HomeMy WebLinkAboutRA 2010-11 Final Financial Statements 6-30-2011LADE ELSINORE RECREATION AUTHORITY
COMPONENT UNIT
FINANCIAL STATEME
WITH REPORT ON A
Im
LAKE ELSINORE RECREATION AUTHORITY
Independent Auditors' Report
Basic Financial Statements:
Statement of Net Assets
Statement of ActiN
Balance Sheet - G
Reconciliation of t
Sheet to the Stag
Statement of Reve
Fund Balance - t
Reconciliation of t
Revenues, Expel
to the Statement
Notes to Basic Fin
TABLE OF CONTENTS
June 30, 2011
Page
Number
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3
4
5
6
7
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9 20
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, 2011, 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.
As described in Note 5 to the basic financial statements, the Authority has implemented the provisions
of Governmental Accounting Standards Board Statement Number 54, "Fund Balance Reporting and
Governmental Fund Type Definitions ", for the year ended June 30, 2011
-1-
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, 2011, 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.
January 13, 2012
Irvine, California
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LAKE ELSINORE RECREATION AUTHORITY
STATEMENT OF NET ASSETS
June 30, 2011
ASSETS:
Restricted assets:
Cash and investments with fiscal agents (Note 2)
Interest receivable
Lease receivable -\T-+-
QaQ I 1z;L11z;
TOTAL ASSI
LIABILITIES:
Due to City of Lal
Restricted liabiliti
Interest payable
Noncurrent liabili
Due within one
Due in more tha
TOTAL LIAB
NET ASSETS (DEl
Restricted for deb,
Unrestricted
TOTAL NET
See independent auditors' report and notes to basic financial statements.
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Governmental
Activities
$ 105
1,487
13,365,000
13,368,152
13,588
1)487
390,000
12,975,000
13,380,075
105
(13,588)
$ (11,923)
LAKE ELSINORE RECREATION AUTHORITY
STATEMENT OF ACTIVITIES
For the year ended June 30, 2011
Governmental activities:
Interest on long-term debt
Total governmental
activities
$ 38,361 $ -
$ 38,361
enues:
t incor
[al.general revenues
ange in net assets
EFICIT - BEGINNING OF YEAR
EFICIT - END OF YEAR
See independent auditors' report and notes to basic financial statements.
- 4-
1� CIR
(38,361)
32,257
32,257
(6,104)
$
(11,Y23)
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
Total governmental
activities
$ 38,361 $ -
$ 38,361
enues:
t incor
[al.general revenues
ange in net assets
EFICIT - BEGINNING OF YEAR
EFICIT - END OF YEAR
See independent auditors' report and notes to basic financial statements.
- 4-
1� CIR
(38,361)
32,257
32,257
(6,104)
$
(11,Y23)
LAKE ELSINORE RECREATION AUTHORITY
BALANCE SHEET
GOVERNMENTAL FUND
June 30, 2011
ASSETS
Restricted assets:
Cash and investments with fiscal agents
TOTAL ASSFTc
LIABILITIES:
Due to City of Lal
FUND BALANCE
Restricted for deb
Unassigned
TOTAL FUNI
IICel
See independent auditors' report and notes to basic financial statements.
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Debt Service
$ 1,665
1,665
$ 13,588
13,588
1,665
(13,588)
(11,923)
$ 1,665
LAKE ELSINORE RECREATION AUTHORITY
RECONCILIATION OF THE GOVERNMENTAL FUND BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
June 30, 2011
Fund balance (deficit) for governmental fund
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
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 gover
See independent auditors' report and notes to basic financial statements.
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$ (11,923)
13,365,000
1,487
(1,487)
(13,365,000)
$ (11,923)
LAKE ELSINORE RECREATION AUTHORITY
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
GOVERNMENTAL FUND
REVENUES:
Lease payments - principal
Lease payments - interest
'Pn'PAT DU-k7U-\TTTUQ
EXPENDITURES:
Debt service:
Principal retiree
Interest and fise
1 9
EXCESS OF -.
(UNDER) E
FUND BALANCE
FUND BALANCE
For the year ended June 30, 2011
See independent auditors' report and notes to basic financial statements.
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Debt Service
$ 375,000
33,657
408,657
375,000
39,761
414,761
(6,104)
(5,819)
$ (11,923)
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, 2011
Net change in fund balance (deficit) - total governmental fund $
Amounts reported for governmental activities in the Statement of Activities
are different because:
The govemmei
but repaymer
lease receival
Principal le
The governmei
debt as exper
long -term lia
Long-term
Some revenues
financial resc
Interest inc,
Some expenses
use of curren-
fund expendi
Interest and
Change in net assets of governmental activities
See independent auditors' report and notes to basic financial statements.
- 8 -
(6,104)
(375,000)
375,000
(1,400)
=1
$ (6,104)
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2011
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 Rinds of the Authority have been blended within the
financial statements of the City because the .1. .City ity 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:
III 11111111�;I�ti �� 1i iilill�11�1�11�t; �� i �� I I I I . I'll I I ; ,
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 I if
s gm icant 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.
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LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
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 11 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, 2011
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-ten-11
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.
The Authority reports the following major gov
The Debt Service Fund is used to ac
repayment of, long -tenn debt principal,
When both restricted and unrestri
to use restricted resources first, ai
D. Explanation of Differences b
of Net Assets:
so
fund:
mulation of resources for, and the
costs.
are available for use, it is the Authority's policy
icted resources as they are needed.
en the Governmental Fund Balance Sheet and the Statement
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:
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, 2011
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, 2011 were:
Lease receivable 13,365,000
Interest receivable 1,487
Total lease receivable and interest receivable
MAMMIM
Long-term liabilities applicable to the Authority's covernmental activities are not due and
payable in the current period and accordingly are not reported as liabilities in the governmental
fund financial statements. All -term) are reported in the
.1.1abilities. (both current and long
Statement of Net Assets. Balances at the en . d of this fiscal year were:
Interest payable
Long-term liabi.
Total
E. Explanation of
Expenditures and
-term debt liabilities
(1,487)
(13,365,000)
&_(13,366,487)
,es between the Governmental Fund Statement of Revenues,
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 $___375,000)
See independent auditors' report.
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LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
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
Interest on Lease Receivable
Interest receivable on the lease recei
reported as governmental fund revenu(
of Activities:
Interest income
Interest on Long-Term
Interest payabl
not reported
Statement of A
Interest and fis
F. Investments:
is not available as a current resource and is not
oWever, these revenues are reported in the Statement
S (1,400)
i long-tem-i debt does not require the use of current financial resources and is
vernmental fund expenditures. However, these expenses are reported in the
ities.
es
Investments are stated at fair value.
G. Fund Balance:
S
In the governmental fund financial statements, governmental fund types report nonspendable
and restricted fund balance for amounts that are not available for appropriation or are legally
restricted by outside parties for use for a specific purpose. Assigned fund balance represents
tentative management plans that are subject to change.
See independent auditors' report.
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LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
1. REPORTING ENTITY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
H. 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.
2. CASH AND INVESTMENTS:
Cash and Investments
The Authority's cash and investments are
indentures. Investments of cash with fisc
Investments Authorized by Debt
Investments of debt proceeds
agreements, rather than the gen+
authorized for funds held, by be
Sponsored Agency Securities, C
Money Market Mutual Funds. Z
in one issuer, maximum percenta
Disclosures Relating
emen
d by bond trustee are governed by provisions of the debt
l provisions of the California Government Code. Investments
trustee include, U.S. Treasury Obligations, U.S. Government
mercial Paper, Local Agency Bonds, Banker's Acceptance and
,e were no limitations on the maximum amount can be invested
allowed or the maximum maturity of an investment.
to 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 $1,665 consisted of
mutual funds, and the fair value of the mutual funds is not affected by changes in interest rates.
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, 2011, 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.
See independent auditors' report.
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LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
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. 2011 amounted to $13,365,000.
4. LONG-TE
Revenue RE
2000 Seri
Revenue
Refundinj
Bonds:
2000
Series A
Revenue R
2000 Serie
Amount
Authorized
15,660,000
Due Within
One Year
)0 $ 390,000
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.
See independent auditors' report.
-15-
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
4. LONG -TERM LIABILITIES (CONTINUED):
Revenue Refunding Bonds (Continued):
2000 Series A (Continued)
Future debt requirements for the 2000 Series A Revenue Refunding Bonds are as follows:
Year Ending
June 30,
2012
2013
2014
2015
2016
2017-2021
2022 -2026
2027-2031
2032
Totals
Principal
Total
$ 399,355
419,083
438,795
458,495
478,179
2,715,669
3,385,378
4,227,474
960,672
$ 118,100 $ 13,483,100
* 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, 2011 of 0.07% 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.
See independent auditors' report.
-16-
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 'DO, 2011
5. GOVERNMENTAL FUND BALANCE CLASSIFICATIONS:
The Authority has implemented Governmental Accounting Standards Board Statement No. 54,
"Fund Balance Reporting and Governmental Fund Type Definitions", for the year ended
June 30, 2011. The fund balances reported on the fund statements now consist of the following
categories:
Nonspendable Fund Balance - This classification includes amounts' that cannot be spent because
they are either (a) not in spendable form or (b) legally or contractually required to be maintained
intact.
Restricted Fund Balance - This classification includes amounts that can be spent only for specific
purposes stipulated by constitution, external resource providers: or through enabling legislation.
Committed Fund Balance - This classification includes amounts that can be used only for the
specific purposes determined by a f6nn9::,, action of the government's highest level of
decision-making authority.
Assigned Fund Balance - This eld, ss I ification includes amounts to be used by the government for
specific purposes but do not meet the criteria to be classified as restricted or committed. In
governmental funds, other than the general, fund, assigned fund balance represents the remaining
amount that is not restricted or committed.
Unassigned Fund Balance - This classification includes all spendable amounts not contained in
other classifications. The unassigned classification is used only to report a deficit balance resulting
from overspending for specific: purposes for which amounts had been restricted, committed or
assigned.
When an expenditure is incurred for purposes for which both restricted and unrestricted fund
balances are available, the Authority's policy is to apply restricted fund balance first.
When an expenditure is incurred for purposes for which committed, assigned or unassigned fund
balances are available, the Authority's policy is to apply committed fund balance first, then
assigned fund balance, and finally unassigned fund balance.
See independent auditors' report.
-17-
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
6. LIABILITY, PROPERTY AND PROTECTION:
Description Self - Insurance Fool 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 121 California public
entities and is organized under a joint powers agreement pursuant to California Government Code
§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
A revised cost allocation methodology was introduced `in 2010 -11, however it retains many
elements of the previous cost allocation methodology. Each member pays an annual contribution
(formerly called the primary deposit) to cover estimated losses for the coverage period. This initial
funding is paid at the beginning of the coverage period. After the close of the coverage period,
outstanding claims are valued. A retrospective deposit computation is then conducted annually
thereafter until all claims incurred during the coverage period are closed on a pool -wide basis.
This subsequent cost re- allocation among members based on actual claim development can result
in adjustments of either refunds or additional deposits required.
The total funding requirement for self - insurance programs is estimated using actuarial models and
pre - funded through the annual contribution. Costs are allocated to individual agencies based on
exposure (payroll) and experience (claims) relative to other members of the risk- sharing pool.
Additional information regarding the cost allocation methodology is provided below.
See independent auditors' report.
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
6. LIABILITY, PROPERTY AND PROTECTION (CONTINUED):
Self - Insurance Programs of the Insurance Authority (Continued)
General Liability Insurance. In the liability program claims are pooled separately between police
and non - police exposures. (1) The payroll of each member is evaluated relative to the payroll of
other members. A variable credibility factor is determined for each member, which establishes the
weight applied to payroll and the weight applied to losses within the formula. (2) The first layer of
losses includes incurred costs up to $30,000 for each occurrence and is evaluated as a percentage of
the pool's total incurred costs within the first layer. (3) The second layer of losses includes
incurred costs from $30,000 to $750,000 for each occurrence and is evaluated as a percentage of
the pool's total incurred costs within the second layer. (4) Incurred costs in excess of $750,000 up
to the reinsurance attachment point of $5 million are distributed based on the outcome of cost
allocation within the first and second loss layers. (5') Costs of covered claims from $5 million to
$10 million are paid under a reinsurance contract subject to a $2.5 million annual aggregate
deductible. Costs of covered claims from $J.0 million to $15 million are paid under two
reinsurance contracts subject to a combined $3 million annual aggregate deductible. On a
cumulative basis for all 2010 -11 reinsurance contracts the annual aggregate deductible is
$5.5 million. (6) Costs of covered claims from 15 million up to $50 million are covered through
excess insurance policies.
The overall coverage limit for each member including all layers of coverage is $50 million per
occurrence.
Costs of covered claims for subsidence losses are paid by reinsurance and excess insurance with a
pooled sub -limit of $35 million per occurrence. This $35 million subsidence sub -limit is composed
of (a) $5 million retained within the pool's SIR, (b) $10 million in reinsurance and (c) $20 million
in excess insurance. The excess insurance layer has a $20 million annual aggregate.
Purchased. Insurance
All Risk 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 $35,808,267. 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.
See independent auditors' report.
-19-
LAKE ELSINORE RECREATION AUTHORITY
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2011
6. LIABILITY, PROPERTY AND PROTECTION (CONTINUED):
Purchased Insurance (Continued)
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.
Wt Me,
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 Insu ranee, Authority may be obtained at their administrative
office located at 8081 Moody Street, La Palma, California 90623.
7. CONTINGENCIES:
As of June 30,2011, in the,
matters which would have a
Authority.
info
See independent auditors' report.
the Authority's management, there are no outstanding
t effect on the financial condition of the funds of the
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