Auditor s Responsibility Under Auditing Standards Generally Accepted in the United States of America

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1 Board of Trustees Village of Grayslake, Illinois Grayslake, Illinois As part of our audit of the financial statements of Village of Grayslake, Illinois as of and for the year ended April 30, 2015, we wish to communicate the following to you. Auditor s Responsibility Under Auditing Standards Generally Accepted in the United States of America An audit performed in accordance with auditing standards generally accepted in the United States of America is designed to obtain reasonable, rather than absolute, assurance about the financial statements. In performing auditing procedures, we establish scopes of audit tests in relation to the financial statements taken as a whole. Our engagement does not include a detailed audit of every transaction. Our engagement letter more specifically describes our responsibilities. These standards require communication of significant matters related to the financial statement audit that are relevant to the responsibilities of those charged with governance in overseeing the financial reporting process. Such matters are communicated in the remainder of this letter or have previously been communicated during other phases of the audit. The standards do not require the auditor to design procedures for the purpose of identifying other matters to be communicated with those charged with governance. An audit of the financial statements does not relieve management or those charged with governance of their responsibilities. Our engagement letter more specifically describes your responsibilities. Qualitative Aspects of Significant Accounting Policies and Practices Significant Accounting Policies The Village s significant accounting policies are described in Note 1 of the audited financial statements. The Village follows accounting principles conforming with standards set by the Governmental Accounting Standards Board (GASB). For the fiscal year ended April 30, 2015, the Village s Police Pension Fund adopted the requirements of GASB Statement No. 67, Financial Reporting for Pension Plans, an amendment of GASB Statement No. 25. This new guidance requires additional disclosures and required supplemental information in the separately issued report of the Village s Police Pension Fund.

2 Board of Trustees Village of Grayslake, Illinois Page 2 Alternative Accounting Treatments We had discussions with management regarding alternative accounting treatments within accounting principles generally accepted in the United States of America for policies and practices for material items, including recognition, measurement and disclosure considerations related to the accounting for specific transactions as well as general accounting policies, as follows: No matters are reportable. Management Judgments and Accounting Estimates Accounting estimates are an integral part of financial statement preparation by management, based on its judgments. The following areas involve significant estimates for which we are prepared to discuss management s estimation process and our procedures for testing the reasonableness of those estimates: Depreciation Expense Management s estimate of depreciation expense is based on estimated useful lives for assets. We evaluated the key factors and assumptions used to develop the depreciation expense in determining that it is reasonable in relation to the financial statements taken as a whole. Pensions and Other Post-Employment Benefits Costs and liabilities disclosed in Notes 9 and 10 are based on actuarial assumptions and are subject to uncertainties of future events. Financial Statement Disclosures The following areas involve particularly sensitive financial statement disclosures for which we are prepared to discuss the issues involved and related judgments made in formulating those disclosures: Note 10 reports the Village s funding of pension benefits for both Illinois Municipal Retirement Fund and Police Pension Fund employees and participants. During the year ended April 30, 2015 audit process, it was determined that a payable recorded to the Village of Glenview at April 30, 2014, was in error, as the cost was actually for dispatch services received in fiscal year A restatement was recorded in the 2015 financial statements as disclosed in Note 13. Audit Adjustments During the course of any audit, an auditor may propose adjustments to financial statement amounts. Management evaluates our proposals and records those adjustments which, in its judgment, are required to prevent the financial statements from being materially misstated. Some adjustments proposed may not be recorded because their aggregate effect is not currently material; however, they could involve areas in which adjustments in the future could be material, individually or in the aggregate.

3 Board of Trustees Village of Grayslake, Illinois Page 3 An audit adjustment was proposed and accepted relating to the restatement noted above. Certain entries were made to prepare the Entity-wide financial statements, based on information received from the Village. Several reclassification entries were also made to properly report balances in the annual financial statements. Auditor s Judgments About the Quality of the Entity s Accounting Principles During the course of the audit, we made the following observations regarding the Company s application of accounting principles: No matters are reportable. Disagreements with Management The following matters involved disagreements which if not satisfactorily resolved would have caused a modified auditor s opinion on the financial statements: No matters are reportable. Consultations with Other Accountants. During our audit, we were aware that management had consulted with other accountants about the following auditing or accounting matters: The Village engages the firm of Eder Casella & Co. to provide routine accounting services which included preparation of yearend accounting records and analyses. There were no disagreements with Eder Casella & Co. on any accounting, audit or financial reporting issues. Difficulties Encountered in Performing the Audit Our audit requires cooperative effort between management and the audit team. During our audit, we found significant difficulties in working effectively on the following matters: No matters are reportable. Other Material Written Communications Listed below are other material written communications between management and is related to the audit: Management representation letter (attached). Internal Control Over Financial Reporting In planning and performing our audit of the financial statements of Village of Grayslake, Illinois, as of and for the year ended April 30, 2015, in accordance with auditing standards generally

4 Board of Trustees Village of Grayslake, Illinois Page 4 accepted in the United States of America, we considered the Village s internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Village s internal control. Accordingly, we do not express an opinion on the effectiveness of the Village s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as discussed below, we identified certain deficiencies in internal control that we consider to be a material weakness and other deficiencies that we consider to be significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements of the Village s financial statements on a timely basis. A deficiency in design exists when a control necessary to meet a control objective is missing or an existing control is not properly designed so that, even if the control operates as designed, a control objective would not be met. A deficiency in operation exists when a properly designed control does not operate as designed or when the person performing the control does not possess the necessary authority or competence to perform the control effectively. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Village s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We observed the following matters that we consider to be significant deficiencies or a material weakness. Material Weakness Recognition of Expenditure/Expense in Proper Period Comment: During the audit process for 2015, it was noted that Dispatch Service expenditures in the General Fund were less than prior years. Upon review by the Finance Director, it was determined that a prior year audit entry accrued a payment made to the Village of Glenview in May 2014 which was erroneously recorded as a fiscal cost. This was a semi-annual payment under the contract, and appears to have been consistently accrued in the yearend close. As a result, a restatement was required to remove the cost from the 2014 fiscal year, and to record the expenditure/expense in fiscal 2015.

5 Board of Trustees Village of Grayslake, Illinois Page 5 Recommendation: We recommend that the annual closing process include evaluation of when services are performed under certain material contracts so that they are accounted for in the correct period. Management s Response: The Village will implement a structured process of evaluating audit entries to verify and correctly determine the need for recording accrued expenses. Significant Deficiency Internal Controls over the Schedule of Expenditures of Federal Awards (SEFA) (Prior Year Comment) Prior Comment: Currently, the Village does not have a centralized process for monitoring the various federal awards that they have outstanding. The decentralized grants management system in place made it difficult for Village personal to identify all Federal awards received and expended and the Federal programs under which they were resolved. The structure of the grants management system currently in place also makes it difficult for Village personal to perform other program and award identification activities which include, as applicable, identification of the CFDA title and number, award number and year, name of the Federal agency, and name of the pass-through entity for each Federal program operated by the Village during the given fiscal year. Prior Recommendation: We recommend that the Village charge an individual in each department with the task of identifying each Federal program in operation by CFDA title and number, award number and year, name of Federal agency, and name of the pass-through entity. This information along with supporting documentation of revenues and expenditures (i.e. project worksheets, quarterly fiscal report forms, etc.) should be submitted to the Finance department or another designated department or individual within a reasonable time frame after year-end to ensure timely and accurate completion of the SEFA. Additionally, the Village should implement a centralized grant management system that calls for all grant information to be housed in one place. Finally, all grant-related information should be updated periodically so that an accurate accounting of all grant activities is available at all times. Current Year Status: This comment is repeated. The Village has determined that Federal Awards were not expended in an amount to reach the current threshold requiring a Single Audit. We continue to recommend that the process of preparing a SEFA be centralized and part of the annual financial closing process. Management s Responses: In November of FY15 the Village implemented new software providing a centralized process for monitoring the various federal awards and tracking contracts based on project/grant coding, presenting an efficient means of reporting data on project expenditures and revenues. Additionally all documents pertaining to a specific project are stored in the Villages document retention system on a per project basis. Collectively this has integrated the entire capital project costing process in that Finance is made aware initially and creates coding associated with the project/award for all AP

6 Board of Trustees Village of Grayslake, Illinois Page 6 invoices or expenses to be tracked, while the Manager s Office has assigned a single staff member to track and store all pertinent documents related to any project/contract or federal award and uses the correct coding when generating payments. Segregation of Duties Cash Receipts Other Matters Comment: Our review of internal controls and duties assignments indicated a situation where one person was in a position to override certain controls in the cash receipts area. Specifically, the accounts receivable clerk has primary responsibility to collect cash receipts, make deposits, reconcile bank cash deposits and post to customer balances. This position may also make adjustments to the accounts receivable records. Internal controls would be strengthened by segregating these duties to prevent or identify either mistakes or intentional misstatement. Recommendation: We recommend that the cash receipts/accounts receivable process be evaluated to better segregate duties so that one person would not be in a position where errors or misstatements might occur but would not be identified quickly and corrected. Management s Responses: The Village, on an ongoing basis, works to improve productivity and efficiency in service delivery to help reduce cost and improve services. The reorganization of Finance Division has included the installation of updated software and increased use of private contractors that will allow for further segregation of duties related to the accounts receivable processes. Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions This statement amends the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, and Statement No. 50, Pension Disclosures, as they relate to governmental employers that account for pensions provided through trusts, or equivalent arrangements, that meet certain criteria. The statement includes guidance for accounting for participating employers in single-employer and multiple-employer defined-benefit pension plans, cost-sharing plans, defined-contribution plans and plans with insured benefits. More specifically, Statement No. 68 requires governments providing defined-benefit pensions to recognize their long-term obligation for pension benefits as a liability for the first time, and to more comprehensively and comparably measure the annual costs of pension benefits. The Statement also enhances accountability and transparency through revised and new note disclosures and required supplementary information (RSI). The effective date for this standard is for periods beginning after June 15, 2014; therefore, this standard will apply to the Village s 2016 year-end financial statements.

7 Board of Trustees Village of Grayslake, Illinois Page 7 GASB Statement No. 72, Fair Value Measurement and Application On March 2, 2015, the GASB released Statement No. 72, Fair Value Measurement and Application, which would generally require state and local governments to measure investments at fair value. GASB s goal is to enhance comparability of governmental financial statements by requiring fair value measurement for certain assets and liabilities using a consistent definition and accepted valuation techniques. This standard expands fair value disclosures to provide comprehensive information for financial statement users about the impact of fair value measurements on a government s financial position. The requirements are effective for financial statements for periods beginning after June 15, 2015, with early application encouraged. Therefore, the statement will be required to be adopted no later than the fiscal year ending April 30, The Village should consider what additional investments may be subject to fair value measurement and if existing internal controls are sufficient. Governments also should consider if current information systems are adequate to provide the information required for the new disclosures and if any valuation specialists may be needed. GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pension GASB Statement No. 75 replaces the requirements of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. GASB Statement No. 75 requires governments to report a liability on the face of the financial statements, in accordance with the following: Employers that are responsible only for OPEB liabilities for their own employees and that provide OPEB through a defined benefit OPEB plan administered through a trust that meets specified criteria will report a net OPEB liability (the difference between the total OPEB liability and the assets accumulated in trust to make the benefit payments). Employers that participate in a cost-sharing OPEB plan that is administered through a trust that meets specified criteria will report a liability equal to the employer s proportionate share for the collective OPEB liability for all employers participating in the plan. Employers that do not provide OPEB through a trust that meets specified criteria will report the total OPEB liability for their own employees. GASB Statement No. 75 requires more extensive note disclosures and required supplementary information (RSI) about the OPEB liabilities. GASB Statement No. 75 is effective for fiscal years beginning after June 15, Therefore, the statement will be effective for the Village s year ending April 30, While not effective in the short term, we recommend the Village begin assessing the potential impact on the financial statements of this statement and begin the process of communicating the impact with those charged with governance and other stakeholders.

8 Board of Trustees Village of Grayslake, Illinois Page 8 This letter is intended solely for the information and use of the Board of Trustees and management and is not intended to be and should not be used by anyone other than these specified parties. Oakbrook Terrace, Illinois October 30, 2015

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15 Village of Grayslake, Illinois Comprehensive Annual Financial Report For the Year Ended April 30, 2015

16 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED APRIL 30, 2015 Prepared by Finance Department Bettina K. O Connell, Finance Director/Treasurer

17 Table of Contents Comprehensive Annual Financial Report Year Ended April 30, 2015 PAGE INTRODUCTORY SECTION Letter of Transmittal List of Principal Officials Organization Chart i-v vi vii FINANCIAL SECTION INDEPENDENT AUDITOR S REPORT 1-3 MANAGEMENT S DISCUSSION AND ANALYSIS 4-18 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 19 Statement of Activities Fund Financial Statements Balance Sheet - Governmental Funds Reconciliation of Balance Sheet - Governmental Funds to the Statement of Net Position 24 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 27 Statement of Net Position - Proprietary Funds 28 Statement of Revenues, Expenses and Changes in Net Position - Proprietary Funds 29 Statement of Cash Flows - Proprietary Funds 30 Statement of Fiduciary Net Position - Police Pension Trust Fund 31 Statement of Changes in Fiduciary Net Position - Police Pension Trust Fund 32 Notes to Financial Statements 33-58

18 Table of Contents Comprehensive Annual Financial Report Year Ended April 30, 2015 PAGE REQUIRED SUPPLEMENTARY INFORMATION FINANCIAL SECTION Schedules of Funding Progress and Employer Contributions Analysis of Funding Progress Illinois Municipal Retirement Fund - Regular 59 Illinois Municipal Retirement Fund - SLEP 59 Police Pension Fund 59 Employer Contributions Illinois Municipal Retirement Fund - Regular 60 Illinois Municipal Retirement Fund - SLEP 60 Police Pension Fund 60 Other Post-Employment Benefits 61 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budgetary Basis and Actual 62 Retirement Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 63 Motor Fuel Tax Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 64 Notes to the Required Supplementary Information 65 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES GOVERNMENTAL FUND TYPES MAJOR FUND Capital Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 66

19 Table of Contents Comprehensive Annual Financial Report Year Ended April 30, 2015 PAGE FINANCIAL SECTION NONMAJOR GOVERNMENTAL FUNDS Combining Balance Sheet - Nonmajor Governmental (Special Revenue) Funds 67 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental (Special Revenue) Funds 68 Insurance Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 70 Drug Forfeiture Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 71 Non-Drug Forfeiture Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 72 DUI Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 73

20 Table of Contents Comprehensive Annual Financial Report Year Ended April 30, 2015 PAGE STATISTICAL SECTION FINANCIAL TRENDS Net Position by Component Changes in Net Position Fund Balances of Governmental Funds Changes in Fund Balance of Governmental Funds REVENUE CAPACITY Tax Revenues by Source of Governmental Funds 84 Assessed Value and Estimated Actual Value of Taxable Property 85 Property Tax Rates - Direct and Overlapping Governments Principal Property Taxpayers Property Tax Levies and Collections Sales Tax Collected by Category Direct and Overlapping Sales Tax Rates 94 DEBT CAPACITY Outstanding Debt by Type 95 Ratios of General Bonded Debt Outstanding 96 Legal Debt Margin Information DEMOGRAPHIC AND ECONOMIC INFORMATION Demographic Statistics 99 Principal Village Employers 100 OPERATING INFORMATION Ten Largest Consumers - Waterworks and Sewerage Systems 101 Full-Time Equivalent Employees Operating Indicators Capital Asset Statistics

21 INTRODUCTORY SECTION

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27 List of Principal Officials April 30, 2015 MAYOR Rhett Taylor BOARD OF TRUSTEES Bruce R. Bassett Amy Edwards Ronald L. Jarvis Shawn M. Vogel Kevin D. Waldenstrom Elizabeth Davies VILLAGE CLERK Cynthia E. Lee VILLAGE MANAGER Mike Ellis BUILDING COMMISIONER Kevin McCrory ZONING OFFICER Kirk Smith DIRECTOR OF PUBLIC WORKS/ VILLAGE ENGINEER Bill Heinz TREASURER/FINANCE DIRECTOR Bettina K. O Connell POLICE CHIEF Phillip Perlini vi

28 Organization Chart for the Village of Grayslake Department Residents/Businesses Position Mayor/Village Board Village Manager Management Services Building Public Works Police Admin Finance Permitting/ Enforcement Zoning/Planning Director of Public Works/Village Engineer Police Chief Assistant to the Village Manager Admin Serv/Contract Manager Senior Management Analyst Heritage Center Executive Director Finance Director Building Commisioner Zoning Officer Operating Manager/Assistant to the Director of Public Works Operations Commander Investigations Commander Support Services Commander (Vacant) A/R Clerk Periodic Part Time Intern Executive Assistant- Deputy Village Clerk Part time Staff Contracted Accounting Staff (part time) Customer Service Team (Part time) Executive Secretary Contracted Inspection Services (part time) Maintenance Worker I (2) Seasonal Parttime Staff Laborer (2) Records & C.A.D. Supervisor Contracted Police Dispatching Services Seargent (5) Police Officer (16) Police Officer - Part Time FT Equivelent (2) Seargent (1) Police Officer (3) Investigations Police Offficer- Permanent Part Community Service Officer (2) School Resource Officer (2) Note: The Village employs various contractors that are not listed in this chart vii

29 FINANCIAL SECTION

30 INDEPENDENT AUDITOR S REPORT

31 Independent Auditor s Report President and Board of Trustees Village of Grayslake, Illinois Grayslake, Illinois We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Village of Grayslake, Illinois as of and for the year ended April 30, 2015, and the related notes to the financial statements, which collectively comprise the Village s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

32 President and Board of Trustees Village of Grayslake, Illinois Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Village of Grayslake, Illinois as of April 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matter The April 30, 2014 financial statements, before they were restated for the matter discussed in Note 13, were audited by other auditors and their report thereon, dated October 27, 2014, expressed an unmodified opinion. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 4 through 18 and Required Supplementary Information comprised of pension related information and budgetary comparison schedules for the General, Retirement and Motor Fuel Tax Funds, on pages 59 through 65 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of the financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Village s financial statements as a whole. The introductory section, combining and individual fund financial statements and schedules and statistical section listed in the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures in accordance with auditing standards generally

33 President and Board of Trustees Village of Grayslake, Illinois Page 3 accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole. The introductory and statistical sections were not audited by us and, accordingly, we do not express an opinion thereon. Oakbrook Terrace, Illinois October 30, 2015

34 MANAGEMENT S DISCUSSION AND ANALYSIS

35 MANAGEMENT S DISCUSSION AND ANALYSIS April 30, 2015 As management of the Village of Grayslake, we offer readers of the Village s financial statements this narrative overview and analysis of the financial activities of the Village for the fiscal year ended April 30, 2015 (FY15). Since the Management s Discussion and Analysis (MD&A) is designed to focus on the current year s activities, resulting changes and currently known facts, it should be read in conjunction with the Village s financial statements. Financial Highlights The assets of the Village of Grayslake exceeded its liabilities at the close of the fiscal year end April 30, 2015 by $145,924,628 (net position). Of this amount, $21,911,499 (unrestricted net position) may be used to meet the government s ongoing obligations to citizens and creditors. The Village s total net position increased by $1,929,908 or 1.34% as a result of FY15 activities, and the business-type activities net position decreased by $16,874 or (0.1%). As of the close of FY15, the Village of Grayslake s governmental funds reported unassigned balances of $5,037,661, or approximately 30% of expenditures, which is available for spending at the government s discretion. At the end of FY15, unassigned fund balance for the General Fund represents 65% of total General Fund expenditures, which are reported as $7,742,405 for the fiscal year The Village of Grayslake has remained debt free since FY09. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Village s basic financial statements. The Village s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the Village s finances in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the Village s assets, liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as one useful indicator of whether the financial position of the Village is improving or deteriorating. The Statement of Activities presents information showing how the Village s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. 4

36 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) The Governmental Activities reflect the Village s basic services, including administration, police protection, control over building and construction, public buildings, certain recreational services (parks, museums) and maintenance of streets. Property taxes, shared state taxes and local utility taxes finance the majority of these services. The Business-type Activities reflect private sector type operations, where the fee for service typically covers all or most of the cost of operations, including depreciation. The Business-type Activities of the Village consist of water and sewer service, garbage/recycling collection service, aquatic center and parking facilities. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Village uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Village can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the Village s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Village adopts an annual appropriation by ordinance within the first quarter of each fiscal year. In this appropriation ordinance, the Village Board appropriates sums of money to defray all possible expenses and liabilities of the Village, including the amounts to be deposited in reserves provided for in the Illinois Pension Code, and further specify the objects and purposes for which these appropriations are made and the amount appropriated for each object or purpose. Although this ordinance sets the legal spending limits, the Village Board additionally adopts a Working Budget which is more precise to the anticipated expenditures for a given fiscal year. For purposes of discussion, references to the Budget throughout this document shall refer to the Working Budget, not the legal spending limits prescribed in the Appropriation Ordinance. The Village maintains three types of governmental funds - General Fund, special revenue funds, and capital projects funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General Fund, Retirement Fund, Motor Fuel Tax Fund and the Capital Projects Fund, each of which is considered to be a major fund. Information from the remaining special revenue funds is combined into a single column presentation identified as nonmajor governmental funds. A detailed breakdown of the nonmajor special revenue funds information can be found on pages 67 through 73 of this report. 5

37 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) The Village also maintains one type of proprietary fund (enterprise funds). Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Village uses enterprise funds to account for its water and sewer service, garbage/recycling collection service, aquatic center and parking facilities. Proprietary funds provide the same type of information as the government-wide financial statements. The proprietary fund financial statements provide separate information for the water and sewer service, garbage/recycling collection service, aquatic center and parking facilities, of which all are considered to be major funds of the Village. Fiduciary funds are used to account for resources held for the benefit of parties outside the Village funds. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the Village s own programs. The accounting used for fiduciary funds is similar to that used by proprietary funds. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the information provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information related to budgetary information and the Village s progress in funding its I.M.R.F. and Police Pension obligations to provide pension benefits to its employees. Nonmajor fund information can be found immediately following the required supplementary information. 6

38 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as one useful indicator of a government s financial position. In the case of the Village of Grayslake, assets exceeded liabilities by $145,924,628 at the close of FY14. Net Assets (in Millions) Governmental Business-Type Activities Activities Total Assets: Current and Other Assets $ Capital Assets Total Assets Liabilities: Current Liabilites Noncurrent Liabilities Total Liabilities Deferred Inflows of Resources Net Position: Net Investment in Capital Assets Restricted Unrestricted Total Net Position $ By far the largest portion of the Village of Grayslake s net position, which is 84.3%, reflects its investment in capital assets (i.e., land, buildings, infrastructure, machinery and equipment), net of any related debt used to acquire those assets that is still outstanding. These capital assets are used to provide services to citizens; consequently, these assets are not available for future spending. An additional 0.9% of the net position represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($21.9 million) may be used to meet the Village s ongoing obligations to citizens and creditors. Governmental Activities Restricted Net Position includes $575,059 Motor Fuel Tax expenditures; $6, Services; $20,418 Non-Drug Forfeiture; $52,127 for DUI enforcement; $125,126 for Insurance Premiums; and $308,360 for Retirement Benefit expenses. At the end of FY15, the Village is able to report positive balances in all three categories of net position, both for the government as a whole as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. 7

39 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) REVENUES Program Revenues: Changes in Net Position (in Millions) Governmental Business-Type Activities Activities Total Charges for Services $ Operating Grants/Contributions Capital Grants/Contributions General Revenues: Property Taxes Other Taxes Investment Earnings Other Total Revenues EXPENSES General Government Public Safety Public Works Water/Sewer Garbage Parking Aquatic Total Expenses Excess (Deficiency) of Revenues over Expenses before Transfers (0.82) Transfers (0.11) (0.17) Change in Net Position (0.03) (0.99) Net Position - Beginning Net Position - Ending $ Governmental Activities increased the Village of Grayslake s net position by $1.94 million. Key elements of this increase are reflected in the above condensed Statement of Activities. Business-type Activities reported Combined Net Position of $45.74 million. Of this total, $3.74 million is unrestricted, indicating availability for continuing Village services. 8

40 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) Government and Business-type activities are represented in the below graphs. Other Taxes 30.25% Revenues by Source For the Year Ended April 30, 2015 Other 0.91% Charge for Services 50.58% Public Works 19.54% Expenses by Type For the Year Ended April 30, 2015 General Parking Government 1.07% Garbage 11.45% Aquatic 7.79% 3.31% Water/Sewer 26.82% Investment Earnings 0.00% Property Taxes 14.03% Capital Grants Contributions 4.23% Public Safety 30.03% Governmental Activities Revenue The total revenues decreased $1.22 million for FY15; $14.07 million in FY15 compared to $15.29 million in FY14. Overall operating revenues were on budget (+1% or $271,328); the additional revenue was used to offset lower enterprise revenue from reduced water sales and aquatic center attendance. Property taxes represent about 14.06% of the Village s revenue. As the Village is subject to the Tax Cap Limitation Act, the Village s overall property tax extension increased 1.5% from $3,046,598 to $3,093, The Village s equalized assessed valuation decreased 3.75% from $470,154,141 to $452,508,241 for tax years FY14 (2013 tax assessments) and FY15 (2014 tax assessments) respectively, reflecting the downturn in property values and assessment changes due to homeowner protests similar to other communities. State-shared sales tax revenues increased $135,542 (6.44%) from $2,105,905 in FY14 to $2,241,447 in FY15. Automotive and Filling Stations continue to represent the largest sales category (34.23%) for Grayslake. Auto sales tax increased $69,798 (10.81%). Increased revenue was also posted in Drinking and Eating Places $12,207 (4.90%), Lumber Building Hardware $5,513 (2.60%), and Agriculture $31,093 (23.46%), Food $44,772 (12.57%) and Furniture $1,645 (7.08%). The remaining sales categories that posted losses included, Manufacturers $1,528 (5.26%) and Drug & Miscellaneous Retail $152 (.03%), Simplified Municipal Telecommunication Tax (SMT) revenue decreased $91,793 (-15.49%) in FY15. Natural Gas Tax revenue increased by $22,148 (8.77%) for FY15; this increase can be attributed to the receipts posted as a result of the colder winter months of Electricity Surcharge Tax revenue decreased $18,392 (2.81%). The Village s Electricity Surcharge Rebate Program returned $5,965 to Senior Citizens. On cash basis, State-shared income tax revenues increased $214,295 (10.60%) from the previous fiscal year. The State delays these payments and as of April 30, 2015, payments from the State were lagging by two or three months and these will likely continue considering the State s financial problems. 9

41 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) During FY15, the Grayslake Police Department continued to provide one liaison officer to Grayslake Community High School Central Campus and one to the North Campus. Contribution of $159,373 received from GCHS is recorded as Governmental Activities: Operating Contributions. Annual Police Pension costs are actuarially calculated based on assumptions for salary, benefit costs and investment returns. Over the years the Village has made contributions in excess of the financial obligations as presented by an independent actuary. The annual required contribution for FY15 was $586,805. The Village s 2014 tax levy, which was received in FY15, a portion of personal property replacement tax, and an additional Village contribution, amounted to $931,452. The Illinois Division of Insurance Pension funding level percentages based on State Statute reflects an 81% funding level, which is higher than the Village s conservative actuarial estimates ending FY15 funding level; specifics can be found in Note 10 on pages The Village of Grayslake has provided police protection and dispatching services to the Village of Hainesville. Revenue collected for this service was $803,203 for FY15. An agreement extension for these services was executed in FY15 which provides for the provision of the services until FY21. With the current economy, the Federal Reserve Board has continued to maintain the Fed Funds rate at all-time historical lows. The Village s bank service agreement contains a provision requiring the bank to pay 25 basis points below the Fed Funds rate to all Village accounts. The Village continued its contractual relationship with a local bank for investment management services of $5.89 million of non-operating funds. The bank s investment performance matched the benchmark for the final quarter of FY15. The provisions of the Village s investment policy did not change in FY15; however, a close monitoring of the performance continues. Expenses/Expenditures The Village s Governmental Activities expenses decreased $.16 million from the prior year; $12.25 million in FY15 compared to $12.09 million in FY14, expenses were in line with budgets. Overall operating expenses were $167,108 (1%) less than the prior year. Total operating costs were $467,956 under budget. The Police Department expenditures represent 49.2% of the General Fund s operating costs. Actual expenses for salary/benefits and contractual services costs were 1.69% and 1.19% below budget, respectively. Building and Grounds expenditures were $7,826 (5.45%) below budget. Landscape contract costs were $3,370 below budget. Senior center programs were on budget, and there were no noteworthy changes to the mosquito abatement, and environmental programs in FY15. The Building Department expenditures were under budget by $44,344 due to limited new construction building permits; however, expenditures exceeded revenues by $237,196, for additional contracted building inspection services tied to issued building permits. This represents an improvement when compared to FY14 $349,377 deficit. 10

42 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) The Village purchases its liability and property insurance in the insurance market. For worker s compensation coverage the Village is a member of the Illinois Public Risk Fund, an Illinois not-for-profit corporation organized and operating as an intergovernmental joint insurance pool. Insurance costs continue to be unpredictable. Costs increased 9.07% in FY14/15. The Village has benefited from its privatization program in the form of lower liability and worker s compensation exposures, due to lower payroll numbers, and the continual shifting of liability to contractors which has historically minimized costs. The Motor Fuel Tax Fund operating costs were less than budgeted by $20,654 (4.00%). The Village continued its approach of fully funding its pension obligations based on both short-term costs and long-term actuarial analysis. Typically, municipal governments pension funding levels will fluctuate year to year. The IMRF actuary utilizes a smoothing technique that delays and softens the effect to the employer rate. In fact, the Village s 2014 calendar year employer contribution rate of 11.52% decreased to 9.92% for 2015 calendar year. Actual expenses decreased $35,127 as the result of attritional changes from full-time to part-time staffing in customer service personnel. Business-type Activities Revenues The Village reports the Water/Sewer, Garbage/Recycling, Aquatic Center and Commuter Parking as proprietary funds. The Water/Sewer Fund, Garbage/Recycling Fund and Commuter Parking Fund are considered major funds; however, the Village voluntarily reports the Aquatic Center Fund as a major proprietary fund as well. Total revenues increased $0.28 million; $7.74 million in FY15 compared to $7.46 million in FY14. Total water and sewer revenues less the operating cost budget infrastructure reimbursement transfer exceeded regular operating costs and an infrastructure reimbursement transfer to the general operating fund by $89,277. With the lack of new building construction, water customer accounts remained at about 7,191 throughout the year. Grayslake s water and sewer rate increased in accordance with the Village s adopted multi-year rate plan for FY15. The Central Lake County Joint Action Water Agency reported that first quarter sales volume for fiscal year 2015 is 2,345 million gallons. This is 11% lower than the preceding 5-year average and 14% lower than the preceding 10-year average, reflecting a trend of lower percentage water use in the service area which includes the Village. Year-to-year sales volume can be impacted by weather. This summer was unseasonably cool and wet leading to decreased water consumption. Long term sales declines are due to increased use of water conserving devices. Garbage rates remained unchanged and the overall Garbage Fund revenue remained virtually unchanged. Another year of historically low interest rates significantly affected interest income which has steadily declined in recent years. The Metra Parking Fund parking revenues remained similar to FY14. Revenues were still $16,305 (8.07%) in total higher when compared to FY12. The 279 parkers agree to an automatic withdrawal of $35 from their bank account in exchange for unlimited monthly parking usage, a $10 increase from FY12 rates. 11

43 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) Aquatic Center income was lower in FY15 due to decreasing sales impacted by the poor weather during the summer of The national economic situation continues to impact membership sales revenue at area pools including the Village s Aquatic Center. Expenses Water was purchased from the Central Lake County Joint Action Water Agency (CLCJAWA) at a rate of $2.60 per thousand gallons (1.56% less than FY14), because of the May 1, 2013, 3.4% decrease due to the agency s bond refinance. Wastewater treatment service is provided under a contractual agreement with Lake County Public Works at a rate of $3.70 (effective January 1, 2012) per thousand gallons of water usage. The Village charged all municipal customers at a rate of $13.01 combined water and sewer rate per 1,000 gallons. The spread between the purchase and sale rates is intended to finance the operations of the municipal waterworks and sewage system, including, but not limited to labor costs, supplies and miscellaneous infrastructure repairs. The proprietary funds operating expenses decreased $.63 million from the prior year; $8.28 million in FY14 compared to $7.65 million in FY15. Garbage expenses were less than budgeted for due to reduced employer costs as a result of the shift from full-time to part-time staff. Static contract costs have helped keep expenses down. The Village has operated all facets of the aquatic center in-house since FY06 using Village, primarily seasonal, staff. Operating costs for FY15 (pool season 2014) were $34,390 greater than FY14 (pool season 2013), this can be primarily attributed to increasing costs associated with utilities and facility improvements. Personnel/benefit expenses were the same as FY14 with only a small $350 difference. While Metra owns the Lake Street train station building and lots, the Village owns the Washington Street train station building, land and parking lots. Under an agreement with Metra, the Village is responsible for routine maintenance activities for both facilities. The $1.75 daily parking fee is collected by the Village for maintenance of the properties and buildings. The combined parking capacity was 844 spaces and was unchanged from FY14. Revenues continue to be lower due to less parking lot usage. Cost containments have kept expenses down; operating expenses were $5,009 greater than total revenues however before depreciation and interfund transfers the fund realized a gain of $63,949. FINANCIAL ANALYSIS OF THE GOVERNMENT S FUNDS As noted earlier, the Village of Grayslake uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The Governmental Accounting Standards Board prepares standards to be followed by units of local government. Standard 54 has significantly changed the reporting of Fund Balance. The Village of Grayslake has implemented Standard 54 effective FY11. 12

44 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) New definitions were created by Standard 54: Fund Balance the difference between assets plus deferred outflows of resources, less liabilities and deferred inflows of resources in a Governmental Fund. Nonspendable Fund Balance the portion of a Governmental Fund s net assets that are not available to be spent, either short term or long term, in either form (e.g. prepaid assets, inventories, long-term receivables) or through legal restrictions (i.e., principal of an endowment). Restricted Fund Balance the portion of a Governmental Fund s fund balance that is subject to external enforceable legal purpose restrictions as to what the fund balance can be spent on. Committed Fund Balance the portion of a Governmental Fund s fund balance that is limited with self-imposed constraints or limitations that have been placed at the highest level of decision making authority. Assigned Fund Balance the portion of a Governmental Fund s fund balance to denote management s intended use of resources. Unassigned Fund Balance available expendable financial resources in a governmental fund that are not the object of tentative management plan (i.e., assigned). Positive unassigned fund balance can only be reported in the General Fund. The focus of the Village s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Village s financing requirements. In particular, Unassigned Fund Balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of April 30, 2015, the governmental funds reported combined ending fund balances of $17,190,839, a decrease of $593,118 in comparison with the prior year as a result of expenditures towards pre-planned capital projects. Approximately 29.3 % of this balance constitutes Unassigned Fund Balance, which is available for spending at the Village s discretion. The remainder of the fund balance is Assigned: $1,489,288; Committed: $9,050,174; Restricted: $99,162 and Non-spendable: $625,554. The General Fund is the primary operating fund of the Village. At the end of the current fiscal year, Unassigned Fund Balance of the General Fund was $5,045,093 representing 69.0% of current expenditures. As a measure of the General Fund s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. The fund balance of the Village s General Fund decreased by $204,807 during FY15. In addition to the expenditures exceeding revenues by $345,722, the $140,915 net transfers contributed to the overall net decrease. The Retirement Fund reported a decrease of $280,748 in FY15, which was the result of the Village Board decision to use a surplus in the fund to make an additional contribution to the Police Pension Fund. The Motor Fuel Tax Fund increase of $208,500 was a result of better than expected State allocations, and delay of certain projects into the succeeding fiscal year. 13

45 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) The Capital Projects Fund balance decreased by $351,647 after transferring $131,815 back to the General Fund for reimbursement of costs. The Fund balance provides a source of funding for future major projects. Certain projects budgeted in FY15 have been delayed until the succeeding year. Proprietary Funds The Village of Grayslake s proprietary funds provide the same type of information found in the businesstype activities column of the government-wide financial statements but in more detail. Unrestricted net position for FY15 includes $3,434,331 for Water and Sewer Fund; $381,446 for Garbage Fund; ($23,697) for Aquatic Center Fund and ($54,464) for the Commuter Parking (Metra) Fund. The total decrease in net position was $0.016 million for all funds, from FY14 $46.77 million to FY15 $45.75 million. The Village intends to operate the Water/Sewer Operating Fund at a breakeven rate while maintaining a cash reserve equal to at least two months of operating expenses. Any surplus reserves in the Aquatic Center Fund are set aside to offset possible weather related declines in revenue and for future capital improvements to the facility. Other factors concerning the finances of these funds have already been addressed in the discussion of the Village s business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS The following chart reflects the condensed Budgetary Comparison Schedule (in millions): Original and Final Budget Actual Variance General Fund: Revenues: Property Taxes $ (0.010) Intergovernmental and Other Local Taxes (0.574) Licenses and Permits Other $ (0.394) Expenditures: Current: General Government $ (0.087) Public Safety (0.095) Public Works/Transportation (0.050) Capital Outlay: Public Safety (0.001) Public Works/Transportation (1.113) $ (1.346) 14

46 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) The Village s working budget remained the same throughout the year. As noted on pages 62 and 65, the budgetary schedules do not include Police Pension tax levies, and similar contributions to the Police Pension Fund. Since many of the Village s expenditures can be impacted by factors not controllable by the Village, such as the weather and economy, budget line items are best estimates based on past typical experience. During the year, there were no increases to the original Appropriation. All operating fund balance targets were met or exceeded except in the aquatic center fund, reflecting favorable financial and budgetary performance. Overall, General Fund expenditures were 15.75% under budget with many individual line items below budget and some exceeding the estimates included in the budget line items. CAPITAL ASSET AND DEBT ADMINISTRATION Governmental Activities Change in Capital Assets (in millions) Net Balance Additions/ Balance April 30, Transfers/ April 30, 2014 Deletions 2015 Non-Depreciable Assets Land $ CIP (2.980) Other Capital Assets Buildings and Improvements Infrastructure Equipment and Vehicles Accumulated Depreciation on Capital Assets (18.570) (2.002) (20.572) $ The Village completes capital improvement projects on a pay-as-you-go basis. Dollars are accumulated over time to pay for planned projects. In FY15, major projects included village center phase III improvements, finance enterprise resource (ERP) software, Route 120 and Lake Street intersections improvements, Route 120 and Lake Street Park improvements, the Salt Dome project construction and annual neighborhood road resurfacing. Refer to Note 4 on pages for detailed capital asset information. 15

47 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) Business-type Activities Change in Capital Assets (in millions) Net Balance Additions/ Balance April 30, Adjustments/ April 30, 2014 Deletions 2014 Non-Depreciable Assets Land $ CIP Other Capital Assets Buildings and Improvements Computer Parking Aquatic Center Infrastructure Equipment and Vehicles Accumulated Depreciation on Capital Assets (15.422) (0.908) (16.330) Construction in progress (CIP) includes: $ (0.751) Governmental Activities: Atkinson Road Extension (Rt. 120 to Rt. 137) $ 1,936,992 Lake Street and Route 120 Phases I & II 139,552 Rt. 53/120 14,740 Lake St. Bike Path 14,700 Center St. Alley 5,241 Business-type Activities: Lake Street Metra Station - Rehab 1,176,613 Debt Administration The Village of Grayslake continues to be debt free and has no long-term outstanding debt as of fiscal year end. The Village does not intend to issue debt within the next fiscal year. Long-term outstanding debt was eliminated in FY09. Under Illinois Statutes, as a non-home rule community, our legal debt limit has been established at 8.625% of assessed valuation. The Village s legal debt limitation is $39 million based on the 2014 total assessed valuation of $452,508,

48 MANAGEMENT S DISCUSSION AND ANALYSIS (CONT.) The Village has maintained its AA3 bond rating from Moody s Investor Services since September 6, ECONOMIC FACTORS The impacts of national economic conditions continued to affect the Village in FY15. Although some improvement was realized over the prior year, economic conditions still impact several sectors including construction, consumer spending and investment returns. The Illinois Funds average daily money market rate (below 10 basis points) remained unattractive for investment purposes throughout FY15. A normal yield curve results when the longer maturity dates yield greater returns than the shorter maturity dates. An inverted curve occurs when short-term maturities generate a greater return than longer term maturity dates. There has been minimal to no advantage in seeking longer than one year certificates of deposit in the current investment climate, so the Village s portfolio remains fairly liquid. At the end of FY15, the twelve month certificate of deposit from a local bank was yielding.35% or 3.5 times the Illinois Funds money market. The Village was able to fully fund the seven capital asset reserve sub-funds which provide funding for major facility and equipment repairs and replacements based on a 20-year projection of need. The Village will be able to complete its planned capital improvement program for FY16 as well. Property taxes provide the Village of Grayslake with a stable revenue source, although the source is subject to an annual tax cap and does not grow appreciably. Shared revenues from the State of Illinois continue to provide a source of income; however, concerns over the State of Illinois budget crisis continue to impact the per capita taxes (use, income and MFT). Over the years the Village has worked to keep per person (capita) costs rising less than inflation. Conservative fiscal practices such as operating process evaluations, re-engineering of operating processes, contracting services to private firms, intergovernmental service delivery agreements and technology improvements in service delivery have all allowed the Village to maintain cost control. In fact, since 1992 Village operating costs have increased 39.1% less than inflation. Even when new services (aquatic center, senior center and heritage center) have been added since 1992, per capita spending still rose 36.4% less than inflation since