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Help Financial Statements For Year Ended April 30, 20080 0 • • • • • High -Level Excess Liability Pool Basic Financial Statements and Independent Auditors' Report April 30, 2008 and 2007 MILLER COOPER & CO., LTD. 0 0 9 0 0 • • • 6 • CONTENTS Page PRINCIPAL OFFICIALS 3 INDEPENDENT AUDITORS' REPORT 4 MANAGEMENT'S DISCUSSION AND ANALYSIS 5 -7 BASIC FINANCIAL STATEMENTS Balance Sheets 8 Statements of Revenues, Expenses, and Changes in Retained Earnings - Budget and Actual 9 Statements of Cash Flows 10 Notes to the Financial Statements 11 - 17 REQUIRED SUPPLEMENTARY INFORMATION 19-21 MILLER COOPER & CO., LTD. 1� High -Level Excess Liability Pool PRINCIPAL OFFICIALS April 30, 2008 Mark Horton, Wheaton Thomas Kuehne, Arlington Heights Christine Tromp, Elk Grove Village David Erb, Mount Prospect • • 0 • • -3- 0 MILLER COOPER & CO., LTD. Chairman Vice - Chairman Secretary Treasurer MILLER CODPER &CO3Ltd ' ACCOUNT'ANT'S AND CONSULTANT'S 4) INDEPENDENT AUDITORS' REPORT Members of the Board of Directors High -Level Excess Liability Pool Mount Prospect, Illinois We have audited the accompanying basic financial statements of the High -Level Excess Liability Pool as of and for the years ended April 30, 2008 and 2007, as listed in the table of contents. These financial statements are the responsibility of the Pool's management. Our responsibility is to express an opinion on these financial statements based on our audits. r We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well 61 as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 6 11 0 s In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the High -Level Excess Liability Pool as of April 30, 2008 and 2007, and the changes in its financial position and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The management's discussion and analysis on pages 5 through 7 and ten -year claims development information on pages 20 through 21 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. MILLER, COOPER & CO., LTD. J Certified Public Accountirits Deerfield, Illinois March 13, 2009 1751 Lake Cook Road, Suite 400, Deerfield, IL 60015 ■ 500 West Madison Street, Suite 3350, Chicago, IL 60661 -.W� a^ n °,o, ^ °, memo,, ^' BAKER TILLY 847.205.5000 ■ Fax 847205.1400 ■ www.millercooper.com INTERNATIONAL • Management's Discussion and Analysis FOR THE YEAR ENDED APRIL 30, 2008 Management of the High -Level Excess Liability Pool (HELP) offers this narrative overview and analysis of the financial activities of HELP for the fiscal year ended April 30, 2008. We encourage readers to consider the information presented here in conjunction with HELP financial statements and notes to the financial statements to enhance their understanding of HELP's financial performance. HIGH -LEVEL EXCESS LIABILITY POOL — OVERVIEW HELP is a public entity risk pool established by fifteen municipalities in Illinois to provide excess liability coverage ($10,000,000 of coverage after a $2,000,000 self - insured retention). HELP was • organized on April 1, 1987 with an initial term of 11 years through April 30, 1998. The agreement was extended for a second term that ran through April 30, 2008. A third term is approved to further extend the agreement through April 30, 2018. The purpose of the pool is to act as a joint self - insurance pool for the purpose of seeking the prevention or lessening of liability claims for injuries to persons or property or claims for errors and omissions made against the members. HELP is governed by a Board of Directors which consists of one appointed representative from each member municipality. Each Director has an equal vote. The officers of HELP are appointed by the Board of Directors. The Board of Directors determines the general policies of HELP; makes all appropriations; approves contracts; adopts resolutions providing for the issuance of debt by HELP; adopts bylaws, rules, and regulations; and exercises such powers and performs such duties as may be prescribed in the Agency Agreement or the bylaws. i During this fiscal year, there were 15 member municipalities: Village of Arlington Heights, Village of Chicago Ridge, Village of Deerfield, City of Des Plaines, Elk Grove Village, Village of Glenview, Village of Hoffman Estates, Village of Lincolnshire, Village of Mount Prospect, Village of Oak Lawn, City of Park Ridge, Village of Skokie, Village of Streamwood, City of Wheaton, and the Village of Winnetka. 0 0 The following discussion provides an assessment by management of the current financial position, results of operations, cash flow and liquidity, and changes in financial position for HELP. Information presented in this discussion supplements the financial statements, schedules, and exhibits of the 2008 Annual Report. FINANCIAL POSITION Total assets for HELP increased by $959,713, from $12,527,571 in 2007 to $13,487,284 in 2008. Assets are made up entirely of cash and investments. The HELP investment portfolio consists of $1,546,426 of common stocks held in the form of an equity index fund and $11,940,858 invested in money market funds held through The Illinois Funds and the Illinois Metropolitan Investment Fund. -5- • MILLER COOPER & CO., LTD. 0 0 Management's Discussion and Analysis FOR THE YEAR ENDED APRIL 30, 2008 FINANCIAL POSITION (CONT.) The liability for claims reserve remained at $2,000,000 in 2008. a Fund equity in the form of retained earnings increased $960,396 from $10,522,888 to $11,483,284. 9 0 [] 0 0 9 kH^7Y kf f y d wik, Y } £ ;fi i' y 2008 2007 Total Assets $13,487,284 $12,527,571 Total Liabilities $2,004,000 $2,004,683 Total Fund Equity 11,483,284 10,522,888 Total Liabilities and Fund Equity $13,487,284 $12,527,571 RESULTS OF OPERATIONS Total operating revenues for 2008 were $1,011,142. This is a decrease of 50% from the prior year. Operating revenues consisted solely of member assessments. The amount of the member assessments from year to year is determined annually at a regular Board of Directors meeting. The HELP Board decreased member assessments due to the increase in assets over the past five years. Total operating expenses decreased by $1,492,097. There were no claim payments made this fiscal year. Nonoperating income decreased by $343,672 due to a decline in interest rates. This income was derived solely from investment earnings on HELP's cash and investment portfolio. HELP net income for 2008 was $960,396, up from $823,113 from the prior year. IN • MILLER COOPER & CO., LTD. 0 a • 0 0 LAN f • Management's Discussion and Analysis FOR THE YEAR ENDED APRIL 30, 2008 RESULTS OF OPERATIONS (CONT.) Total operating revenues Total operating expenses Total nonoperating income Net income 2008 $1,011,142 425,832 375,086 $960,396 2007 $2,022,284 1,917,929 718,758 $823,113 1 CASH FLOW AND LIQUIDITY HELP generated a net positive cash flow from operating and investing activities. For year ended April 30, 2008, cash and cash equivalents were $11,940,858 versus $10,905,166 in 2007. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of HELP's finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to David O. Erb, Director of Finance, Village of Mount Prospect, 50 South Emerson Street, Mount Prospect, Illinois 60056. -7- MILLER COOPER & CO., LTD. BASIC FINANCIAL STATEMENTS MILLER COOPER & CO., LTD. 0 • • 0 0 C 0 • High -Level Excess Liability Pool BALANCE SHEETS April 30, 2008 and 2007 ASSETS CURRENT ASSETS Cash equivalents and investments Total assets LIABILITIES AND FUND EQUITY CURRENT LIABILITIES Accounts payable Claims reserve Total liabilities FUND EQUITY Retained earnings Total liabilities and fund equity The accompanying notes are an integral part of these statements. -8- MILLER COOPER & CO., LTD. 2008 2007 $ 13,487,284 $ 12,527,571 $ 13,487,284 $ 12,527,571 $ 4,000 $ 4,683 2,000,000 2,000,000 2,004,000 2,004,683 11,483,284 10,522,888 $ 13,487,284 $ 12,527,571 • • • The accompanying notes are an integral part of these statements. MILLER COOPER & CO., LTD. High -Level Excess Liability Pool STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS - BUDGET AND ACTUAL Years Ended April 30, 2008 and 2007 2008 2007 Budget Actual Budget Actual Operating revenues Member assessments $ 1,011,142 $ 1,011,142 $ 2,022,283 $ 2,022,284 Total operating revenues 1,011,142 1,011,142 2,022,283 2,022,284 • Operating expenses Risk management consultants 35,000 34,500 28,000 30,000 Excess insurance 500,000 373,109 500,000 371,772 Claims expense - - - 1,477,500 Attorneys' fees • Case review 15,000 3,479 15,000 5,453 Corporate matters 20,000 3,032 20,000 5,019 Auditing fees 7,000 7,200 6,200 6,590 Actuary fees - - - 14,934 Surety bonds 2,000 1,762 2,000 1,762 Meeting expenses 2,000 - 2,000 76 •� Membership dues 4,000 2,750 4,000 4,823 Total operating expenses 585,000 425,832 577,200 1,917,929 Operating income 426,142 585,310 1,445,083 104,355 Investment income 575,000 375,086 400,000 718,758 NET INCOME $ 1,001,142 960,396 $ 1,845,083 823,113 Retained earnings Beginning of year 10,522,888 9,699,775 • End of year $ 11,483,284 $ 10,522,888 • • The accompanying notes are an integral part of these statements. MILLER COOPER & CO., LTD. 0 High -Level Excess Liability Pool STATEMENTS OF CASH FLOWS Years Ended April 30, 2008 and 2007 2008 2007 Cash flows from operating activities Cash received from members $ 1,011,142 $ 2,022,284 Cash paid to suppliers (426,515) (439,746) Net cash provided by operating activities 584,627 1,582,538 MILLER COOPER & CO., LTD. Cash flows from investing activities Purchase of investments (31,695) (121,449) Investment income 482,760 626,646 Net cash provided by investing activities 451,065 505,197 INCREASE IN CASH AND CASH EQUIVALENTS 1,035,692 2,087,735 Cash equivalents Beginning of year 10,905,166 8,817,431 End of year $ 11,940,858 $ 10,905,166 Reconciliation Cash equivalents $ 11,940,858 $ 10,905,166 Investments 1,546,426 1,622,405 Total cash equivalents and investments $ 13,487,284 $ 12,527,571 Reconciliation of operating loss to net cash provided by operating activities Operating income $ 585,310 $ 104,355 Adjustments to reconcile operating income to net cash provided by operating activities Increase (decrease) in liabilities Accounts payable (683) 683 Claims reserve - 1,477,500 Net cash provided by operating activities $ 584,627 $ 1,582,538 Supplemental noncash investing activities Change in market value of investments $ (107,674) $ 92,112 s The accompanying notes are an integral part of these statements. -10- MILLER COOPER & CO., LTD. 0 • • 0 High -Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS April 30, 2008 and 2007 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of High -Level Excess Liability Pool, Illinois (the Pool) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to goverment 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 Pool's accounting policies are described below. 1. Reporting Entity and its Services In evaluating how to define the Pool for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth by the Governmental Accounting Standards Board (GASB). Based upon the application of GASB criteria, there are no potential component units to be included in the Pool's reporting entity. The Pool is defined as a joint venture under these standards. • 0 • The Pool was organized on April 1, 1987. The current agreement expired on April 30, 2008, and was extended for another ten -year term, with an expiration date of April 30, 2018. The purpose of the Pool is to act as a joint self - insurance pool for the purpose of seeking the prevention or lessening of liability claims for injuries to persons or property or claims for errors and omissions made against the members and other parties included within the scope of coverage of the Pool. The initial amount of coverage provided to the members by the Pool was $1,000,000 per occurrence and in the aggregate, with a self - insured retention of $1,000,000. The amount of coverage provided to the members by the Pool for subsequent years is as follows: Year ended Member Pool Pool Total Ended Risk Occurrence Excess Risk April 30, Responsibility Limit Coverage Financed 1988 -1994 $ 1,000,000 $ 5,000,000 $ - $ 6,000,000 1995 -1996 1,000,000 5,000,000 5,000,000 11,000,000 1997 -1999 1,000,000 2,000,000 8,000,000 11,000,000 2000 1,000,000 2,000;000 10,000,000 13,000,000 2001 1,000,000 2,000,000 12,000,000 15,000,000 2002 1,000,000 3,000,000 8,000,000 12,000,000 2003 1,000,000 3,000,000 7,000,000 11,000,000 2004 2,000,000 3,000,000 7,000,000 12,000,000 2005 -2008 2,000,000 4,000,000 6,000,000 12,000,000 -11- • MILLER COOPER & CO., LTD. :'] • High -Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS Aril 30, 2008 and 2007 0 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. Reporting Entity and its Services (Continued) Entities joining the Pool at its inception must remain members for a minimum of ten years. Entities applying for membership in the Pool may do so on approval of a two- thirds vote of the Board of the Pool. Underwriting and rate - setting policies have been established after consultation with actuaries. Members are subject to a supplemental assessment in the event of deficiencies. • -12- • MILLER COOPER & CO., LTD. At April 30, 2008, the following municipalities were members of the Pool: • % Share Current Assets, Cumulative Annual Liabilities, Premium Premiums and Equity Contributions • Village of Arlington Heights 11.41 % 11.65 % $ 2,784,342 Village of Chicago Ridge 2.56 2.51 600,646 Village of Deerfield 3.68 3.52 841,004 City of Des Plaines 9.54 9.90 2,365,731 Elk Grove Village 7.46 7.61 1,819,670 • Village of Glenview 8.67 7.42 1,774,167 Village of Hoffman Estates 8.38 8.04 1,921,762 Village of Lincolnshire 1.97 1.67 398,217 Village of Mount Prospect 7.07 7.32 1,750,396 Village of Oak Lawn 9.12 9.25 2,210,513 • City of Park Ridge 5.70 5.76 1,376,666 Village of Skokie 8.80 9.53 2,278,434 Village of Streamwood 4.52 4.41 1,054,527 City of Wheaton 7.44 7.42 1,772,513 Village of Winnetka 3.68 3.99 952,517 • 100.00% 100.00 % $ 23,901,105 • -12- • MILLER COOPER & CO., LTD. • High -Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS • April 30, 2008 and 2007 • NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2. Fund Accounting The Pool operates as a single proprietary fund, more specifically as an enterprise fund. Proprietary funds are used to r account for activities similar to those found in the private sector, where the determination of net income is necessary or useful to sound financial administration. Services from such activities are provided to outside parties. Its operations are such that: C7� a) The Pool provides risk management services to its member municipalities, and b) Members fund the Pool to cover the costs of providing such services. 0 3. Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All proprietary funds are accounted for on a flow of economic resources measurement focus. With this measurement • focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Proprietary fund -type operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in net total assets. The accrual basis of accounting is utilized by proprietary fund types. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. The Pool has elected to apply all applicable GASB pronouncements and all Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) issued on or before November 30, 1989, unless they conflict with or contradict GASB 0 pronouncements. 4. Budgets Budgets are adopted on a basis consistent with GAAP. Annual budgets are adopted for the Pool. All annual budgets lapse at fiscal year -end. -13- • MILLER COOPER & CO., LTD. 0 High -Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS April 30, 2008 and 2007 0 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5. Cash Equivalents For purposes of the statement of cash flows, the Pool considers all highly liquid investments with a maturity of three 40 months or less when purchased to be cash equivalents. U 6. Investments Investments are carried at fair value. 7. Claims Reserve Liabilities The Pool establishes claims reserve liabilities based upon an estimate of the ultimate cost of claims that have been reported but not settled and of claims that have been incurred but not reported. The length of time for which such costs must be estimated varies depending on the individual facts and circumstances. Adjustments to claims reserve liabilities are charged or credited to expense in the period in which they are made. (See Note E.) 8. Use of Estimates In preparing financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Because the final resolution of potentially large claims against the Pool is uncertain, management believes that actual results could differ materially from those estimates. NOTE B - LEGAL COMPLIANCE AND ACCOUNTABILITY Budgets • The budget is prepared by function and activity, and includes information on the past year, current year estimates, and requested amounts for the next fiscal year. The proposed budget is presented to the governing body for review. The governing body may add to, subtract from, or change amounts, but may not change the form of the budget. 9 The budget may be amended by a majority vote of the governing body. No amendments were passed for 2008 and 2007. -14- 0 MILLER COOPER & CO., LTD. • High -Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS • April 30, 2008 and 2007 • NOTE C - DEPOSITS AND INVESTMENTS 1. Permitted Deposits and Investments The Pool's investment policy is more restrictive than state statutes. The Pool deposits /investments are limited to approved banks and specifically authorized investments including bonds, notes, bills, and other full faith and credit U.S. Government securities, interest - bearing investments (C.D.$), The Illinois Funds (State Treasurer - Managed investment pool), IMET investment fund (short-term local government investment pool), money market mutual funds, and fixed income and equity securities (with credit risk limited to 45% of the portfolio). • As of April 30, 2008, the Pool had the following cash equivalents and investment maturities. Investment Maturities (In Years) Investment Type Fair Value Less than 1 1 -3 Equities Illinois Funds $ 9,256,976 $ 9,256,976 $ - $ - Illinois Metropolitan Investment Fund 2,683,882 - 2,683,882 - Mutual Fund - Equities 1,546,426 - - 1,546,426 Total cash equivalents and investments $ 13,487,284 $ 9,256,976 $ 2,683,882 $ 1,546,426 • As of April 30, 2007, the Pool had the following cash equivalents and investment maturities. Investment Maturities (In Years) Investment Type Fair Value Less than 1 1 -3 Equities Illinois Funds $ 8,329,831 $ 8,329,831 $ - $ - Illinois Metropolitan Investment Fund 2,575,335 - 2,575,335 - Mutual Fund - Equities 1,622,405 - - 1,622,405 . Total cash equivalents and investments $ 12,527,571 $ 8,329,831 $ 2,575,335 $ 1,622,405 1. Interest Rate Risk The Pool's investment policy does not limit investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The objective is to maintain a core portfolio with maturities in the one -to. three year range. -15- • MILLER COOPER & CO., LTD. 0 High -Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS • April 30, 2008 and 2007 0 NOTE C - DEPOSITS AND INVESTMENTS (Continued) 2. Credit Risk State law limits investments in commercial paper, corporate bonds, and mutual bonds funds to the top two ratings 0 issued by nationally recognized statistical rating organizations. The Pool's investment policy is more restrictive than state statutes. The Pool's deposits /investments are limited to approved banks and specifically authorized investments including bonds, notes, bills and other full faith and credit U.S. Government securities, interest - bearing investments (C.D.$), The Illinois Funds (State Treasurer - Managed investment pool), Illinois Metropolitan Investment Fund (short. term local government investment pool), money market mutual funds, and fixed income and equity securities. As of April 30, 2008, The Illinois Funds Money Market Fund was rated AAAm by Standard & Poor's and the Illinois Metropolitan Investment Fund 1 -3 Year Government Bond Fund was rated AAAf by Standard & Poor's. The Illinois Funds is not registered with the SEC. The Illinois Funds is sponsored by the State Treasurer in accordance with state law. The fair value of the positions in The Illinois Funds is the same as the value of The Illinois Funds shares. 0 3. Custodial Credit Risk For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the Pool will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. As of April 30, 2008, the Pool was not subject to custodial credit risk, as all of the Pool's investments are insured. • 4. Concentration of Credit Risk It is the policy of the Pool to diversify its investment portfolio. Investments shall be diversified to eliminate the risk of loss resulting in overconcentration in a security, maturity, issuer, or class of securities. The Pool's investment policy requires the Pool to diversify its investments by investment type. Diversification by investment type is as follows: Bonds, notes, bills, and other full faith and credit U.S. Government securities - 100% maximum; interest - bearing investments - 50% maximum; Illinois Funds - 100% maximum; Illinois Metropolitan Investment Fund - 100% maximum; money market mutual funds - 50% maximum; and fixed income and equity securities - 45% maximum. 0 NOTE D -• CONTINGENT LIABILITIES - LITIGATION There are several claims and legal actions pending against members of the Pool. Management and their legal counsel believes that certain actions against the members could result in losses to the Pool. Except as discussed in Note E, no • additional amounts have been recorded as losses and additional claims reserve because unfavorable outcomes are not probable and cannot be reasonably estimated. sm • MILLER COOPER & CO., LTD. • High -Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS • April 30, 2008 and 2007 • NOTE E - CLAIMS RESERVE LIABILITIES As discussed in Note A, the Pool establishes a liability for both reported and unreported insured events, which includes estimates of future payments for both claims and losses and related claims adjustment expenses. The claims reserve liability at year -end relates to claim year 1998. The schedule below presents the changes in the claims reserve for the • years ended April 30, 2008 and 2007, respectively. 2008 2007 Unpaid claims and claims adjustment expenses at the • beginning of the year. $ 2,000,000 $ 522,500 Incurred claims and claims adjustment expenses Provision for insured events of the current fiscal year - - Increases in provision for insured events of prior • fiscal years - 1,477,500 Total incurred claims and claims adjustment expenses - 1,477,500 Payments • Claims and claims adjustment expenses attributable to insured events of the current fiscal year - Claims and claims adjustment expenses attributable to insured events of the prior fiscal year - Total payments - - Total unpaid claims and claims adjustment expenses at the end of the fiscal year $ 2,000,000 $ 2,000,000 NOTE F - RECLASSIFICATIONS Certain reclassifications have been made to the 2007 financial statements in order to conform to the 2008 presentation. These reclassifications have no effect on the net income of the financial statements. NOTE G - SUBSEQUENT EVENT • Subsequent to April 30, 2008, some of the Pool's investments had a decrease in market value of approximately $500,000. aIre • MILLER COOPER & Co., LTD. 0 REQUIRED SUPPLEMENTARY INFORMATION • • U • G • • • MILLER COOPER & CO., LTD. 0 High -Level Excess Liability Pool REQUIRED SUPPLEMENTARY INFORMATION April 30, 2008 0 Ten -Year Claims Development Information C7 • • The table on the following pages illustrates how the Pool's earned revenues and investment income compare to related costs of losses and other expenses assumed by the Pool as of the end of each of the last ten years. The rows of the table are defined as follows: (1) This line shows the total of each fiscal year's earned contribution revenues and investment revenues. (2) This line shows each fiscal year's other operating costs of the pool, including overhead and claims expense not allocable to individual claims. (3) This line shows the Pool's incurred claims and allocated claims adjustment expenses (both paid and accrued) as originally reported at the end of the first year in which the event that triggered coverage under the contract occurred (called policy year). (4) This section of ten rows shows the cumulative amounts paid as of the end of successive years for each policy year. (5) This section of ten rows shows how each policy year's incurred claims increased or decreased as of the end of successive years. This annual reestimation results from new information received on known claims and reevaluation of existing information on known claims, as well as emergence of new claims not previously known. (6) This :line compares the latest reestimated incurred claims amount to the amount originally established (line 3), and shows whether this latest estimate of claims cost is greater or less than originally thought. As data for individual policy years mature, the correlation between original estimates and reestimated amounts is commonly used to evaluate the accuracy of incurred claims currently recognized in less mature policy years. The columns of the table show data for successive policy years. M • MILLER COOPER & CO., LTD. E High -Level Excess Liability Pool REQUIRED SUPPLEMENTARY INFORMATION (Continued) Ten -Year Claims Development Information April 30, 2008 Ten -Year Claims Development Information (Continued) 1. Net earned required contribution and investment income 2. Unallocated expenses 3. Estimated incurred claims and expense, end of policy year 4. Paid (cumulative) as of End of policy year One year later Two years later Three years later Four years later Five years later Six years later Seven years later Eight years later Nine years later 5. Reestimated incurred claims and expense: End of policy year One year later Two years later Three years later Four years later Five years later Six years later Seven years later Eight years later Nine years later 6. Increase (decrease) in estimated incurred claims and expense from the end of the policy year • 1999 2000 2001 2002 $ 1,741,861 $ 1,462,539 $ 1,546,330 $ 1,316,531 155,438 195,627 178,869 295,634 8,935 - 268,760 - 8,935 - 501,022 - 8,935 - 501,022 - 8,935 - 501,022 - - 501,022 50 :2,000 - 360,000 - 8,935 - 593,760 - 8,935 - 501,022 - 8,935 - 501,022 - 8,935 - 501,022 - - 501,022 -20- 501,022 - 8,935 • MILLER COOPER & CO., LTD. 6 • 2003 2004 2005 2006 2007 2008 $ 1,054,854 $ 1,993,124 $ 2,009,041 $ 2,377,597 $ 2,741,042 $ 1,386,228 • 433,015 398,860 381,974 387,739 434,976 422,353 505,000 - 5,000 - - - 150,000 - - 150,000 - 150,000 505,000 - 5,000 5,000 - - 505,000 505,000 7,500 - - 505,000 5,000 - - 150,000 - - 150,000 150,000 f (355,000) - (5,000) (5,000) - - • -21- • MILLER COOPER & CO., LTD. MILLER CODPER &C0G4%Ltd Accouiv ANPs AND CONSUCIANPs Members of the Board of Directors High -Level Excess Liability Pool This letter is intended to inform the Board of Directors of the High -Level Excess Liability Pool (the Pool) about significant matters related to the conduct of the annual audit so that it can appropriately discharge its oversight responsibility and that we comply with our professional responsibilities to the Board of Directors. The following summarizes various matters which must be communicated to you under auditing standards generally accepted in the United States of America. The Auditors' Responsibility Under Auditing Standards Generally Accepted in the United States of America Our audit of the financial statements of the Pool for the year ended April 30, 2008 was conducted in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error, fraudulent financial reporting, or misappropriation of assets. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Accordingly, the audit was designed to obtain reasonable, rather than absolute, assurance about the financial statements. We believe that our audit accomplished that objective. Management Judgments and Accounting Estimates Accounting estimates are an integral part of the preparation of financial statements and are based upon management's current judgment. The process used by management encompasses their knowledge and experience about past and current events and certain assumptions about future events. Management has informed us that they used all the relevant facts available to them at the time to make the best judgments about accounting estimates and we considered this information in the scope of our audit. Estimates significant to the financial statements include such items as the claims reserve. The Board may wish to monitor throughout the year the process used to compute and record these accounting estimates. Audit Adjustments There was one audit adjustment made to the original trial balance presented to us to begin our audit. The following is a description of the adjustment that could, in our judgment, have a significant effect on the Pool's financial reporting process. Increase (Decrease) in Fund Egtk To correct double posting of interest income (7,555) 1751 Lake Cook Road, Suite 400, Deerfield, IL 60015 ■ 500 West Madison Street, Suite 3350, Chicago, IL 60661 -AV menu _gym o BAKER TILLY 847.205.5000 ■ Fax 847.205.1400 ■ www.millercooper.com INTERNATIONAL 1 Members of the Board of Directors High -Level Excess Liability Pool Uncorrected Misstatements Page Two We accumulated one uncorrected misstatement, which was discussed with management and was determined by management to be immaterial to the financial statements. Therefore, the adjustment to correct this misstatement was not made to the financial statements. This uncorrected misstatement is summarized below. Increase (Decrease) in Fund Equity To record current year interest receivable Accounting Policies and Alternative Treatments $ 4,954 Management and the Board have the ultimate responsibility for the appropriateness of the accounting policies used by the Pool. The Pool did not adopt any significant new accounting policies nor have there been any changes in existing significant accounting policies during the current period which should be brought to your attention. We did not identify any significant or unusual transactions or significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. The following is a description of significant accounting policies which will be applicable in future years: GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, issued in June 2008, will be effective for the Pool beginning with its year ending April 30, 2011. This Statement addresses the recognition, measurement, and disclosure of information regarding derivative instruments entered into by state and local governments. Common types of derivative instruments used by governments include interest rate and commodity swaps, interest rate locks, options (caps, floors, and collars), swaptions, forward contracts, and future contracts. The Pool's management has not yet determined the effect that this Statement will have on the Pool's financial statements. New Auditing Standards In March 2006, the American Institute of Certified Public Accountants (the "AICPA "), issued eight new Statements of Auditing Standards ( "SASs ") related to risk (Statements No. 104-111). These SASS became effective for your year ended April 30, 2008, and we implemented them. MILLER COOPER & CO., LTD. Members of the Board of Directors High -Level Excess Liability Pool Page Three Other Information in Documents Containing Audited Financial Statements We are not aware of any other documents that contain the audited basic financial statements. If such documents were to be published, we would have a responsibility to determine that such financial information was not materially inconsistent with the audited statements of the Pool. Disagreements with Management We encountered no disagreements with management over the application of significant accounting principles, the basis for management's judgments on any significant matters, the scope of the audit, or significant disclosures to be included in the financial statements. Representations from Management We have requested certain written representation from management, which were included in a letter dated March 13, 2009, which we have received. Consultations with Other Accountants We are not aware of any consultations management had with other accountants about accounting or auditing matters. Major Issues Discussed with Management Prior to Retention No major issues were discussed with management prior to our retention to perform the aforementioned audit. Difficulties Encountered in Performing the Audit We did not encounter any difficulties in dealing with management relating to the performance of the audit. Closing We will be pleased to respond to any questions you have about the foregoing. We appreciate the opportunity to continue to be of service to the Pool. This report is intended solely for the information and use of the Board of Directors and management and is not intended to be and should not be used by anyone other than the specified parties. MILLER, COOPER & CO., LTD. 01�_4 Fe, 'CA��_q 'X Certified Public Accountants Deerfield, Illinois March 13, 2009 MILLER COOPER & CO., LTD.