A N N U A L R E P O R T

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1 CALIFORNIA JOINT POWERS RISK MANAGEMENT AUTHORITY A N N U A L R E P O R T

2 Accredited With Excellence California Joint Powers Risk Management Authority has been Accredited with Excellence by the California Association of Joint Powers Authorities (CAJPA) since May 28, Cover Photo : Petaluma Public Library

3 Mission Statement The California Joint Powers Risk Management Authority is a public agency pool dedicated to protecting its members from catastrophic losses by providing: Comprehensive Property and Excess Liability Coverage Financial Stability Quality Risk Management Support

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5 Table of Contents Message from the General Manager... About California Joint Powers Risk Management Authority... Staff... Members Board of Directors Committees... General Liability Program... Optional Coverage Programs... Property... Boiler & Machinery... Automobile Physical Damage... The Risk Management Program... Facts & Figures... Total Assets Member Payroll Rates & Claims Expenses vs. Investment Income Premiums vs. Redistributions... Redistributions... Net Cost & Net Benefits Property Values & Rates Management s Discussion & Analysis Independent Auditor s Report... 33

6 Message from the General Manager When the founders created CJPRMA twenty-one years ago, they did so with the idea that the organization would eventually become financially self-sustaining. Their approach was simple. First, provide a level of coverage that was practical, realistic and sufficient to meet the needs of the members in most situations. Second, control expenses by keeping policies and administrative services focused on the mission the provision of excess liability coverage. Third, create a fund that was large enough to generate a level of investment income sufficient to pay most losses. In order to achieve this, the members paid a rate, in 1986, that was double that which is being charged today. They also agreed to leave those funds in the CJPRMA investment program, for as long as was necessary, in order to create financial stability. Their goal was to keep the program simple in order to make it effective. They knew that they couldn t be all things to all members so they focused on being the one thing that everyone needed. They provided liability coverage at the excess level. As we are well aware, changing conditions require flexibility in order to deal with new challenges. Today, there are several issues facing the organization. One is the loss of historical perspective, due to attrition. A second is the developing dependence upon CJPRMA for programs and services which were originally provided by the members. A third is financial in nature. Members have become concerned about the cost of increasing contributions. With regard to expenses, there has been a very substantial increase from pre-year 2000 levels. The cost of purchasing commercial reinsurance is several million dollars a year. In addition, CJPRMA has implemented an extensive risk management program which will need to be expanded even further in the future. As with most things cyclical, member risk management programs no longer seem to be given the level of importance they had during the period of time when liability coverage was difficult, if not impossible, to obtain. With severely restricted budgets, these programs have to compete for very limited financial resources. Some member programs have been reduced or actually eliminated. CJPRMA established its risk management program in 2003 in order to assist its members by supplementing their existing programs. With regard to coverage, up until the year 2000, the limit was $10 million and was completely self-funded. Today, the limit is $40 million, with $35 million being purchased on the commercial reinsurance market. California Joint Powers 1 Risk Management Authority

7 The reasons for this change in policy were twofold. One was that some very large verdicts had been returned against other public entities. There was concern that a verdict in excess of the existing coverage limit would hit one or more of the members, with devastating financial results. The second was that other JPAs had increased their coverage limits to much higher levels. In order to be competitive, it was felt that CJPRMA s limits should be increased, as well. When it was originally established, there was an agreed, specific division of responsibilities between CJPRMA and its members. CJPRMA was responsible for providing excess liability coverage and the members were responsible for creating and funding effective risk management programs. These included management of the frequency and severity of their own claims, provision of effective loss control training and inspection programs, and funding their own expenses with regard to training, conferences, and attendance at CJPRMA meetings. These were their contributions toward minimizing the financial impact on CJPRMA. In addition, it made the members active participants in the CJPRMA program and provided them with an incentive to internally market the benefits of their membership. The challenge for the future is to balance these competing interests in a way that meets the members needs while assuring CJPRMA s continued financial success. In light of the developing economic crisis and its negative impact on public agencies, the CJPRMA Board redesigned the basis of the methodology utilized for the calculation of member contributions. By doing so, the Board was able to reduce member s contributions for the Program Year by an estimated 36%. In addition, the Board has become actively engaged in reassessing and redesigning its long term strategic plan in order to meet the economic challenges of upcoming years. The founders met the challenge of their day by breaking new ground with their creative and innovative approach to providing an excess liability coverage program that was not dependent upon the insurance industry. The challenge for today s members is very similar. Although the issues are more comprehensive and complex, the current members of CJPRMA recognize them and embrace the opportunity to expand upon the vision of the founders by continuing to maintain the level of success that has been the trademark of this organization. ROBERT J. GERMAN GENERAL MANAGER CALIFORNIA JOINT POWERS RISK MANAGEMENT AUTHORITY California Joint Powers 2 Risk Management Authority

8 About CJPRMA The California Joint Powers Risk Management Authority (CJPRMA) is a statewide risk retention pool that was established in 1986 to provide excess general liability coverage for its members. Its creation was a direct reaction to the insurance industry s decision to decline to cover public entities in California. Insurance companies felt, collectively, that public agencies represented very high risk exposures. As a result, they either declined to renew coverage or elevated premiums to levels that were simply unacceptable. The members of CJPRMA determined that the risk exposure had been greatly exaggerated and decided to pool their collective resources in order to provide coverage for all participants. That effort resulted in the provision of broader coverage at lower rates than were previously available. Since cash contributions were utilized to fund the program and no debt was incurred, it also provided a substantial financial return on their investment. A redistribution of funds has taken place each year since The amount of funding that is returned to the members is determined through an annual actuarial study. More importantly, there has never been an assessment of the members in CJPRMA s history. Currently, the membership is comprised of 17 individual cities and 5 joint powers authorities. The combined membership represents over 120 public entities throughout the state. The program provides $40 million in excess liability coverage through a combination of pooled risk retention and commercial reinsurance. CJPRMA also provides programs for the group purchase of commercial insurance coverage for property, boiler & machinery, and automobile physical damage. California Joint Powers 3 Risk Management Authority

9 Staff Robert J. German, General Manager David J. Clovis, Risk Manager Lola Deem, Financial Analyst Anna E. Swanson, Office Assistant Saima M. Begum, Office Assistant ~ Board Counsel A. Byrne Conley, Esq. Gibbons & Conley ~ Treasurer Roger Carroll, Finance Director Town of Loomis (SCORE) ~ Investment Manager Chandler Asset Management ~ Financial Auditor Maze and Associates ~ Actuary ARM Tech ~ Claims Auditor Robert Bergen, Marsh ~ Insurance Broker James Pinckney, Marsh ~ 2333 San Ramon Valley Blvd., Suite 250 San Ramon, CA (925) (925) (fax) California Joint Powers 4 Risk Management Authority

10 Members City of Alameda City of Chico City of Fairfield City of Fremont City of Livermore City of Lodi Northern California Cities Self-Insurance Fund (Including the Cities of Anderson, Auburn, Colusa, Corning, Dixon, Folsom, Galt, Gridley, Jackson, Lincoln, Marysville, Oroville, Paradise, Red Bluff, Rio Vista, Rocklin, Willows and Yuba City) City of Petaluma Public Entity Risk Management Authority (Including Adelanto, Banning, Barstow, Blythe, Cathedral City, Coachella, Desert Hot Springs, Holtville, Imperial Valley Emergency Communications Authority, La Mesa, March Joint Powers Authority, Mojave Desert & Mountain Integrated Waste Management Authority, Mount San Jacinto Winter Park Authority, Murrieta, Norco, Palo Verde Valley Transit Authority, PERMA, Perris, Rancho Mirage, San Jacinto, Stanton, SunLine Transit Agency, Tulelake, Victor Valley Economic Development Authority, Victor Valley Transit Authority, Victorville, Westmoreland) City of Redding Redwood Empire Municipal Insurance Fund (Including the Cities of Arcata, Cloverdale, Cotati, Eureka, Fort Bragg, Fortuna, Healdsburg, Lakeport, REMIF, Rohnert Park, Sebastopol, Sonoma, St. Helena, Ukiah, Willits and Windsor) City of Roseville City of San Leandro City of San Rafael City of Santa Rosa Small Cities Organized Risk Effort (Including the Cities of Biggs, Colfax, Crescent City, Dorris, Dunsmuir, Etna, Ft. Jones, Ione, Isleton, Live Oak, Loomis, Loyalton, Montague, Mt. Shasta, Portola, Rio Dell, Shasta Lake, Susanville, Weed, Williams and Yreka) City of Stockton City of Sunnyvale City of Vacaville City of Vallejo Yolo County Public Agency Risk Management Insurance Authority (Including Capay Valley FPD, Clarksburg FPD, Cottonwood Cemetery District, City of Davis, Davis Cemetery District, Dunnigan FPD, East Davis FPD, Esparto Unified School District, Madison FPD, No Man s Land FPD, Sacramento-Yolo Poert District, Springlake FPD, City of West Sacramento, City of Winters, Winters Cemetery District, Winters FPD, City of Woodland, Yolo County, Yolo County Communications Emergency Service Agency, Yolo County Habitat Conservation JPA, Yolo County Historical Museum, Yolo County In-Home Supportive Services Public Authority, Yolo County LAFCO, Yolo County Law Library and Yolo-Solano Air Quality Management District) California Joint Powers 5 Risk Management Authority

11 Board Of Directors Darrell Handy, City of Alameda Jessica Henry, City of Chico Robyn Kain, City of Fairfield Steven Schwarz, City of Fremont William Henderson, City of Livermore Janet Hamilton, City of Lodi Dixon Coulter, NCCSIF Scott Ellerbrock, PERMA Ronald Blanquie, City of Petaluma Chris Millard, City of Pomona Chris Carmona, City of Redding Jeffrey Davis, REMIF Charles Wilson, City of Roseville Mary Ann Perini, City of San Leandro Leslie Loomis, City of San Rafael Lynne Margolies, City of Santa Rosa Roger Carroll, SCORE Kathleen Williams, City of Stockton Rebecca Moon, City of Sunnyvale Paul Wildermuth, City of Vacaville Harry Maurer, City of Vallejo Jeffrey Tonks, YCPARMIA Executive Committee William Henderson (Livermore) - President Lynne Margolies (Santa Rosa) - Vice President Darrell Handy (Alameda) Robyn Kain (Fairfield) Roger Carroll (SCORE) Dixon Coulter (NCCSIF) Jeff Tonks (YCPARMIA) California Joint Powers 6 Risk Management Authority

12 City of San Leandro Police Department California Joint Powers 7 Risk Management Authority

13 General Liability Program Participation in this program is mandatory. It is an occurrence based risk retention program which utilizes commercial reinsurance for the upper level limits. It provides $40 million in broad form general liability coverage to the participants. That includes coverage for automobile liability, third party bodily injury and property damage, personal injury, and public officials errors and omissions. The coverage from $500,000 to $5 million is pooled in two layers, from $500,000 to $1 million and from $1 million to $5 million. The coverage from $5 million to $40 million is provided through a commercial reinsurance program. The coverage is subject to a retained limit of either $500,000 or $1 million. There is no annual aggregate, except for a few specific types of claims. Member contributions are based on payroll. The rates are established through an actuarial study that is conducted annually. Optional Coverage Programs Property Program The Property Program is a group purchase of commercial insurance. It provides $300 million in coverage to the participants, subject to a deductible of $25,000 with no annual aggregate. The rates are negotiated each year and premiums are based on property values. Boiler & Machinery Program The Boiler & Machinery Program is a group purchase of commercial insurance. It provides $21.5 million in coverage with deductibles that vary from member to member. The rates are negotiated each year and also vary from member to member. Under the current programs, losses are adjusted by one designated company. It coordinates the Property and Boiler & Machinery losses in order to eliminate any potential coverage gaps. Automobile Physical Damage The APD Program is a group purchase of commercial insurance for vehicles valued in excess of $25,000. It provides $1 million per occurrence in coverage to the participants, subject to a deductible of $10,000, with no annual aggregate. The rates are negotiated each year and premiums are based on vehicle values. California Joint Powers 8 Risk Management Authority

14 Risk Management Program The Risk Management program provides CJPRMA members with a variety of services. It focuses primarily on group and individual training programs, audits of existing risk management programs, the creation of model policies, and the provision of risk management consultation services. The program has developed a broad set of resources for member usage. Group training programs were provided to the members during the 2007/2008 program year. Sewer Backups How to respond under the new regulations! was presented by David Patzer from Risk Management Solutions at four CJPRMA locations. This session focused on the new state regulations that are required to be met when responding to sanitary sewer overflows. The program also provided attendees with a set of tools for use in the creation of an appropriate response program. Contract Management - The hands on approach to Contractual Risk Transfer, was presented by David Clovis, Risk Manager for CJPRMA, at two locations. It focused on all aspects of contract management and ongoing liability associated with contractors. The third group program, Not everyone belongs on the government bus, and Why things go right and Why things go wrong was presented by Gordon Graham. He is one of the premier presenters on risk management in the public sector. The two Gordon Graham sessions defined the importance of risk management and the need to effectively manage human resources. CJPRMA also provided two Board Member Orientation Programs and a session detailing the CJPRMA Property Program. Additional training sessions were presented throughout the year by David Clovis, CJPRMA s Risk Manager. Park and Recreation Risk Management sessions were presented in Sunnyvale, Santa Rosa, Roseville and Sunnyvale. The NIMS, SEMS, ICS Certification Class for Non-emergency Responders were presented to the City of Petaluma. In addition, audits and inspections were performed for the Cities of Stockton, Sunnyvale and Lodi. Another benefit was the provision of assistance to members dealing with unique risk management issues, such as the specialized use of airport facilities, parades, development of sewer treatment plans, insurance certificates and other public events. CJPRMA provides an online special event insurance program to its members. The program was created in 2007 and is provided by Gales Creek Insurance Services, located in Portland, Oregon. This program provides state of the art insurance protection for all special events and significantly reduces the amount of staff time required for processing. In addition to the above, CJPRMA Staff participated in numerous meetings with members in order to assist with the finalizing of all information for the property appraisal program. These sessions focused on the findings of the appraisers in order to confirm that all data had been properly identified and valued. California Joint Powers 9 Risk Management Authority

15 Alameda City Hall California Joint Powers 10 Risk Management Authority

16 Petaluma Public Library California Joint Powers 11 Risk Management Authority

17 (in Millions) Total Assets Currently, CJPRMA has total assets of $93.3 million. This is an increase of $13.7 million from the prior year, and $27.4 million since The organization has received $ million in member contributions since It has returned $86.11 million (44.4%) to the members in the form of redistributions. The unexpended portion of $92 million remains in the investment program. California Joint Powers 12 Risk Management Authority

18 (in Billions) Total Member Payroll Since 2004, the amount of member payroll has increased by $310 million (23.8%), to a total of $1.61 billion. Since this is the basis upon which member contributions are calculated, the growth has helped to maintain the organization s financial stability. In its 22 year history, no assessments have ever been made against the membership.. CJPRMA staff conducting Board Member education California Joint Powers 13 Risk Management Authority

19 Payroll by Member Entity The JPA members account for 39% of the total payroll. The largest is YCPARMIA (11%). The individual cities account for 61 % of the total payroll, with the largest being Stockton (7%). California Joint Powers 14 Risk Management Authority

20 Alameda City Hall California Joint Powers 15 Risk Management Authority

21 (Per $100 of Payroll) Liability Rates Since 2004, liability rates have increased by.176/$100 of payroll (19.8%), for a $500,000 retained limit, and by.15/$100 of payroll (23%) for a $1 million retained limit. These moderate increases are a reflection of the program s financial stability. City Hall of Stockton California Joint Powers 16 Risk Management Authority

22 Claims Activity The average number of open claims increased slightly from 2004 to However, in 2007 they returned to the same level as Although there was a slight reduction in frequency, the level of severity increased.. Balshaw Bridge over the Petaluma River California Joint Powers 17 Risk Management Authority

23 Claims Expense v. Investment Income CJPRMA s very successful investment program has generated enough revenue to pay for 90% of its claims and administrative expenses, leaving the vast majority of its core assets untouched. California Joint Powers 18 Risk Management Authority

24 (in Millions by Program Year) Excess Liability Program Premiums v. Redistributions The CJPRMA program was designed to create a pool of funds which would generate enough investment income to pay the vast majority of its claims and administrative expenses. In order to achieve that goal, the investment program was divided into two parts, the Loss Payment Account and the Long Term Investment Account. These accounts have continually generated a rate of return which exceeds their benchmarks. Of the $ million that has been collected as member contributions, $86.11 million (44.4%) has been returned to the members, in the form of redistributions, and $92 million (47.5%) remains in the investment program. California Joint Powers 19 Risk Management Authority

25 (in Millions) Redistribution by Fiscal Year In 1989, CJPRMA began returning excess equity to its members. Since that year, approximately $86.11 million has been returned to the members. That represents approximately 44.4% of their initial contributions. These redistributions are a reflection of the organization s sound investment practices and strong fiscal management.. City of San Leandro Police Department California Joint Powers 20 Risk Management Authority

26 Net Cost/Net Benefit People working in the public sector remember the crises of the 1980 s and 1990 s when insurance companies charged outrageous rates for limited amounts of coverage or refused to write any coverage at all for some public agencies. CJPRMA was formed as a direct challenge to those misconceptions regarding the risk of covering public agencies. The success of its program has proven those insurance industry assumptions to have been inaccurate. Two measures of the success of the CJPRMA Liability Program are net cost and net benefit. With reference to net cost, the difference between what has been paid in (approximately $ million) and what has been returned to the members (approximately $86.11 million) is approximately $107.6 million. Since approximately $92 million remains in its investment program, the net cost of providing liability coverage to all of its members, for twenty-two years, has been approximately $16 million, total. That s an average cost of $727,812 per year for (1) the provision of between $10 million and $40 million in liability coverage, (2) the payment of all member losses exceeding their retained limits, and (3) the cost of all administrative expenses. California Joint Powers 21 Risk Management Authority

27 With reference to net benefit, since 1986, the members of CJPRMA have made in excess of $ million in contributions to the program. Of that amount, approximately $86.1 million has been returned to the members. Approximately $92 million remains in the investment program. In addition, over $54.9 million has been paid to cover members claims. That s a total of approximately $232.7 million in equity and benefits. Since only $193.7 million was charged, in the form of contributions, the net benefit to the members of CJPRMA has been more than $38.9 million in excess of their contributions. The founders of CJPRMA were correct when they assumed that the insurance industry had miscalculated the risks of providing liability coverage to public agencies. Proof of that is in the success of its program. City of San Leandro, Memory Wall California Joint Powers 22 Risk Management Authority

28 (in Billions) Property Program Total Insured Values CJPRMA provides a commercially insured program for the property of its members. Since 2004, the total insured value of that property has increased by $1.95 billion (58.7%), from $3.32 billion to $5.27 billion. Playground outside of the Marin History Museum, San Rafael California Joint Powers 23 Risk Management Authority

29 Property Program Values by Member Entity The largest member of the property program, in terms of total insured values (TIV), is REMIF (15%). The largest individual city is Roseville (12%). California Joint Powers 24 Risk Management Authority

30 (Per $100 of Valuation) Property Program Rates Since 2004, the rate charged for providing coverage under the commercially insured property program has decreased by.008 (17.78%), from.045/$100 to.037/$100 of valuation. The most recent year was a direct reflection of softening market conditions. Considering the size of the program, the rates have been very reasonable. Our Hands City of Chico Manicipal Center Building California Joint Powers 25 Risk Management Authority

31 Carnegie Library, City of Alameda California Joint Powers 26 Risk Management Authority

32 Management s Discussion & Analysis The management of California Joint Powers Risk Management Authority (CJPRMA) is pleased to present the following discussion and analysis of the operating results, financial condition and liquidity of CJPRMA for the fiscal year ended June 30, This discussion should be read in conjunction with the financial statements and notes to the financial statements included with this report. Overall Program Highlights CJPRMA is a joint powers authority created by certain California cities and other joint powers authorities to provide a pooled approach to the members liability coverage as allowed under the California Government Code. At June 30, 2008 it consisted of 22 members representing over 130 public entities throughout California. The program provides $40 million in excess liability coverage through a combination of pooled risk retention and commercial reinsurance. In addition to the liability program, CJPRMA provides for the group purchase of commercial insurance for property, auto physical damage, and boiler and machinery coverage. Fiscal Year 2008 Financial Highlights Entity-wide & Fund Basis CJPRMA had $40.7 million in net assets at June 30, Of this amount, $40.7 million was restricted for the liability program, $166,000 was restricted for the worker s compensation program that was closed as of June 30, 1990 and ($143,000) was restricted for the property program. GASB Statement No. 34 requires the issuance of entity-wide financial statements as well as fund financial statements. However, since CJPRMA has only one fund and that fund is accounted for as an enterprise fund, the entity-wide financial statements are also the individual fund statements. California Joint Powers 27 Risk Management Authority

33 Overview of the Authority s Basic Financial Statement Maze & Associates, Certified Public Accountants, has performed an independent audit of our financial statements in accordance with generally accepted auditing standards. The assets, liabilities, revenues and expenses are reported on a full-accrual basis. The Basic Financial statements are in two parts: 1) Management s Discussion and Analysis (this part), and 2) The Basic Financial Statements, which include the entity-wide financial statements, along with the Notes to these financial statements. The Basic Financial Statements comprise the entity-wide Financial Statements. These financial statements provide both a short-term and a long-term view of CJPRMA s financial activities and financial position. Description of the Basic Financial Statements CJPRMA s financial statements are prepared in conformity with generally accepted accounting principles and include amounts based upon reliable estimates and judgments. The financial statements include a Statement of Net Assets and a Statement of Revenues, Expenses and Changes in Net Assets. The Statement of Net Assets presents information on CJPRMA s assets and liabilities; the difference between the two representing CJPRMA s net assets, or pool equity. The Statement of Revenues, Expenses and Changes in Net Assets presents information showing total revenues versus total expenses and shows how CJPRMA s net assets changed during the fiscal year. All revenues and expenses are recognized as soon as the underlying event occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in the disbursement or collection of cash during future fiscal years (i.e. the expense associated with an increase in claims liability, involving cash outlay in future time periods). The Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the financial statements. The notes describe the nature of CJPRMA s operations and significant accounting policies and clarify unique financial information. Capital Assets At the end of fiscal 2008, CJPRMA had $152,707 invested in capital assets, net of depreciation, consisting of office furniture and office equipment. California Joint Powers 28 Risk Management Authority

34 Analysis of Overall Financial Position & Results of Operations Combined Statements of Net Assets CJPRMA Pool Assets Total assets increased $13.7 million, from $79.6 million at June 30, 2007 to $93.3 million at June 30, This increase is attributable to premium increases and the increase in investment income. CJPRMA s investments are managed by Chandler Asset Management and held in a custodial account with The Bank of New York. The managed portfolio consists of securities invested in accordance with CJPRMA s investment policy and the California Government Code. Cash is held in Columbia Treasury Reserve Capital CL FD #232 (Columbia). Columbia is a money market account and is used as a pass-through for the purchase and sale of the Authority s investments. Cash is also held in the Local Agency Investment Fund (LAIF), an external investment pool managed by the State Treasurer s Office. CJPRMA s investment income from interest and realized gains on investments was $4.4 million. Investment income from unrealized gain on investments was $3.2 million. Total investment earnings were $7.6 million for fiscal year CJPRMA carries its investments at fair market value, as required by generally accepted accounting principles. At June 30, 2008, the fair market value of investments exceeded the cost by $1.7 million. The ability of CJPRMA s excess funds to earn investment income has a direct effect on program rates because it is used to discount future liabilities. When investments fall short of projections, additional funding may be required to meet actuarial estimates. CJPRMA takes these interest rate conditions into consideration when developing annual premium contributions. California Joint Powers 29 Risk Management Authority

35 The following graphs depict the make-up of CJPRMA s cash and investments at June 30, 2008 and June 30, June 30, 2008 $91,980,963 June 30, 2007 $78,315,034 California Joint Powers 30 Risk Management Authority

36 Redistribution of Equity In FY 2007/08, CJPRMA continued its practice of redistributing excess equity to its members. Through strong claims management and sound investment practices, the organization has been able to return dividends of approximately $86.1 million since The redistribution in FY 2007/08 was approximately $5.3 million. The following graph shows the redistributions for the last ten years. Equity Redistribution CJPRMA Claims Liabilities The liability for claims for the liability program, increased from $43.1 million at June 30, 2007, to $51 million at June 30, A claim liability for IBNR totaling approximately $10 million was recorded for the current program year. For the fiscal year ending June 30, 2008, CJPRMA contracted with ARM Tech for an actuarial valuation of its claim costs. This is used to project liabilities for future years as well as to provide projected funding levels for current and prior years. Funding for the 2007/08 fiscal year was calculated at the 70% confidence level and discounted at 4% to recognize the future investment earnings on those funds. The 70% confidence level assumes that there is a 70% chance that the amount collected will be sufficient to cover losses. For financial statement purposes, the liability for claims has been recorded on an expected and undiscounted basis as required by GASB Statement No. 10. During the current fiscal year, Mr. Mike Galvin of Marsh Risk & Insurance Services performed an independent claims audit. The purpose of the claims audit is to examine claims at each member entity and review those with an exposure in excess of $50,000. This is to determine whether claims have been properly reserved and reported and that the contents of the members files, on claims reported to CJPRMA, are properly reflected in the CJPRMA files.. California Joint Powers 31 Risk Management Authority

37 Economic Outlook & Major Initiatives Liability Program In the coming year, CJPRMA expects the withdrawal of one member. Redistributions to members, which represent refunds of excess contributions, are expected to be approximately $6.5 million. In response to the decreased revenue anticipated by member entities, CJPRMA will be implementing a new process for calculating the liability program premium. CJPRMA will be issuing an RFP for claims auditor. Information System for policy and claims administration. Property Program No changes are anticipated. Boiler & Machinery Program No changes are anticipated. Automobile Physical Damage Program No changes are anticipated. Contacting the Authority s Financial Management These Basic Financial Statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the Authority s finances. Questions about these Statements should be directed to the California Joint Powers Risk Management Authority at 2333 San Ramon Valley Boulevard, Suite 250, San Ramon, CA California Joint Powers 32 Risk Management Authority

38 Independent Auditor s Report MAZE AND ASSOCIATES California Joint Powers 33 Risk Management Authority

39 Statement of Net Assets For the Year Ended June 30, 2008 California Joint Powers 34 Risk Management Authority

40 Revenues, Expenses and Changes For the Year Ended June 30, 2008 California Joint Powers 35 Risk Management Authority

41 Statement of Cash Flow For the Year Ended June 30, 2008 California Joint Powers 36 Risk Management Authority

42 City of San Leandro Police Department California Joint Powers 37 Risk Management Authority

43 Back Cover : Dancing Trout City Council Chambers, Chico

44 2333 San Ramon Valley Boulevard, Suite 250, San Ramon, CA (925) California Joint Powers Risk Management Authority