PALATINE PARK DISTRICT PALATINE, ILLINOIS COMPREHENSIVE ANNUAL FINANCIAL REPORT. For the Year Ended December 31, 2016

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2 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended December 31, 2016 Prepared by: Michael G. Clark Executive Director Elliott F. Becker Superintendent of Finance

3 TABLE OF CONTENTS Page(s) INTRODUCTORY SECTION Principal Officials... Organizational Structure... Certificate of Achievement for Excellence in Financial Reporting... Transmittal Letter... i ii iii iv-viii FINANCIAL SECTION INDEPENDENT AUDITOR S REPORT GENERAL PURPOSE EXTERNAL FINANCIAL STATEMENTS Management s Discussion and Analysis... MD&A 1-8 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position... 3 Statement of Activities... 4 Fund Financial Statements Governmental Funds Balance Sheet Reconciliation of Fund Balances of Governmental Funds to the Governmental Activities in the Statement of Net Position... 7 Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Governmental Activities in the Statement of Activities Notes to Financial Statements

4 TABLE OF CONTENTS (Continued) Page(s) FINANCIAL SECTION (Continued) GENERAL PURPOSE EXTERNAL FINANCIAL STATEMENTS (Continued) Required Supplementary Information Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund Recreation Fund Illinois Municipal Retirement Fund Schedule of Employer Contributions Schedule of Changes in the Employer s Net Pension Liability and Related Ratios Notes to Required Supplementary Information COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES MAJOR GOVERNMENTAL FUNDS General Fund Schedule of Revenues Schedule of Expenditures Recreation Fund Schedule of Revenues Schedule of Expenditures Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Acquisition and Improvement Fund Bond and Interest Fund NONMAJOR GOVERNMENTAL FUNDS Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Special Recreation Fund... 46

5 TABLE OF CONTENTS (Continued) Page(s) STATISTICAL SECTION Financial Trends Net Position by Component Change in Net Position Fund Balances of Governmental Funds Changes in Fund Balances of Governmental Funds Revenue Capacity Assessed Value and Actual Value of Taxable Property Property Tax Assessed Valuations, Rates and Extensions Property Tax Rates - Direct and Overlapping Governments Principal Property Taxpayers Property Tax Levies and Collections Debt Capacity Ratios of Outstanding Debt by Type Ratios of Net General Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information Demographic and Economic Information Demographic and Economic Information Principal Employers Operating Information Full-Time Equivalent Employees Operating Indicators Capital Asset Statistics... 70

6 INTRODUCTORY SECTION

7 PRINCIPAL OFFICIALS December 31, 2016 LEGISLATIVE BOARD OF PARK COMMISSIONERS Terry Ruff, President Nick Sawyer, Vice President Jennifer Rogers, Treasurer Sue Gould Nick Sawyer ADMINISTRATIVE Michael G. Clark, Executive Director FINANCE DIVISION Elliott Becker Superintendent of Finance - i -

8 Palatine Park District Organizational Chart Supt of District Services & Projects Superintendent of Finance Superintendent of Parks & Planning Asst Supt of Finance & Personnel Parks Administrative Assistant Asst Superintendent of Parks & Planning Risk Manager HR Manager IT Manager Registrar IT Administrator Volunteer Coordinator Accounting (3) Assistant Registrar Customer Service Representative (3) Parks Foreman (4) Laborer Staff Full-time (21) Communications & Marketing Manager Marketing Coordinator Sponsorship Coordinator Athletic Coordinator Palatine Park District Residents Superintendent of Recreation Fitness, Health & Wellness Coord Park Board of Commissioners (5) Executive Director Asst Superintendent of Recreation Aquatics Manager Swim Team Coordinator Cultural Arts Coordinator Gymnastics Coordinator Head Age Group Coach Preschool/Tot Coordinator Special Interest Coordinator Falcon Park Manager Asst Falcon Park Manager Golf Course Superintendent Asst Golf Course Superintendent Mechanic Superintendent of Facilities Head Golf Professional Asst Golf Professional Stables Manager/ Trainer Assistant Trainer Executive Assistant Board Secretary Theatre Coordinator Asst Superintendent of Facilities Facilities Coordinator Custodial Foreman Custodians - ii -

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15 FINANCIAL SECTION

16 INDEPENDENT AUDITOR S REPORT Members of the Board of Commissioners Palatine Park District Palatine, Illinois We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining fund information of the Palatine Park District, Palatine, Illinois (the District), as of and for the year ended December 31, 2016, and the related notes to financial statements, which collectively comprise the District 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 of 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 District 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 District 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

17 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund and the aggregate remaining fund information of the Palatine Park District, Palatine, Illinois, as of December 31, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and other required supplementary information listed in the table of contents 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 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 District s basic financial statements. 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 basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Naperville, Illinois July 24,

18 GENERAL PURPOSE EXTERNAL FINANCIAL STATEMENTS

19 Management s Discussion and Analysis The following Management Discussion and Analysis (MD&A) provides an introduction to the financial performance and statements of the Palatine Park District for the year ended December 31, The MD&A is designed to assist the reader by focusing on significant issues; provide an overview of the Park District s financial activity; identify material deviation from the financial plan; identify individual fund issues or concerns; and identify changes in the Park District s financial position and its ability to address subsequent years challenges. Since the MD&A is designed to focus on current activities, resulting changes and current known facts, it should be read in conjunction with the brief transmittal letter, the financial statements and accompanying notes to those statements included in this section. The accompanying financial statements implement financial reporting requirements including government-wide and by major fund. This allows the user to address relevant questions, to broaden a basis for comparison and to enhance the Park District s accountability. The Palatine Park District (the District) was established in 1945 to provide recreation activities and facilities for the residents of Palatine, Cook County, Illinois. The five-member, volunteer Board of Commissioners serve six year staggered terms and establish policy, strategic direction and governing ordinances. Financial Highlights for Fiscal Year 2016 The District s software for registration and financial operations has exceeded its useful life and no longer serves the District s interest. In March of 2015, the District went live with new registration software. In May, 2016 the District signed an agreement to purchase and implement financial software. The Finance Software was put into use early in The 2016 CAFR has been prepared to comply with the requirements to apply for and receive the Government Finance Officers Award for Excellence in Financial Reporting for the second straight year. Net Position of the District totaled $71.2 million as of December 31, Of this amount, $54.3 million is invested in capital assets, $3.8 million is restricted for special levies, and $13 million is unrestricted and may be used to meet the general obligations of the District. There is a small amount of inventory, $6,117 that is unspendable. Total tax revenue (including replacement taxes) of $13.9 million was collected representing an increase of only 2.2%. Although the tax levy extended reflected an inflationary increase equal to the annual percentage change in the consumer price index (CPI), property tax revenue can fluctuate from year to year depending on various factors. However, due to modest annual tax increases, property tax revenue has increased steadily over each of the last nine years. Included in the total tax revenue are replacement taxes, which was flat (increased $200) as corporate profitability is still undergoing recovery. The triennial reassessment done in 2016 reflects an increase in Equalized Assessed Valuation (EAV) of 15.7%. MD&A 1

20 Charges for services remained flat increasing by just under $40, had seen a substantial increase in revenues of 5.7%. The District did not anticipate another significant increase and, given the current economy, was pleased with this result. The General Fund reported an ending fund balance of $7.9 million, an increase of $110,000 over the prior year. This increase is the result of a reduction in expenses as the District continues to operate as efficiently as possible. Included in the General Fund are property taxes and expenditures for insurance, audit, and medical claim. A summary of activity of each of the funds appears on pages 41 and 42 of this document. The Recreation Fund Balance at the end of fiscal 2016 increased by $734,000 despite a one million dollar transfer to the Acquisition and Improvements Fund to comply with the District s fund balance policy. The 2016 CAFR also recognizes the inclusion of Governmental Accounting Standards Board Statement 68, Accounting and Financial Reporting for Pensions, which recognizes liabilities, deferred outflows of resources and expenses; and modified certain disclosures in the notes to financial statements and required supplementary information. The impact to the Government Wide Financial Statements is $3.2 million. Overview The MD&A is intended to serve as an introduction to the Park District s basic financial statements. The Palatine Park District s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report contains other supplementary information in addition to the basic financial statements. These components are described below. Government-Wide Financial Statements The government-wide financial statements are designed to emulate the corporate sector in that all governmental and business-type activities are consolidated into columns which add to a total for the Primary Government. These statements combine and consolidate the governmental funds current financial resources with capital assets and long-term obligations using the accrual basis of accounting and economic resources measurement focus. The government-wide financial statements include a Statement of Net Position and a Statement of Activities. The Statement of Net Position presents the Park District s assets/deferred outflows and liabilities/deferred inflows, with the difference reported as net position. Over time, a change in net position is an indicator of the improvement (an increase) or deterioration (a decrease) in the Park District s financial condition. The Statement of Activities presents the revenues and expenses of the Park District. The difference between these is the change in net position for the year. The costs of various activities supported by the Park District s general taxes and other resources is intended to summarize and simplify the user s analysis of the cost of various governmental services and subsidy to various fees for service activities. The Governmental Activities in the Statement of Activities reflect the Pak District s basic services, including general government, funded by real estate taxes. The Recreation activities reflect fees for service operations including recreation programs and golf, where the fee for services typically covers much of the cost of operation, including depreciation. MD&A 2

21 Fund Financial Statements Traditional users of governmental financial statements will find the Governmental Fund Financial Statements presentation more familiar. A fund is a grouping used to maintain control over resources that are segregated for specific activities or objectives. Major Funds are reported separately. Governmental Funds are presented in the fund financial statements and encompass the same functions reported as governmental activities in the government wide financial statements. The focus is different with fund statements providing a distinctive view of the District s governmental funds. These statements report short-term fiscal accountability with spendable resources and balances of spendable resources at the end of the year. This information may be useful in evaluating the Park District s short-term financing requirements. Commitments of $792,698 and $379,259 are included in the fund balances of the Debt Service and Special Recreation funds respectively and are shown as restricted. Since the focus of the government-wide financial statements are longer term, comparisons between the governmental funds and government-wide may provide insight to the long term impact of near term financial 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 the comparison between governmental funds and the Statement of Net Position. The District internally maintains five individual governmental funds, information on four major funds is presented separately in the governmental fund balance sheet and in the statement of revenues, expenditures and changes in fund balances. The four major funds are the General, Recreation, Capital Projects, and Debt Service Funds. Activity from any other governmental fund for which there is a tax levy is a non-major fund. The Park District adopts an annual appropriated budget for all its funds. Budgetary comparison statements are included in the basic financial statements found later in this report. These statements demonstrate compliance with the Park District s adopted annual appropriated budget. Notes to the Financial Statements The notes provide additional information that is essential to understanding data provided in the government-wide and fund financial statements. The Notes to the Financial Statements begin on page 11. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Park District s IMRF employee pension obligations, as well as budgetary compliance schedules for the General, Recreation, Capital Projects and Debt Service Funds. Required supplementary information can be found beginning on page 36 of this report. Individual fund statements and schedules can be found on pages of this report. MD&A 3

22 Government-Wide Financial Analysis The Park District s Net Position over time may serve as a useful indicator of a government s financial position. The following table presents a condensed summary of the District s Net Position as of December 31, 2016 and In 2014, the Park District closed its remaining Enterprise Funds. As a result, the Financial Statements below represent only Governmental or Primary Government type activities. Governmental/Primary Type Activities Current & Other Assets 35,913,263 34,981,132 Deferred Outflows 4,113,656 3,409,484 Capital Assets 69,472,189 68,952,292 Total Assets 109,499, ,342,908 Long-Term Liabilities 21,981,802 22,007,766 Other Liabilities 1,759,766 3,036,816 Total Liabilities 23,741,568 25,044,582 Deferred Inflows of Resources 14,581,974 14,062,453 Total Liabilities and Deferred Inflows of Resources 38,323,542 39,107,035 Net Position: Net Investment in Capital Assets 54,283,777 52,462,909 Restricted 3,864,641 1,787,765 Unrestricted 13,027,148 13,985,199 Total Net Position 71,175,566 68,235,873 The District s assets exceeded liabilities/deferred inflows by $71.2 million at December 31, By far the largest portion of the District s net position (76.3%) reflects its investment in capital assets (e.g. land, infrastructures, buildings, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide services to its residents; consequently these assets are not available for future spending. Although the District s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the District s net position (5.4%) represents resources that are subject to external restrictions on how they may be used, or are not able to be spent. The remaining balance is unrestricted (18.3%) and may be used to meet the District s ongoing obligations to residents and creditors. Tax revenue represented the largest portion of the revenue base, yielding 61.2% of the total. The District s goal is to maintain as close to an even split between property tax revenues and those related to user fees. Property taxes fund governmental activities including but not limited to the District s contribution to the Illinois Municipal Retirement Fund (IMRF), Social Security Fund, Audit Fund and Special Recreation Fund. MD&A 4

23 Charges for services accounted of the total revenue. Because the District does not receive all of its funding through property tax revenue it must also charge a fee for programs and services that it provides to its residents in order to cover all costs associated with the program offerings. Pricing for programs and services is evaluated each year during preparation of the fiscal year budget for the succeeding year. The chart below summarizes the major revenue sources of the District for fiscal TOTAL REVENUE 1,330,961, 5.85% 7,649,088, 33.60% Services Property Taxes Other 13,935,771, 61.22% The total cost of providing programs and services was $22 million. General Government expense accounted for 31% of total expenses or $6.6 million. These expenses include administrative and park maintenance services needed to support all District operations including recreational programs and services, as well as $0.6 million in depreciation expense. Recreation expenses include direct costs associated with providing recreational programs and operational costs as well as $1.6 million in depreciation expense. Recreation expenses comprised 48.84% of the total expenses or $10.4 million. TOTAL EXPENSES 761,354, 3.9% 7,834, % General Government Recreation Interest and Fiscal Charges 11,278,785, 56.7% MD&A 5

24 Financial Analysis of the District s Funds Governmental Funds The focus of the District s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the District 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. For the fiscal year ending December 31, 2016 the Palatine Park District s governmental funds reported a combined ending fund balance of $18.4 million representing an increase of $400,000 from Of the total fund balances, $5.1 million is unassigned and is available for spending at the District s discretion for funding future capital improvements including those that will be identified in the District s Comprehensive Master Plan. As a measure of the District s overall liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total expenditures. Unassigned fund balance represents 29.2% of total expenditures in the General and Recreation Funds, while the total fund balance represents 72.5% of that same amount. The Special Recreation Fund, which captures the financial activity relative to its participation within the Northwest Suburban Special Recreation Association, is the District s only no major fund. Fund Budgetary Variances The Palatine Park District approved budget and appropriations amounts at the January 12, 2016 Board meeting. No budget amendments were made during the 2016 fiscal year. The General Fund accounts for the resources traditionally associated with local government, except those accounted for in another fund. Included in these services are general administration and park maintenance. Financing is primarily provided from an annual property tax levy and Illinois Personal Property Replacement Tax. Expenditures were well under budget due to savings with respect to personnel and related benefits. The Recreation Fund, also reported as a major fund, contains revenue and expenditures for all recreation programs. In addition, taxes are extended for recreation purposes and allocated to this fund. On a combined basis revenue totaled $12.3 million. Programming revenues exceeded budget expectations by $900,000 primarily as a result of efficiencies created in program management. The Acquisitions and Improvements Fund is used to account for all financial resources that are restricted, committed, or assigned to expenditure for capital outlays. It is the current Park District practice to allocate non-operating revenue and excess fund balances from the General and Recreation Funds into this fund. The Debt Service Fund is established to account for restricted, committed, or assigned resources required for the payment of principal and interest. MD&A 6

25 Capital Assets and Debt Administration Capital Assets The District s investment in capital assets, net of depreciation at December 31, 2016 totaled $69.5 million. Capital assets increased slightly from the prior fiscal year as substantial resources were put into maintaining its current facilities. It should be noted that not all project expenditures are capitalized, as they must meet the District s requirements of a capitalized asset. The District is currently developing its comprehensive master plan and is committed to develop completed a strong capital program position itself to successfully address current and future community needs. Capital Assets As of December 31, 2016 and 2015 Capital Assets - Net of Depreciation As of December 31, 2016 (In Thousands) Increase/ (Decrease) % Increase/ (Decrease) Land $33,738 $33,738 $0 0.00% Buildings and Improvements Land Improvements 22,312 22,242 ($70) -0.31% 9, $ % Furniture and Equipment 3, $7 0.22% Construction-in-Progress $ % Total Net Capital Assets 68,953 69,474 $ % Detailed financial activity on Capital Assets may be obtained from Note 5, Capital Assets, page 21. Debt Administration The Park District has $15.6 million in general obligation bonds outstanding as of December 31, Annual debt service is recorded in the General Fund. The District issued $740,500 in general obligation bonds during fiscal The bonds were used to refund certain outstanding general obligation alternate bonds. More information on the Park District s debt can be found in Note 7 and 8, pages MD&A 7

26 Although the District s debt position is expected to remain manageable due to retirement of outstanding obligations, reduction in costs due to a refunding of multiple bonds outstanding at the end of the year, diversified tax base, and healthy reserves subsequent to year end, the District issued approximately $9 million in alternate revenue bonds for the purpose of participating in an intergovernmental agreement with School District 512 (Harper College). As part of the issuance, Moody s Investor Service reaffirmed its Aa rating on the District s outstanding General Obligation debt on March 1, Economic Factors Through conservative efforts to build its reserves and careful financial planning, the District s financial position continues to remain strong today. The District was able to successfully navigate a down turn in property values and saw EAVs rise substantially with the 2016 triennial reassessment. Additionally, its TIF districts are nearing the end of their useful lives. Depending on the Village of Palatine s direction with these TIF districts, the Park District should see a significant contribution in the next few years. Prudent financial planning is necessary to ensure that the District is well positioned to take advantage of opportunities presented, that program offerings are cost effective and managed within the Park District s budget. The Park District is further committed to work with other agencies within its community to provide greater services to the public. This was reflected in the joint efforts in renovating the District s administrative facilities. The District regularly meets with Community leaders at the Library and School District in an attempt to create other mutually beneficial partnerships. With the Board of Commissioner s commitment to maintaining reserves and leading with careful planning for future expansion, the Park District will continue to serve its residents with excellent programs and facilities. Subsequent to year end the State of Illinois ended a two year budget impasse. At present there is no direct impact to the Park District. However, discussion of a property tax freeze would impact future revenues. Contacting the Park District s Financial Management This financial report is designed to provide our residents and customers with a general overview of the Park District s finances and to demonstrate the District s commitment to public accountability. If you have any questions or comments about this report or would like to request additional financial information, please contact the Finance Division, Palatine Park District, 250 E. Wood, Palatine, Illinois This report can also be found on the Park District s web site at MD&A 8

27 STATEMENT OF NET POSITION December 31, 2016 Governmental Activities ASSETS Cash and investments $ 19,755,195 Receivables (net, where applicable, of allowances for uncollectibles) Property taxes 14,618,049 Notes 1,166,757 Accounts 180,945 Interest 36,088 Prepaid expenses 150,112 Inventory 6,117 Capital assets not being depreciated 34,222,472 Capital assets being depreciated (net of accumulated depreciation) 35,249,717 Total assets 105,385,452 DEFERRED OUTFLOWS OF RESOURCES Unamortized loss on refunding 946,129 Pension items - IMRF 3,167,527 Total deferred outflows of resources 4,113,656 Total assets and deferred outflows of resources 109,499,108 LIABILITIES Accounts payable 974,374 Accrued payroll 289,492 Due to affiliates 118,920 Accrued interest payable 32,480 Other unearned revenue 344,500 Long-term liabilities Due within one year 1,397,193 Due in more than one year 20,584,609 Total liabilities 23,741,568 DEFERRED INFLOWS OF RESOURCES Deferred property taxes 14,581,974 Total liabilities and deferred inflows of resources 38,323,542 NET POSITION Net investment in capital assets 54,283,777 Restricted for Liability insurance 445,270 Audit 7,321 Museum 35,990 Special recreation 379,259 Retirement 2,204,103 Debt service 792,698 Unrestricted 13,027,148 TOTAL NET POSITION $ 71,175,566 See accompanying notes to financial statements

28 STATEMENT OF ACTIVITIES For the Year Ended December 31, 2016 Net (Expense) Revenue and Change in Net Position Primary Program Revenues Government Operating Capital Charges Grants and Grants and Governmental FUNCTIONS/PROGRAMS Expenses for Services Contributions Contributions Activities PRIMARY GOVERNMENT Governmental Activities General government $ 7,498,688 $ - $ - $ - $ (7,498,688) Culture and recreation 13,228,014 7,649, (5,578,926) Interest and fiscal charges 497, (497,466) Total governmental activities 21,224,168 7,649, (13,575,080) TOTAL PRIMARY GOVERNMENT $ 21,224,168 $ 7,649,088 $ - $ - (13,575,080) General Revenues Taxes Property taxes 13,782,432 Replacement taxes 153,339 Intergovernmental - unrestricted 48,871 Investment income 158,852 Miscellaneous 969,899 Total 15,113,393 CHANGE IN NET POSITION 1,538,313 NET POSITION, JANUARY 1 68,235,873 Change in accounting principle 1,401,380 NET POSITION, JANUARY 1, RESTATED 69,637,253 NET POSITION, DECEMBER 31 $ 71,175,566 See accompanying notes to financial statements

29 BALANCE SHEET GOVERNMENTAL FUNDS December 31, 2016 Total Acquisition Nonmajor Total and Debt Governmental Governmental General Recreation Improvements Service Funds Funds ASSETS Cash and investments $ 7,801,393 $ 5,868,516 $ 4,915,528 $ 791,179 $ 378,579 $ 19,755,195 Receivables (net, where applicable, of allowances for uncollectibles) Property taxes 7,527,967 4,412,594-1,879, ,675 14,618,049 Interest 36, ,088 Notes 1,166, ,166,757 Accounts 40, , ,945 Inventory - 6, ,117 Due from other funds 87, ,623 Prepaid items 150, ,112 TOTAL ASSETS $ 16,810,001 $ 10,428,111 $ 4,915,528 $ 2,670,992 $ 1,176,254 $ 36,000,

30 Total Acquisition Nonmajor Total and Debt Governmental Governmental General Recreation Improvements Service Funds Funds LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES Accounts payable $ 82,398 $ 551,789 $ 340,187 $ - $ - $ 974,374 Accrued payroll 134, , ,492 Due to other funds - 87, ,623 Due to affiliates - 118, ,920 Other unearned revenue - 344, ,500 Total liabilities 217,353 1,257, , ,814,909 DEFERRED INFLOWS OF RESOURCES Unavailable revenues - notes 1,186, ,186,662 Unavailable property taxes 7,497,837 4,408,848-1,878, ,995 14,581,974 Total deferred inflows of resources 8,684,499 4,408,848-1,878, ,995 15,768,636 Total liabilities and deferred inflows of resources 8,901,852 5,666, ,187 1,878, ,995 17,583,545 FUND BALANCES Nonspendable Inventory - 6, ,117 Prepaid items 150, ,112 Restricted Liability insurance 445, ,270 Audit 7, ,321 Museum - 35, ,990 Special recreation , ,259 Retirement 2,204, ,204,103 Debt service , ,698 Working cash Assigned Recreation programs - 4,719, ,719,787 Capital projects - - 4,575, ,575,341 Unassigned General fund 5,101, ,101,343 Total fund balances 7,908,149 4,761,894 4,575, , ,259 18,417,341 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 16,810,001 $ 10,428,111 $ 4,915,528 $ 2,670,992 $ 1,176,254 $ 36,000,886 See accompanying notes to financial statements

31 RECONCILIATION OF FUND BALANCES OF GOVERNMENTAL FUNDS TO THE GOVERNMENTAL ACTIVITIES IN THE STATEMENT OF NET POSITION December 31, 2016 FUND BALANCES OF GOVERNMENTAL FUNDS $ 18,417,341 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds 69,472,189 The loss on refunding of bonds is deferred and amortized on the statement of net position 946,129 Differences between expected and actual experiences, assumption changes and the net difference between projected and actual earnings for the Illinois Municipal Retirement Fund are recognized as deferred outflows and inflows of resources on the statement of net position 3,167,527 Revenues are recognized for governmental activities when earned regardless of availability 1,186,662 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the governmental funds Bonds payable (15,575,000) Net pension liability - IMRF (5,461,303) Unamortized premium on bonds payable (559,534) Compensated absences payable (385,965) Accrued interest payable (32,480) NET POSITION OF GOVERNMENTAL ACTIVITIES $ 71,175,566 See accompanying notes to financial statements

32 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended December 31, 2016 Total Acquisition Nonmajor Total and Debt Governmental Governmental General Recreation Improvements Service Funds Funds REVENUES Taxes $ 7,261,936 $ 4,210,782 $ - $ 1,701,360 $ 761,693 $ 13,935,771 Charges for services - 7,649, ,649,088 Intergovernmental , ,871 Investment income 156,328-2, ,852 Donations ,812 5, ,891 Miscellaneous 83, , , ,552 Total revenues 7,501,923 12,304, ,487 1,701, ,693 22,906,025 EXPENDITURES Current General government 6,621, ,621,142 Culture and recreation - 10,401, ,783 10,884,555 Capital outlay 83, ,634 2,697, ,998 3,159,482 Debt service Principal retirement 435, ,000-1,315,000 Interest and fiscal charges 247, , ,902 Bond issuance costs ,803-4,803 Total expenditures 7,387,348 10,570,006 2,698,306 1,129, ,781 22,476,884 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 114,575 1,734,556 (2,061,819) 571,917 69, ,

33 Total Acquisition Nonmajor Total and Debt Governmental Governmental General Recreation Improvements Service Funds Funds OTHER FINANCING SOURCES (USES) Transfers in $ - $ - $ 1,000,000 $ - $ - $ 1,000,000 Transfers (out) - (1,000,000) (1,000,000) Total other financing sources (uses) - (1,000,000) 1,000, NET CHANGE IN FUND BALANCES 114, ,556 (1,061,819) 571,917 69, ,141 FUND BALANCES, JANUARY 1 7,793,574 4,027,338 5,637, , ,347 17,988,200 FUND BALANCES, DECEMBER 31 $ 7,908,149 $ 4,761,894 $ 4,575,341 $ 792,698 $ 379,259 $ 18,417,341 See accompanying notes to financial statements

34 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE GOVERNMENTAL ACTIVITIES IN THE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2016 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 429,141 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures; however, they are capitalized in the statement of activities 2,741,719 Revenues in the statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds (143,545) Some expenses in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds Depreciation of capital assets (2,221,822) Amortization of bond premiums 39,299 Amortization of loss on refunding (53,321) The repayment of long-term debt is reported as an expenditure when due in governmental funds but as a reduction of principal outstanding in the statement of activities 1,315,000 The change in accrued interest payable on long-term debt is reported as an expense on the statement of activities 13,261 The change in the net pension liability for the Illinois Municipal Retirement Fund is reported only in the statement of activities (1,820,845) The change in deferred outflows and inflows of resources for the Illinois Municipal Retirement Fund is reported only in the statement of activities 1,176,958 The change in compensated absences liability is reported as an expense on the statement of activities 62,468 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $ 1,538,313 See accompanying notes to financial statements

35 NOTES TO FINANCIAL STATEMENTS December 31, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Palatine Park District, Palatine, Illinois (the District) have been prepared in conformity with accounting principles generally accepted in the United States of America, as applied to government units (hereinafter referred to as generally accepted accounting principles (GAAP)). The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the District s accounting policies are described below. a. Reporting Entity The District is a municipal corporation governed by an elected five-member board. As required by GAAP, these financial statements present the District (the primary government). There are no component units that are required to be included in the District s reporting entity because of the significance of their operational or financial relationship with the District. b. Fund Accounting The District uses funds to report on its financial position and the changes in its financial position. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. The District s funds are classified into the governmental category: Governmental funds are used to account for all of the District s general activities, including the collection and disbursement of restricted or committed monies (special revenue funds), the acquisition or construction of major capital assets other than those financed by proprietary funds (capital projects funds) and the accumulation of resources that are restricted, committed or assigned for the payment of principal and interest on long-term obligations (debt service funds). The General Fund is used to account for all activities of the District not accounted for in another fund. c. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the District. With the exception of interfund services provided and used, the effect of material interfund activity has been eliminated from these statements. Governmental activities, are normally supported by taxes and intergovernmental revenues

36 NOTES TO FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) c. Government-Wide and Fund Financial Statements (Continued) The statement of activities demonstrates the degree to which the direct expenses of a given function, segment or program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements. The District reports the following major governmental funds: The General Fund (the District s Corporate Fund) accounts for the resources traditionally associated with local government, except those accounted for in another fund. Included in these services are general administration and park maintenance. Financing is primarily provided from an annual property tax levy and Illinois personal property replacement taxes. The Recreation Fund accounts for the operations of the District s recreational programs and concessions. Financing is provided from an annual property tax levy restricted by the state for recreation purposes and fees and charges for programs and activities assigned for recreation purposes. The Acquisitions and Improvement Fund accounts for the acquisition and construction of major capital facilities other than those financed by proprietary funds. Financing is provided by grants and donations. The Debt Service Fund was established to account for restricted, committed or assigned resources required for the payment of principal and interest. d. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred. Property taxes are recognized as revenues in the year for which they are levied (i.e., intended to finance). Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Non-operating revenue/expenses are incidental to the operations of these funds

37 NOTES TO FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Measurement Focus, Basis of Accounting and Financial Statement Presentation Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they become both measurable and available). Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The District recognizes property taxes when they become both measurable and available in the year intended to finance. Expenditures are recorded when the related liability is incurred. Principal and interest on general long-term debt are recorded as expenditures become due. Those revenues susceptible to accrual (within 60 days) are property taxes, interest revenue and charges for services. The District reports unearned revenue and unavailable/deferred revenue on its financial statements. Unavailable revenues arise when potential revenue does not meet both the measurable and available or earned criteria for recognition in the current period. Deferred revenues arise when property tax levies are intended to finance the next fiscal year. Unearned revenue arises when a revenue is measurable but not earned under the accrual basis of accounting. Unearned revenues also arise when resources are received by the District before it has a legal claim to them or prior to the provision of services, as when grant monies are received prior to the issuance of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability and deferred inflows of resource for unearned and unavailable/deferred revenue are removed from the financial statements and revenue is recognized. e. Cash and Investments Cash and Cash Equivalents For purposes of the statement of cash flows, the District considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Investments Investments with a maturity of less than one year when purchased, non-negotiable certificates of deposit and other nonparticipating investments are stated at cost or amortized cost. Investments with a maturity greater than one year when purchased are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

38 NOTES TO FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) f. Inventories Inventories are valued at cost, which approximates market, using the weighted average method. g. Prepaid Items/Expenses Payments made to vendors for services that will benefit periods beyond the date of this report are recorded as prepaid items. h. Capital Assets Capital assets, which include property, plant, equipment, infrastructure assets (e.g., bike trails, paths, roads, bridges and similar items) and intangibles (software and easements) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $250,000 for infrastructure, $50,000 for buildings and building improvements and $10,000 for vehicles, machinery and equipment and furniture and fixtures and an estimated useful life in excess of three years. Such assets are reported at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. Property, plant and equipment are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings 45 Improvements Machinery and equipment Furniture and fixtures 5-20 Vehicles