DIJPAGE PIJBLIC SAFETY COMMUNICATIONS

Transcription

1 DIJPAGE PIJBLIC SAFETY COMMUNICATIONS MANAGEMENT LETTER FOR THE FISCAL YEAR ENDED APRIL 30, 20T6

2 Lauterbach & Amen, LLP CERTIFIED PUBLIC ACCOUNTANTS 27W457 WARRENVILLE RD.. WARRENVILLE, ILLINOIS PHONE o F4X www. lauterbachamen.com July 15,2016 Board of Directors DuPage Public Safety Communications Glendale Heights, Illinois In planning and performing our audit of the financial statements of DuPage Public Safety Communications, for the year ended April 30, 2016, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the intemal control structure. We do not intend to imply that our audit failed to disclose commendable aspects of your system and structure. For your consideration we herein submit our coílments and suggestions which are designed to assist in eflecting improvements in intemal confols and procedures. Those less significant matters, if any, which arose during the course of the audit, were reviewed with management as the audit field work progressed. The accompanying comments and recommendations are intended solely for the information and use of the Finance Committee, Board of Directors, management, and others within DuPage Public Safety Communications. We will review the status of these comments during our next audit engagement. We have already discussed many of these comments and suggestions with various DuPage Public Safety Communications personnel. We would be pleased to discuss our comments and suggestions in fitttrer detail with you at your convenience, to perform any additional study of these matters, or to review the procedures necessary to bring about desirable changes. We commend the finance department for the well prepared audit package and we appreciate the courtesy and assistance given to us by the entire DuPage Public Safety Communications' staff. få,^a * C,r,*^l P LAUTERBACH & AMEN, LLP

3 PRIOR RECOMMEI\DATIONS 1 CIAL ON STA ACC PENSIONS Comment In June 2012, the Governmental Accounting Standards Board (GASB) issued Statement No. 67, Financial Reportingfor Pension Plans, which applies to individual pension plans issuing their own audited financial statements, and Statement No. 68, Accounting and Financial Reportingfor Pensions, which applies to the state and local government employers that sponsor pension plans. The Statements apply to the reporting of the Illinois Municipal Retirement Fund (IMRF) for the DuPage Public Safety Communications. The Statements establish standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures related to the pension plans. The Statements specifically identify the methods and assumptions that are to be used in calculating and disclosing these pension-related accounts in the financial statements and also provide for additional note disclosures and required supplementary information. The Statements are intended to improve information provided by state and local government employers regarding financial support to their pension plans, and ultimately requires that the total net pension liabilities of the pension plans be recorded on the face of the financial statements of the sponsoring government. GASB Statement No. 67 is applicable to the separately issued financial statements of IMRF for the year ended April 30, GASB Statement No. 68 is applicable to the DuPage Public Safety Communications' financial statements for the year ended April 30, Recommendation IMRF will automatically be providing the necessary information to all member agencies; we recommend the DuPage Public Safety Communications review the information provided by IMRF. Lauterbach & Amen, LLP will also work directly with the DuPage Public Safety Communications to assist in the implementation process, including assistance in determining the implementation timeline with the DuPage Public Safety Communications, providing all framework for the financial statements in order to complete the implementation, and assisting in answering any questions or concerns DuPage Public Safety Communications or pension fund(s) might have related to the implementation process or requirements. Status This comment has been implemented and will not be repeated in the future.

4 DUPAGE PUBLIC SAFETY COMMUNICATIONS ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED APRIL 30, 2016

5 Table of Contents PAGE FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT MANAGEMENT S DISCUSSION AND ANALYSIS... MD&A 1-6 FINANCIAL STATEMENTS Statement of Net Position... 3 Statement of Revenues, Expenses and Changes in Net Position... 4 Statement of Cash Flows... 5 Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Other Post-Employment Benefit Plan Schedule of Funding Progress and Employer Contributions Schedule of Employer Contributions Illinois Municipal Retirement Fund Schedule of Changes in the Employer s Net Pension Liability Illinois Municipal Retirement Fund SUPPLEMENTAL SCHEDULES Schedule of Detailed Expenses Budget and Actual

6 INDEPENDENT AUDITORS REPORT

7 E Lauterbaah &, Amen, LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT A ITORSI REPORT 27W457 WARRENVILLE RD. o WARRENVILLE, ILLINOIS PHONE 630, o FAX wwwlauterbachamen.com July 15,2016 Board of Directors DuPage Public Safety Communications Glendale Heights, Illinois We have audited the accompanying financial statements of the the business-type activities of the DuPage Public Safety Communications, Illinois, as of and for the year ended April 30, 2016, and the related notes to the financial statements, which collectively comprise the DuPage Public Safety Communications' 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 erïor. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. V/e 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 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 DuPage Public Safety Communications' 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 DuPage Public Safety Communications' 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. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of the DuPage Public Safety Communications, Illinois, as of April 30,2016, 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. I

8 DuPage Public Safety Communications, Illinois July 15, 2016 Page 2 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not 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 DuPage Public Safety Communications, Illinois, basic financial statements. The supplemental schedules are presented for purposes of additional analysis and are not a required part of the financial statements. The supplemental 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, 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 supplemental schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. LAUTERBACH & AMEN, LLP 2

9 MANAGEMENT S DISCUSSION AND ANALYSIS

10 MANAGEMENT S DISCUSSION AND ANALYSIS General Information DuPage Public Safety Communications (DU-COMM) is an intergovernmental agency as defined in the Illinois statues (5 ILCS 220/1) formed in 1975 by our member departments to provide emergency communications services to police, fire, and emergency medical services. DU-COMM is a large consolidated public safety communications center in Illinois and currently serves forty-one (41) member agencies and over 800,000 residents in DuPage and neighboring counties. DU-COMM receives requests for Police, Fire, and EMS via and non-emergency lines. DU-COMM processes over one (1) million phone calls each year, including over 194, calls, and over 605,000 calls for service. Municipalities and fire districts have worked together to provide a high level of service to their citizens in public safety communications. DU-COMM not only serves our member agencies, but is a critical communications hub for the Mutual Aid Box Alarm System (MABAS) Divisions 12 and 16. In this capacity DU-COMM handles fire communications for major incidents in MABAS Divisions 12 and 16. These Division members include agencies that are not members of DU-COMM. Internally DU-COMM has three (3) departments: Operations, Support Services, and Administration. The Operations department is where Telecommunicators answer incoming calls. DU-COMM has seventy (70) full-time and two (2) part-time Telecommunicators, and three (3) part-time Alarm Operators, supervised by five (5) Communications Supervisors and managed by three (3) Communications Managers. The Operations department is supported by a Training/QA Manager and a Protocol Coordinator and under the control of the Deputy Director Operations. The Support Services department includes two divisions: Technical Services and Management Information Systems (MIS). Technical Services has three (3) full-time Technicians, and one (1) part-time Technician supervised by the Technical Services Manager along with support from the Systems Coordinator. The Technical Services staff is responsible for the maintenance and installation of agency radio infrastructure and the DU-COMM facility. MIS is staffed with four (4) contract employees and one (1) part-time GIS Coordinator providing support and system administration for the agency and member departments related to communications or interfaces with DU-COMM. The Support Services department is under the control of the Deputy Director Support Services. Administration includes the Executive Director, Deputy Director Operations, Deputy Director Support Services, Finance/HR Manager, Executive Secretary, Finance Clerk, and Office Assistant. The administrative staff provides support functions including payroll, benefit administration, finance, and overall management and leadership of the agency. This Management s Discussion and Analysis is a required supplementary element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in its Statement No. 34. The purpose is to provide an overview of the financial activities of DU- COMM based on currently known facts, decisions, or conditions. MD&A 1

11 MANAGEMENT S DISCUSSION AND ANALYSIS Statement of Net Position April 30, 2016 ASSETS 2016 Current Assets Cash and Investments $7,963,179 Accounts Receivable 166,422 Total Current Assets 8,129,601 Capital Assets Nondepreciable Capital Assets 418,689 Depreciable Capital Assets 9,754,929 Depreciation (7,142,889) Total Noncurrent Assets 3,030,729 DEFERRED OUTFLOWS OF RESOURCES MD&A 2 Total Assets 11,160,330 Deferred Items - IMRF 2,178,151 Total Assets and Deferred Outflows of Resources 13,338,481 LIABILITIES Current Liabilities Accounts Payable 16,034 Accrued Payroll 352,965 Compensated Absences 368,020 Other Payables 2,633 Total Current Liabilities 428,482 Long-Term Liabilities Net Pension Liability IMRF 3,623,209 Net Post-Employment Benefit Obligation 56,850 Total Long-Term Liabilities 3,991,229 Total Liabilities 4,419,711 NET POSITION Invested in Capital Assets 3,030,729 Unrestricted 5,888,041 Total Net Position 8,918,770 See accompanying Notes to the Financial Statements and Independent Auditor s Report.

12 MANAGEMENT S DISCUSSION AND ANALYSIS Statement of Activities All Funds Year Ended April 30, Budget Actual Difference Operating Revenues Charges for Services Participation Fees $11,279,920 11,279,920 - Alarm Fees 825, ,455 (48,545) Miscellaneous Consolidation Fees Contractual Services* 6,720 *181, ,236 Grants 3,500 4, Miscellaneous** 98,625 **217, ,807 Rebills 1,000 58,716 57,716 Tower Leases 249, ,912 (64,488) Total Operating Revenues 12,464,165 12,703, ,666 Operating Expenses Salaries, Wages, FICA,and IMRF 9,370,400 9,675,491 (305,091) MIS Consulting 426, ,722 (29,722) Insurance Benefits 1,044, ,485 56,415 Insurance Property/WC 137, ,621 11,379 Phones 450, ,263 29,737 Facilities/Maint/Equip - GH 268, ,037 71,694 General Expenses 359, , ,700 Facilities/Maint/Equip - Towers 66,970 40,134 26,836 Facilities/Maint/Equip - Alarms 31,000 29,211 1,789 Facilities/Maint/Equip - Capital 958,500 56, ,430 Rebills 1,000 28,601 (27,601) Depreciation - 342,414 (342,414) Total Operating Expenses 13,114,201 12,602, ,152 Operating Income (Loss) (650,036) 101, ,818 * $175,180 ETSB Reimbursement for DEDIRS Radio Maintenance provided by DU-COMM Support Services staff. Invoiced quarterly to the ETSB based on contract. ** $185,584 Consolidation: Admin fee (Hinsdale & New Agency Contributions (Burr Ridge, Clarendon Hills, Willowbrook) $9,432 VFIS Reimbursement for Alarm lawsuit legal fees $10,775 Trident Reimbursement for vehicle claim $6,000 Vehicle trade-ins MD&A 3

13 MANAGEMENT S DISCUSSION AND ANALYSIS Statement of Activities All Funds Year Ended April 30, Budget Actual Difference Nonoperating Revenues (Expenses) Interest Income $7,250 6,754 (496) Transfers In 1,309, ,708 (322,480) Transfers Out (1,309,188) (986,708) 322,480 7,250 6,754 (496) Change in Net Position (642,786) 108, ,322 Non-GAAP Activity Assigned Funds - Revenues 549, ,200 (341,300) Assigned Funds - Expenses (518,438) (520,438) 2,000 Reserves - Revenues 227, ,871 78,004 Capital Assets Radio/Testing Equipment - (24,510) 24,510 Building Security Electronics - (17,945) 17,945 Software - (28,748) 28,748 Second Facility - CIP - (36,369) 36,369 Radio Network Equipment - (65,387) 65,387 Vehicles - (92,822) 92, , ,852 4,485 Excess Revenues Over (Under) Expenses (383,449) 363, ,837 Financial Highlights DU-COMM s Assets exceed its Liabilities by $8,918,770 as of April 30, Capital Assets of $3,030,729 Unrestricted Net Position $5,888,041 As a result of current year operations, Net Position increased by $108,536 from the previous year. Total Liabilities of $4,419,711 includes accounts payable, accruals for payroll, compensated absences, Net Pension Liability for IMRF, Net Post-Employment Benefit Obligation, and other payables. Beginning net postion was decreased $271,300 due to the implementation of GASB Statement No. 68, which requires governments to include the IMRF pension liability and related deferred items on the financial statements. MD&A 4

14 MANAGEMENT S DISCUSSION AND ANALYSIS Revenue DU-COMM s Operations Fund (001) is funded primarily by member agency shares, assessed annually for dispatch services. The Board of Directors agreed upon the current funding formula with 75% of the budget shared by the police agencies and the remaining 25% split between the fire agencies. The police agencies are assessed a per officer fee based on the total number of sworn officers. The fire agencies use the assessed value of their districts per the county tax assessor s office. The agency assessments are combined with additional revenue from: $131,580 reserve contribution fees from Hinsdale PD and FD, $54,004 consolidation fees from Burr Ridge PD, Clarendon Hills PD/FD, Willowbrook PD joining May 1, 2016 (FYE17), $175,180 ETSB Reimbursement for DEDIRS Radio Maintenance provided by DU-COMM Support Services staff, $1,000 board-up company registrations, $270 subpoena requests, $4,250 Hanover Township EMA s annual fee, $3,440 IPRF annual safety grant, $1,000 Enbridge Community Safety Grant, $5,184 interest earned, $9,432 VFIS alarm lawsuit reimbursement, $58,716 rebilled purchases to member agencies, $10,775 Trident claim reimbursements, $5,225 IPRF Workers Compensation refund, $6,000 CarMax van trade-in, and $1,672 miscellaneous revenues to fund our Operations Fund. The Operations Fund (001) also benefits from $78,000 of revenue from the Alarm Fund (009) to offset the cost of the three part-time Alarm Operators and $75,000 of revenue from the Tower Fund (006) to offset some of the cost of Technicians. The Capital Fund (004) is primarily funded by a transfer from the Alarm Fund (009) which has a revenue of $776,455 generated by monitoring the municipal alarm boards of member agencies. The Tower Fund (006) is funded by $184,912 in fees generates by leasing tower space to private companies and outside governmental units. Expenses The Operations Fund has the largest portion of expenses totaling $12,134,220, accounting for 96.3% of all non-capitalized expenses. The largest expenses are: payroll, unemployment insurance, taxes, and benefits totaling $9,481,190 (not including IMRF liability), representing 86.6% of the Operations Fund. Variations between Original and Final Budgets Actual amounts for revenue and expenses were within the budget approved by the DU- COMM Board for the fiscal year ending April 30, 2016 with $1,888,584 excess being added to reserves. An amendment to the FYE17 budget in July 2016, reallocated $527,700 of those funds to the FYE17 budget for projects not completed in FYE16, thus leaving a net addition to reserves of $1,360,884. MD&A 5

15 MANAGEMENT S DISCUSSION AND ANALYSIS Capital Assets DU-COMM expended $265,781 for capital assets in fiscal year Investment in capital assets decreased by $76,633 which is the difference between the capital asset additions and the depreciation expense of $342,414. Economic Conditions Due to the continued economic conditions and state/federal funding limitations, DU-COMM acted responsibly in trying to maintain or reduce expenses and seek reimbursement from other government agencies in as many areas as possible. DU-COMM realized its member agencies had been significantly impacted by the economy. DU-COMM s largest portion of revenue is generated by member agency shares, as determined by operational needs. Contacting DuPage Public Safety Communications Board s Administration The financial report is designed to provide a general overview of DU-COMM s finances, compliance with finance related laws and regulations, and demonstrate DU-COMM s commitment to public accountability. Question about this report, or requests for additional information should be sent to: Executive Director DU-COMM 600 Wall Street Glendale Heights IL MD&A 6

16 BASIC FINANCIAL STATEMENTS

17 Statement of Net Position April 30, 2016 ASSETS Current Assets Cash and Investments $ 7,963,179 Accounts Receivable 166,422 Total Current Assets 8,129,601 Noncurrent Assets Capital Assets Nondepreciable Capital Assets 418,689 Depreciable Capital Assets 9,754,929 Depreciation (7,142,889) Total Noncurrent Assets 3,030,729 Total Assets 11,160,330 DEFERRED OUTFLOWS OF RESOURCES Deferred Items - IMRF 2,178,151 Total Assets and Deferred outflows of Resources 13,338,481 LIABILITIES Current Liabilities Accounts Payable 16,034 Accrued Payroll 352,965 Compensated Absences 368,020 Other Payables 2,633 Total Current Liabilities 739,652 Long-Term Liabilities Net Post-Employment Benefit Obligation 56,850 Net Pension Liability - IMRF 3,623,209 Total Noncurrent Liabilities 3,680,059 Total Liabilities 4,419,711 NET POSITION Investment in Capital Assets 3,030,729 Unrestricted* 5,888,041 Total Net Position 8,918,770 * See the Notes to the Financial Statements pages 8-9 for a reconciliation of unrestricted net position that has been assigned for certain purposes at year-end and reserves that were used in the current year. The notes to the financial statements are an integral part of this statement. 3

18 Statement of Revenues, Expenses and Changes in Net Position For the Fiscal Year Ended April 30, 2016 Operations Capital Alarm Tower Totals Operating Revenues Charges for Services Participation Fees $ 11,279, ,279,920 Alarm Fees , ,455 Miscellaneous 462, , ,456 Total Operating Revenues 11,742, , ,912 12,703,831 Operating Expenses Salaries and Wages 7,228, ,228,793 FICA and IMRF 2,446, ,446,698 Telecommunications 442, ,721 Information Services 35, ,768 Insurance 1,114, ,114,106 Professional Services 511, ,982 Office Management 23, ,303 Uniforms and Incentives 25, ,335 Training and Testing 50, ,161 Maintenance Services 193,857-29, ,068 Equipment - 47, ,166 Facility Maintenance - 8, ,904 Tower Rent ,683 3,683 Routine Maintenance ,846 7,846 Utilities ,542 15,542 Insurance ,135 1,135 Capital Reserves 32, ,895 Agency Rebill 28, ,601 Tower Repairs ,928 11,928 Depreciation - 342, ,414 Total Operating Expenses 12,134, ,484 29,211 40,134 12,602,049 Operating Income (Loss) (391,756) (398,484) 747, , ,782 Nonoperating Revenues (Expenses) Interest Income 5,184 1, ,754 Transfer In 316, , ,708 Transfer Out - (163,708) (748,000) (75,000) (986,708) 321, ,862 (748,000) (75,000) 6,754 Change in Net Position (69,864) 109,378 (756) 69, ,536 Net Position - Beginning as Restated 8,810,234 Net Position - Ending 8,918,770 The notes to the financial statements are an integral part of this statement. 4

19 Statement of Cash Flows For the Fiscal Year Ended April 30, 2016 Cash Flows from Operating Activities Receipts from Customers and Users $ 10,550,609 Payment to Employees (7,228,793) Payment to Suppliers (1,653,091) 1,668,725 Cash Flows from Capital and Related Financing Activities Purchase of Capital Assets (265,781) Cash Flows from Investing Activities Interest Received 6,754 Net Change in Cash and Cash Equivalents 1,409,698 Cash and Cash Equivalents Beginning - May 1, ,553,481 Ending - April 30, ,963,179 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities Operating Income 101,782 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation Expense 342,414 (Increase) Decrease in Current Assets (2,153,222) Increase (Decrease) in Current Liabilities 3,377,751 Net Cash Provided by Operating Activities 1,668,725 The notes to the financial statements are an integral part of this statement. 5

20 Notes to the Financial Statements April 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of DuPage Public Safety Communications, Illinois (DU-COMM) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. 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 Dispatch Center's accounting policies are described below. The government-wide financial statements are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). The more significant of DU-COMM S accounting policies established in GAAP and used by DU-COMM are described below. REPORTING ENTITY DU-COMM is a cooperative venture which provides equipment, services and other necessary items to operate and maintain a joint public safety communications system for the mutual benefit of participating members. As of April 30, 2016, 18 municipal police departments and 23 fire protection agencies (of which 8 are municipal fire departments and 15 are fire protection districts) located wholly or partially within DuPage County, Illinois are members of DU-COMM. BASIS OF PRESENTATION BASIC FINANCIAL STATEMENTS In the Statement of Net Position, DU-COMM s activities are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. DU-COMM s net position is reported in two parts: net investment in capital assets and unrestricted. DU-COMM utilizes proprietary fund type accounting. Proprietary funds are used to account for activities similar to those found in the private sector, where the determination of net income is necessary or useful to sound financial administration. Goods or services from such activities are provided to members and are accounted for as enterprise funds. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING Measurement Focus All proprietary funds utilize an economic resources measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net position, financial position, and cash flows. All assets/deferred outflows and liabilities/deferred inflows (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net position. 6

21 Notes to the Financial Statements April 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued MEASUREMENT FOCUS AND BASIS OF ACCOUNTING Continued Basis of Accounting DU-COMM s basic financial statements are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of DU-COMM are charges to members for services. Operating expenses for DU-COMM include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. ASSETS, LIABILITIES AND NET POSITION OR EQUITY Cash and Investments For the purpose of the Statement of Net Position, the cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of purchase. Investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on national exchanges are valued at the last reported sales price. Investments that do not have any established market, if any, are reported at estimated fair value. Interfund Receivables, Payables and Activity Interfund activity is reported as loans, services provided, reimbursements or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Deferred Outflows/Inflows of Resources Deferred outflow/inflow of resources represents an acquisition of net position that applies to a future period and therefore will not be recognized as an outflow or resources (expense)/inflow of resources (revenue) until that future time. The deferred outflows/inflows of resources have been added as a result of DU-COMM recording net pension liability related to IMRF. 7

22 Notes to the Financial Statements April 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued ASSETS, LIABILITIES AND NET POSITION OR EQUITY Continued Capital Assets Capital assets purchases or acquired with an original cost of $10,000 or more are reported at historical cost or estimated historical cost. Donated capital assets are valued at their estimated fair market value on the date received. 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. Improvements are capitalized and depreciated over the remaining useful lived of the related capital assets, as applicable. Depreciation of capital assets are computed using the straight-line method with useful lives of 3-50 years. Compensated Absences Vested or accumulated vacation leave of proprietary funds is recorded as an expense and liability of those funds as the benefits accrue to employees. In accordance with the provisions of GASB Statement No. 16, Accounting for Compensated Absences, no liability is recorded for non-vesting accumulating rights to receive sick pay benefits. Net Position In the basic financial statements, equity is classified as net position and displayed in two components: Investment in capital assets Consists of capital assets including restricted capital assets, net of accumulated depreciation. Unrestricted All other net position balances that do not meet the definition of restricted or net investment in capital assets. The Board has internally assigned portions of the unrestricted net position to show resources set aside for purposes shown below at year-end. Additionally, the Board during the annual budget process may elect to use existing net position balances to fund current year operations (use of reserves), which are also shown on the following page. Unrestricted Net Position 2016 Assigned for Vehicles $ 92,559 Assigned for Equipment and Related 429,110 Assigned for Computers and Related 174,207 Assigned for Furniture, Fixtures and Related 443,141 Assigned for Building Maintenance, Security and Related 318,373 Unassigned 4,430,651 Total Unrestricted Net Position 5,888,041 8

23 Notes to the Financial Statements April 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued ASSETS, LIABILITIES AND NET POSITION OR EQUITY Continued Net Position Continued Use of Existing Net Position Reserves in Current Year 2016 Use of Operations Reserves $ 149,871 Use of Capital Reserves - Total Use of Existing Reserves in Current Year 149,871 NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY BUDGETARY INFORMATION Budgets are adopted on a basis consistent with generally accepted accounting principles. The Intergovernmental Cooperation Act does not establish budgetary requirements. However, the Bylaws for DU-COMM require that an annual budget be adopted and approved by the Board. The Executive Committee prepares the budget. The budget is prepared by category and includes information on the past year, current year estimates, and requested assessments for the next fiscal year. The proposed budget is presented to the Board of Directors for approval and adoption. The budget for DU-COMM may only be adopted or amended by its Board of Directors. Expenses may not legally exceed budgeted amounts except as noted in DU-COMM s bylaws. DEPOSITS AND INVESTMENTS Permitted Deposits and Investments Statutes authorize DU-COMM to make deposits/invest in commercial banks, savings and loan institutions, obligations of the U.S. Treasury and U.S. Agencies, obligations of States and their political subdivisions, credit union shares, repurchase agreements, commercial paper rated within the three highest classifications by at least two standard rating services, and the Illinois Funds investment pool. Illinois Funds is an investment pool management by the Illinois Public Treasurer s Office, which allows governments within the state to pool their funds for investment purposes. Although not registered with the SEC, Illinois Funds does operate in a manner consistent with Rule 2a7 of the investment company Act of Investments in Illinois Funds are valued at the share price, the price for which the investment could be sold. 9

24 Notes to the Financial Statements April 30, 2016 NOTE 3 DETAIL NOTES ON THE BASIC FINANCIAL STATEMENTS DEPOSITS AND INVESTMENTS Continued Credit Risk, Custodial Credit Risk and Concentration Risk Continued Deposits. At year-end, the carrying amount of DU-COMM s deposits totaled $6,607,930 and the bank balances totaled $6,702,099. DU-COMM also has $1,355,249 invested in the Illinois Funds at year end, which has an average maturity of less than one year. Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Besides investing in security instruments authorized under State Statute, DU-COMM s investment policy states credit risk may be mitigated by pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisers with which DU-COMM will due business with, and diversifying the investment portfolio so that the impact of potential losses from any one type of security or from any one individual issuer will be minimized. DU-COMM s investment in the Illinois Funds is rated AAAm by Standard & Poor s. Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. DU-COMM s investment policy states that interest rate risk may be mitigated by structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations and investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools. To the extent possible, DU-COMM will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, DU- COMM will not directly invest in securities maturing more than three years from the date of purchase. Reserve funds may be invested in securities exceeding three years if the maturities of such investments are made to coincide as nearly as practicable with the expected use of the funds. Any investment purchased with a maturity longer than four years must be supported with written documentation explaining the reason for the purchase and must be specifically approved by the Board of Directors. Custodial Credit Risk Deposits. In the case of deposits, this is the risk that in the event of bank failure, DU-COMM s deposits may not be returned to it. DU-COMM s investment policy requires that funds on deposit in excess of FDIC limits must be secured by some form of collateral, witnessed by a written agreement. In order to anticipate market changes and provide a level of security for all funds, the amount of collateral provided will be at a minimum of 102% of the fair market value of principal and accrued interest. Direct investments guaranteed by the United States or an agency of the United States government do not require collateral. At April 30, 2016, the entire bank balance was covered by federal depository or equivalent insurance. Illinois Funds is not subject to custodial credit risk. Concentration of Credit Risk. This is the risk of loss attributed to the magnitude of DU-COMM s investment in a single issuer. DU-COMM s investment policy states that investments shall be diversified by limiting investments to avoid over-concentration in securities from a specific issuer or business sector (excluding U.S. Treasuries and Agency securities), investing in securities with varying maturities, and continuously investing a portion of the portfolio in readily available funds such as local government investment pools, money market funds or overnight repurchase agreements to ensure that the appropriate liquidity is maintained in order to meet ongoing obligations. 10

25 Notes to the Financial Statements April 30, 2016 NOTE 3 DETAIL NOTES ON THE BASIC FINANCIAL STATEMENTS Continued DEPOSITS AND INVESTMENTS Continued Credit Risk, Custodial Credit Risk and Concentration Risk Continued At year-end, DU-COMM has more than 5 percent of the total cash and investment portfolio invested in the Illinois Funds. Illinois Funds is primarily invested in U.S. Government securities. CAPITAL ASSETS The following is a summary of capital assets as of the date of this report: Beginning Balances Ending Increases Decreases Balances Nondepreciable Capital Assets Land $ 290, ,750 Construction in Progress 91,570 36, , ,320 36, ,689 Depreciable Capital Assets Autos 172,893 92, ,715 Building 2,117, ,117,263 Computer Equipment 159,563 28, ,311 Microwave and Radio Equipment 5,916, ,842-6,024,201 Towers 804, ,935 Parking Lot 354, ,504 9,525, ,412-9,754,929 Less Accumulated Depreciation Autos 132,368 52, ,242 Building 868,305 63, ,555 Computer Equipment 107,396 20, ,421 Microwave and Radio Equipment 4,853, ,644-4,997,184 Towers 731,078 35, ,249 Parking Lot 107,788 27, ,238 6,800, ,414-7,142,889 Depreciable Capital Assets, Net 2,725,042 (113,002) - 2,612,040 Capital Assets, Net 3,107,362 (76,633) - 3,030,729 11

26 Notes to the Financial Statements April 30, 2016 NOTE 3 DETAIL NOTES ON THE BASIC FINANCIAL STATEMENTS Continued CAPITAL ASSETS Continued The following estimated useful lives are used to compute depreciation: Autos Buildings Communication Equipment Computer Equipment Office Furniture and Equipment Towers 5 Years 50 Years 5-10 Years 4-5 Years 3-15 Years 15 Years LONG-TERM DEBT Long-Term Liability Activity Changes in long-term liabilities during the fiscal year were as follows: Type of Debt Beginning Balances as Restated Amounts Ending Due within Additions Deductions Balances One Year Governmental Activities Net Pension Liablity - IMRF $ 1,065,057 2,558,152-3,623,209 - Net Post-Employment Benefit Obligation 47,822 9,028-56,850-1,112,879 2,567,180-3,680,059 - NET POSITION RESTATEMENTS Net position was restated due to the implementation of GASB Statement No. 68. The following is a summary of the net position as originally reported and as restated: Increase Net Position As Reported As Restated (Decrease) Business-Type Activities $ 9,081,534 8,810,234 (271,300) 12

27 Notes to the Financial Statements April 30, 2016 NOTE 4 OTHER INFORMATION RISK MANAGEMENT DU-COMM is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; natural disasters; and injuries to DU-COMM s employees. These risks are provided for through a commercial insurance policy purchased from independent third parties. DU- COMM currently reports all its risk management activities in the General Fund. There were no significant changes in insurance coverages from the prior year and settlements did not exceed insurance coverage in any of the past three fiscal years. EMPLOYEE RETIREMENT SYSTEM DEFINED BENEFIT PENSION PLAN Illinois Municipal Retirement (IMRF) DU-COMM contributes to the Illinois Municipal Retirement Fund (IMRF), a defined benefit agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for local governments and school districts in Illinois. The Illinois Pension Code establishes the benefit provisions of the plan; those provisions can only be amended by the Illinois General Assembly. IMRF provides retirement, disability, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. IMRF issues a publicly available financial report that includes financial statements and required supplementary information for the plan as a whole, but not by individual employer. That report may be obtained online at The benefits, benefit levels, employee contributions, and employer contributions are governed by Illinois Compiled Statutes (ILCS) and can only be amended by the Illinois General Assembly. Plan Descriptions Plan Administration. All employees hired in positions that meet or exceed the prescribed annual hourly standard must be enrolled in IMRF as participating members. The plan is accounted for on the economic resources measurement focus and the accrual basis of accounting. Employer and employee contributions are recognized when earned in the year that the contributions are required, benefits and refunds are recognized as an expense and liability when due and payable. Benefits Provided. IMRF has three benefit plans. The vast majority of IMRF members participate in the Regular Plan (RP). The Sheriff s Law Enforcement Personnel (SLEP) plan is for sheriffs, deputy sheriffs, and selected police chiefs. Counties could adopt the Elected County Official (ECO) plan for officials elected prior to August 8, 2011 (the ECO plan was closed to new participants after that date). 13

28 Notes to the Financial Statements April 30, 2016 NOTE 4 OTHER INFORMATION Continued EMPLOYEE RETIREMENT SYSTEM DEFINED BENEFIT PENSION PLAN Continued Illinois Municipal Retirement (IMRF) Continued Plan Descriptions Continued Benefits Provided Continued. IMRF provides two tiers of pension benefits. Employees hired before January 1, 2011, are eligible for Tier 1 benefits. Tier 1 employees are vested for pension benefits when they have at least eight years of qualifying service credit. Tier 1 employees who retire at age 55 (at reduced benefits) or after age 60 (at full benefits) with eight years of service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 1-2/3% of the final rate of earnings for the first 15 years of service credit, plus 2% for each year of service credit after 15 years to a maximum of 75% of their final rate of earnings. Final rate of earnings is the highest total earnings during any consecutive 48 months within the last 10 years of service, divided by 48. Under Tier 1, the pension is increased by 3% of the original amount on January 1 every year after retirement. Employees hired on or after January 1, 2011, are eligible for Tier 2 benefits. For Tier 2 employees, pension benefits vest after ten years of service. Participating employees who retire at age 62 (at reduced benefits) or after age 67 (at full benefits) with ten years of service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 1-2/3% of the final rate of earnings for the first 15 years of service credit, plus 2% for each year of service credit after 15 years to a maximum of 75% of their final rate of earnings. Final rate of earnings is the highest total earnings during any 96 consecutive months within the last 10 years of service, divided by 96. Under Tier 2, the pension is increased on January 1 every year after retirement, upon reaching age 67, by the lesser of: 3% of the original pension amount, or 1/2 of the increase in the Consumer Price Index of the original pension amount. Plan Membership. As of December 31, 2015, the following employees were covered by the benefit terms: Inactive Plan Members Currently Receiving Benefits 19 Inactive Plan Members Entitled to but not yet Receiving Benefits 51 Active Plan Members 87 Total 157 Contributions. As set by statute, DU-COMM s Regular Plan Members are required to contribute 4.50% of their annual covered salary. The statute requires employers to contribute the amount necessary, in addition to member contributions, to finance the retirement coverage of its own employees. DU- COMM s annual contribution rate for calendar year 2015 was 10.85% of covered payroll. 14

29 Notes to the Financial Statements April 30, 2016 NOTE 4 OTHER INFORMATION Continued EMPLOYEE RETIREMENT SYSTEM DEFINED BENEFIT PENSION PLAN Continued Illinois Municipal Retirement (IMRF) Continued Plan Descriptions Continued Net Pension Liability. DU-COMM s net pension liability was measured as of December 31, The total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability was determined by an actuarial valuation performed, as of December 31, 2015, using the following actuarial methods and assumptions: Actuarial Valuation Date 12/31/2015 Actuarial Cost Method Asset Valuation Method Entry Age Normal Market Actuarial Assumptions Interest Rate 7.50% Salary Increases 3.75% to 14.50% Cost of Living Adjustments 2.75% Inflation 2.75% For nondisabled retirees, an IMRF specific mortality table was used with fully generational projection scale MP-2014 (base year 2014). IMRF specific rates were developed from the RP-2014 Blue Collar Health Annuitant Mortality Table with adjustments to match current IMRF experience. For disabled retirees, an IMRF specific mortality tables was used with fully generational projection scale MP-2014 (base year 2014). IMRF specific rates were developed from the RP-2014 Disabled Retirees Mortality Table applying the same adjustment that were applied for nondisabled lives. For active members, an IMRF specific mortality table was used with fully generational projection scale MP-2014 (base year 2014). IMRF specific rates were developed from the RP-2014 Employee Mortality Table with adjustments to match current IMRF experience. 15

30 Notes to the Financial Statements April 30, 2016 NOTE 4 OTHER INFORMATION Continued EMPLOYEE RETIREMENT SYSTEM DEFINED BENEFIT PENSION PLAN Continued Illinois Municipal Retirement (IMRF) Continued Discount Rate The discount rate used to measure the total pension liability was 7.50%, the same as the prior valuation. The projection of cash flows used to determine the discount rate assumed that member contributions will be made at the current contribution rate and that District contributions will be made at rates equal to the difference between the actuarially determined contribution rates and the member rate. Based on those assumptions, the Fund s fiduciary net position was projected to be available to make all project future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all period of projected benefit payments to determine the total pension liability. Discount Rate Sensitivity The following presents the plan s net pension liability, calculated using a Single Discount Rate of 7.50%, as well as what the plan s net pension liability would be if it were calculated using a Single Discount Rate that is 1% lower or 1% higher: 1% Decrease (6.50%) Current Discount Rate 1% Increase (7.50%) (8.50%) Net Pension Liability $ 7,615,733 3,623, ,962 16

31 Notes to the Financial Statements April 30, 2016 NOTE 4 OTHER INFORMATION Continued EMPLOYEE RETIREMENT SYSTEM DEFINED BENEFIT PENSION PLAN Continued Illinois Municipal Retirement (IMRF) Continued Changes in the Net Pension Liability Total Pension Liability (A) Plan Fiduciary Net Position (B) Net Pension Liability (A) - (B) Balances at December 31, 2014 $ 16,593,934 15,528,877 1,065,057 Changes for the Year: Service Cost 652, ,081 Interest on the Total Pension Liability 1,258,001-1,258,001 Difference Between Expected and Actual Experience of the Total Pension Liability 1,253,886-1,253,886 Changes of Assumptions Contributions - Employer - 793,757 (793,757) Contributions - Employees - 329,208 (329,208) Net Investment Income - 79,719 (79,719) Benefit Payments, including Refunds of Employee Contributions (293,255) (293,255) - Other (Net Transfer) - (596,868) 596,868 Net Changes 2,870, ,561 2,558,152 Balances at December 31, ,464,647 15,841,438 3,623,209 17