Our Responsibilities under U.S. Generally Accepted Auditing Standards and Government Auditing Standards

Transcription

1 To the Board of Trustees and Management of Northwest Special Recreation Association In planning and performing our audit of the financial statements of the business-type activities of Northwest Special Recreation Association as of and for the year ended December 31, 2015, in accordance with auditing standards generally accepted in the United States of America, we considered Northwest Special Recreation Association s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Northwest Special Recreation Association s internal control. Accordingly, we do not express an opinion on the effectiveness of the Northwest Special Recreation Association s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses and significant deficiencies may exist that were not identified. Our Responsibilities under U.S. Generally Accepted Auditing Standards and Government Auditing Standards As stated in our engagement letter dated October 17, 2013, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. In planning and performing our audit, we will consider Northwest Special Recreation Association s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. As part of obtaining reasonable assurance about whether Northwest Special Recreation Association s financial statements are free of material misstatement, we will perform tests of its compliance with certain provisions of laws, regulations, contracts, and grants. However, providing an opinion on compliance with those provisions is not an objective of our audit. Generally accepted accounting principles provide for certain required supplementary information (RSI) to supplement the basic financial statements. Our responsibility with respect to management s discussion and analysis, which supplements the basic financial statements, is to apply certain limited procedures in accordance

2 with generally accepted auditing standards. However, the RSI will not be audited and, because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance, we will not express an opinion or provide any assurance on the RSI. The Schedule of Revenues, Expenses, and Changes in Fund Net Position Budget and Actual, which accompanies the financial statements but is not RSI. Our responsibility for this supplementary information, as described by professional standards, is to evaluate the presentation of the supplementary information in relation to the financial statements as a whole and to report on whether the supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole. Planned Scope and Timing of the Audit An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. Our audit will include obtaining an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Material misstatements may result from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity. We will generally communicate our significant findings at the conclusion of the audit. However, some matters could be communicated sooner, particularly if significant difficulties are encountered during the audit where assistance is needed to overcome the difficulties or if the difficulties may lead to a modified opinion. We will also communicate any internal control related matters that are required to be communicated under professional standards. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Northwest Special Recreation Association are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate affecting the Northwest Special Recreation Association s financial statements was: Management s estimate of the depreciation to be charged to capital assets, which is based on reports created by the outside accountant s capital asset software. We evaluated the key factors and assumptions used to develop the depreciation in determining that it is reasonable in relation to the financial statements taken as a whole Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosure affecting the financial statements was: The disclosure of accounting policies in Note 1 to the financial statements. The financial statement disclosures are neutral, consistent, and clear.

3 Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit s financial statements taken as a whole. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated April 22, Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the governmental unit s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters We applied certain limited procedures to the management s discussion and analysis, which is required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the Schedule of Revenues, Expenses, and Changes in Fund Net Position Budget and Actual, which accompanies the financial statements but is not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

4 This communication is intended solely for the information and use of management, Board of Trustees, and others within the organization, and is not intended to be and should not be used by anyone other than these specified parties. Sincerely, April 22, 2016

5 Annual Financial Report

6 Table of Contents Page(s) INDEPENDENT AUDITORS' REPORT 1-2 MANAGEMENT'S DISCUSSION & ANALYSIS 3-7 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 8 Statement of Activities 9 FUND FINANCIAL STATEMENTS Statement of Fund Net Position 10 Statement of Revenues, Expenses, and Changes in Fund Net Position 11 Reconciliation of the Statement of Revenues, Expenses, and Changes in Fund Net Position to the Statement of Activities 12 NOTES TO THE FINANCIAL STATEMENTS REQUIRED SUPPLEMENTARY INFORMATION IMRF Pension Disclosures Schedule of Revenues, Expenses, and Changes in Fund Net Position - Budget and Actual 33 SUPPLEMENTAL SCHEDULE Schedule of Expenses - Budget and Actual i -

7 To The Board of Trustees Northwest Special Recreation Association Rolling Meadows, Illinois INDEPENDENT AUDITORS' REPORT Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities of the Northwest Special Recreation Association as of and for the year ended December 31, 2015, and the related notes to the financial statements which collectively comprise the Association's 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 entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions

8 Opinion 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 Northwest Special Recreation Association, as of December 31, 2015, and the respective changes in financial position and cash flows, where applicable, thereof for the year ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Accounting principles generally accepted in the United States of America require that management's discussion and analysis and certain pension disclosures be presented to supplement the basic financial statements. Such information, although not a required 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 regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquires, 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. The Schedule of Revenues, Expenses, and Changes in Fund Net Position - Budget and Actual listed on the table of contents is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. The Required Supplementary Information has been subjected to the auditing procedures applied in the audit of the basic financial statements for the year ending December 31, 2015 and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The supplemental schedule listed in the accompanying table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Northwest Special Recreation Association. The information has not been audited by us and accordingly, we express no opinion on such matters. April 22, 2016 Darien, Illinois - 2 -

9 NORTHWEST SPECIAL RECREATION ASSOCIATION MANAGEMENT S DISCUSSION AND ANALYSIS DECEMBER 31, 2015 The Northwest Special Recreation Association s (the Association ) management s discussion and analysis is designed to: (1) assist the reader in focusing on significant financial issues, (2) provide an overview of the Association s financial activity, (3) identify changes in the Association s financial position (its ability to address the next and subsequent year challenges), (4) identify any material deviation s from the financial plan (the approved budget) and (5) identify individual fund issues or concerns. The Management s Discussion and Analysis (MD&A) is an element of the new reporting model adopted by the Governmental Accounting Standards Board (GASB) in its Statement No. 34 Basic Financial Statements - and Management s Discussion and Analysis - for State and Local Governments issued June Certain comparative information between the current year and the prior year is required to be presented in the MD&A. Since the MD&A is designed to focus on the current year s activities, resulting changes and currently known facts, please read it in conjunction with the Association s financial statements (beginning on page 8.) Financial Highlights The Association s financial status continues to be improving. The Association concluded the year with unrestricted net position of $3,786,617. Overall operating revenues this past year were $5,077,114 and operating expenses were $4,836,444 for a positive change in fund net position of $252,913. Arrangements with partner Park Districts allow for solid cash flow. Total net position increased from $4,858,36 4 to $5,114,272 over the course of the year. Member Agency contributions assessed and collected were $4,152,138 with a decrease of $84,737 from the previous year. Recreation program registration fees increased over the past year resulting in program fee revenues of $614,976. Overview of the Financial Statements Management s Discussion and Analysis introduces the Association s basic financial statements. The basic financial statements include: (1) government-wide financial statements, (2) fund financial statements and (3) notes to the financial statements. The Association also includes in this report additional information to supplement the basic financial statements

10 NORTHWEST SPECIAL RECREATION ASSOCIATION MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) DECEMBER 31, 2015 Government -wide Financial Statements The Association s annual report includes two government-wide financial statements. These statements provide both long-term and short-term information about the Association s overall status. Financial reporting at this level uses a perspective similar to that found in the private sector with its basis in full accrual accounting and elimination or reclassification of internal activities. The first of these government-wide statements is the Statement of Net Position. This is the statement of position presenting information that includes all of the Association s assets and liabilities, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Association as a whole is improving or deteriorating. Evaluation of the overall health of the Association would extend to other non-financial factors such as diversification of the partner base or the condition of the Association s infrastructure in addition to the financial information provided in this report. The second government-wide statement is the Statement of Activities which reports how the Association s net position changed during the current fiscal year. All current year revenues and expenses are included regardless of when cash is received or paid. An important purpose of the design of the statements of activities is to show the financial reliance of the Association s distinct activities or functions on revenues provided by the Association s partner agencies. The government-wide financial statements are presented on pages 8-9 of this report. Fund Financial Statements A fund is an accountability unit used to maintain control over resources segregated for specific activities or objectives. The Association uses funds to ensure and demonstrate compliance with finance-related laws and regulations. Within the basic financial statements, fund financial statements focus on the Association s flow of financial resources rather than the Association as a whole. Governmental funds are reported in the fund financial statements and encompass essentially the same functions reported as governmental activities in the government-wide financial statements. However, the focus is very different with fund statements providing a distinctive view of the Association s governmental fund. These statements report short-term fiscal accountability focusing on the use of spendable resources and balances of spendable resources available at the end of the year. They are useful in evaluating annual financing requirements of governmental programs and the commitment of spendable resources for the near-term. Since the government-wide focus includes the long-term view, comparisons between these two perspectives may provide insight into the long-term impact of short-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenses and changes in net position provide a reconciliation to assist in understanding the differences between these two perspectives. Budgetary comparison statements are included in the basic financial statements for the general fund. These statements and schedules demonstrate compliance with the Association s adopted annual appropriated budget. The basic governmental fund financial statements are presented on pages of this report

11 NORTHWEST SPECIAL RECREATION ASSOCIATION MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) DECEMBER 31, 2015 Notes to the Financial Statements The accompanying notes to the financial statements provide information essential to a full understanding of the government-wide and fund financial statements. The notes to the financial statements begin on page 13 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Association s progress in funding its obligation to provide pension benefits to its employees. Supplementary information can be found beginning on page 23 of this report. Government -wide Financial Analysis The Association s combined net position increased from $4,858,36 4 to $5,114,272 as a result of operations and a prior period adjustment made for the implementation of GASB 68 in This is after $136,541 in depreciation which is reflected as a decrease in net capital assets. Northwest Special Recreation Association Statement of Net Assets December 31, 2015 and Current and Other Assets $ 4,338,019 $ 4,081,302 Capital Assets 1,442,001 1,454,702 Total Assets 5,780,020 5,536,004 Deferred Inflows - Pension Items 606,522 0 Total Deferred Inflows 606,522 0 Current and Other Liabilities 1,250, ,004 Capital Leases Payable 22,115 31,636 Total Liabilities 1,272, ,640 Net Assets: Invested in Capital Assets 1,419,886 1,423,066 Unrestricted 3,694,386 3,435,298 Total Net Assets $ 5,114,272 $ 4,858,

12 NORTHWEST SPECIAL RECREATION ASSOCIATION MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) DECEMBER 31, 2015 Government -wide Financial Analysis (Continued) Northwest Special Recreation Association Changes in Net Assets December 31, 2015 and Revenues Charges for Services $ 614,976 $ 557,561 Grants and Donations 310, ,752 Member Contributions 4,152,138 4,236,875 Interest Income 5,320 10,931 Miscellaneous 6,923 0 Total Revenues 5,089,357 5,263,119 Expenses Administrative Services 695, ,942 Program Services 4,118,117 4,018,848 Change in Net Penison Obligation 287,519 0 Total Expenses 5,101,135 4,734,790 Decrease (Increase) in Net Position $ (11,778) $ 528,330 Financial Analysis of the Association s Fund Governmental Funds As discussed, governmental funds are reported in the fund statements with a short-term inflow and outflow of spendable resources focus. This information is useful in assessing resources available at the end of the year in comparison with upcoming financing requirements. Governmental funds reported ending fund net position of $3,786,617. The total ending net position of the association shows an increase of $252,913 over the prior year. This increase is primarily the increase in charges for services and decrease in expenses overall as efficiencies are realized in day to day operations. General Fund Budgetary Highlights The general fund is reported as the only fund, and accounts for the routine program operations of the Association. Revenues in the general fund were $5,077,114 which was $61,832 (1%) under budget. Expenses were $4,836,444 which was $456,797 or 9% under budget. The net budget variance was a favorable $397,

13 NORTHWEST SPECIAL RECREATION ASSOCIATION MANAGEMENT S DISCUSSION AND ANALYSIS (CONTINUED) DECEMBER 31, 2015 Capital Asset and Debt Administration Capital Assets The Association s investment in capital assets, net of accumulated depreciation for governmental activities as of December 31, 2015 and 2014 was $1,442,001 and $1,454,702 respectively. Debt Administration Northwest Special Recreation Association Capital Assets (net of depreciation) December 31, 2015 and Building $ 745,278 $ 767,913 Building Improvements 250, ,847 Equipment 53,324 82,158 Parking Lot 41,095 44,830 Transportation Equipment 351, ,954 Capital Assets, net $ 1,442,001 $ 1,454,702 As of December 31, 2015, the Association has not issued bonds however during the year the Association entered into long term capital leases to purchase new technology equipment. The leases have an original principal balance of $39,799, bearing interest between 6.125% and 9.051% and are payable in monthly payments ranging from $ to $ beginning March 1, 2014 and ending January 29, Total debt outstanding at year end is $22,115. Annual debt service requirements to maturity for the leases payable, including interest, are as follows: Fiscal Year Principal Interest Total ,213 1,231 11, , , Total $ 22,115 $ 1,678 $ 23,793 Factors Bearing on the Association s Future At the time these financial statements were prepared and audited, the Association was not aware of any existing circumstances that would adversely affect its financial health in the near future. Contacting the Association s Financial Management This financial report is designed to provide a general overview of the Association s finances, comply with finance related laws and regulations and demonstrate the Association s commitment to public accountability. If you have any questions about this report or would like to request additional information please contact Tracey Crawford, Executive Director, Northwest Special Recreation Association, 3000 Central Rd, #205, Rolling Meadows, IL

14 Statement of Net Position December 31, 2015 Business Type Activities ASSETS Cash $ 4,269,635 Accounts Receivable 2,592 Prepaid Expenses 65,792 Capital Assets Capital Assets, Net of Depreciation 1,442,001 Total Capital Assets 1,442,001 TOTAL ASSETS 5,780,020 DEFERRED OUTFLOWS IMRF Plan Year Adjustments 258,412 IMRF Deferred Outflows 348,110 TOTAL DEFERRED OUTFLOWS 606,522 LIABILITIES Accounts Payable 81,063 Accrued Payroll 94,369 Accrued Vacation 89,753 Net Pension Liability 609,000 Unearned Program Revenue 375,970 Capital Lease Payable Due within one year 10,213 Due in more than one year 11,902 TOTAL LIABILITIES 1,272,270 TOTAL DEFERRED INFLOWS 0 NET POSITION Net Investment in Capital Assets 1,419,886 Unrestricted Amounts 3,694,386 TOTAL NET POSITION $ 5,114,272 See Accompanying Notes To The Financial Statements

15 Statement of Activities NET (EXPENSES) REVENUES AND CHANGES IN NET POSITION PROGRAM REVENUES BUSINESS CHARGES FOR GRANTS AND TYPE FUNCTIONS/PROGRAMS EXPENSES SERVICES DONATIONS ACTIVITIES BUSINESS TYPE ACTIVITIES Administrative Services $ 695,499 $ 0 $ 0 $ (695,499) Program Services 4,118, , ,000 (3,193,141) Change in Net Pension Obligation 287, (287,519) TOTAL BUSINESS TYPE ACTIVITIES $ 5,101,135 $ 614,976 $ 310,000 (4,176,159) GENERAL REVENUES Member Contributions 4,152,138 Miscellanous Income 5,320 Interest Income 6,923 TOTAL GENERAL REVENUES 4,164,381 CHANGE IN NET POSITION (11,778) NET POSITION, BEGINNING OF YEAR 4,858,364 PRIOR PERIOD ADJUSTMENT 267,686 BEGINNING OF YEAR, RESTATED 5,126,050 END OF YEAR $ 5,114,272 See Accompanying Notes To The Financial Statements - 9 -

16 Statement of Fund Net Position December 31, 2015 Special Recreation ASSETS Cash $ 4,269,635 Accounts Receivable 2,592 Prepaid Expenses 65,792 TOTAL ASSETS 4,338,019 DEFERRED OUTFLOWS 0 LIABILITIES Accounts Payable 81,063 Accrued Payroll 94,369 Deferred Program Revenue 375,970 TOTAL LIABILITIES 551,402 DEFERRED INFLOWS 0 FUND NET POSITION Unrestricted 3,786,617 TOTAL FUND NET POSITION 3,786,617 Amounts reported in the statement of net position are different because: Capital assets are reported in the Government-Wide Financial Statements but are not reported in the fund financial statements. 1,442,001 IMRF Plan Year Adjustments are not recorded as deferred outflows in the fund financial statements. 258,412 IMRF Deferred outflows are not reported as deferred outflows in the fund financial statements. 348,110 Accrued Vacation is reported in the Government-Wide Financial Statements but is not reported in the fund financial statements. (89,753) Capital leases are reported in the Government-Wide Financial Statements but are not reported in the fund financial statements. (22,115) Net Pension Liability is not reported in the fund financial statements. (609,000) NET POSITION $ 5,114,272 See Accompanying Notes To The Financial Statements

17 Statement of Revenues, Expenses and Changes in Fund Net Position OPERATING REVENUES Member Contributions $ 4,152,138 Program 614,976 Grants and Contributions 310,000 TOTAL OPERATING REVENUES 5,077,114 OPERATING EXPENSES Administration 699,679 Program 442,641 Salary 2,407,538 Liability/Audit/IMRF 558,037 ADA Compliance 470,708 Capital Outlay 257,841 TOTAL OPERATING EXPENSES 4,836,444 OPERATING INCOME 240,670 NON OPERATING INCOME(EXPENSE) Proceeds from Capital Leases 5,320 Interest Income 6,923 TOTAL NON OPERATING INCOME(EXPENSE) 12,243 CHANGE IN FUND NET POSITION 252,913 FUND NET POSITION, BEGINNING OF YEAR 3,533,704 END OF YEAR $ 3,786,617 See Accompanying Notes To The Financial Statements

18 Reconciliation of the Statement of Revenues, Expenses and Changes in Fund Net Position to the Statement of Activities Net Change in Fund Net Position (Statement of Revenues, Expenses, and Changes in Fund Net Position) $ 252,913 Amounts reported for business type activities in the Statement of Activities are different because: Depreciation of Capital Assets is not considered an expense in the fund financial statements. (136,541) The purchase of Capital Assets is considered an expense in the fund financial statements. 137,014 Capital Lease principal payments are considered an expenditure in the fund financial statements. 9,522 The change in accrued vacation is not considered in the fund financial statements. 8,653 The implementation of GASB Statement 68 requires the following adjustments to be made to the government-wide financial statements: Change in Net Pension Obligation (287,519) IMRF Plan Year Adjustments 4,180 Change in Net Position of Business Type Activities (Statement of Activities) $ (11,778) See Accompanying Notes To The Financial Statements

19 Notes To The Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Northwest Special Recreation Association is a cooperative association of park districts that have organized to jointly provide recreation services for individuals with disabilities. The member agencies include the park districts of Arlington Heights, Bartlett, Buffalo Grove, Elk Grove, Hanover Park, Hoffmann Estates, Inverness, Mount Prospect, Palatine, Prospect Heights, River Trails, Rolling Meadows, Salt Creek Rural, Schaumburg, South Barrington, Streamwood, and Wheeling. A summary of significant accounting policies is as follows: A. Reporting Entity The Association follows the provisions of Governmental Accounting Standards Board Statement No. 39, Determining Whether Certain Organizations Are Component Units an amendment of GASB Statement No. 14. As defined by generally accepted accounting principles established by GASB, the financial reporting entity consists of the primary government, as well as its component units, which are legally separate, tax-exempt entities and meet all of the following criteria: 1. The economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents. 2. The primary government, or its component units, is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization. 3. The economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. The Association has concluded that no entities meet the criteria of Statement 39 for inclusion as a component unit. Likewise, the Association is not required to be included as a component unit of any other entity. Governmental Accounting Standards Board Statement No. 61, The Financial Reporting Entity, is an amendment of GASB Statements No. 14 and No. 39, which does not have impact on the current year financial statements. B. Basis of Presentation The implementation of GASB 34 requires three statements to be shown as basic financial statements for all stand-alone enterprise fund entities. They are the Statement of Net Position, which presents the financial condition of the governmental activities of the Association at fiscal year end, the Statement of Revenues, Expenses and Changes in Fund Net Position, which presents a comparison between direct expenses and program revenues for the Association s activities, and the Statement of Cash Flows (not presented in this report). All statements are prepared on the full accrual basis

20 Notes To The Financial Statements (Continued) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Presentation (Continued) Enterprise funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. The Association has one fund which operates as a stand alone enterprise fund whose function is to provide special recreation. C. Basis of Accounting The basic financial statements are presented using the economic resources measurement focus and 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 the economic asset is used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The Association reports unearned program revenues on its Statement of Net Position. Unearned revenues arise from program charges received before the program has started. D. Measurement Focus The basic financial statements are presented using the flow of economic resources measurement focus, which means all assets, deferred outflows, liabilities (whether current or non-current), and deferred inflows are included on the Statement of Net Position and the operating statements present increases and decreases in net total position. E. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates

21 Notes To The Financial Statements (Continued) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Budgetary and Budgetary Accounting The Association follows these procedures in establishing the budgetary data reflected in the financial statements. The Association Director submits to the Board a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them. The budget is legally enacted by the Board of Trustees. The budget may be amended by the Board of Trustees. G. Cash and Cash Equivalents For purpose of reporting cash flows, cash and cash equivalents are defined as cash on hand, amounts held at financial institutions, and short-term highly liquid investments that are readily convertible to known amounts of cash. Investments with an original maturity of three months or less are considered short-term for these purposes. H. Prepaid Items Payments made to vendors for services that will benefit periods beyond December 31, 2015 are recorded as prepaid items. I. Capital Assets Depreciation of all exhaustible capital assets over the threshold of $500 is recorded as an allocated expense in the Statement of Activities, with accumulated depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Building Building Improvements Furniture and Equipment Vehicles 50 Years Years 5-20 Years 8-15 Years J. GASB Pronouncements In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments. This Statement establishes new financial reporting requirements for state and local governments throughout the United States. The requirements of this Statement are effective in three phases based on a government s total revenues in the first year ending after June 15, The Association has adopted this Statement for the period beginning January 1, Governmental Accounting Standards Board Statement No. 61, The Financial Reporting Entity, is an amendment of GASB Statements No. 14 and No. 39, which does not have impact on the current year financial statements

22 Notes To The Financial Statements (Continued) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) J. GASB Pronouncements (Continued) As of January 1, 2012, the Association has implemented GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows or Resources, and Net Position. The objective of this Statement is to improve financial reporting by standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effect on a government s net position. As of January 1, 2012, the Association has implemented GASB Statement No. 65 Items Previously Reported as Assets and Liabilities. The objective of this statement is to establish accounting and financial reporting standards that reclassify as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities. The Statement also recognizes as outflows of resources or inflows of resources certain items that were previously reported as assets and liabilities. K. Compensated Absences It is the Association s policy to permit employees to accumulate earned but unused vacation for an unlimited number of years. The maximum amount of days that can be accrued is the equivalent of one year s vacation credits. Upon termination, an employee shall be paid for unused vacation time. As of December 31, 2015 and 2014, the amount of accumulated unpaid vacation is $89,753 and $98,406, respectively. The liability is accounted for in the Government-Wide Statement of Net Position. L. Equity Classifications Equity is classified as net position and displayed in three components: Net Investment in capital assets consists of capital assets, net of accumulated depreciation and related debt, if applicable. Restricted Amounts consists of amounts with constraints placed on the use either by external groups such as creditors, grantors, contributors, or laws or regulations of other governments, or law through constitutional provisions or enabling legislation. Unrestricted Amounts consists of all other amounts that do not meet the definition of restricted or invested in capital assets. NOTE 2 DEPOSITS AND INVESTMENTS A. Deposits At December 31, 2015, the carrying amount of the Association s deposits was $4,269,635 and the bank balance was $4,366,

23 Notes To The Financial Statements (Continued) NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) B. Investments Included in the carrying amount of the Association s deposit is a balance in the Illinois Park District Liquid Asset Fund, created in 1975 by the Illinois General Assembly. Oversight is provided with an annual audit by the Illinois Auditor General. This pooled investment with other park districts is similar in nature to a money market fund and consists primarily of certificates of deposit, U.S. Government securities, commercial paper, and corporate bonds. Because individual securities are not owned by the Park District, amounts invested in the Illinois Park District Liquid Asset Fund are not categorized. The Association s value in the pool is based on the average maturity of the pool s investments. Further, the fair value of the Park District s position in the pool is equal to the value of its pool shares. Carrying Amount Fair Value Illinois Park District Liquid Asset Fund $ 1,308,729 $ 1,400,780 (Rated AAAm by Standard & Poor) Total Investments $ 1,308,729 $ 1,400,780 The Association may, upon adoption of an ordinance, elect to invest in: Its own general obligation bonds. Its own tax anticipation warrants, bearing interest at a rate not to exceed 4% per annum. Bonds or other interest-bearing obligations of the United States or State of Illinois. Savings accounts or certificates of deposit of any state or national bank that are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). Treasury notes and other securities issued by agencies of the United States. Bonds, notes, certificates of indebtedness, treasury bills, or other securities guaranteed by the full faith and credit of the United States. Certificates of deposit or time deposits constituting direct obligations of any bank, as defined in the Illinois Banking Act. Short-term obligations of corporations organized in the United States with assets exceeding $500 million, if: 1. such obligations are rated at the time of purchase within the highest standard rating services by at least two rating agencies and which mature not later than 270 days from the date of purchase; 2. no more than 25% of any fund is invested in such obligations at any time; and 3. such purchases do not exceed 10% of the corporation s outstanding obligations. Shares or other securities of any state or federally chartered savings and loan association, the shares of investment certificates of which are insured by the Federal Savings and Loan Insurance Corporation. The Illinois Governmental Cash Investment Fund. C. Policies and Investments It is the policy of the Association to invest its funds in a manner which will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the Association and conforming to all state and local statutes governing the investment of public funds, using the prudent person standard for managing the overall portfolio. The primary objective of the policy is safety (preservation of capital and protection of investment principal), liquidity and yield

24 Notes To The Financial Statements (Continued) NOTE 2 DEPOSITS AND INVESTMENTS (CONTINUED) C. Policies and Investments (Continued) Custodial credit risk for deposits with financial institutions is the risk that in the event of a bank s failure, the Association s deposits may not be returned to it. The Association s investment policy requires pledging of collateral of all bank balances in excess of federal depository insurance with the collateral held by a third party in the Association s name. The Association limits its exposure to credit risk, the risk that the issuer of a debt security will not pay its par value upon maturity, by primarily investing in obligations guaranteed by the United States Government or securities issued by agencies of the United States Government that are explicitly or implicitly guaranteed by the United States Government. NOTE 3 CAPITAL ASSETS A summary of the changes in capital assets for the year follows. Depreciation expense for the year ended December 31, 2015 was $136,541. Balance Balance 12/31/14 Adjustments Additions Retirements 12/31/15 Capital Assets Subject to Depreciation Building $ 1,006,000 $ 0 $ 0 $ 0 $ 1,006,000 Building Improvements 335, ,644 Equipment 360,061 (136,475) ,586 Parking Lot 71, ,730 Transportation Equipment 1,031,779 90, ,014 (128,492) 1,130,358 Total 2,805,214 (46,418) 137,014 (128,492) 2,767,318 Less Accumulated Depreciation Building (238,087) (2,515) (20,120) 0 (260,722) Building Improvements (54,797) (17,964) (12,132) 0 (84,893) Equipment (277,901) 127,991 (20,352) 0 (170,262) Parking Lot (26,900) (149) (3,586) 0 (30,635) Transportation Equipment (752,827) (74,119) (80,351) 128,492 (778,805) Total Accumulated Depreciation (1,350,512) 33,244 (136,541) 128,492 (1,325,317) Net Capital Assets $ 1,454,702 $ (13,174) $ 473 $ 0 $ 1,442,

25 Notes To The Financial Statements (Continued) NOTE 4 DEFERRED REVENUE During the years ended December 31, 2015 and 2014, the Association received $330,163 and $326,649 of prepaid member contributions, respectively and program fees of $45,807 and $49,258, respectively to be used for the subsequent fiscal year s operations. These funds are accordingly classified on the accompanying financial statements as a liability and will be recognized as revenue in the subsequent fiscal year. NOTE 5 DEBT COMMITMENTS In October 2013, the Association entered into several capital lease agreements with HP. The proceeds of these leases were used to purchase new server equipment. The leases have an original principal balance of $39,799, bearing interest between 6.125% and 9.051% and are payable in monthly payments ranging from $256 to $356 beginning March 1, 2014 and ending January 29, As of December 31, 2015 a summary of Capital Leases Payable is as follows: Amount Due Balance Principal Balance Within 12/31/14 Paid 12/31/15 One Year Capital Leases Payable $ 31,637 $ 9,522 $ 22,115 $ 10,213 Total Debt $ 31,637 $ 9,522 $ 22,115 $ 10,213 Annual debt service requirements to maturity for the leases payable, including interest, are as follows: Fiscal Year Principal Interest Total ,213 1,231 11, , , Total $ 22,115 $ 1,678 $ 23,793 NOTE 6 - SUBSEQUENT EVENTS The date to which events occurring after December 31, 2015, the date of the most recent balance sheet, have been evaluated for possible adjustment to the financial statements or disclosure is April 22, 2016 the date the financial statements were available to be issued

26 Notes To The Financial Statements (Continued) NOTE 7 - MEMBERS CONTRIBUTIONS Contributions received from members during the 2015 fiscal year were: Members Amounts Arlington Heights $ 535,737 Bartlett 239,370 Buffalo Grove 308,227 Elk Grove 309,119 Hanover Park 146,440 Hoffmann Estates 300,774 Inverness 40,985 Mount Prospect 337,354 Palatine 473,944 Prospect Heights 75,162 River Trails 97,046 Rolling Meadows 132,477 Salt Creek Rural 34,316 Schaumburg 653,299 South Barrington 77,885 Streamwood 174,333 Wheeling 215,670 $ 4,152,138 NOTE 8 - RISK MANAGEMENT The Northwest Special Recreation Association is exposed to various risks related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and net income losses. Since July 1, 1985, the Northwest Special Recreation Association has been a member of the Park District Risk Management Agency (PDRMA) Property/Casualty Program. PDRMA is a public entity risk pool consisting of park districts, forest preserve districts, special recreation associations and certain non-profit organizations serving the needs of public entities formed in accordance with the terms of an intergovernmental cooperative agreement among its members. Property, general liability, automobile liability, crime, boiler and machinery, public officials liability, employment practices liability, workers compensation and pollution liability coverage is provided in excess of specified limits for the members, acting as a single insurable unit. The following table is a summary of the property/casualty coverage in effect for the period January 1, 2015 through January 1, 2016: PDRMA Member Self-Insured Insurance Policy Coverage Deductible Retention Limits Company Number 1. Property Property/Bldg/Contents PDRMA Reinsurers: P All losses per occurrence $1,000 $1,000,000 $1,000,000,000/all members Various Reinsurers Declaration 11 through the Public Entity Flood/except Zones A&V $1,000 $1,000,000 $250,000,000/occurrence/annual aggregate Property Flood, Zones A&V $1,000 $1,000,000 $200,000,000/occurrence/annual aggregate Reinsurance Earthquake Shock $1,000 $100,000 $100,000,000/occurrence/annual aggregate Program (PEPIP)