Help Financial Statements For Year Ended April 30, 20040
0
0
L
•
•
•
11
•
•
•
High -Level Excess
Liability Pool, Illinois
General Purpose Financial Statements
and Independent Auditors' Report
April 30, 2004 and 2003
MILLER COOPER & Co., LTD.
•
•
•
CONTENTS
1
C
•
•
MLLER COOPER & Co., LTD.
Page
•
PRINCIPAL OFFICIALS
3
INDEPENDENT AUDITORS' REPORT
4
GENERAL PURPOSE FINANCIAL STATEMENTS
•
Balance Sheets
6
Statements of Revenues, Expenses, and Changes in Retained Earnings - Budget
and Actual
7
•
Statements of Cash Flows
8
Notes to the Financial Statements
9-15
REQUIRED SUPPLEMENTARY INFORMATION
17-19
•
1
C
•
•
MLLER COOPER & Co., LTD.
•
0
High -Level Excess Liability Pool, Illinois
PRINCIPAL OFFICIALS
April 30, 2004
•
Robert Nowak Chairman
• Mark Horton Vice - Chairman
Gail Paul Secretary
Edward McKee Treasurer
•
C
•
•
•
•
MILLER COOPER & CO., LTD.
•
•
MILLER
CAPER
&Co.)Ltd
ACCOUNTANTS AND CONSULTANTS
INDEPENDENT AUDITORS' REPORT
Members of the Board of Directors
High -Level Excess Liability Pool, Illinois
We have audited the accompanying general purpose financial statements of the High -Level Excess Liability Pool,
Illinois, as of and for the years ended April 30, 2004 and 2003, as listed in the table of contents. These general
purpose financial statements are the responsibility of the High -Level Excess Liability Pool, Illinois' management.
Our responsibility is to express an opinion on these general purpose financial statements based on our audits.
•
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 as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the general purpose financial statements referred to above present fairly, in all material respects,
the financial position of the High -Level Excess Liability Pool, Illinois as of April 30, 2004 and 2003, and the
. results of its operations and its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the general purpose financial statements of
High -Level Excess Liability Pool, Illinois, taken as a whole. The accompanying financial information listed as
. required supplementary information in the accompanying contents, pages 17 through 19, is presented for purposes
of additional analysis are required by the Governmental Accounting Standards Board, and is not a required part of
the general purpose financial statements of the High -Level Excess Liability Pool, Illinois. 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.
Certified Public Accountants
0
Northbrook, Illinois
June 10, 2004
E�
650 DUNDEE ROAD, SUITE 250
NORMROOX IL 60062 -2759
PHONE 847/205 -5000 FAX 847/205 -1400
e -mail mccltd @millercooper.com
GENERAL PURPOSE FINANCIAL STATEMENTS
•
•
•
El
i
•
•
i
MILLER COOPER & CO., LTD.
•
High -Level Excess Liability Pool, Illinois
BALANCE SHEETS
•
April 30, 2004 and 2003
ASSETS
•
CURRENT ASSETS
Cash equivalents and investments
•
•
r
•
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.
-6-
•
MILLER COOPER & Co., LTD.
2004 2003
$ 7,014,349 $ 7,137,854
$ 4,000 $ 4,000
1,332,000 1,948,888
1,336,000 1,952,888
5,678,349 5,184,966
$ 7,014,349 $ 7,137,854
0
•
High -Level Excess Liability Pool, Illinois
STATEMENTS OF REVENUES, EXPENSES AND
CHANGES IN RETAINED EARNINGS - BUDGET AND ACTUAL
Years ended April 30, 2004 and 2003
Operating revenues
Member assessments
• Operating expenses
Risk management consultants
Excess insurance
Claims expense
Attorney's fees
Case review
` Corporate matters
Auditing fees
Surety bonds
Meeting expenses
Office supplies and expense
Memberships and dues
•
Total operating expenses
0
i
U
•
11
Operating income (loss)
Nonoperating revenues (expenses)
Net investment income (expense)
NET INCOME (LOSS)
Retained earnings
Beginning of year
End of year
2004 2003
Budget Actual Budget Actual
$ 1,459,080 $ 1,459,080 $ 1,215,900 $ 1,215,900
35,000
31,500
35,000
40,992
600,000
353,100
400,000
370,375
-
1,090,005
-
608,139
30,000
10,876
30,000
14,221
20,000
4,325
20,000
4,057
5,000
4,600
5,000
13,429
1,000
1,590
1,000
1,068
2,000
138
2,000
-
100
-
100
-
5,500
3,607
5,000
3,094
698,600
1,499,741
498,100
1,055,375
760,480
(40,661)
717,800
160,525
200,000
534,044
150,000
(161,046)
$ 960,480
493,383 $
867,800
(521)
5,184,966 5,185,487
$ 5,678,349 $ 5,184,966
The accompanying notes are an integral part of these statements.
-7-
MILLER COOPER & Co., LTD.
0
High -Level Excess Liability Pool, Illinois
STATEMENTS OF CASH FLOWS
• Years ended April 30, 2004 and 2003
• 2004 2003
Cash flows from operating activities
Operating income (loss) $ (40,661) $ 160,525
Adjustments to reconcile operating income (loss) to net
cash provided by (used in) operating activities
Increase (decrease) in assets and liabilities
• Claims reserve (616,888) 565,888
Net cash provided by (used in) operating activities (657,549) 726,413
•
•
The accompanying notes are an integral part of these statements.
-8-
•
MILLER COOPER & CO., LTD.
Cash flows from investing activities
Sales of investments
485,766
2,669,779
Purchases of investments
(588,957)
(672,099)
Net investment income (loss)
135,994
(154,867)
Net cash provided by investing activities
32,803
1,842,813
INCREASE (DECREASE) IN CASH EQUIVALENTS
(624,746)
2,569,226
•
Cash equivalents
Beginning of year
2,675,105
105,879
End of year
$ 2,050,359 $
2,675,105
•
Reconciliation
Cash equivalents
$ 2,050,359 $
2,675,105
Investments
43963,990
4,462,749
Total cash equivalents and investments
$ 7,014,349 $
7,137,854
•
•
•
The accompanying notes are an integral part of these statements.
-8-
•
MILLER COOPER & CO., LTD.
High -Level Excess Liability Pool, Illinois
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2004 and 2003
• NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of High -Level Excess Liability Pool, Illinois (Intergovernmental' Risk Pool), have
been prepared in conformity with accounting principles generally accepted in the United States of
America (GAAP) 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 Intergovernmental Risk Pool's accounting policies are
described below.
1. Reporting_ Entity and its Services
•
In evaluating how to define the Intergovernmental Risk 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 in GASB Statement
No. 14, "The Financial Reporting Entity ". Based upon the application of these criteria, there are no
• potential component units to be included in the Intergovernmental Risk Pool's reporting entity. The
Intergovernmental Risk Pool is defined as a joint venture under these standards.
The Intergovernmental Risk Pool was organized on April 1, 1987. The current agreement expires on
April 30, 2008. The purpose of the Intergovernmental Risk 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 Intergovernmental Risk Pool. The initial amount of coverage
provided to the members by the Intergovernmental Risk 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 Intergovernmental Risk Pool for subsequent years is as follows:
in
•
MILLER COOPER & CO., LTD.
Member
Pool
Pool
Total
Year 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 -2003
1,000,000
3,000,000
8,000,000
12,000,000
2004
2,000,000
3,000,000
7,000,000
12,000,000
in
•
MILLER COOPER & CO., LTD.
•
High -Level Excess Liability Pool, Illinois
NOTES TO THE FINANCIAL STATEMENTS
• April 30, 2004 and 2003
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1. Reporting Entity and its Services (Continued)
Entities applying for membership in the Intergovernmental Risk Pool may do so on approval of a two-
•
100,00% 100,00% $ 17,190,800
-10-
•
MILLER COOPER & CO., LTD.
thirds vote of the Board of the Intergovernmental Risk Pool. Underwriting and rate - setting policies
have been established after consultation with risk management consultants and
attorneys. Members
are subject to a supplemental assessment in the event of deficiencies.
At April 30, 2004, the following municipalities were members of the Intergovernmental Risk Pool:
•
% Share
Current
Assets,
Cumulative
Annual
Liabilities,
Premium
Premium
and Equity
Contributions
Village of Arlington Heights
11.61
% 11.81 % $
2,027,859
Village of Chicago Ridge
2.57
2.48
426,619
Village of Deerfield
3.31
3.53
607,146
City of Des Plaines
9.25
10.08
1,733,656
Elk Grove Village
7.60
7.73
1,328,464
Village of Glenview
8.84
7.06
1,213,346
Village of Hoffman Estates
8.56
7.81
1,342,045
Village of Lincolnshire
1.77
1.56
267,901
Village of Mount Prospect
7.48
7.39
1,270,860
Village of Oak Lawn
8.75
9.31
1,599,807
City of Park Ridge
5.75
5.74
987,602
Village of Skokie
8.88
9.69
1,666,604
Village of Streamwood
4.40
4.36
750,268
City of Wheaton
7.51
7.38
1,268,238
Village of Winnetka
3.72
4.07
700,385
•
100,00% 100,00% $ 17,190,800
-10-
•
MILLER COOPER & CO., LTD.
•
High -Level Excess Liability Pool, Illinois
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2004 and 2003
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2. Fund Accounting
The Intergovernmental Risk 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. Goods or services from such activities are provided to outside parties. Its operations
are such that:
• a) The Intergovernmental Risk Pool provides risk management services to its member
municipalities,
and
•
•
•
•
b) Members fund the Intergovernmental Risk Pool to cover the costs of providing such services.
3. Basis of Accounting
The accounting and financial reporting treatment applied to a fund is determined by its measurement
focus.
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 Intergovernmental Risk 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 pronouncements.
-11-
•
MILLER COOPER & Co., LTD.
•
High -Level Excess Liability Pool, Illinois
NOTES TO THE FINANCIAL STATEMENTS
• April 30, 2004 and 2003
• NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
4. Budgets
Budgets are adopted on a basis consistent with GAAP. Annual budgets are adopted for the
Intergovernmental Risk Pool. All annual budgets lapse at fiscal year -end.
5. Cash Eovalents
For purposes of the statement of cash flows, the Intergovernmental Risk Pool considers all highly
• liquid investments with a maturity of three months or less when purchased to be cash equivalents.
6. Claims Reserve Liabilities
The Intergovernmental Risk 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 (Note E).
• 7. 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 Intergovernmental
Risk Pool is uncertain, management believes that actual results could differ materially from those
estimates.
•
-12-
•
MILLER COOPER & Co., LTD.
•
High -Level Excess Liability Pool, Illinois
NOTES TO THE FINANCIAL STATEMENTS
• April 30, 2004 and 2003
• 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.
The budget may be amended by a majority vote of the governing body. No amendments were passed for
2004 and 2003.
NOTE C - DEPOSITS AND INVESTMENTS
1. Permitted Deposits and Investments
• The Intergovernmental Risk Pool's investment policy is more restrictive than State Statutes. The
Intergovernmental Risk Pool 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, 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 (with credit risk, limited to 45% of
portfolio).
2. Investments
• The Intergovernmental Risk Pool's investments are categorized to give an indication of the level of risk
assumed by the entity at year -end. Category 1 includes investments that are insured or registered for
which the securities are held by the Intergovernmental Risk Pool or its agent in the Intergovernmental
Risk Pool's name. Category 2 includes uninsured and unregistered investments for which the securities
are held by the counterparty's trust department or agent in the Intergovernmental Risk Pool's name.
• Category 3 includes uninsured and unregistered investments for which the securities are held by the
counterparty, or by its trust department or agent but not in the Intergovernmental Risk Pool's name and
uninsured, unregistered, and uncollateralized investments.
•
-13-
•
MILLER COOPER & Co., LTD.
•
High -Level Excess Liability Pool, Illinois
NOTES TO THE FINANCIAL STATEMENTS
• April 30, 2004 and 2003
• NOTE C - DEPOSITS AND INVESTMENTS (Continued)
2. Investments (Continued)
Category Fair Value
• 1 2 3 2004 2003
Common stocks $ 2,490,016 $ - $ - $ 2,490,016 $ 2,017,390
Not subject to risk categories
• Money market mutual funds 97,118 92,919
Illinois Metropolitan Investment Fund 2,376,856 2,352,440
Illinois Funds 2,050,359 2,675,105
•
•
$ 7,014,349 $ 7,137,854
The money market funds are secured by the Securities Investor Protection Corporation (SIPC) and additional
private insurance. The Illinois Funds are managed by the Illinois State Treasurer as provided by the State
Statutes, and the Illinois Metropolitan Investment Fund is managed by the financial institutions in which it is
held. The market value of each fund equals the carrying value.
NOTE D - CONTINGENT LIABILITIES - LITIGATION
There are several claims and legal actions pending against members of the Intergovernmental Risk Pool.
Management and their legal counsel believe that certain actions against the members could result in losses to
• the Intergovernmental Risk 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.
•
[1
-14-
•
AtLLER COOPER & Co., LTD.
Ll
•
•
•
High -Level Excess Liability Pool, Illinois
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2004 and 2003
NOTE E - CLAIMS RESERVE LIABILITIES
As discussed in Note A, the Intergovernmental Risk 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, 2004 and 2003.
Unpaid claims and claims adjustment expenses at
the beginning of the fiscal year
Incurred claims and claims adjustment expenses
Provision for insured events of the current
fiscal year
Increases in provision for insured events of prior
2004 2003
$ 1,948,888 $ 1,383,000
- 505,000
fiscal years 1,090,005
Total incurred claims and claims adjustment expenses 1,090,005
• 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
-15-
1,706,893
1,706,893
103,139
608,139
42,251
42,251
$ 1,332,000 $ 1,948,888
•
MILLER COOPER & Co., LTD.
0
0
•
cl
C
•
•
•
•
•
REQUIRED SUPPLEMENTARY INFORMATION
MILLER COOPER & CO., LTD.
0
High -Level Excess Liability Pool, Illinois
• REQUIRED SUPPLEMENTARY INFORMATION
April 30, 2004 and 2003
0 Ten -Year Claims Development Information
C
•
•
•
C
The table following illustrates how the Intergovernmental Risk Pool's earned revenues and investment
income compare to related costs of losses and other expenses assumed by the Intergovernmental Risk 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 Intergovernmental Risk Pool, including overhead and
claims expense not allocable to individual claims. (3) This line shows the Intergovernmental Risk 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).
-17-
MILLER COOPER & Co., LTD.
r'
r'
•
0
-19-
MILLER COOPER & CO., LTD.
1998
1999
2000
2001
2002
2003
2004
$ 1,393,815 $
1,741,861 $
1,462,539 $
1,546,330 $
1,316,531 $
1,054,854 $
1,993,124
243,466
155,438
195,627
178,869
295,634
433,015
398,860
0
0
0
0
0
505,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
268,760
0
0
0
0
0
0
0
0
505,000
0
0
0
0
0
0
505,000
0
0
0
0
502,000
0
0
360,000
0
0
0
593,760
0
0
0
0
0
593,760
0
502,000
0
0
0
-19-
MILLER COOPER & CO., LTD.
MILLER
CAPER
&Co.)Ltd
ACCOUNTANTS AND CONSULTANTs
Members of the Board of Directors
High -Level Excess Liability Pool, Illinois
In planning and performing our audit of the financial statements of the High -Level Excess Liability Pool,
Illinois (the Pool) for the year ended April 30, 2004, we considered its internal control in order to
determine our auditing procedures for the purpose of expressing our opinion on the financial statements
and not to provide assurance on internal control.
However, we noted a matter that is an opportunity for strengthening internal controls and operating
efficiency.
Because of inherent limitation of internal control, errors or irregularities may nevertheless occur and not
be detected. Also, projection of any evaluation of the internal control to future periods is subject to the
risk that may become inadequate because of changes in conditions or that the degree of compliance may
deteriorate.
Our comment and suggestion follows:
Claims Expense Budget
The Pool does not budget for claims expense in the annual budget approved by the board. We believe the
Pool would benefit from the inclusion of an estimated claims expense budget to provide a more accurate
prediction of the Pool's financial position.
Management Response:
Management does not believe it is possible to accurately project settlement payments.
This report is intended solely for the information and use of the Board of Directors, management and
others within the Pool and is not intended to be and should not be used by anyone other than these
specified parties. We appreciate serving the Pool and would be happy to assist you in addressing and
implementing any of the suggestions in this letter.
MILLER, COOPER & CO., LTD.
Certified Public Accountants
Northbrook, Illinois
June 10, 2004
MMY mpt oa Ise 650 DUNDEE ROAD, SUITE 250
NOKMROOK. IL 60062 -2759
PHONE 847/205 -5000 FAX 847/205 -1400
e -mail mccltd@millercooper.com