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HELP financial statements for year ended April 30, 2016 and Independent Auditors' Report April 30, 2016 and 2015 High-Level Excess Liability Pool Basic Financial Statements Page PRINCIPAL OFFICIALS 3 INDEPENDENT AUDITORS' REPORT 4 - 5 MANAGEMENT'S DISCUSSION AND ANALYSIS 6 - 10 BASIC FINANCIAL STATEMENTS Statements of Net Position 11 Statements of Revenues, Expenses, and Changes in Net Position - Budget and Actual 12 Statements of Cash Flows 13 Notes to the Financial Statements 14 - 21 REQUIRED SUPPLEMENTARY INFORMATION (Unaudited) Ten-Year Claims Development Information 23 - 25 SUPPLEMENTARY INFORMATION Term III and Term II Combining Statement of Net Position 27 Combining Statement of Revenues, Expenses, and Changes in Net Position 28 CONTENTS David Erb, Mount Prospect Chairman Christine Tromp, Elk Grove Village Secretary Eric Burk, Village of Deerfield Treasurer April 30, 2016 High-Level Excess Liability Pool PRINCIPAL OFFICIALS -3- Management's Responsibility for the Financial Statements Auditors' Responsibility (Continued) 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 also includes 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. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' 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 auditors consider internal control relevant to the Pool'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 Pool'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 audit opinion. INDEPENDENT AUDITORS' REPORT Members of the Board of Directors High-Level Excess Liability Pool Deerfield, Illinois We have audited the accompanying statements of net position, statements of revenues, expenses and changes in net position - budget and actual, and statements of cash flows of High-Level Excess Liability Pool (the Pool),as of and for the years ended April 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise the Pool's basic financial statements, as listed in the table of contents. Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit 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 from material misstatement. Report on the Financial Statements Members of the Board of Directors High-Level Excess Liability Pool Opinion Other Matters Required Supplementary Information Other Information Deerfield, Illinois August 30, 2016 (Continued) MILLER, COOPER & CO., LTD. Certified Public Accountants Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Pool's basic financial statements. The other schedules, listed in the table of contents as supplementary information, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information 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 financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America.In our opinion, the supplementary information is fairly stated in all material respects in relation to the basic financial statements as a whole. In our opinion, the financial statements referred to above present fairly,in all material respects, the financial position of the business-type activities and the major fund of the Pool,as of April 30, 2016 and 2015, and the changes in net position and cash flows for the years then ended,in accordance with accounting principles generally accepted in the United States of America. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 6 through 10 and ten-year claims development information on pages 23 through 25 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 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 information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. High-Level Excess Liability Pool Management’s Discussion and Analysis FOR THE YEAR ENDED APRIL 30, 2016 -6- 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, 2016. We encourage readers to consider the information presented here in conjunction with HELP’s 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 (Currently $13,000,000 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 was approved to further extend the agreement through April 30, 2018. Thirteen municipalities make up the pool’s membership for Term III. 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. During this fiscal year, there were 13 member municipalities taking part in Term III: Village of Arlington Heights, Village of Deerfield, City of Des Plaines, Elk Grove Village, Village of Glenview, Village of Hoffman Estates, Village of Lincolnshire, Village of Mount Prospect, City of Park Ridge, Village of Skokie, Village of Streamwood, City of Wheaton, and the Village of Winnetka. Two additional members who terminated their membership at the conclusion of Term II, Village of Chicago Ridge and Village of Oak Lawn, are still liable for any claims that arose during the Term II period but have not yet been reported at this time. 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 2016 Annual Financial Report. FINANCIAL POSITION Total assets for HELP increased from $8,378,195 to $9,356,634 as a result of member contributions and no claim expenses during the year. Assets are comprised of cash, cash equivalents and investments. The HELP investment portfolio consists of $2,745,189 of common stocks held in the form of an equity index fund and $6,590,146 invested in money market funds held through The Illinois Funds and the Illinois Metropolitan Investment Fund. High-Level Excess Liability Pool Management’s Discussion and Analysis FOR THE YEAR ENDED APRIL 30, 2016 -7- FINANCIAL POSITION (Continued) Total liabilities consist primarily of a claims reserve totaling $4,000,000, which increased $770,000 from the prior year due to a change in the actuary’s estimate. No claims were paid during the year. Net position increased from $5,145,556 to $5,352,842 as a result of the current year member contributions and favorable claims activity. Table 1 Statements of Net Position 2016 2015 Current Assets Cash, cash equivalents, and investments $ 9,356,634 $ 8,378,195 Total Assets $ 9,356,634 $ 8,378,195 Current Liabilities Claims reserve Accounts payable $ 4,000,000 3,792 $ 3,230,000 2,639 Total Liabilities 4,003,792 3,232,639 Total Net Position - unrestricted 5,352,842 5,145,556 Total Liabilities and Net Position $ 9,356,634 $ 8,378,195 RESULTS OF OPERATIONS Total operating revenues for 2016 were $1,284,504, an increase from $989,811 in 2015. The entire amount of operating revenues came from member contributions. The amount of the member contributions from year to year is determined annually at a regular Board of Directors meeting. The increase in member contributions was in line with HELP’s long term plan to increase surplus as a result of the negative claim experience in 2015 and 2014. Total operating expenses, net of reinsurance reimbursements, increased from a net benefit of $65,424 to a net expense of $1,123,170. This was due to amounts received from the reinsurance provider reducing operating expenses in 2015. Excluding claims expense, net of reinsurance reimbursements, total operating expenses were essentially flat year to year. High-Level Excess Liability Pool Management’s Discussion and Analysis FOR THE YEAR ENDED APRIL 30, 2016 -8- RESULTS OF OPERATIONS (Continued) Table 2 Changes in Net Position 2016 2015 Total Operating Revenues $ 1,284,504 $ 989,811 Total Operating Expenses, Net of Reinsurance Reimbursements 1,123,170 (65,424) Total Nonoperating Revenues 45,952 248,413 Member distributions Member contributions - - (4,100,000) 3,617,840 Increase in Net Position 207,286 821,488 Net Position Beginning of Year 5,145,556 4,324,068 End of Year $ 5,352,842 $ 5,145,556 BUDGETING HIGHLIGHTS The fiscal year for HELP runs from May 1 through April 30. The annual budget is approved at the first quarterly meeting of the calendar year, prior to the start of the fiscal year. For fiscal year 2015/2016, the annual budget was approved on March 20, 2015. There were no amendments to the original 2015/2016 budget. Table 3 below reflects the original budget and actual revenues and expenses for HELP. High-Level Excess Liability Pool Management’s Discussion and Analysis FOR THE YEAR ENDED APRIL 30, 2016 -9- BUDGETING HIGHLIGHTS (Continued) Table 3 HELP Annual Budget Fiscal Year 2015/2016 Original Budget Actual Operating Revenues Member Contributions $ 1,277,004 $ 1,284,504 Total Operating Revenues 1,277,004 1,284,504 Operating Expenses Expenses, net of reinsurance reimbursements 385,600 __1,123,170 Total Operating Expenses 385,600 1,123,170 Nonoperating Revenues Unrealized gains (losses) - (24,359) Investment income 180,000 70,311 Total Nonoperating Revenue 180,000 45,952 Increase in Net Position $ 1,071,404 $ 207,286 CASH FLOW AND LIQUIDITY Cash flow from operating, investing, and financing activities increased due to favorable claims activity and member contributions. FACTORS BEARING ON THE FUTURE External factors potentially having an impact to the financial stability and functioning of HELP include adverse claims activity and adverse pooling legislation. HELP pooled coverage attaches above $2,000,000. A single large claim or catastrophic event with multiple claimants could shrink reserves or result in a supplemental payment from its members. Measures are in place at member organizations that work to minimize the likelihood and impact of adverse claims on the pool. Adverse pooling legislation is anything that works against sound practices of insurance pools such as set enrollment periods or minimum membership commitments. HELP’s legal counsel and insurance consultant have been proactive in reviewing the by-laws in the event adverse pooling legislation is passed. High-Level Excess Liability Pool Management’s Discussion and Analysis FOR THE YEAR ENDED APRIL 30, 2016 -10- 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 Mr. Eric Burk, Finance Director, Village of Deerfield, 850 Waukegan Road, Deerfield Illinois 60015. BASIC FINANCIAL STATEMENTS ASSETS 2016 2015 CURRENT ASSETS Cash, cash equivalents, and investments $ 9,356,634 $ 8,378,195 Total assets $ 9,356,634 $ 8,378,195 LIABILITIES AND NET POSITION CURRENT LIABILITIES Claims reserve $ 4,000,000 $ 3,230,000 Accounts payable 3,792 2,639 Total liabilities 4,003,792 3,232,639 NET POSITION Unrestricted 5,352,842 5,145,556 Total liabilities and net position $ 9,356,634 $ 8,378,195 The accompanying notes are an integral part of these statements. High-Level Excess Liability Pool STATEMENTS OF NET POSITION April 30, 2016 and 2015 -11- Budget Actual Budget Actual Operating revenues Member assessments $ 1,277,004 $ 1,284,504 $ 982,311 $ 989,811 Total operating revenues 1,277,004 1,284,504 982,311 989,811 Operating expenses Risk management consultants 41,000 41,500 40,000 40,500 Excess insurance 290,000 285,951 400,000 276,582 Attorneys' fees Case review 20,000 2,029 10,000 21,015 Corporate matters 10,000 5,592 12,000 6,439 Auditing fees 16,600 10,100 15,000 9,850 Surety bonds 2,000 -2,000 - Meeting expenses 2,000 -2,000 - Membership dues 4,000 2,250 4,000 2,430 Office supplies -498 -308 Actuary fees -5,250 -5,250 Claims expense, net of reinsurance reimbursements (see Note E)- 770,000 2,000,000 (427,798) Total operating expenses, net of reinsurance reimbursements 385,600 1,123,170 2,485,000 (65,424) Operating income (loss)891,404 161,334 (1,502,689) 1,055,235 Nonoperating revenues Unrealized gains (losses)-(24,359)- 254,806 Investment income (loss)180,000 70,311 170,000 (6,393) Total nonoperating revenues 180,000 45,952 170,000 248,413 Income (loss) before contributions and distributions $ 1,071,404 207,286 $ (1,332,689) 1,303,648 Member distributions - (4,100,000) Member contributions - 3,617,840 INCREASE IN NET POSITION 207,286 821,488 Net position Beginning of year 5,145,556 4,324,068 End of year $ 5,352,842 $ 5,145,556 The accompanying notes are an integral part of these statements. 2016 High-Level Excess Liability Pool STATEMENTS OF REVENUES, EXPENSES, AND Years Ended April 30, 2016 and 2015 CHANGES IN NET POSITION - BUDGET AND ACTUAL 2015 -12- 2016 2015 Cash flows from operating activities Cash received from members $ 1,284,504 $ 989,811 Cash paid to suppliers (352,017) (362,374) Claims paid - (3,586,856) Net cash provided by (used in) operating activities 932,487 (2,959,419) Cash flows from investing activities Purchases of investments (56,601) (55,962) Investment income (loss)70,311 (6,393) Net cash provided by (used in) investing activities 13,710 (62,355) Cash flows from financing activities Member distributions, net of Term III contributions - (482,160) Net cash used in financing activities - (482,160) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 946,197 (3,503,934) Cash and cash equivalents Beginning of year 5,665,248 9,169,182 End of year $ 6,611,445 $ 5,665,248 Reconciliation Cash and cash equivalents $ 6,611,445 $ 5,665,248 Investments 2,745,189 2,712,947 Total cash, cash equivalents, and investments $ 9,356,634 $ 8,378,195 Reconciliation of operating income to net cash used in operating activities Operating income $ 161,334 $ 1,055,235 Adjustments to reconcile operating income to net cash provided by (used in) operating activities Accounts receivable - 402,707 Accounts payable 1,153 2,639 Claims reserve 770,000 (4,420,000) Net cash provided by (used in) operating activities $ 932,487 $ (2,959,419) Supplemental noncash investing activities Change in market value of investments $ (24,359) $ 254,806 The accompanying notes are an integral part of these statements. High-Level Excess Liability Pool STATEMENTS OF CASH FLOWS Years Ended April 30, 2016 and 2015 -13- 1. Years Member Pool Pool Total Ended Risk Occurrence Excess Risk April 30,Responsibility Limit Coverage Financed 1988 $1,000,000 $1,000,000 $-$2,000,000 1989-1994 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 2005-2013 2,000,000 4,000,000 6,000,000 12,000,000 2014-2016 2,000,000 4,000,000 9,000,000 15,000,000 High-Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS Years Ended April 30, 2016 and 2015 The financial statements of the High-Level Excess Liability Pool (the Pool) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP),as applied to this type of government entity. 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. 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 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. Reporting Entity and its Services The Pool was organized on April 1, 1987. The Term II agreement expired on April 30, 2008, and was extended for another ten-year term (Term III),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 amount of coverage provided to the members by the Pool for subsequent years is as follows: NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -14- High-Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS Years Ended April 30, 2016 and 2015 1. % Share % Share Assets,Assets, Liabilities, Cumulative Liabilities, Cumulative and Net Position Assessments and Net Position Assessments 12.64 % $ 966,940 11.65 % $ 2,784,342 *- - 2.51 600,646 3.74 285,722 3.52 841,004 11.09 848,121 9.90 2,365,731 8.25 631,052 7.61 1,819,670 9.47 723,672 7.42 1,774,167 9.98 763,609 8.04 1,921,762 2.53 193,240 1.67 398,217 8.31 635,642 7.32 1,750,396 *- - 9.25 2,210,513 6.22 475,659 5.76 1,376,666 10.29 786,878 9.53 2,278,434 5.28 403,839 4.41 1,054,527 8.02 613,513 7.42 1,772,513 4.18 320,032 3.99 952,517 100.00 % $ 7,647,919 100.00 % $ 23,901,105 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Reporting Entity and its Services (Continued) Entities joining the Pool 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 contribution in the event of deficiencies. Village of Arlington Village of Hoffman Estates Elk Grove Village Village of Chicago Ridge *The Village of Chicago Ridge and the Village of Oak Lawn terminated their memberships after Term II and are not covered under Term III. City of Wheaton Village of Winnetka Village of Oak Lawn Term II Village of Deerfield Village of Lincolnshire The following were percentages of shares and cumulative contributions for the members of the Pool as of April 30, 2016: Village of Mount Prospect Term III Village of Glenview City of Park Ridge City of Des Plaines Village of Skokie Village of Streamwood -15- High-Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS Years Ended April 30, 2016 and 2015 1. 2. Fund Accounting 3. Basis of Accounting 4. The Pool provides risk management services to its member municipalities,a) The Pool operates as a single proprietary fund, more specifically as an enterprise fund. Proprietary funds are used to 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: Members fund the Pool to cover the costs of providing such services. 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. b) NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) and The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. 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. Reporting Entity and its Services (Continued) 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 in the statement of net position. Proprietary fund-type operating statements present increases (e.g., revenues) and decreases (e.g., expenses) in total net position. During the year ended April 30, 2015, the Pool distributed $4,100,000 from Term II.Amounts contributed to Term III totaled $3,617,840 and the remaining $482,160 was distributed to the Village of Chicago Ridge and the Village of Oak Lawn. -16- High-Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS Years Ended April 30, 2016 and 2015 5. 6. 7. 8. 9. Cash Equivalents Investments Use of Estimates Member Assessments Member assessments are determined each year by the formula approved by the Board of Directors and as defined in the Pool's by-laws. The formula is based on a member's revenues, miles of streets, full-time equivalent employees and total number of state licensed vehicles and fire vehicles. Assessments are earned in the membership year to which they apply. Investments are carried at fair value. The reported value of the pool is the same as the fair value of the pool shares. Investments in mutual funds are stated at share price which approximates fair value. 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 the adjustments are made. (See Note E.) For purposes of the statement of cash flows, the Pool considers all highly liquid investments with a maturity of three months or less, when purchased, to be cash equivalents. NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. -17- High-Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS Years Ended April 30, 2016 and 2015 NOTE B - LEGAL COMPLIANCE AND ACCOUNTABILITY - BUDGETS 1. Permitted Deposits and Investments Cash - deposit with financial institution $ 21,299 Cash equivalents and investments 9,335,335 $ 9,356,634 Fair Value Less than 1 Equities The Illinois Funds $ 3,865,386 $ 3,865,386 $ - Illinois Metropolitan Investment Fund 2,724,760 2,724,760 - Mutual Fund - Equities 2,745,189 -2,745,189 Total cash equivalents and investments $ 9,335,335 $ 6,590,146 $ 2,745,189 NOTE C - DEPOSITS AND INVESTMENTS Type The budget includes information on the past year, current year estimates, and requested amounts for the next fiscal year. As of April 30, 2016, the Pool's cash, cash equivalents and investments were comprised of the following: 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. The Pool's investment policy is more restrictive than state statutes. The Pool's deposits and investments are limited to approved banks and specifically authorized investments including bonds, notes, bills, and other full faith and credit U.S. Government securities, mortgage-backed securities, the Illinois Funds (State Treasurer-Managed investment pool), Illinois Metropolitan Investment Fund (IMET) (short-term local government investment pool), corporate bonds, and fixed income and equity securities (with credit risk limited to 45% of the portfolio). Maturities (In Years) The budget may be amended by a majority vote of the Board.No amendments were passed for the years ended April 30, 2016 or April 30, 2015. As of April 30, 2016, the Pool had the following cash equivalents and investments. -18- High-Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS Years Ended April 30, 2016 and 2015 1. Permitted Deposits and Investments (Continued) Fair Value Less than 1 Equities The Illinois Funds $ 2,949,735 $ 2,949,735 $ - Illinois Metropolitan Investment Fund 2,715,513 2,715,513 - Mutual Fund - Equities 2,712,947 -2,712,947 Total cash equivalents and investments $ 8,378,195 $ 5,665,248 $ 2,712,947 2. 3. 4. NOTE C - DEPOSITS AND INVESTMENTS (Continued) Custodial Credit Risk As of April 30, 2015, the Pool had the following cash equivalents and investment. Type Credit Risk Maturities (In Years) During 2015, the Pool made an adjustment to write-off certain IMET investments totaling approximately $77,000. The write-off is included in investment income. With respect to deposits, custodial credit risk is the risk that,in the event of bank failure, the Pool's deposits may not be returned to it. The Pool's investment policy limits the exposure to deposit custodial credit risk by requiring all deposits in excess of FDIC insurable limits to be secured by collateral in the event of default or failure of the financial institution holding the funds.As of April 30, 2016, all of the deposits with financial institutions were insured or secured by collateral. Interest Rate Risk As of April 30, 2016, The Illinois Funds Money Market Fund was rated AAAm 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. 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. -19- High-Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS Years Ended April 30, 2016 and 2015 4. 5. 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 schedule below presents the changes in the claims reserve for the years ended April 30, 2016 and 2015, respectively. There are several claims and legal actions pending against members of the Pool. Management and their legal counsel believe 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 because unfavorable outcomes are not probable and cannot be reasonably estimated. NOTE C - DEPOSITS AND INVESTMENTS (Continued) 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, 2016, the Pool's investments were in compliance with their policy. Custodial Credit Risk (Continued) NOTE D - CONTINGENT LIABILITIES - LITIGATION NOTE E - CLAIMS RESERVE LIABILITIES 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; mortgage- backed securities - 30% maximum; the Illinois Funds - 100% maximum; Illinois Metropolitan Investment Fund (IMET) - 100% maximum; corporate bonds mutual funds - 30% maximum; and fixed income and equity securities - 40% maximum. Concentration of Credit Risk -20- High-Level Excess Liability Pool NOTES TO THE FINANCIAL STATEMENTS Years Ended April 30, 2016 and 2015 2016 2015 Unpaid claims and claims adjustment expenses at the beginning of the fiscal year $ 3,230,000 $ 7,650,000 Incurred claims and claims adjustment expenses Provision for insured events of the current fiscal year 840,000 780,000 Decreases in provision for insured events of prior fiscal years (70,000) (1,613,144) Total incurred claims and claims adjustment expenses 770,000 (833,144) 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 - 3,586,856 Total payments - 3,586,856 Total unpaid claims and claims adjustment expenses at the end of the fiscal year $ 4,000,000 $ 3,230,000 NOTE F - RECLASSIFICATIONS NOTE G - SUBSEQUENT EVENT Management has evaluated subsequent events through August 30, 2016, the date these financial statements were available to be issued. Management has determined that no events or transactions have occurred subsequent to the statement of net position date that require disclosure in the financial statements. Claims expense,as reported on the Statement of Revenues, Expenditures and Changes in Net Position - Budget and Actual,is net of reinsurance reimbursements totaling $0 and $2,060,821 for the years ended April 30, 2016 and 2015, respectively. NOTE E - CLAIMS RESERVE LIABILITIES (Continued) Certain reclassifications were made to 2015 balances to conform with 2016 presentation. -21- REQUIRED SUPPLEMENTARY INFORMATION (Unaudited) Ten-Year Claims Development Information High-Level Excess Liability Pool REQUIRED SUPPLEMENTARY INFORMATION April 30, 2016 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 fiscal ten years. The rows of the table are defined as follows: (1) This line shows the total of each fiscal year's required contributions and investment revenues, net of excess insurance. (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. -23- Ten-Year Claims Development Information (Continued) 2007 2008 2009 2010 1. Required contributions and investment revenues Direct earned $ 2,741,042 $ 1,346,104 $ 1,006,549 $ 921,911 Excess insurance (371,772) (373,109) (321,981) (318,482) Net earned 2,369,270 972,995 684,568 603,429 2. Unallocated expenses 63,204 52,723 56,511 58,436 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 - 4,000,000 - Eight years later - 4,000,000 Nine years later - 5. Reestimated incurred claims and expense:- - End of policy year - - - - One year later - - - - Two years later - - - - Three years later - - - 200,000 Four years later - - 100,000 100,000 Five years later - 1,500,000 - - Six years later - 5,000,000 - Seven years later - - Eight years later - - Nine years later - 6. Increase in estimated incurred claims and expense from the end of the policy year - - - 100,000 April 30, 2016 Ten-Year Claims Development Information High-Level Excess Liability Pool REQUIRED SUPPLEMENTARY INFORMATION -24- 2011 2012 2013 2014 2015 2016 $ 915,654 $ 906,732 $ 921,534 $ 918,351 $ 927,456 $ 1,298,214 (275,421) (277,170) (275,591) (270,582) (276,582) (285,951) 640,233 629,562 645,943 647,769 650,874 1,012,263 55,741 59,277 79,596 98,955 85,792 67,219 - - - 700,000 780,000 840,000 2,000,000 - - - - - 2,000,000 - - - - 2,000,000 - - - 2,000,000 - - 2,000,000 - 2,000,000 - - - 700,000 780,000 840,000 - - 1,000,000 1,500,000 700,000 - 400,000 400,000 1,500,000 250,000 250,000 300,000 200,000 200,000 100,000 100,000 200,000 300,000 800,000 (80,000) - -25- SUPPLEMENTARY INFORMATION ASSETS Term III Term II Total CURRENT ASSETS Cash, cash equivalents, and investments $ 5,083,630 $ 4,273,004 $ 9,356,634 Total assets $ 5,083,630 $ 4,273,004 $ 9,356,634 LIABILITIES AND NET POSITION CURRENT LIABILITIES Claims reserve $ 3,500,000 $ 500,000 $ 4,000,000 Accounts payable 2,532 1,260 3,792 Total liabilities 3,502,532 501,260 4,003,792 NET POSITION Unrestricted 1,581,098 3,771,744 5,352,842 Total liabilities and net position $ 5,083,630 $ 4,273,004 $ 9,356,634 High-Level Excess Liability Pool TERM III AND TERM II COMBINING STATEMENT OF NET POSITION April 30, 2016 -27- Term III Term II Total Operating revenues Member assessments $ 1,284,504 $ - $ 1,284,504 Total operating revenues 1,284,504 - 1,284,504 Operating expenses Risk management consultants 20,750 20,750 41,500 Excess insurance 285,951 - 285,951 Attorneys' fees Case review 168 1,861 2,029 Corporate matters 4,062 1,530 5,592 Auditing fees 5,050 5,050 10,100 Membership dues 2,250 -2,250 Office supplies 249 249 498 Actuary fees 2,625 2,625 5,250 Claims expense, net of reinsurance reimbursements 770,000 - 770,000 Total operating expenses, net of reinsurance reimbursements 1,091,105 32,065 1,123,170 Operating income (loss)193,399 (32,065) 161,334 Nonoperating revenue Unrealized losses (7,819) (16,540) (24,359) Investment income 25,472 44,839 70,311 Total nonoperating revenue 17,653 28,299 45,952 INCREASE (DECREASE) IN NET POSITION 211,052 (3,766) 207,286 Net position Beginning of year 1,370,046 3,775,510 5,145,556 End of year $ 1,581,098 $ 3,771,744 $ 5,352,842 Year Ended April 30, 2016 High-Level Excess Liability Pool TERM III AND TERM II COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION -28-