HomeMy WebLinkAboutREC Fin Stmt Final 2-16-11LAKE ELSINORE RECREATION AUTHORITY
COMPONENT UNIT
FINANCIAL STATEMENTS.
WITH REPORT ON AUDIT
BYINDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
JUNE 30, 2010
LAKE ELSINORE RECREATION AUTHORITY
TABLE OF CONTENTS
June 30, 2010
Page
Number
Independent Auditors' Report 1 - 2
Basic Financial Statements:
Statement of Net Assets 3
Statement of Activities 4
Balance Sheet - Governmental Fund 5
Reconciliation of the Governmental Fund Balance
Sheet to the Statement of Net Assets 6
Statement of Revenues, Expenditures and Changes in
Fund Balance - Governmental Fund 7
Reconciliation of the Governmental Fund Statement of
Revenues, Expenditures and Changes in Fund Balance
to the Statement of Activities 8
Notes to Basic Financial Statements 9-19
DIEHL, EVANS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
MICHAEL R LUDIN, CPA
APARTNERSHIP INCLUDING ACCOUNTANCY CORPORATIONS CRAIG W. SPRAKER, CPA
NITIN P. PATEL, CPA
ROBERT J. CALLANAN, CPA
5 CORPORATE PARK SUITE 100 *PHILIP H. HOLTKAMP, CPA
*THOMAS M. PERLOWSKI, CPA
IRVINE, CALIFORNIA 92606 -5165 *HARVEY I. SCHROEDER, CPA
(949) 399 -0600 • FAX (949) 399 -0610 KENNETH R. AMES, CPA
www.diehleyans.com WILLIAM C. PENTZ, CPA
February 7, 2011 *A PROFESSIONAL CORPORATION
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Lake Elsinore Recreation Authority
Lake Elsinore, California
We have audited the accompanying financial statements of the governmental activities and the major
fund of the Lake Elsinore Recreation Authority (the Authority), (a component unit of the City of Lake
Elsinore, California), as of and for the year ended June 30, 2010, which collectively comprise the
Authority's basic financial statements, as listed in the table of contents. These financial statements are
the responsibility of the Authority's management. Our responsibility is to express opinions 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 basic financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Authority's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinions.
As described more fully in Note 1A, the basic component unit financial statements present only the
Authority and are not intended to present fairly the financial position and results of operations of the
City of Lake Elsinore, California in conformity with accounting principles generally accepted in the
United States of America.
-1-
OTHER OFFICES AT: 2965 ROOSEVELT STREET 613 W. VALLEY PARKWAY, SUITE 330
CARLSBAD, CALIFORNIA 92008 -2389 ESCONDIDO, CALIFORNIA 92025 -2598
(760) 729 -2343 • FAX (760) 729 -2234 (760) 741 -3141 • FAX (760) 741 -9890
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities and the major fund of the Authority as of
June 30, 2010, and the respective changes in financial position thereof for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
The Authority has not presented the management's discussion and analysis that accounting principles
generally accepted in the United States of America require to be presented to supplement the basic
financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing
information.
-2-
LAKE ELSINORE RECREATION AUTHORITY
STATEMENT OF NET ASSETS
June 30, 2010
Governmental
Activities
ASSETS:
Restricted assets:
Cash and investments with fiscal agents (Note 2) $ 3,065
Interest receivable 2,887
Lease receivable (Note 3) 13,740,000
TOTAL ASSETS 13,745,952
LIABILITIES:
Due to City of Lake Elsinore
8,884
Restricted liabilities:
Interest payable
2,887
Noncurrent liabilities (Note 4):
Due within one year
375,000
Due in more than one year
13,365,000
TOTAL LIABILITIES
NET ASSETS (DEFICIT):
Restricted for debt service
Unrestricted
TOTAL NET DEFICIT
13,751,771
3,065
(8,884)
$ (5,819)
See independent auditors' report and notes to basic financial statements.
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LAKE ELSINORE RECREATION AUTHORITY
STATEMENT OF ACTIVITIES
For the year ended June 30, 2010
Net (Expense)
Revenue and
Changes in
Program Revenues Net Assets
Charges Operating Capital
for Grants and Grants and Governmental
Functions /programs Expenses Services Contributions Contributions Activities
Governmental activities:
Interest on long -term debt $ 36,077 $ - $ - $ - $ (36,077)
Total governmental
activities $ 36,077 $ - $ - $ - (36,077)
General revenues:
Investment income
Total general revenues
Change in net assets
NET DEFICIT - BEGINNING OF YEAR
NET DEFICIT - END OF YEAR
See independent auditors' report and notes to basic financial statements.
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32,740
32,740
(3,337)
(2,482)
$ (5,819)
LAKE ELSINORE RECREATION AUTHORITY
BALANCE SHEET
GOVERNMENTAL FUND
June 30, 2010
Debt Service
ASSETS
Restricted assets:
Cash and investments with fiscal agents $ 3,065
TOTAL ASSETS $ 3,065
ZOO 1180 LIVOW Hy"'Wow
LIABILITIES:
Due to City of Lake Elsinore $ 8,884
TOTAL LIABILITIES 8,884
FUND BALANCE (DEFICIT):
Reserved for debt service
Unreserved, undesignated
TOTAL FUND BALANCE (DEFICIT)
TOTAL LIABILITIES AND FUND BALANCE
See independent auditors' report and notes to basic financial statements.
-5-
3,065
(8,884)
(5,819)
$ 3,065
LAKE ELSINORE RECREATION AUTHORITY
RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
June 30, 2010
Fund balance (deficit) for governmental fund
$ (5,819)
Amounts reported for governmental activities in the Statement of Net Assets
are different because:
Long -term assets which are not considered to be current financial
resources are not reported in the governmental fund:
Lease receivable
Interest receivable
13,740,000
2,887
Long -term liabilities are not due and payable in the current period
are not reported in the governmental fund:
Interest payable
Long -term liabilities
Net deficit of governmental activities
(2,887)
(13,740,000)
$ (5,819)
See independent auditors' report and notes to basic financial statements.
M
LAKE ELSINORE RECREATION AUTHORITY
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUND
For the year ended June 30, 2010
See independent auditors' report and notes to basic financial statements.
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Debt Service
REVENUES:
Lease payments - principal
$ 355,000
Lease payments - interest
32,251
TOTAL REVENUES
387,251
EXPENDITURES:
Debt service:
Principal retirement
355,000
Interest and fiscal charges
35,588
TOTAL EXPENDITURES
390,588
EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES
(3,337)
FUND BALANCE (DEFICIT) - BEGINNING OF YEAR
(2,482)
FUND BALANCE (DEFICIT) - END OF YEAR
$ (5,819)
See independent auditors' report and notes to basic financial statements.
-7-
LAKE ELSINORE RECREATION AUTHORITY
RECONCILIATION OF THE GOVERNMENTAL FUND STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
TO THE STATEMENT OF ACTIVITIES
For the year ended June 30, 2010
Net change in fund balance (deficit) - total governmental fund
Amounts reported for governmental activities in the Statement of Activities
are different because:
The governmental fund reports the receipt of lease payments as revenue,
but repayments of the principal are included as a reduction of the
lease receivable in the Statement of Net Assets.
Principal lease payments
The governmental fund reports retirement of the principal of long -term
debt as expenditures, but retirements are included as a reduction of
long -term liabilities in the Statement of Net Assets.
Long -term debt principal payments
Some revenues reported in the Statement of Activities are not current
financial resources and are not reported as governmental fund revenues.
Interest income
Some expenses reported in the Statement of Activities do not require the
use of current financial resources and are not reported as governmental
fund expenditures.
Interest and fiscal charges
Change in net assets of governmental activities
See independent auditors' report and notes to basic financial statements.
$ (3,337)
(355,000)
355,000
MU
(489)
$ (3,337)
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2010
1. REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES:
A. Description of the Reporting Entity:
The Lake Elsinore Recreation Authority (the Authority) is a joint exercise of powers between
the City of Lake Elsinore (the City) and the Lake Elsinore Redevelopment Agency (the
Agency), created by a joint powers agreement dated December 1, 1996. The purpose of the
Authority is to provide, through the issuance of revenue bonds, a financing pool to fund capital
improvement projects. These revenue bonds are to be repaid solely from the revenues of
certain public obligations. The Authority does not have taxing power. The City Council also
acts as the governing body of the Authority. The Authority's activities in these financial
statements are reported as a debt service fund.
The Authority is a component unit of the City and, accordingly, the financial statements of the
Authority are included in the financial statements of the City. The Authority is an integral part
of the reporting entity of the City. The funds of the Authority have been blended within the
financial statements of the City because the City Council of the City is the governing board of
the Authority and exercises control over the operations of the Authority. Only the funds of the
Authority are included herein, therefore, these financial statements do no purport to represent
the financial position or results of operations of the City.
B. Basis of Presentation:
The accounting policies of the Authority conform to accounting principles generally accepted
in the United States of America as they are applicable to governmental units. The
Governmental Accounting Standard Board (GASB) is the accepted standard setting body for
establishing governmental accounting and financial reporting principles. The more significant
accounting policies reflected in the financial statements are summarized as follows:
Government -Wide and Fund Financial Statements
The government -wide financial statements (i.e., the Statement of Net Assets and the Statement
of Activities) report information on all of the nonfiduciary activities of the primary government
(the Authority). Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are reported separately from business -type activities, which rely to
a significant extent on fees and charges for support. All Authority activities are governmental;
no business -type activities are reported in the statements.
See independent auditors' report.
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
1. REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
B. Basis of Presentation (Continued):
Government -Wide and Fund Financial Statements (Continued)
The Statement of Activities demonstrates the degree to which the direct expenses of a given
function or segment are offset by program revenues. Direct expenses are expenses that are
clearly identifiable with a specific program, project, function or segment. The Authority does
not have program revenues. Taxes and other items that are properly not included among
program revenues are reported instead as general revenues.
As part of the basic financial statements, separate fund financial statements are provided for
governmental funds.
The Authority has only one governmental fund, which is reported as a major fund.
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation:
The government -wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Under the economic resources
measurement focus, all assets and liabilities (whether current or noncurrent) associated with
their activity are included on their balance sheets. Operating statements present increases
(revenues) and decreases (expenses) in total net assets. Under the accrual basis of accounting,
revenues are recorded when earned and expenses are recorded when a liability is incurred,
regardless of the timing of related cash flows.
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Under the current financial
resources measurement focus, only current assets and current liabilities are generally included
on their balance sheets. The reported fund balance (net current assets) is considered to be a
measure of "available spendable resources ". Governmental fund operating statements present
increases (revenues and other financing sources) and decreases (expenditures and other
financing uses) in net current assets. Accordingly, they are said to present a summary of
sources and uses of "available spendable resources" during a period.
See independent auditors' report.
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LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
1. REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued):
Under the modified accrual basis of accounting, revenues are considered to be available when
they are collectible within the current period or soon enough thereafter to pay liabilities of the
current period. For this purpose, the government considers revenues to be available if they are
collected within 60 days of the end of the current fiscal period. Expenditures generally are
recorded when a liability is incurred, except for principal and interest on general long -term
liabilities which are recognized as expenditures to the extent they have matured. Proceeds of
general long -term liabilities are reported as other financing sources. Interest associated with
the current fiscal period is considered to be susceptible to accrual, and are therefore recognized
as revenues on the current fiscal period.
All government -wide statements of the Authority follow FASB Statements and Interpretations
issued on or before November 30, 1989, Accounting Principles Board Opinions and Accounting
Research Bulletins, unless those pronouncements conflict with GASB pronouncements.
The Authority reports the following major governmental fund:
The Debt Service Fund is used to account for the accumulation of resources for, and the
repayment of, long -term debt principal, interest and related costs.
When both restricted and unrestricted resources are available for use, it is the Authority's policy
to use restricted resources first, and then unrestricted resources as they are needed.
D. Explanation of Differences between the Governmental Fund Balance Sheet and the Statement
of Net Assets:
These differences from the long -term economic focus of the Statement of Net Assets versus the
current financial resources focus on the Governmental Fund Balances Sheets are described
below:
Lease Receivable and Interest Receivable
The lease receivable and related interest receivable applicable to the Authority's governmental
activities are not current resources and accordingly are not reported as assets in the
governmental fund financial statements. All receivables (both current and long -term) are
reported on the Statement of Net Assets.
See independent auditors' report.
-11-
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
1. REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
D. Explanation of Differences between the Governmental Fund Balance Sheet and the Statement
of Net Assets (Continued):
Lease Receivable and Interest Receivable (Continued)
Balances at June 30, 2010 were:
Lease receivable $ 13,740,000
Interest receivable 2,887
Total lease receivable and interest receivable $ 13.742.887
Long -Term Debt Liabilities
Long -term liabilities applicable to the Authority's governmental activities are not due and
payable in the current period and accordingly are not reported as liabilities in the governmental
fund financial statements. All liabilities (both current and long -term) are reported in the
Statement of Net Assets. Balances at the end of this fiscal year were:
Interest payable $ (2,887)
Long -term liabilities (13,740,000)
Total long -term debt liabilities (13.742.887)
E. Explanation of Differences between the Governmental Fund Statement of Revenues,
Expenditures and Changes in Fund Balance and the Statement of Activities:
These differences arise from the long -term economic focus of the Statement of Activities versus
the current financial resources focus of the governmental funds are described below:
Lease Receivable Payments
Some revenues reported in the Statement of Revenues, Expenditures and Changes in Fund
Balances are included as an addition or deletion of lease receivable in the Statement of Net
Assets.
Principal payment on lease (355.000)
See independent auditors' report.
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LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
1. REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
E. Explanation of Differences between the Governmental Fund Statement of Revenues,
Expenditures and Changes in Fund Balance and the Statement of Activities (Continued):
Long -Term Debt Principal Payments
Some expenditures reported in the Statement of Revenues, Expenditures and Changes in Fund
Balances are included as an addition or deletion of long -term liabilities in the Statement of Net
Assets.
Long -term debt principal payments S 355,000
Interest on Lease Receivable
Interest receivable on the lease receivable is not available as a current resource and is not
reported as governmental fund revenues. However, these revenues are reported in the Statement
of Activities:
Interest income
Interest on Long -Term Debt
$ 489
Interest payable on long -term debt does not require the use of current financial resources and is
not reported as governmental fund expenditures. However, these expenses are reported in the
Statement of Activities.
Interest and fiscal charges $ RM
F. Investments:
Investments are stated at fair value.
G Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenditures /expenses during the reporting period. Actual results could differ
from those estimates.
See independent auditors' report.
-13-
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
2. CASH AND INVESTMENTS:
Cash and Investments
The Authority's cash and investments are held by outside fiscal agents under provisions of the bond
indentures. Investments of cash with fiscal agent are governed by the trust indenture.
Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustee are governed by provisions of the debt
agreements, rather than the general provisions of the California Government Code. Investments
authorized for funds held by bond trustee include, U.S. Treasury Obligations, U.S. Government
Sponsored Entity Obligations, Commercial Paper, Local Agency Bonds, Banker's Acceptance and
Money Market Mutual Funds. There were no limitations on the maximum amount can be invested
in one issuer, maximum percentage allowed or the maximum maturity of an investment.
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value
of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of
its fair value to changes in market interest rates. One of the ways that the Authority manages its
exposure to interest rate risk is by purchasing shorter term investments to provide the cash flow and
liquidity needed for operations. The Authority's cash and investments of $3,065 consisted of
mutual funds, and the fair value of the mutual funds is not affected by changes in interest rates.
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally recognized
statistical rating organization. At June 30, 2010, the minimum required rating for the investment in
mutual funds is A. The actual rating by Standard and Poor's of the investment was AAA.
3. LEASE RECEIVABLE:
The Authority has entered into a lease agreement with the City to lease certain recreation facilities
financed with the proceeds of the 2000 Series A Revenue Refunding Bonds and prior bonds
(1997 Series A Bonds). Under the lease agreement, the Authority receives lease payments in an
amount to pay the debt service on the 2000 Series A Revenue Refunding Bonds (see Note 4). The
lease receivable balance at June 30, 2010 amounted to $13,740,000.
See independent auditors' report.
-14-
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
4. LONG -TERM LIABILITIES:
June 30, 2010
Date of Years of Rate of Amount
Issue Maturity Interest Authorized
Revenue Refunding Bonds:
2000 Series A 7/00 2005 -2032 Variable $ 15,660,000
Outstanding Outstanding Due Within
June 30, 2009 Additions Retirements June 30, 2010 One Year
Revenue
Refunding
Bonds:
2000
Series A 14.095.000 $ - $ 355.000 13.740.000 $ 375,000
Revenue Refunding Bonds:
2000 Series A
In July 2000, $15,660,000 principal amount of Revenue Refunding Bonds, Series A was issued in
accordance with the indenture to provide funds to finance the Authority's lease of certain City
recreation facilities from the City for lease back to the City and refund the 1997 Series A Revenue
Bonds. The term bonds are due in annual installments of $300,000 to $960,000 from
February 1, 2006 through February 1, 2032; interest is variable. The Bonds are subject to call and
redemption prior to their stated maturity commencing February 1, 2002, at specified redemption
prices.
Future debt requirements for the 2000 Series A Revenue Refunding Bonds are as follows:
Year Ending
June 30.
2011
2012
2013
2014
2015
2016-2020
2021-2025
2026-2030
2031-2032
Totals
See independent auditors' report.
Principal
$ 375,000
390,000
410,000
430,000
450,000
2,565,000
3,210,000
4,030,000
1,880,000
13.740,000
-15-
Interest *
$ 27,480
26,730
25,950
25,130
24,270
107,040
78,930
43,700
5,680
$ 364.910
Total
$ 402,480
416,730
435,950
455,130
474,270
2,672,040
3,288,930
4,073,700
1,885,680
14.104.910
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
4. LONG -TERM LIABILITIES (CONTINUED):
Revenue Refunding Bonds (Continued):
2000 Series A (Continued)
* Interest on the bonds is payable on the first of each month, so long as the bonds bear
interest at a variable interest rate, and after conversion to a fixed rate, interest will be
payable on February 1 and August 1 of each year. The amount of the payments are not yet
known due to the variable interest rate which is calculated weekly. For purposes of this
schedule, the interest rate at June 30, 2010 of 0.20% was used to calculate the future
interest payments.
If for any reason the Remarketing Agent does not set a variable rate on the second Business Day of
a calendar week, then the variable rate for that period will remain at the variable rate set for the
immediately preceding Wednesday through Tuesday period. If a court holds that the variable rate
set for any period is invalid or unenforceable, the variable rate for that period, will be set, as
determined by the Remarketing Agent, as the rate that is equal to the 30 -day tax- exempt or taxable
commercial paper rate, as appropriate, published in The Bond Buyer (or any successor to such
publication) as of the date of determination of the unenforceable rate or, in the event The Bond
Buyer (or any such successor) is no longer published, any other newspaper or journal containing
financial news, printed in the English language and customarily published on each business day, or
general circulation in New York, New York and selected by the Authority, whose decision will be
final and conclusive.
5. FUND BALANCE RESERVE:
At June 30, 2010, the debt service fund balance of $3,065 was reserved. This reserve was
established for cash restrictions for future debt service in such a manner that they will not be
considered as current available funds.
See independent auditors' report.
-16-
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
6. LIABILITY, PROPERTY AND PROTECTION:
Description Self- Insurance Pool Pursuant to Joint Powers Agreement
To account for risks of loss and liability claims, the Authority participates in the City's liability,
property and protection policy. The City is a member of the California Joint Powers Insurance
Authority (Insurance Authority). The Insurance Authority is composed of 122 California public
entities and is organized under a joint powers agreement pursuant to California Government Code
Section 6500 et. seq. The purpose of the Insurance Authority is to arrange and administer
programs for the pooling of self - insured losses, to purchase excess insurance or reinsurance, and to
arrange for group purchased insurance for property and other coverages. The Insurance Authority's
pool began covering claims of its members in 1978. Each member government has an elected
official as its representative on the Board of Directors. The Board operates through a 9- member
Executive Committee.
Self- Insurance Programs of the Insurance Authority
General Liability Insurance
Each member government pays a primary deposit to cover estimated losses for a fiscal year (claims
year). After the close of a fiscal year, outstanding claims are valued. A retrospective deposit
computation is then made for each open claims year. Claims are pooled separately between police
and non - police. Costs are allocated to members by the following methods within each of the four
layers of coverage: (1) the first $30,000 of each occurrence is charged directly to the member's
primary deposit; (2) costs from $30,000 to $750,000 and the loss development reserves associated
with losses up to $750,000 are pooled based on the member's share of losses under $30,000;
(3) losses from $750,000 to $2,000,000 and the associated loss development reserves are pooled
based on payroll; (4a) costs of covered claims from $2,000,000 to $50,000,000 are paid under
reinsurance and excess insurance policies; (4b) subject to a $3,000,000 annual aggregate
deductible; (4c) and a quota - sharing agreement whereby the Insurance Authority is financially
responsible for 40% of losses occurring within the $2,000,000 to $10,000,000 layer. The costs
associated with 4a -c are estimated using actuarial models and pre - funded as part of the primary and
retrospective deposits.
The overall policy limit for each member including all layers of coverage is $50,000,000 per
occurrence. Costs of covered claims for subsidence losses are paid by excess insurance with the
following sub - limits per member: $25,000,000 per occurrence with a $15,000,000 annual
aggregate.
See independent auditors' report.
-17-
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
6. LIABILITY, PROPERTY AND PROTECTION (CONTINUED):
Purchased Insurance
Environmental Insurance
The City participates in the pollution legal liability and remediation legal liability insurance which
is available through the Insurance Authority. The policy covers sudden and gradual pollution of
scheduled property, streets and storm drains owned by the City. Coverage is on a claims -made
basis. There is a $50,000 deductible. The Insurance Authority has a limit of $50,000,000 for the
3 -year period from July 1, 2008 through July 1, 2011. Each member of the Insurance Authority has
a $10,000,000 limit during the 3 -year term of the policy.
Property Insurance
The City participates in the all -risk property protection program of the Insurance Authority. This
insurance protection is underwritten by several insurance companies. The City's property is
currently insured according to a schedule of covered property submitted by the City to the
Insurance Authority. The City's property currently has all -risk property insurance protection in the
amount of $34,672,957. There is a $5,000 deductible per occurrence except for non - emergency
vehicle insurance which has a $1,000 deductible. Premiums for the coverage are paid annually and
are not subject to retroactive adjustments.
Crime Insurance
The City purchases crime insurance coverage in the amount of $1,000,000 with a $2,500
deductible. The fidelity coverage is provided through the Insurance Authority. Premiums are paid
annually and are not subject to retroactive adjustments.
Adequacy of Protection
During the past three fiscal (claims) years, none of the above programs of protection have had
settlements or judgments that exceeded pooled or insured coverage. There have been no significant
reductions in pooled or insured liability coverage from coverage in the prior year.
The aforementioned information is not included in the accompanying financial statements.
Complete financial statements for the Insurance Authority may be obtained at their administrative
office located at 8081 Moody Street, La Palma, California 90623.
See independent auditors' report.
InIE
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
7. CONTINGENCIES:
As of June 30, 2010, in the opinion of the Authority's management, there are no outstanding
matters which would have a significant effect on the financial condition of the funds of the
Authority.
See independent auditors' report.
-19-