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Chandler Health Care Benefits Trust
Financial Statements and
Report on Internal Control and on Compliance
Year Ended December 31, 2021
CHANDLER HEALTH CARE BENEFITS TRUST
DECEMBER 31, 2021
Contents
Page
Independent Auditor’s Report
1
Management’s Discussion and Analysis (MD&A)
5
Statement of Net Position
9
Statement of Revenues, Expenses and Changes in Net Position
10
Statement of Cash Flows
11
Notes to Financial Statements
12
Report on Internal Control and on Compliance
19
Independent Auditor’s Report
Board of Trustees
Chandler Health Care Benefits Trust
Report on Audit of Financial Statements
Opinion
We have audited the accompanying financial statements of the Chandler Health Care Benefits Trust (Trust),
an internal service fund of the City of Chandler, Arizona, as of and for the year ended December 31, 2021,
and the related notes to the financial statements, as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the Chandler Health Care Benefits Trust, as of December 31, 2021, and the changes in financial
position and cash flows thereof for the year then ended in accordance with accounting principles generally
accepted in the United States of America.
Basis for Opinion
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. Our responsibilities under those standards are
further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our
report. We are required to be independent of the Chandler Health Care Benefits Trust and to meet our other
ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Emphasis of Matter
As discussed in Note 1A, the financial statements of the Chandler Health Care Benefits Trust, an internal
service fund of the City of Chandler, Arizona, are intended to present the financial position, the changes in
financial position, and the cash flows of only that portion of the City of Chandler, Arizona, that is
attributable to the transactions of the Chandler Health Care Benefits Trust. They do not purport to, and do
not present fairly the financial position of the City of Chandler, Arizona, as of December 31, 2021, the
changes in its financial position, or, where applicable, its cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States of America. Our opinion is not modified
with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with accounting principles generally accepted in the United States of America, and for 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.
Page 1
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore
is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and
Government Auditing Standards will always detect a material misstatement when it exists. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control. Misstatements are considered material if there is a substantial likelihood that, individually or in the
aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing
Standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, and design and perform audit procedures responsive to those risks. Such procedures
include examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements.
Obtain an understanding of internal control relevant to the audit 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 Trust’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements.
We are required to communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit, significant audit findings, and certain internal control related matters
that we identified during the audit.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s
Discussion and Analysis, as listed in the table of contents, be presented to supplement the financial
statements. Such information is the responsibility of management and, although not a part of the financial
statements, is required by the Governmental Accounting Standards Board, who considers it to be an
essential part of financial reporting for placing the financial statements in an appropriate operational,
economic, or historical context. We 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 financial statements, and
other knowledge we obtained during our audit of the financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Page 2
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated May 19, 2022,
on our consideration of the Chandler Health Care Benefits Trust’s internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 Chandler Health Care Benefits Trust’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 Chandler Health Care Benefits Trust’s internal control
over financial reporting and compliance.
Heinfeld, Meech & Co., P.C.
Tucson, Arizona
May 19, 2022
Page 3
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)
(Required Supplementary Information)
Page 4
CHANDLER HEALTH CARE BENEFITS TRUST
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)
DECEMBER 31, 2021
As management of the Chandler Health Care Benefits Trust (Trust), we offer readers of the Trust’s
financial statements this narrative overview and analysis of the financial activities of the Trust for
the year ended December 31, 2021. The management’s discussion and analysis is presented as
required supplementary information to provide additional explanation to the financial statements.
FINANCIAL HIGHLIGHTS
The Trust’s total net position decreased $3.3 million to $11.3 million, primarily due to an
increase in claims expense.
Operating revenues of $22.3 million included $17.9 million in employer premiums, $2.1
million in employee premiums and $2.0 million in retiree premiums.
The Trust had approximately $25.4 million in operating expenses, consisting primarily of
$22.4 million of claims expense.
The overall impact of the COVID-19 Pandemic during the fiscal year was that 2,071
members tested for COVID-19, resulting in 6,646 claims at a cost of $253,362. In addition,
450 members received confirmed COVID-19 diagnoses resulting in 2,513 claims at a cost
of $779,078. COVID-19 testing and diagnoses claims are included in the claims paid lines
in operating expenses. These claims were unplanned in regards to actuarial projections.
OVERVIEW OF FINANCIAL STATEMENTS
This discussion and analysis are intended to serve as an introduction to the Trust’s financial
statements.
The statement of net position presents information on all of the Trust’s assets, liabilities, and
deferred inflows/outflows of resources with the difference reported as net position. Over time,
increases or decreases in net position may serve as a useful indicator of whether the financial
position of the Trust is improving or deteriorating.
The statement of revenues, expenses and changes in net position presents information showing
how the Trust’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 of the
timing of related cash flows. Thus, revenues and expenses are reported in this statement for some
items that will only result in cash flows in future fiscal periods.
Page 5
CHANDLER HEALTH CARE BENEFITS TRUST
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)
DECEMBER 31, 2021
OVERVIEW OF FINANCIAL STATEMENTS
The statement of cash flows outlines the cash inflows and outflows related to the operation of the
Trust for the year ended. As discussed more thoroughly in Note 1 to the financial statements, the
operations of the Trust are accounted for as an element of the City of Chandler’s internal service
funds. As a result, only the financial statements required for the financial activity of the Trust are
presented.
Notes to the financial statements. The notes provide additional information that is essential to a
full understanding of the data provided in the financial statements. The notes to the financial
statements can be found immediately following the financial statements.
FINANCIAL ANALYSIS
Net position may serve over time as a useful indicator of a government’s financial position. In the
case of the Trust, assets exceeded liabilities by $11.3 million at the current fiscal year end.
The following table presents a summary of the Trust’s net position for the fiscal years ended
December 31, 2021 and 2020.
2021
2020
Current assets
$ 17,001,383
$ 19,369,692
Total assets
17,001,383
19,369,692
Current liabilities
5,442,829
4,565,737
Noncurrent liabilities
226,000
215,200
Total liabilities
5,668,829
4,780,937
Net position:
Unrestricted
11,332,554
14,588,755
Total net position
$ 11,332,554
$ 14,588,755
At the end of the current and prior year, the Trust reported a positive net position. The Trust’s
financial position is the product of several financial transactions, including the net results of
activities. The change in total assets is primarily due to a decrease in cash and investment balances
at year end. The change in total liabilities is primarily due to an increase in the amounts due to the
City at year end related to operational expenses of the Trust.
Page 6
CHANDLER HEALTH CARE BENEFITS TRUST
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)
DECEMBER 31, 2021
FINANCIAL ANALYSIS
Changes in net position. The Trust’s total revenues for the current fiscal year were $22.2 million.
The total expenses were $25.4 million. The following table presents a summary of the changes in
net position for the years ended December 31, 2021 and 2020.
2021
2020
Revenues:
Contributions and premiums
$ 21,999,044
$ 21,840,316
Investment income
(65,166)
548,468
Other
258,384
208,305
Total revenues
22,192,262
22,597,089
Expenses:
Claims
22,438,970
19,812,216
HSA and FSA contributions
225,050
251,650
Administrative fees
1,987,229
1,622,925
Other
797,214
857,441
Total expenses
25,448,463
22,544,232
Changes in net position
(3,256,201)
52,857
Net position, beginning
14,588,755
14,535,898
Net position, ending
$ 11,332,554
$ 14,588,755
The following are significant current year transactions that have had an impact on the change in
net position.
An increase in contributions and premiums of $158,728 (less than 1%).
An increase in claims expense of $2.6 million due to an increase in large claimants
(>$100,000), from $5.6 million in the prior year to $8.0 million in the current year. These
large claimants are for serious ongoing medical conditions that are not related to
COVID-19.
Claims
88%
HSA and FSA
contributions
1%
Administration fees
8%
Other
3%
Expenses - Fiscal Year 2021
Page 7
CHANDLER HEALTH CARE BENEFITS TRUST
MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)
DECEMBER 31, 2021
CLAIMS PAYABLE
As of December 31, 2021, the Trust had $4.5 million in claims payable. Additional information
on the Trust’s claims payable can be found in Note 3.
ECONOMIC FACTORS, RESERVE LEVELS AND NEXT YEAR’S RATES
An actuarial analysis is completed annually and updated throughout the plan year to help ensure
the Trust is funded at an appropriate level and to monitor economic impacts that will affect future
rate setting and reserves. The Trust’s goal is to maintain a minimum end of year reserve equal to
the IBNR plus two months of costs. For the year ended December 31, 2021, the actuary estimated
a minimum reserve of $6,934,000 (IBNR as of December 31, 2021 of $2,260,000 + 2022 two
months of Incurred Claims and Administration of $4,674,000), and the Trust’s net position at
December 31, 2021 was $11,332,554. Based on end of year results, it was determined that
contributions were adequate to maintain the appropriate reserve level as of December 31, 2021.
During the process of developing the contribution rates for the year ended December 31, 2022,
many factors are considered by the Trust’s administration. The primary factors taken into
consideration are threefold: attempt to keep rates affordable, while staying within industry pricing;
ensure reserves are sufficient to maintain the financial health of the Trust; and address current and
future implications of the Affordable Care Act. The COVID-19 pandemic is rapidly evolving and
has impacted 2021 and will impact 2022 claims experience. At this point, it is unclear what the
impact will be for future claims experience, medical cost inflation and costs in general for the
health trust. Due to recent spending trends, it is projected that the City’s General Fund will provide
a $5.0 million contribution in fiscal year 2022-23. Additionally, a rate increase in calendar year
2023 is projected as well.
CONTACTING THE TRUST’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, and investors and creditors
with a general overview of the Trust’s finances and to demonstrate the Trust’s accountability for
the resources it receives. If you have questions about this report or need additional information,
contact the Management Services Department, Chandler Health Care Benefits Trust; 175 South
Arizona Avenue, 4th Floor; Chandler, Arizona 85225, 480-782-2333.
Page 8
Assets
Current assets:
Cash and investments
16,953,575
$
Accrued investment income
34,982
Prepaid items
12,826
Total assets
17,001,383
Liabilities
Current liabilities:
Accounts payable
2,904
Accrued payroll
17,815
Compensated absences payable
47,613
Due to City
1,136,374
Employee claims payable, due to Blue Cross Blue Shield
1,721,957
Retiree claims payable, due to Blue Cross Blue Shield
479,261
COBRA claims payable, due to Blue Cross Blue Shield
2,905
Claims payable, incurred claims but not reported
2,034,000
Total current liabilities
5,442,829
Noncurrent liabilities:
Claims payable, incurred claims but not reported
226,000
Total noncurrent liabilities
226,000
Total liabilities
5,668,829
Net position
Unrestricted
11,332,554
$
CHANDLER HEALTH CARE BENEFITS TRUST
STATEMENT OF NET POSITION
DECEMBER 31, 2021
The notes to the financial statements are an integral part of this statement.
Page 9
Operating revenues:
Contributions:
Employer premiums
17,865,674
$
Employee premiums
2,057,730
Retiree premiums
2,016,187
COBRA premiums
59,453
Other:
Recovery of medical claims
68,631
Wellness programs
125,000
Administrator contribution
55,000
Miscellaneous
9,753
Total operating revenues
22,257,428
Operating expenses:
Claims paid - employees
18,116,040
Claims paid - retirees
4,084,783
Claims paid - COBRA
130,147
Claims incurred but not reported
108,000
Health savings and flexible spending account contributions
225,050
Personnel services
441,837
Contractual services
308,082
Self-insurance administrative fees
1,985,986
COBRA administrative fees
1,243
Wellness programs
13,248
Comparative effectiveness fee
8,800
Audit fees
7,370
Bank fees
621
Promotional
2,459
Operating supplies
9,267
Total operating expenses
25,442,933
Operating income (loss)
(3,185,505)
Nonoperating revenues (expenses):
Payments to City
(5,530)
Investment income (loss)
(65,166)
Total nonoperating revenues (expenses)
(70,696)
Change in net position
(3,256,201)
Net position, beginning of year
14,588,755
Net position, end of year
11,332,554
$
CHANDLER HEALTH CARE BENEFITS TRUST
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE YEAR ENDED DECEMBER 31, 2021
The notes to the financial statements are an integral part of this statement.
Page 10
Increase/Decrease in Cash and Cash Equivalents
Cash flows from operating activities:
Cash received for premiums and other operating purposes
23,072,465
$
Cash payments for claims
(22,345,676)
Cash payments to suppliers for other services
(2,579,904)
Cash payments to employees for services
(446,241)
Net cash provided by/used for operating activities
(2,299,356)
Cash flows from noncapital financing activities:
Cash paid to City for technology replacement
(5,530)
Net cash provided by/used for non-capital financing activities
(5,530)
Cash flows from investing activities:
Investment income
(55,768)
Proceeds from sales of investments
16,446,284
Purchases of investments
(14,085,630)
Net cash provided by/used for investing activities
2,304,886
Net increase/decrease in cash and cash equivalents
-
Cash and cash equivalents, beginning of year
-
Cash and cash equivalents, end of year
-
$
Reconciliation of operating income/loss to cash provided by/used for operating activities:
Operating income/loss
(3,185,505)
$
Adjustments to reconcile operating income/loss to net cash provided by/used for
operating activities:
Changes in assets and liabilities:
Increase/decrease in due to/from City
815,037
Increase/decrease in prepaids
(1,744)
Increase/decrease in claims payable
93,293
Increase/decrease in accounts payable
(16,033)
Increase/decrease in accrued payroll
1,553
Increase/decrease in compensated absences payable
(5,957)
Net cash provided by/used for operating activities
(2,299,356)
$
Reconciliation of Cash and Cash Equivalents to the Statement of Net Position:
Cash and cash equivalents
-
$
Investments
16,953,575
Cash and investments
16,953,575
$
CHANDLER HEALTH CARE BENEFITS TRUST
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2021
The notes to the financial statements are an integral part of this statement.
Page 11
CHANDLER HEALTH CARE BENEFITS TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Chandler Health Care Benefits Trust (Trust) have been prepared
in conformity with accounting principles generally accepted in the United States of America
as applied to government units. The Governmental Accounting Standards Board (GASB) is
the accepted standard-setting body for establishing governmental accounting and financial
reporting principles.
The more significant of the Trust’s accounting policies are described below.
A. Reporting Entity
The Trust is accounted for as an internal service fund of the City of Chandler, Arizona (City),
and the ultimate financial accountability for the Trust remains with the City. General risk
management is a responsibility of the City. Additional information about the City is reported
in the City’s Annual Comprehensive Financial Report.
The Trust was organized in September 2010 for the purpose of funding payments to health
care vendors who provide health care services to benefit-eligible participating City employees,
elected officials, retirees, eligible dependents, and other eligible persons as determined by the
City. The financial statements present only the Trust as one of the internal service funds of the
City and are not intended to present the balances and activity of all City internal service funds
or the City in its entirety.
The Health Care Benefits Trust Board (Board) consists of five trustees. No Trustee may be a
member of the City Council and no more than one Trustee may be an employee of the City.
No former member of the City Council or former employee of the City shall be a Trustee.
B. Measurement Focus and Basis of Accounting
The financial statements are reported using the economic resources measurement focus and
accrual basis of accounting. Revenues are recorded when earned and expenses are recorded
when incurred, regardless of the timing of related cash flows. Operating revenues and expenses
are distinguished from nonoperating items. Operating revenues generally consist of employer
and employee premiums and other related revenues, while operating expenses are primarily
the payment of health claims and the administration of the Trust. All revenues and expenses
not meeting this definition are reported as nonoperating revenues and expenses.
C. Cash and Investments
For purposes of the Statement of Cash Flows, the Trust considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
The Board adopted a resolution to cause the assets of the Trust to be invested, consistent with
the City’s investment policy. The Trust's investments are stated at fair value. Fair value is based
on quoted market prices as of the valuation date.
Page 12
CHANDLER HEALTH CARE BENEFITS TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Arizona statute requires a pooled collateral program for public deposits and a Statewide
Collateral Pool Administrator (Administrator) in the State Treasurer’s Office. The purpose of
the pooled collateral program is to ensure that governmental entities’ public deposits placed in
participating depositories are secured with collateral of 102 percent of the public deposits, less
any applicable federal depository insurance. An eligible depository may not retain or accept
any public deposit unless it has deposited the required collateral with a qualified escrow agent
or the Administrator. The Administrator manages the pooled collateral program, including
reporting on each depository’s compliance with the program.
D. Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are
recorded as prepaid items in the financial statements when applicable.
E. Compensated Absences
Vacation leave vests with the employee as it is earned dependent on accumulated time and the
individual's vacation benefits. All employees may carry-forward only the amount of vacation
benefits equal to the maximum allowable earned credits for the preceding calendar year. Upon
termination or retirement, an employee will be compensated for accumulated vacation leave
dependent on accumulated time and the individual's vacation benefits. Payment will be based
on the individual's rate of pay at termination or retirement. Upon death, the same benefits shall
be paid to the employee's beneficiary.
F. Claims Payable
The Trust establishes claims liabilities based on estimates of the ultimate cost of claims
(including future claim adjustment expenses) that have been reported but not settled, and of
claims that have been incurred but not reported. Adjustments to claim liabilities are charged
or credited to expense in the periods in which they are made. A provision for inflation in the
calculation of estimated future claims costs is implicit in the calculation because reliance is
placed both on actual historical data that reflect past inflation and on other factors that are
considered to be appropriate modifiers of past experience. Given the inherent uncertainty in
the nature of such estimates, future losses will likely deviate, perhaps materially, from those
estimates.
G. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position may report a separate section for deferred
outflows of resources. This separate financial statement element, deferred outflows of
resources, represents a consumption of net position that applies to a future period and so will
not be recognized as an outflow of resources (expense) until then.
Page 13
CHANDLER HEALTH CARE BENEFITS TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In addition to liabilities, the statement of net position may report a separate section for deferred
inflows of resources. This separate financial statement element, deferred inflows of resources,
represents an acquisition of net position that applies to a future period and so will not be
recognized as an inflow of resources (revenue) until that time.
H. Contributions
The Trust agreement provides that each participating member and the City contribute a
specified amount to the Trust. The contribution rates are determined by the Board on an annual
basis.
I. Investment Income
Investment income is composed of interest, dividends, and net changes in the fair value of
applicable investments.
J. Net Position Flow Assumption
In the financial statements the Trust applies restricted resources first when outlays are incurred
for purposes for which either restricted or unrestricted amounts are available.
K. Estimates
The preparation of the financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results may differ from those estimates.
L. Reinsurance
The Trust has entered into reinsurance contracts for health insurance coverage. Reinsurance
coverage is for specific losses in excess of $350,000, with a 125 percent aggregate limit.
NOTE 2 – CASH AND INVESTMENTS
Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of bank
failure, the Trust’s deposits may not be returned to the Trust. At year end, both the carrying
amount of the Trust’s deposits and the bank balance were zero.
Page 14
CHANDLER HEALTH CARE BENEFITS TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 2 – CASH AND INVESTMENTS
The following summarizes amounts reported as investments in the accompanying financial
statements:
Investment Maturities
Investment Type
Category Fair Value
Less than 1
Year
1-5
Years
Concentration
of Credit
Risk %
S&P /
Moody's
Rating
Money Market Fund
Level 1 $ 10 $ 10 $
0.00% AAAm/NR
Custodial Money Market
Level 1
2,527,237
2,527,237
14.91% AAAm/NR
Certificate of Deposit:
Credit Suisse New York
Level 2
139,969
139,969
0.83%
A+/A1
DNB Bank ASA/CY LT
Level 2
126,777
126,777
0.75%
A-1+/P-1
HSBC Bank USA NA
Level 2
190,020
190,020
1.12%
A-1/P-1
Nordea Bank AB NY
Level 2
186,775
186,775
1.10%
A-1+/P-1
Skandinaviska Enskilda Banken NY
Level 2
191,835
191,835
1.13%
A-1/P-1
Sumitomo Mitsui Bank NY
Level 2
135,253
135,253
0.80%
A-1/P-1
UBS Ag Stamford CT CD
Level 2
234,904
234,904
1.39%
A-1/P-1
U.S. Treasuries
Level 1
7,166,369
3,277,190
3,889,179
42.27%
Municipal Bond
Scottsdale, AZ TXBL GO Bonds
Level 2
88,323
88,323
0.52%
AAA/Aaa
U.S. Agencies:
Fannie Mae
Level 2
1,923,241
493,672
1,429,569
11.34%
AA+/Aaa
Freddie Mac
Level 2
2,069,997
164,923
1,905,074
12.21%
AA+/Aaa
Corporate Bonds:
Adobe Inc Corporation
Level 2
101,102
101,102
0.60%
A+/A2
Amazon.com
Level 2
269,357
60,829
208,528
1.59%
AA/A1
American Honda Finance Corporation
Level 2
126,001
126,001
0.74%
A-/A3
Apple Corp.
Level 2
201,038
201,038
1.19%
AA+/Aaa
Bank of of America Corporation
Level 2
134,111
134,111
0.79%
A-/A2
Caterpillar Finl Service Corporation
Level 2
134,597
134,597
0.79%
A/A2
Hershey Company
Level 2
170,695
170,695
1.01%
A/A1
JPMorgan Charse &CO Corporation
Level 2
218,087
218,087
1.29%
A-/A2
Toyota Motor Credit Corporation
Level 2
136,141
136,141
0.80%
A+/A1
Wal-Mart Stores Inc Corporation
Level 2
310,571
310,571
1.83%
AA/Aa2
Walt Disney Company/The
Level 2
171,165
171,165
1.00%
BBB+/A2
$16,953,575 $ 8,087,629 $ 8,865,946
100.00%
Fair Value Measurements. The Trust 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
Page 15
CHANDLER HEALTH CARE BENEFITS TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 2 – CASH AND INVESTMENTS
Valuation Techniques. U.S. Treasuries and Money Market Funds are classified in Level 1 of
the fair value hierarchy are valued using prices quoted in active markets for identical securities.
Governmental bonds, corporate bonds, and other fixed income instruments classified in
Level 2 of the fair value hierarchy are valued based on significant other observable inputs,
which may include, but are not limited to, quoted prices for similar assets or liabilities in
markets that are active, quoted prices for identical or similar assets or liabilities in markets that
are not active, inputs other than quoted prices that are observable for the assets or liabilities
(such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks
and default dates) or other market corroborated inputs. All investments in which the fair value
hierarchy is applicable are measured at fair value on a recurring basis.
Interest Rate Risk. In accordance with the City’s investment policy, the Trust manages its
exposure to declines in fair value by limiting the maturities of its investment portfolio to five
years.
Credit Risk. In accordance with the City’s investment policy, the Trust allows for investments
in obligations guaranteed by the full faith and credit of the United States of America,
government sponsored enterprises, government bonds with minimum credit ratings of AA+ or
Aaa, commercial paper with a minimum short term rating of A-1 or P-1, negotiable certificates
of deposit, corporate bonds carrying a minimum credit rating of A-, and the Local Government
Investment Pool. The Trust’s investments in U.S. Agencies, Corporate Bonds and Money
Market Funds were rated no lower than AA+, BBB+ and AAAm by Standard & Poor's,
respectively, as of year end.
Custodial Credit Risk - Investments. The custodial credit risk for investments is the risk that,
in the event of the failure of the counterparty to a transaction, the Trust will not be able to
recover the value of its investments or collateral securities that are in the possession of an
outside party. To limit its exposure and in accordance with the City's investment policy, the
Trust requires all security transactions that are exposed to custodial credit risk to be processed
on a delivery versus payment (DVP) basis with the underlying investments held by a third
party acting as the Trust's agent separate from where the investment was purchased or by the
trust department of the bank where purchased, in the Trust's name.
Concentration of Credit Risk. In accordance with the City’s investment policy, the Trust does
not allow for an investment in any one issuer that is in excess of five percent of the total
investments. Securities issued by the United States of America or its agencies are exempt from
this provision.
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CHANDLER HEALTH CARE BENEFITS TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2021
NOTE 3 – CLAIMS PAYABLE
As discussed in Note 1, the Trust establishes a liability for both reported and unreported claims
costs, which includes estimates of both future claim payments and related claim adjustment
expenses. The following represents changes in those aggregate liabilities for the Trust during
the year ended December 31, 2021 and 2020.
2021
2020
Unpaid claims and claim adjustments, beginning
$ 4,370,831
$ 3,355,059
Incurred claims and claim adjustment expenses:
Provision for insured events of the current year
21,405,686
18,963,341
Increase in provision for insured events of prior years
1,033,282
848,875
Total claims and claim adjustment expenses
22,438,968
19,812,216
Payments:
Claims and claim adjustment expenses attributable to insured
events of the current year
(18,863,232)
(16,046,593)
Claims and claim adjustment expenses attributable to insured
events of prior years
(3,482,444)
(2,749,851)
Total claims payments
(22,345,676)
(18,796,444)
Unpaid claims and claim adjustments, ending
$ 4,464,123
$ 4,370,831
Page 17
REPORT ON INTERNAL CONTROL
AND ON COMPLIANCE
Page 18
Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with
Government Auditing Standards
Independent Auditor’s Report
Board of Trustees
Chandler Health Care Benefits Trust
We have audited, in accordance with the 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, the financial statements of the
Chandler Health Care Benefits Trust, an internal service fund of the City of Chandler, Arizona, as
of and for the year ended December 31, 2021, and the related notes to the financial statements,
which collectively comprise Chandler Health Care Benefits Trust’s financial statements, and have
issued our report thereon dated May 19, 2022. Our report included an emphasis of matter paragraph
regarding the financial statements not representing the entire City of Chandler, Arizona.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Chandler Health
Care Benefits Trust’s internal control over financial reporting (internal control) as a basis for
designing audit procedures that are appropriate in the circumstances for the purpose of expressing
our opinion on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of Chandler Health Care Benefits Trust’s internal control. Accordingly, we do not
express an opinion on the effectiveness of Chandler Health Care Benefits Trust’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or
combination of deficiencies, in internal control such that there is a reasonable possibility that a
material misstatement of the entity’s financial statements will not be prevented, or detected and
corrected on a timely basis. A significant deficiency is a deficiency, or a combination of
deficiencies, in internal control that is less severe than a material weakness, yet important enough
to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies. Given these limitations, during our audit we did
not identify any deficiencies in internal control that we consider to be material weaknesses.
However, material weaknesses or significant deficiencies may exist that have not been identified.
Page 19
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether Chandler Health Care Benefits Trust’s
financial statements are free from material misstatement, we performed tests of its compliance
with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with
which could have a direct and material effect on the financial statements. However, providing an
opinion on compliance with those provisions was not an objective of our audit, and accordingly,
we do not express such an opinion. The results of our tests disclosed no instances of
noncompliance or other matters that are required to be reported under Government Auditing
Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
entity’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the entity’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Heinfeld, Meech & Co., P.C.
Tucson, Arizona
May 19, 2022
Page 20