance with federal
eligibility requirements.
Context:
Screening is a required element of the provider enrollment process and is used to determine
whether an individual and/or entity is eligible to participate as a Medicaid/CHIP provider.
Examples of screening activities include, but are not limited to, license verification, site visits,
identity confirmation, and exclusion status assessment.
ALASKA STATE LEGISLATURE II - 79 DIVISION OF LEGISLATIVE AUDIT
Sixty newly enrolled Medicaid providers were randomly selected for testing. Of this
number, 13 were individual providers rendering behavioral health services7 for which the
following errors were found:
x One provider lacked documentation to support that the provider was screened at the
time of enrollment. Specifically, there was no evidence to show Division of Health
Care Services (DHCS) staff or the fiscal agent obtained and verified the provider’s
National Provider Identifier or checked the provider against the relevant federal
databases to verify the provider was not excluded. According to DHSS staff, the
provider was rescreened after auditors identified the issue and staff determined the
provider was eligible to be enrolled.
x Two providers lacked documentation to support that professional licensing or
education requirements were met prior to enrollment. According to DHCS staff, the
providers were rescreened after auditors identified the issue. DHCS staff determined
one provider met requirements and one did not.
Cause:
Deficiencies were due to human error and inadequate training in enrolling new provider types.
Criteria:
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Per Title 42 CFR 455.410, the State must require all enrolled providers to be screened
under 42 CFR 455 Subpart E.
Title 42 CFR 455.450 requires that the State screen all initial applications based on a
categorical risk level of “limited,” “moderate,” or “high”. If a provider could fit within more
than one risk level described in this section, the highest level of screening is applicable.
Title 42 CFR 455.450 requires the State Medicaid agency to verify that a provider meets any
applicable federal regulations or State requirements for the provider type prior to making an
enrollment determination.
Effect:
Inadequate controls over provider eligibility increase the risk of unqualified providers
delivering services to Medicaid recipients.
7
The random sample included eight behavioral health clinical associates, four mental health professional clinicians,
and one substance use disorder counselor, which were new provider types added in FY 20.
ALASKA STATE LEGISLATURE II - 80 DIVISION OF LEGISLATIVE AUDIT
Questioned Costs:
Assistance Listing 93.767: None
Assistance Listing 93.778: $33,812
Recommendation:
DHCS’s director should strengthen training and implement procedures to ensure providers are
screened and enrolled in accordance with federal and State requirements.
Finding No. 2021-049
Federal Awarding Agency: USDHHS
Impact: Noncompliance
Assistance Listing Number and Title: 93.775, 93.777, 93.778 Medicaid Cluster
Federal Award Number: 2005AKMAP, 2105AKMAP
Applicable Compliance Requirement: Special Tests and Provisions
Condition:
A Medicaid system defect allowed certain laboratory, outpatient, and professional claims to
bypass National Correct Coding Initiative (NCCI) system edits during one quarter in FY 21.
Context:
The Centers for Medicare and Medicaid Services’ NCCI promotes national correct coding
methodologies and helps reduce improper coding that may result in inappropriate payments
of Medicare Part B claims and Medicaid claims. State Medicaid programs were required to
incorporate compatible NCCI methodologies in the Medicaid claims processing system by
October 1, 2010. NCCI edits are a component of the NCCI methodologies, designed to prevent
improper payment when incorrect code combinations are reported or when services are
reported with incorrect units of service. As part of the NCCI, states are required to implement
new quarterly Medicaid NCCI edit files on the first day of every calendar quarter. DHSS’s
fiscal agent subcontracts the management of NCCI edits in the AHE MMIS. The subcontractor
is in charge of deploying the quarterly NCCI edit files in the AHE MMIS.
Review of a sample of 25 NCCI edits showed six were not consistently applied throughout
FY 21. The amount of claims that bypassed NCCI procedure-to-procedure edits is not known
and DHCS staff is working with its fiscal agent and subcontractor to identify affected claims
to recoup overpayments. Auditors determined affected claims were isolated to a two-month
period in FY 21 and the overpayment for FY 21 was likely above $25,000.
Cause:
The fiscal agent’s subcontractor inadvertently removed some of the content rules while
deploying a system change. The subcontractor identified the issue during performance of its
quality control procedures and fixed the issue in the same quarter.
ALASKA STATE LEGISLATURE II - 81 DIVISION OF LEGISLATIVE AUDIT
Criteria:
Section 1903(r) of the Social Security Act requires state Medicaid agencies to operate
mechanized claims processing and information retrieval systems that incorporate compatible
methodologies of the NCCI administered by the secretary and such other methodologies of
that initiative.
Title 45 CFR 75.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant awards.
Effect:
Claims were paid without being subjected to NCCI edits, resulting in an unknown amount of
unallowed payments to providers.
Questioned Costs:
Assistance Listing 93.778: $7,223
Recommendation:
DHCS’s director should continue to work with its fiscal agent and subcontractor to identify
affected claims and recoup overpayments made to providers.
Finding No. 2021-050
Type: Other State Issues
Impact: Noncompliance
Condition:
Six potential DHSS shortfalls were identified for FY 21.
Context:
Five potential shortfalls identified in the FY 20 single audit were still outstanding as of
March 2022 in the following amounts:
Appropriation Appropriation Title Amount
H282 (BFY 2009) Eligibility Information System Maintenance $100,213
H286 (BFY 2009) Fraud Case Management System Replacement $76,334
H274 (BFY 2010) Safety & Support Equipment for Probation $72,838
Officers & Front Line Workers
ALASKA STATE LEGISLATURE II - 82 DIVISION OF LEGISLATIVE AUDIT
H012 (BFY 2016) Medicaid Services $69,786
H006 (BFY 2019) Public Assistance $5,656,513
Additionally, one FY 21 potential shortfall was identified as of March 2022 in the following
amount:
Appropriation Appropriation Title Amount
H006 (BFY 2017) Public Assistance $4,040,541
Cause:
According to management, revenues for appropriations H282, H286, and H274 were recorded
in the wrong appropriations during the conversion of these appropriations from the prior
accounting system, causing the potential shortfalls. Competing priorities due to staff turnover
and the COVID-19 pandemic resulted in DHSS not adequately monitoring and timely
correcting the shortfalls.
For appropriation H012, DHSS management asserted the removal and reestablishment of an
encumbrance from budget fiscal year 2016 in the State’s accounting system complicated the
accurate tracking of financial activity for this appropriation, which caused the shortfall.
As of March 2022 the billed receivables balance of appropriations H006 (BFY 2019
and 2017) are over three and four years old respectively. The age of the receivables reduces
the probability DHSS will collect the entire remaining balances, which creates the potential
shortfalls. According to management, the department is currently completing a reconciliation
of the outstanding receivables, which has been slowed due to staff turnover. The potentially
uncollectible receivables are further discussed in finding No. 2021-026 on Page II-46.
Criteria:
The State Budget Act provides that if actual collections fall short of the appropriated program
receipts, an agency is required to reduce its budget by the estimated reduction in collections.
Effect:
As a result of the potential shortfalls, unauthorized general funds may have been expended.
Recommendation:
DFMS’s director should take measures to resolve revenue shortfalls, including collecting any
remaining revenue if possible and requesting a supplemental appropriation if necessary.
Additionally, DFMS’s director should improve procedures over billing and monitoring
revenue collections to prevent future revenue shortfalls.
ALASKA STATE LEGISLATURE II - 83 DIVISION OF LEGISLATIVE AUDIT
(Intentionally left blank)
ALASKA STATE LEGISLATURE II - 84 DIVISION OF LEGISLATIVE AUDIT
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT (DLWD)
Nine findings were issued to DLWD in the State of Alaska, Single Audit for the Fiscal Year
Ended June 30, 2020. Prior year Finding Nos. 2020-057 through 2020-059 and 2020-061
through 2020-063 are resolved. Prior year Finding No. 2020-065 is not resolved and is
reiterated in this report as Finding No. 2021-054. Prior year Finding Nos. 2020-060 and
2020-064 are not significant issues in the current year and are not reiterated in this report.
Three new findings have been issued during the FY 21 statewide single audit and are included
as Finding Nos. 2021-051 through 2021-053.
The views of responsible officials and management’s corrective action plan are included in
Section IV – Corrective Action Plan.
ALASKA STATE LEGISLATURE II - 85 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-051
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
Transfers to the Child Support Enforcement Division (CSED) from the Unemployment
Compensation Fund (UCF) were incorrectly recorded in the State’s accounting system (IRIS).
Context:
DLWD staff record UCF financial activity in IRIS monthly. The transactions, supported by
reports generated by UCF subsystems, record all of the monthly activity related to
unemployment benefits, including withholdings for child support. DLWD has two UCF
subsystems: DB2 and FastUI. DB2 is the legacy DLWD UCF system. FastUI is a new system
implemented at the end of FY 20 to account for a population of individuals newly eligible
under federal laws to address the COVID-19 pandemic. During FY 21, DLWD fiscal staff had
a process for accurately recording, in IRIS, the DB2 related withholdings and transfers to
CSED. DLWD fiscal staff did not have a process for recording, in IRIS, FastUI system child
support withholdings.
Cause:
DLWD accountants did not update FY 21 monthly procedures to accurately record child
support withholdings and transfers from the FastUI system.
Criteria:
Codification of Governmental Accounting and Financial Reporting Standards,
Section 1600.130 requires proprietary fund statements of net position and revenues, expenses,
and changes in fund net position to be presented using the economic resources measurement
focus and the accrual basis of accounting.
Effect:
Child support withholdings processed in the FastUI system for all 12 months of FY 21 were
incorrectly recorded in IRIS, which understated UCF revenues by $2 million and overstated
UCF liabilities by $2 million. Once identified by auditors, the misstatements were corrected
by agency staff and properly reported in the Annual Comprehensive Financial Report. The
internal control deficiencies increased the risk of material misstatements in financial reporting.
Recommendation:
DLWD’s Division of Employment and Training Services (DETS) director should implement
procedures to accurately account for child support withholdings.
ALASKA STATE LEGISLATURE II - 86 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-052
Federal Awarding Agency: U.S. Department of Homeland Security
(USDHS)
Impact: Material Weakness, Material Noncompliance
Assistance Listing Number and Title: 97.050 Presidential Declared Disaster Assistance
to Individuals and Households - Other Needs –
COVID-19
Federal Award Number: 4533DRAKSPLW
Applicable Compliance Requirement: Allowable Costs/Cost Principles, Eligibility
Condition:
Fourteen of 40 claims tested for the Presidential Declared Disaster Assistance to Individuals
and Households - Other Needs, known as Lost Wages Assistance (LWA), were paid to
recipients that did not meet LWA COVID-19 self-certification eligibility requirements.
Specifically,
x Two claimants completed the required self-certification after receiving benefits;
x Eight claimants were ineligible due to answering “no” to the COVID-19 self-
certification question; and
x Four claimants did not complete the required self-certification.
Context:
To be eligible for LWA, an individual must have received at least $100 of benefits from
unemployment insurance (UI) programs specified in the LWA grant award and certify they
were impacted by COVID-19. As a part of implementing the new UI benefit programs
authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, DLWD
implemented COVID-19 self-certification questions in April 2020.
Benefit payments for the LWA program were paid out of two systems, DB2 and FastUI. The
FastUI system processed UI benefits for a population of claimants not eligible for regular UI.
In order to be eligible for programs processed from FastUI, claimants were required to answer
“yes” to a COVID-19 self-certification question. The FastUI system was programmed to pay
benefits if a claimant answered “yes” to the certification question. All 14 recipients who had
not completed the required self-certification were paid out of the DB2 system.
For benefits processed out of DB2, the self-certification question was only added to the initial
application for regular UI benefits. Claimants were required to complete the initial regular
application when first applying for UI benefits, if there was a break in benefits, or if there was
a change in factors determining eligibility. Claimants were not prompted to complete the self-
certification question if the benefit application was completed before the question was added
and there was no change in circumstances or break in eligibility through the LWA benefit
period. Additionally, the question was not added to applications for other programs providing
eligibility for LWA. Although the self-certification question was answered for a portion of the
ALASKA STATE LEGISLATURE II - 87 DIVISION OF LEGISLATIVE AUDIT
LWA claimants, DB2 did not have the capability to read claimants’ responses to the self-
certification question, and the response was not considered in determining eligibility.
Cause
DLWD added a self-certification question to the initial application for unemployment benefits
processed out of DB2, but did not ensure all recipients completed the question and certain
benefit application forms were not updated to include the certification question. Additionally,
the DB2 system could not read responses to the self-certification question.
Staffing shortages, limited resources, and pressure to quickly implement the program
contributed to the deficiency.
Criteria:
Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant award.
The LWA grant award and the Alaska State Administrative Plan for the LWA program define
eligible individuals as persons who self-certify that the eligible individual is unemployed,
partially unemployed, or unable or unavailable to work due to disruptions caused by
COVID-19, and who were eligible to receive at least $100 of UI benefits.
Effect:
Failure to ensure all claimants completed the required COVID-19 self-certification resulted in
benefit payments to ineligible recipients.
Questioned Costs:
$4,200
Recommendation:
DETS’s director should strengthen internal controls, including procedures and system
program logic, to ensure benefits are only paid to eligible recipients.
Finding No. 2021-053
Federal Awarding Agency: USDHS
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 97.050 Presidential Declared Disaster Assistance
to Individuals and Households - Other Needs –
COVID-19
Federal Award Number: 4533DRAKSPLW
Applicable Compliance Requirement: Reporting
ALASKA STATE LEGISLATURE II - 88 DIVISION OF LEGISLATIVE AUDIT
Condition:
DLWD accounting staff did not retain supporting documentation for the LWA weekly
program status reports.
Context:
The LWA grant award requires weekly program status reports. The reports are compiled from
information in two unemployment benefit systems, DB2 and FastUI. Specifically, the reports
must include the following program data:
x The number and dollar amount of applications approved weekly;
x The number of individuals eligible to receive assistance under this award, broken out
by the programs identified in Section 4(d)(i) of the August 8, 2020, Presidential
Memorandum;
x The amount of assistance disbursed weekly; and
x The number of appeals received.
Cause
Due to competing priorities and the need to provide benefits quickly, department staff did not
implement procedures to retain supporting documentation for the weekly program reports.
Criteria:
Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
grant award.
Title 2 CFR 200.333 requires the State to retain financial records, supporting documents,
statistical records, and all other nonfederal entity records pertinent to a federal award for a
period of three years from the date of submission of the final expenditure report.
Effect:
Failure to retain supporting documentation prevented auditors from verifying the accuracy of
submitted LWA weekly program status reports.
Questioned Costs:
None
Recommendation:
DETS’s director should strengthen procedures over reporting to ensure supporting
documentation is retained.
ALASKA STATE LEGISLATURE II - 89 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-054
Prior Year Finding: 2020-065
Type: Other State Issue
Impact: Noncompliance
Condition:
Control deficiencies were identified in a DLWD Information Technology (IT) system.
Context:
The details related to the control weakness and the relevant audit criteria are being withheld
from this report to prevent the weakness from being exploited. Pertinent details have been
communicated to agency management in a separate confidential document.
Cause
The control deficiencies were mainly due to competing priorities exacerbated by the
COVID-19 pandemic, and according to DLWD management, limitations resulting from
untimely vendor processes.
Criteria:
The State of Alaska’s Information Security Policies and National Institute of Standards and
Technology Special Publication 800-53r4 provide criteria related to the identified deficiencies.
Effect:
The IT control deficiencies increase the risk of loss or manipulation of sensitive data.
Recommendation:
DLWD’s Division of Administrative Services director should strengthen IT controls in
accordance with State security policy.
ALASKA STATE LEGISLATURE II - 90 DIVISION OF LEGISLATIVE AUDIT
DEPARTMENT OF COMMERCE, COMMUNITY,
AND ECONOMIC DEVELOPMENT (DCCED)
One finding was issued to DCCED in the State of Alaska, Single Audit for the Fiscal Year
Ended June 30, 2020. Prior year Finding No. 2020-066 is not resolved and is reiterated in this
report as Finding No. 2021-056.
One new finding has been issued during the FY 21 statewide single audit and is included as
Finding No. 2021-055.
The views of responsible officials and management’s corrective action plan are included in
Section IV – Corrective Action Plan.
ALASKA STATE LEGISLATURE II - 91 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-055
Type Basic Financial Statements
Impact: Significant Deficiency
Condition:
DCCED staff inaccurately reported federal expenditures on the FY 21 draft Schedule of
Expenditures of Federal Awards (SEFA) for one program, collectively overstating federal
expenditures by approximately $12.7 million. Additionally, amounts passed through to
subrecipients for the program were understated by approximately $258.1 million.
Context:
The FY 21 errors identified by auditors impacted one federal program. Once identified, the
errors were corrected by agency staff and accurately presented in the FY 21 statewide SEFA.
Cause:
The misstatements were due to human error and misunderstanding of how to properly report
amounts related to reimbursable service agreements between State agencies. DCCED’s SEFA
review procedures were insufficient to identify and correct the errors.
Criteria:
Per Title 2 CFR 200.510(b), the State must prepare appropriate financial statements, including
the SEFA, in accordance with federal regulations. Furthermore, Title 2 CFR 200.303 requires
the State to establish and maintain effective internal controls over federal awards that provide
reasonable assurance that the State is managing federal awards in compliance with federal
statutes, regulations, and the terms and conditions of the federal awards.
Effect:
Inadequate SEFA preparation and review procedures increase the risk of financial reporting
errors. The SEFA serves as the primary basis for the determination of major programs as
required by federal regulations. Inaccuracies in the amount of expenditures reported on the
SEFA increase the risk of noncompliance with federal audit and reporting requirements.
Noncompliance with federal regulations may result in the federal awarding agency imposing
additional conditions or taking corrective action, including additional reporting requirements
or withholding/terminating funding.
Recommendation:
DCCED’s Division of Administrative Services (DAS) director should increase training and
strengthen procedures for the preparation and review of the SEFA to ensure expenditures
related to reimbursable service agreements are accurate, complete, and supported.
ALASKA STATE LEGISLATURE II - 92 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-056
Prior Year Finding: 2020-066
Federal Awarding Agency: United States Department of the Treasury
Impact: Significant Deficiency, Noncompliance
Assistance Listing Number and Title: 21.019 Coronavirus Relief Fund (CRF) -
COVID-19
Federal Award Number: SLT0031, SLT0073
Applicable Compliance Requirement: Subrecipient Monitoring
Condition:
DCCED’s Division of Community and Regional Affairs (DCRA) staff did not identify all
federally required information on FY 21 CRF grant subaward documents or conduct timely
risk assessments of all CRF subrecipients.
Context:
DCRA entered into grant agreements with 188 local government communities under the direct
municipal relief portion of the CRF program. The audit reviewed a random sample of 19 and
a judgmental selection of four community grant agreements. All community grant agreements
tested did not include the federal awarding agency, federal award identification number, or
federal award date. Sixteen of 23 community grant agreements (70 percent) did not include
notification of the federal audit requirement.
Additionally, the audit reviewed risk assessments for the 23 CRF subrecipients selected for
testing. Risk assessments for eight of 23 CRF subrecipients (35 percent) were untimely. Three
of the eight untimely risk assessments were performed after auditors requested the
assessments.
Cause:
A similar finding was identified in the FY 20 audit. Due to an oversight, DCRA grant staff did
not correct the prior finding by updating or amending the CRF subaward documentation to
include all federally required information. Additionally, although DCCED staff performed
risk assessments in FY 21 on more subrecipients when compared to FY 20, not all required
assessments were performed timely. According to DCCED staff, CRF risk assessments were
untimely due to the large number of assessments needed, the late start in performing them,
and staffing constraints.
Criteria:
Title 2 CFR 200.303 requires the State to establish and maintain effective internal controls
over federal awards that provide reasonable assurance that the State is managing federal
awards in compliance with federal statutes, regulations, and the terms and conditions of the
federal awards.
ALASKA STATE LEGISLATURE II - 93 DIVISION OF LEGISLATIVE AUDIT
Title 2 CFR 200.332 requires the State to perform annual risk assessments; ensure every
subaward includes the required information at the time of the subaward; and ensure that every
subrecipient is audited as required by Subpart F—Audit Requirements of this part when it is
expected that the subrecipient's federal awards expended during the respective fiscal year
equaled or exceeded the threshold set forth in Title 2 CFR 200.501.8
Effect:
Absent risk assessments for all subrecipients, higher risk communities may not be sufficiently
monitored, increasing the risk of inappropriate use of CRF monies and noncompliance with
federal laws. Not providing the required information in the subaward documents increases the
risk of subrecipient noncompliance with the terms and conditions of the federal award and
could result in the State repaying CRF monies to the federal government.
Questioned Costs:
None
Recommendation:
DCRA and DAS’s directors should strengthen procedures to ensure compliance with all
subrecipient monitoring requirements applicable to federally funded subawards administered
by DCCED.
8
Title 2 CFR 200.501 requires that a nonfederal entity that expends $750,000 or more during the nonfederal entity's
fiscal year in federal awards must have a single audit.
ALASKA STATE LEGISLATURE II - 94 DIVISION OF LEGISLATIVE AUDIT
DEPARTMENT OF MILITARY AND VETERANS’ AFFAIRS (DMVA)
No findings were issued to DMVA in the State of Alaska, Single Audit for the Fiscal Year
Ended June 30, 2020.
Six new findings have been issued during the FY 21 statewide single audit and are included as
Finding Nos. 2021-057 through 2021-062.
The views of responsible officials and management’s corrective action plan are included in
Section IV – Corrective Action Plan.
ALASKA STATE LEGISLATURE II - 95 DIVISION OF LEGISLATIVE AUDIT
Finding No. 2021-057
Type: Basic Financial Statements
Impact: Significant Deficiency
Condition:
The audit of the Alaska National Guard and Alaska Naval Militia Retirement System
(NGNMRS) FY 21 financial statements could not be completed by an independent auditor.
Context:
The NGNMRS audit is annually performed by an independent auditor. The audit process
requires cooperation between DMVA staff, Department of Administration Division of
Retirement and Benefits (DRB) accountants, the plan’s third party administrator, and the
DRB’s actuary. To allow for timely completion of the Annual Comprehensive Financial
Report (ACFR), Department of Administration Division of Finance (DOF) accountants
required outside audits of funds be submitted to DOF by October 15, 2021, for inclusion in
the ACFR.
Cause:
The NGNMRS audit could not be completed by the outside auditor because data needed for
the audit was not maintained by DMVA. Specifically, the auditor needed evidence to support
dates people entered the National Guard and dates people entered the Alaska National Guard
in order to test actuarial information; however, the evidence was not maintained by DMVA.
Criteria:
Per Codification of Governmental Accounting and Financial Reporting Standards,
Section 1300.103, governments should report governmental, proprietary, and fiduciary funds
to the extent activities meet the criteria for using those funds.
Effect:
Incomplete ACFR information may negatively impact decision-making by report users.
Recommendation:
DMVA’s commissioner should improve procedures to ensure evidence is maintained to allow
the NGNMRS audit to be completed.
ALASKA STATE LEGISLATURE II - 96 DIVISION OF LEGISLATIVE AUDIT
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