Northwest Suburban Municipal Joint Action Water Agency

Transcription

1 Northwest Suburban Municipal Joint Action Water Agency Elk Grove Village, Illinois Comprehensive Annual Financial Report Year Ended April 30, 2015

2 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended April 30, 2015 Prepared by: Fiscal Department of the Northwest Suburban Municipal Joint Action Water Agency

3 TABLE OF CONTENTS Page(s) INTRODUCTORY SECTION Officers and Officials... Organizational Chart... Certificate of Achievement for Excellence in Financial Reporting... Transmittal Letter... i ii iii iv-vii FINANCIAL SECTION INDEPENDENT AUDITOR S REPORT GENERAL PURPOSE EXTERNAL FINANCIAL STATEMENTS Management s Discussion and Analysis... MD&A 1-8 Basic Financial Statements Statement of Net Position Statement of Revenues, Expenses, and Changes in Net Position... 5 Statement of Cash Flows Notes to Financial Statements Required Supplementary Information Schedule of Funding Progress and Employer Contributions Illinois Municipal Retirement Fund Other Postemployment Benefit Plan SUPPLEMENTAL DATA Budgetary Information Schedule of Changes in Net Position - Restricted Accounts... 37

4 TABLE OF CONTENTS (Continued) Page(s) SUPPLEMENTAL DATA (Continued) FINANCIAL SECTION (Continued) Schedule of Operating Expenses - Budget and Actual - Operations and Maintenance Account Long-Term Debt Requirements Water Special Obligation Bonds, Series 1997A Water Supply System Revenue Refunding Bonds, Series Water Supply System Revenue Refunding Bonds, Series Trustee Accounts - Bank of New York Schedule of Changes in Trustee Accounts Members Deposit Accounts Schedule of Changes in Account Balances STATISTICAL SECTION (Unaudited) Net Position by Component Change in Net Position Schedule of Revenues by Source Schedule of Expenses by Function Census Delivered Water Average Per Day Ratios of Outstanding Debt by Type Schedule of Revenue Bond Coverage Demographic and Economic Information Principal Employers Full-Time Equivalent Employees Operating Indicators Capital Asset Statistics by Function... 59

5 INTRODUCTORY SECTION

6 OFFICERS AND OFFICIALS April 30, 2015 BOARD OF DIRECTORS Village of Elk Grove Village Village of Hanover Park Village of Hoffman Estates Village of Mount Prospect City of Rolling Meadows Village of Schaumburg Village of Streamwood Secretary Treasurer Craig Johnson Rodney Craig William McLeod Arlene Juracek Thomas Rooney Al Larson, Chairman Billie Roth James Norris Christine Tromp EXECUTIVE COMMITTEE Village of Elk Grove Village Village of Hanover Park Village of Hoffman Estates Village of Mount Prospect City of Rolling Meadows Village of Schaumburg Village of Streamwood Raymond Rummel Juliana Maller James Norris, Chairman David Strahl Barry Krumstok Brian Townsend Sharon Caddigan EXECUTIVE DIRECTOR Kevin Lockhart ASSISTANT EXECUTIVE DIRECTOR Paul May - i -

7 ORGANIZATIONAL CHART MEMBERS VILLAGE OF ELK GROVE VILLAGE VILLAGE OF MOUNT PROSPECT VILLAGE OF HANOVER PARK CITY OF ROLLING MEADOWS VILLAGE OF HOFFMAN ESTATES VILLAGE OF SCHAUMBURG VILLAGE OF STREAMWOOD BOARD OF DIRECTORS (7) EXECUTIVE COMMITTEE (7) EXECUTIVE DIRECTOR (1) ASSISTANT DIRECTOR (1) PLANT MANAGER (1) SECRETARY (1) OPERATORS (5) MECHANIC (2) ELECTRONICS TECHNICIAN (1) SCHEDULER (1) FOREMAN (1) - ii -

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9 October 1, 2015 Chairman Al Larson Members of the Board of Directors Members of the Executive Committee Northwest Suburban Municipal Joint Action Water Agency The Comprehensive Annual Financial Report (CAFR) of the Northwest Suburban Municipal Joint Action Water Agency for the fiscal year ended April 30, 2015 is submitted herewith. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the Agency. This report was prepared in conformity with generally accepted accounting principles. The CAFR includes an independent audit, as required by state statute and our Water Revenue Bonds. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner that presents fairly the financial position and changes in financial positions of the Agency. All disclosures necessary to enable the reader to gain an understanding of the Agency's financial activity have been included. The Northwest Suburban Municipal Joint Action Water Agency is an intergovernmental agency created under the Illinois Intergovernmental Cooperation Act to construct and operate a water supply system to obtain and transmit treated potable water, drawn from Lake Michigan, to the water systems of the member municipalities. The membership of the Agency consists of seven contiguous municipalities located in Northwest Cook, DuPage and Kane counties in Illinois: Elk Grove Village, Hanover Park, Hoffman Estates, Mount Prospect, Rolling Meadows, Schaumburg and Streamwood. The financial reporting entity (the Agency) includes all operations of the primary government. The Agency has no component unit. Component units are legally separate entities for which the primary government is financially accountable. The Agency is governed by a Board of Directors that consists of one elected official from each member. Each Director has an equal vote. The officers of the Agency are appointed by the Board of Directors. The Board of Directors determines the general policies of the Agency, makes all appropriations, approves contracts for sale or purchase of water, adopts resolutions providing for the issuance of bonds and notes by the Agency, adopts by-laws, rules and regulations and exercises such powers and performs such duties as may be prescribed in the Agency Agreement or its By-Laws. The operation of the Agency is conducted under the direction of the Executive Committee, subject to the general policy decisions of the Board of Directors. The Executive Committee is responsible for carrying out the policy decisions of the Board of Directors. The Executive Committee consists of the Village manager or other appointed official of each member community. Each member is entitled to one vote on the committee. - iv -

10 The administrative and operational functions of the Agency are the responsibility of the Executive Director. The Executive Director reports to the Executive Committee and is accountable for the operation of the system in accordance with Agency policies and directions. Additional Agency staff personnel include an Assistant Director, Secretary, Water Operations Manager, Foreman, five Plant Operators, two Mechanics, Electronics Technician and a Scheduling Coordinator. The main pump station and system are manned and controlled on a twenty-four hour daily basis. Major activities during Fiscal Year Continue I-90 pipeline relocation engineering, planning and construction 2. Implementation of new fund accounting software 3. Replacement of drain valves 4. Implementation of new transmission network for SCADA system 5. Install security camera system 6. Review and analyze water supply alternatives Activities Planned for Fiscal Year Continue I-90 pipeline relocation engineering, planning and construction 2. Implementation of GIS/GPS software 3 Continuation of alternative water supply evaluation 4. Variable frequency drive replacement program 5. Standpipe repairs Accounting System and Budgetary Control In developing and evaluating the Agency's accounting system, consideration is given to the adequacy of the internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: 1. The safeguarding of assets against loss from unauthorized use or disposition. 2. The reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that: 1. The cost of a control should not exceed the benefits likely to be derived. 2. The evaluation of costs and benefits requires estimates and judgments by management. All internal controls evaluations occur within the above framework. We believe the Agency's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. FINANCIAL INFORMATION Please refer to the Management Discussion and Analysis for summaries. The budget is adopted by the Board of Directors prior to the beginning of the fiscal year. The budget is prepared in accordance with the Bond Resolution and Water Supply Agreement, which provides for different cost component formulas with which members reimburse the Agency for actual costs. Members are provided with a monthly financial budget analysis and a billing statement. - v -

11 LONG TERM FINANCIAL PLANNING The Agency submits a budget annually which provides a summary and analysis of revenue and expenditures for the upcoming fiscal year. This report also includes a ten year financial forecast that incorporates estimated water usage, cost of water, debt service, operating expenses and projected capital expenditures. The Agency also includes the five year Capital Improvement Plan in the same budget document. ILLINOIS MUNICIPAL RETIREMENT FUND (IMRF) This pension plan covers all other full-time employees who work for the Agency. The Illinois Municipal Retirement Fund benefits are coordinated with Social Security benefits. Funding for this pension plan is made through contributions from the employer and employees as a percent of payroll costs. The employer s percentage of contributions for calendar year 2015 is 17.03% of the employees wages, respectively. Employees contributed 4.5% of their wages to IMRF. Employees covered under this pension plan are also covered under Social Security, increasing the respective employer and employee contributions by an additional 6.5 %. RISK MANAGEMENT The Agency participates in two public entity risk pools to protect against casualty and health risk losses. The Intergovernmental Personnel Benefit Cooperative (IPBC) insures employee health, accident and life claims and the Municipal Insurance Cooperative Agency (MICA) insures general liability, first-party property losses, third-party liability claims, worker s compensation claims and public official liability claims. The Agency has ongoing training and safety program for water supply operation and maintenance. ECONOMIC CONDITION AND OUTLOOK The seven member municipalities have a current daytime population of approximately 500,000 people located in a contiguous geographic area of approximately seventy-eight square miles. Although the area is primarily single-family residential, there are significant industrial and commercial areas. The service area is adjacent to O'Hare International Airport, one of the world's busiest airports. OTHER INFORMATION The Agency engaged the independent certified public accounting firm of Sikich to render an opinion on the financial statements. As independent auditors, Sikich also provided an objective outside review of management's performance in reporting operating results and financial condition. All requirements have been complied with and the auditor's opinion is included in the Financial Section of the report. AWARD The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Agency for its Comprehensive Annual Financial Report for the fiscal year ended April 30, The Certificate of Achievement is a prestigious national award that recognizes conformance with the highest standards for preparation of state and local government financial reports. - vi -

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13 FINANCIAL SECTION

14 INDEPENDENT AUDITOR S REPORT Members of the Board of Directors Northwest Suburban Municipal Joint Action Water Agency Elk Grove, Illinois We have audited the accompanying financial statements of the Northwest Suburban Municipal Joint Action Water Agency, Elk Grove Village, Illinois (the Agency), as of and for the year ended April 30, 2015, and the notes to the financial statements which collectively comprise the Agency s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Agency 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 Agency 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

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16 GENERAL PURPOSE EXTERNAL FINANCIAL STATEMENTS

17 Management s Discussion & Analysis Overview of the Annual Financial Report Management s Discussion and Analysis (MD&A) serves as an introduction to, and should be read in conjunction with, the basic audited financial statements and supplementary information. The MD&A represents management s examination and analysis of the Agency s financial condition and performance. Summary financial statement data, key financial and operational indicators used in the Agency s budget, bond resolution and other management tools were used for this analysis. The financial statements report information about the Agency using full accrual accounting methods as utilized by similar business activities in the private sector. However, rate-regulated accounting principles applicable to private sector utilities are not required to be used by government utilities and have not been used in this report. The basic financial statements include a statement of net position, a statement of revenues, expenses and changes in net position, a statement of cash flows and notes to the financial statements. The statement of net position presents the financial position of the Agency on a full accrual historical cost basis. The statement of net position presents information on all of the Agency s assets and deferred outflows and liabilities with the difference reported as net position. Over time, increases and decreases in net position are one indicator of whether the financial position of the Agency is improving or deteriorating. While the statement of net position provides information about the nature and amount of resources and obligation at year-end, the statement of revenues, expenses and changes in net position presents the results of the business activities over the course of the fiscal year and information as to how the net position changed during the year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. This statement also provides certain information about the Agency s recovery of its costs. The statement of cash flows presents changes in cash and cash equivalents resulting from operational, financing and investing activities. This statement presents cash receipts and cash disbursement information without consideration of the earnings event, when an obligation arises, or depreciation of capital assets. The notes to the financial statements provide required disclosures and other information that are essential to a full understanding of material data provided in the statements. The notes present information about the Agency s accounting policies, significant account balances and activities, material risks, obligations, commitments, contingencies and subsequent events, if any. Supplementary information such as debt coverage data is provided. MD&A 1

18 Management s Discussion & Analysis Financial Analysis The following comparative condensed financial statements and other selected information serve as the key financial data and indicators for management, monitoring and planning. General Trends and Significant Events The following information details the water pumped to members and net cost as purchased from the City of Chicago. The volume of water sold in fiscal year was approximately billion gallons, a decrease of 3.97% from fiscal year A wet and cool summer was the big contributor to the decrease. Pumpage by Fiscal Year Fiscal Year Pumped (Gallons) ,265,083, ,689,073, ,096,897, ,682,767, ,853,019, ,185,344, ,427,627, ,064,366, ,123,968, ,231,528,000 Net Cost per Thousand Gallons of Water Charged to Members The net cost per thousand gallons is simply the average member payments divided by total water pumped to each member community. Member payments are based on formulas that seek to reimburse the Agency for cash expenditures. Pumped Cost by Fiscal Year Fiscal Year Pumped Cost $ MD&A 2

19 Management s Discussion & Analysis Cost of water purchased from the City of Chicago (1,000) gallons Fiscal Year Gallons (000) Cost Gross Cost ,265, ,735, ,689, ,361, ,362, ,747, ,870, ,476, ,031, ,173, ,397, ,901, ,687, ,080, ,344, ,133, ,396, ,487,853 Financial Condition The following tables indicate that the Agency s financial condition remained strong at year-end with adequate liquid assets, reliable plants and systems to meet demand and a reasonable level of unrestricted net position. The current financial condition, technical support staff capabilities and operating and expansion plans to meet anticipated customer needs are well balanced and under control. The Agency purchases all water from the City of Chicago which raised its rates again by 15% on January 1, This increase resulted in a corresponding rate increase by the Agency which resulted in the large increases in Other Noncurrent Assets, Current Liabilities, Operating Revenues and Operating Expenses. The following charts summarize the statement of net position with comparisons to the prior year. Statement of Net Position 2015 As Restated 2014 Change % of Change Total Current Assets $28,420,044 $16,970,567 $11,449, % Noncurrent Assets Net Capital Assets 56,981,794 44,928,089 12,053, % Other Noncurrent Assets 3,068,788 21,307,021 (18,238,233) -86.5% Total Assets 88,470,626 83,205,677 5,264, % Deferred Outflow of Resources 197,963 3,115,942 (2,917,979) -93.6% Total Deferred Outflows of Resources 197,963 3,115,942 (2,917,979) -93.6% Current Liabilities 10,388,102 16,475,723 (6,090,621) % Total Noncurrent Liabilities 64,079,704 56,450,584 7,629, % Net Position Total Liabilities 74,467,806 72,926,307 (1,541,499) 2.1% Net investment in capital assets 6,801,388 (11,626,080) 18,427, % Restricted 12,438,152 11,106,013 1,332, % Unrestricted (5,038,757) 13,915,379 (18,954,136) % Total Net Position (Deficit) $14,200,783 $13,395,312 $805, % MD&A 3

20 Management s Discussion & Analysis The Agency has had deficits and profits because of its billing method of receiving payments for cash-only disbursements. Such items as depreciation and amortization are not billed while an item such as bond principal is billed. The net deficit position will become positive as bond principal is retired. Statement of Revenues, Expenses and Changes in Net Position Revenues Operating Revenues-Charges for Services Miscellaneous Income Change $48,859,961 $45,052,727 $3,807,234 Non-Operating Revenues-Investment Income 269, ,794 (147,452) Expenses Total Revenues 49,129,303 45,469,521 3,659,782 Purchases of Water 40,503,623 35,152,748 5,350,875 All other 7,339,264 6,060,261 1,279,003 Total Expenses 47,842,887 41,213,009 6,629,878 Change in Net Position 1,286,416 4,256,512 (2,970,096) Net Position May 1 (as restated) 12,914,367 9,138,800 3,775,567 Net Position April 30 14,200,783 13,395, ,471 The following table shows the Agency s ability to generate net operating cash. Net cash provided by operating activities is shown in total dollars Change Total Operating Revenues $48,859,961 $45,052,727 $3,807,234 Net Cash From Operations 7,849,514 9,216,948 (1,367,434) Net Operating Cash-% of Operating Revenue 16.07% 20.46% % The Agency bills its members one month in arrears for cash paid out in the previous month. In addition, the Agency has advance billed approximately one month of operation and maintenance and three months of debt service payments. The Agency pays its water supplier quarterly in arrears. The Agency maintains total deposits combined in the Operations and Maintenance and Trustee Accounts of $5,603,953. MD&A 4

21 Management s Discussion & Analysis Results of Operations Operating Revenues: Revenues from Operations fall into one category: member charges. The following chart depicts water revenues for the last five fiscal years: Operating Revenues Elk Grove Village $8,247,334 $7,492,595 $6,945,503 $5,423,152 $4,677,641 Hanover Park 4,416,708 3,997,441 3,569,166 2,902,993 2,503,423 Hoffman Estates 8,002,907 7,550,632 6,942,052 5,339,992 4,713,490 Mount Prospect 5,962,594 5,593,268 4,923,797 3,766,774 3,342,871 Rolling Meadows 3,589,856 3,322,294 2,993,881 2,427,203 2,191,888 Schaumburg 13,010,082 12,260,455 11,457,534 9,130,210 7,944,131 Streamwood 5,438,644 4,836,042 4,145,521 3,276,635 2,847,792 Total $48,668,125 $45,052,727 $40,977,454 $32,266,959 $28,221,236 Expenses The Agency operates and maintains a potable water delivery system. The Agency purchases water from the City of Chicago and transports the water through a fifty-five mile transmission main to its seven member communities. Wages and fringe benefits increased from fiscal year to The increase is mostly due to the retirement and resignation of long term employees with associated payouts and rate increases in IMRF and health insurance. The Agency granted a 2.0% wage increase to all employees at the beginning of Salary and related benefits for the last seven years are as follows: Wages and Fringe Benefits $1,935, ,793, ,772, ,691, ,658, ,584, ,518,758 MD&A 5

22 Management s Discussion & Analysis Rate Covenant In the Bond Resolution the Agency covenants and agrees that it will at all times provide sufficient revenues for the safe and proper operation of a water system. The Agency also agrees to maintain certain minimum balances and set aside appropriate amounts of money in specific accounts for the purposes of payments of the outstanding bonds. The Agency has a surety bond that provides as a replacement for a debt service reserve account. Annual debt service requirements to maturity are as follows: Fiscal Year Ending April 30 Principal Bond Interest Total 2015 $5,680,000 $2,149,413 $7,829, ,850,000 1,977,713 7,827, ,030,000 1,744,225 7,774, ,315,000 1,448,313 7,763, ,620,000 1,147,467 7,767, ,920, ,800 7,748, ,255, ,975 7,736, ,610, ,200 7,762,200 Total $52,280,000 $9,930,106 $62,210,106 The Agency is also required to have a minimum balance of $3,000,000 in its Replacement and Contingency Account. The current balance in the account is $4,159,020. Debt Administration As shown in Note 5 of the Financial Statements, on April 30, 2015, the Agency had $64,395,751 of revenue bonds outstanding. Direct debt service payments from the members are approximately $7.8 million per year similar to the last several years reflected in the chart above. MD&A 6

23 Management s Discussion & Analysis Capital Assets Beginning Balance 5/1 Additions Retirements/ Adjustments Ending Balance 4/30 Capital Assets not being depreciated Easements $3,254,354 $- $- $3,254,354 Construction in progress - 13,734,271-13,734,271 Total capital assets not being depreciated Capital Assets being depreciated 3,254,354 13,734,271-16,988,625 Water System 65,398, ,398,765 Booster Station and Standpipes 10,856, ,856,432 Control System 4,734, ,153-5,040,381 Other Construction 460, ,147 Furniture, fixtures & equipment 445, , ,165 Automobiles and trucks 592,474 61, ,987 Leasehold improvements 110, ,117 Temporary Easements 1,000, ,000,000 Total capital assets being depreciated Less accumulated depreciation for $83,598,106 $490,888 - $84,088,994 Water System 29,663,791 1,089,979-30,753,770 Booster Station and Standpipes 6,761, ,411-7,033,379 Control System 4,010, ,429-4,263,052 Other Construction 217,812 11, ,316 Furniture, fixtures & equipment 436,683 12, ,809 Automobiles and trucks 557,122 26, ,781 Leasehold improvements 107,317 1, ,717 Temporary Easements 650,000 25, ,000 Total accumulated depreciation $42,405,316 $1,690,508 - $44,095,824 Total Capital Assets being depreciated $41,192,789 $(1,199,620) - $39,993,170 Capital Assets, Net $44,447,143 $12,534,651 $- $56,981,795 * SEE NOTE 3 IN FINANCIAL STATEMENTS MD&A 7

24 Management s Discussion & Analysis ECONOMIC FACTORS AND IMPACTS The Agency is supported solely by member usage charges, interest income and other miscellaneous income. The current economic conditions, if continued in , will continue to have a negative impact on interest income. In late 2011, JAWA was notified that the City of Chicago was increasing its water rates over the next four years beginning January 1, The percentage rate increases annually have been %, %, % and %. All of these increases have been incorporated into the Agency s monthly billing on January 1 of each year. The City of Chicago has passed an ordinance limiting the rate increases moving forward to 5% or the CPI whichever is less. The first increase under this ordinance will be July 1, Also in late 2011 the Agency was notified by the Illinois State Toll Highway Authority that it was moving forward with the expansion of the I-90 corridor from O Hare to Rockford. The Agency has 16 miles of pipeline that parallels the project. The Agency has negotiated an agreement with the ISTHA that limits the Agency s total exposure for the moving and replacement of sections of the pipeline to $73 million. The ISTHA will pay the contracts for the Agency upfront and requires that the Agency pays a minimum of $1 million per year to the ISTHA and must have the full amount paid by December 31, The interim financing from the ISTHA is interest free until FINAL COMMENTS The Agency historically works very closely with its member communities. The respective staffs have a high degree of intergovernmental cooperation. There is the common view that thoughtful planning and prudent administration of resources will yield efficiency in the operation of the system and thereby result in affordable, efficient and reliable water service. Should there be any questions regarding this report or any item contained herein, please address such questions to: Kevin C. Lockhart, Executive Director Northwest Suburban Municipal Joint Action Water Agency 901 Wellington Avenue Elk Grove Village, Illinois MD&A 8

25 BASIC FINANCIAL STATEMENTS

26 STATEMENT OF NET POSITION April 30, 2015 CURRENT ASSETS Cash and cash equivalents $ 2,852,773 Accounts receivable 3,360,557 Restricted investments 22,206,714 Total current assets 28,420,044 NONCURRENT ASSETS Capital assets Capital assets not being depreciated 16,988,625 Capital assets being depreciated 84,088,993 Accumulated depreciation (44,095,824) Net capital assets 56,981,794 Other noncurrent assets Restricted cash and cash equivalents 2,754,433 Restricted investments 90,642 Accrued interest receivable 199,255 Developer receivable 24,458 Total other noncurrent assets 3,068,788 Total noncurrent assets 60,050,582 Total assets 88,470,626 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 197,963 Total deferred outflows of resources 197,963 (This statement is continued on the following page.) - 3 -

27 STATEMENT OF NET POSITION (Continued) April 30, 2015 CURRENT LIABILITIES Accounts payable and accrued expenses $ 3,434,746 Revenue bonds payable 5,900,000 Interest payable 1,033,356 Due to Illinois State Toll Highway Authority 20,000 Total current liabilities 10,388,102 NONCURRENT LIABILITIES Revenue bonds payable 44,478,369 Due to Illinois State Toll Highway Authority 13,974,271 Deposits payable - members (trustee accounts) 2,882,636 Deposits payable - members (agency accounts) 2,721,317 Net other postemployment benefits obligation 8,643 IMRF net pension obligation 14,468 Total 19,601,335 Total noncurrent liabilities 64,079,704 Total liabilities 74,467,806 NET POSITION Net investment in capital assets 6,801,388 Restricted for debt service 8,087,585 Restricted for improvements and replacements 4,350,567 Unrestricted (5,038,757) TOTAL NET POSITION $ 14,200,783 See accompanying notes to financial statements

28 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION For the Year Ended April 30, 2015 OPERATING REVENUES Charges for services Billings to members $ 48,859,961 Total operating revenues 48,859,961 OPERATING EXPENSES EXCLUDING DEPRECIATION Water pumping and distribution 40,503,623 Administrative 851,810 Total operating expenses excluding depreciation 41,355,433 OPERATING INCOME BEFORE DEPRECIATION 7,504,528 Depreciation 1,690,508 OPERATING INCOME 5,814,020 NON-OPERATING REVENUES (EXPENSES) Investment income 268,790 Interest expense (including amortization) (4,796,946) Miscellaneous income 552 Total non-operating revenues (expenses) (4,527,604) CHANGE IN NET POSITION 1,286,416 NET POSITION, MAY 1 13,395,312 Prior period adjustment (480,945) NET POSITION, MAY 1 - AS RESTATED 12,914,367 NET POSITION, APRIL 30 $ 14,200,783 See accompanying notes to financial statements

29 STATEMENT OF CASH FLOWS For the Year Ended April 30, 2015 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 48,668,125 Payments to suppliers for goods and services (39,773,630) Payments to employees for services (1,044,981) Net cash from operating activities 7,849,514 CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES None - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on bonds (12,025,000) Interest payments (7,958,750) Payments to Illinois State Toll Highway Authority (20,000) Purchase of capital assets (490,889) Net cash from capital and related financing activities (20,494,639) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investment (2,276,137) Investment income 268,790 Sale of investments 4,907,803 Net cash from investing activities 2,900,456 NET INCREASE IN CASH AND CASH EQUIVALENTS (9,744,669) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 21,536,383 CASH AND CASH EQUIVALENTS, END OF YEAR $ 11,791,714 (This statement is continued on the following page.) - 6 -

30 STATEMENT OF CASH FLOWS (Continued) For the Year Ended April 30, 2015 RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating income $ 5,814,020 Miscellaneous income 552 Adjustments to reconcile operating income to net cash from operating activities Depreciation 1,690,508 Changes in assets and liabilities Accounts receivable (192,687) Developer receivable 299 Accounts payable and accrued expenses 281,204 Deposits payable 266,835 Net other postemployment benefits obligation (10,539) IMRF net pension obligation (678) NET CASH FROM OPERATING ACTIVITIES $ 7,849,514 CASH AND INVESTMENTS Cash and cash equivalents $ 2,852,773 Current restricted investments 22,206,714 Noncurrent restricted cash and equivalents 2,754,433 Noncurrent restricted investments 90,642 Total cash and equivalents 27,904,562 Less noncash equivalents (16,112,848) TOTAL CASH AND INVESTMENTS $ 11,791,714 See accompanying notes to financial statements

31 NOTES TO FINANCIAL STATEMENTS April 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Northwest Suburban Municipal Joint Action Water Agency (the Agency) have been prepared in conformity with accounting principles generally accepted in the United States of America, as applied to government units (hereinafter referred to as generally accepted accounting principles (GAAP)). The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Agency s accounting policies are described below. a. Reporting Entity The Agency was organized on March 17, The Agency assumed all contracts, debts, liabilities, obligations, and assets of the Northwest Suburban Water System Venture under Chapter 127, par of the Illinois Revised Statutes titled Intergovernmental Cooperation Act. The purposes and objectives of the Agency are: 1) To provide water to member municipalities on a wholesale basis. 2) To plan, construct, acquire, develop, operate, maintain, or contract for facilities for receiving, storing, and transmitting water from Lake Michigan for the principal use and mutual benefit of the municipalities and their water users. 3) To provide adequate supplies of such water on an economical and efficient basis for the municipalities. At April 30, 2015, the following municipalities were members of the Agency: Village of Elk Grove Village Village of Hanover Park Village of Hoffman Estates Village of Mount Prospect City of Rolling Meadows Village of Schaumburg Village of Streamwood The Agency is an intergovernmental agency created under the Illinois Intergovernmental Act and is governed by a Board of Directors, which consists of one elected official from each member municipality

32 NOTES TO FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) a. Reporting Entity (Continued) This report included all of the funds of the Agency. The reporting entity for the Agency consists of the primary government and its component units. Component units are legally separate organization for which the primary government is financially accountable or other organizations for which the nature and significant of their relationship with the primary government are such that their exclusion would cause the reporting entity s financial statements to be misleading. The Agency has not identified any organizations that meet these criteria. b. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The financial statements are reported 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 economic asset used. Revenues, expenses, gains, losses, assets, deferred outflows of resources, liabilities, and deferred inflows of resources resulting from exchange and exchange like-like transactions are recognized when the exchanges takes place. Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 expenses during the reporting period. Actual results could differ from those estimates. c. Cash and Cash Equivalents For purposes of the statement of cash flows, the Agency considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Additional restrictions may arise from local charters, ordinances, resolutions, and grant resolutions

33 NOTES TO FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. Investments Investments are stated at fair value, which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on quoted market prices. No investments are reported at amortized cost. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment income. The difference between the bank statement balance and carrying value is due to outstanding checks and/or deposits in transit. Illinois Funds is an investment pool managed by the State of Illinois, Office of the Treasurer, which allows governments within the State to pool their funds for investment purposes. Illinois Funds is not registered with the SEC as an investment company, but does not operate in a manner consistent with Rule 2a7 of the Investment Company Act of Investments in Illinois Funds are valued at Illinois Fund s share prices, the price for which the investments could be sold. e. Accounts Receivables/Payables The Agency states accounts receivable at the amounts billed to customers. The carrying amount of accounts receivable is reduced by the valuation allowances that reflects management s best estimate of amounts that will not be collected. The Agency considers the entire amount of the receivable to be collectives and, therefore, estimated the valuation allowance to be zero as April 30, f. Restricted Assets Mandatory segregations of assets are presented as restricted assets. Such segregations are required by bond agreements and other external parties. Current liabilities payable from these restricted assets are so classified. When both restricted and unrestricted resources are available for use and using restricted resources is appropriate, it is the Agency s policy to use restricted resources first, then unrestricted resources

34 NOTES TO FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) g. Capital Assets and Other Assets Capital assets include property, plant, and equipment. Capital assets are defined by the Agency as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. All capital assets are valued at historical cost or estimated historical cost if actual amounts are unavailable. Donated capital assets are recorded at their estimated fair value at the date of donation. Capital assets in service are depreciated or amortized using the straight-line method over the following useful lives: Years Water system Booster station and standpipes Other construction Easements 40 Control system 15 Furniture, fixtures, and equipment 5-7 Automobiles and trucks 5 Leasehold improvements 7 Maintenance and repairs are charged to expense in the year incurred. Expenses that extend the useful life or increase productivity of property, plant, and equipment are capitalized. Interest has been capitalized on assets acquired with debt. The amount of interest capitalized was calculated by offsetting interest expense incurred from the date of the borrowing until completion of the project, with interest earned on invested proceeds over the same period. Buy-Back of Facilities, Reservoirs, and Site at O Hare - Due from the City of Chicago (the City) Section 3.4 of the Water Purchase Agreement between the Agency and the City states that the Agency agrees to sell and the City agrees to buy the facilities and reservoirs, together with any interest in the site, at a price equal to the aggregate costs of the facilities, reservoirs, and site as determined. Payments shall be solely in the form of a credit against any amounts due and owing the City for lake water furnished

35 NOTES TO FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) g. Capital Assets and Other Assets (Continued) Buy-Back of Facilities, Reservoirs, and Site at O Hare - Due from the City of Chicago (the City) (Continued) The Agency will convey to the City its entire right (title and interest) in the facilities and the reservoirs, together with any interest in the site, 30 days after the later of the date all of the obligations issued in whole or in part to finance the provision of the Agency project or any expansion thereof or addition thereto and any obligations issued to refund any of such securities have been paid in full as to principal and interest or at such time as the credits granted by the City equal the aggregate costs of the facilities and reservoirs as determined. The credits shall be determined as follows: each billing to the Agency, computed on the basic charge as adjusted with respect to all quantities of lake water furnished in a calendar year up to the minimum annual quantity applicable to such year, shall be reduced by a credit to the Agency equal to 12% of the net charges on any bill to the Agency for such quantities. With respect to any additional quantities of lake water furnished during such calendar year, billings shall be reduced by a credit to the Agency equal to 25% of the net charges on any bill to the Agency for such quantities. Such credits shall commence with the first billing to the Agency and continue until such time as the City shall have credited the Agency with an amount equal to the aggregate cost of the facilities and reservoirs. As of April 30, 2015, the Agency has been fully reimbursed for their aggregation costs incurred for the site at O Hare Airport and the property has been conveyed to the City. Should the Agency incur further expansion costs at the site they will be eligible for additional reimbursements. h. Deferred Outflows/Inflows of Resources A deferred outflow of resources represents a consumption of net assets that applies to a future period and will not be recognized as an outflow of resources (expense) until that future time

36 NOTES TO FINANCIAL STATEMENTS (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) h. Deferred Outflows/Inflows of Resources (Continued) A deferred charge on refunding arises from advance refunding of debt. The difference between the cost of the securities placed in trust for future payment of refunded debt and the net carrying value of that debt is deferred and amortized as a component of interest expense over the shorter term of the refunding issue or the original term of the refunded debt. The unamortized amount is reported as a deferred outflow of resources in the financials statements. i. Compensated Absences Under terms of employment, employees are granted sick leave and vacations in varying amounts. Only benefits considered to be vested are disclosed in the statements. Vested vacation pay is accrued when earned in the financial statements. The liability at April 30, 2015 is $77,916 and is included in the financial statements within accounts payable and accrued expenses. In the event of termination, there are no amounts due to the Agency employees at April 30, 2015 for accumulated sick leave. j. Long-Term Obligations Long-term debt and other obligations are reported as Agency liabilities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line or effective interest method. k. Revenues and Expenses The Agency distinguished operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the Agency s principal ongoing operations. The principal operating revenues of the Agency are charges to customers for sales and services. Operating expenses for the Agency include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses

37 NOTES TO FINANCIAL STATEMENTS (Continued) 2. DEPOSITS AND INVESTMENTS Deposits and Investments The Agency s investment policy authorizes the Agency to invest in all investments allowed by Illinois Compiled Statutes (ILCS). These include deposits/investments in insured commercial banks, savings and loan institutions, obligations of the U.S. Treasury and U.S. agencies, insured credit union shares, money market mutual funds with portfolios of securities issued or guaranteed by the United States Government or agreements to repurchase these same obligations, repurchase agreements, short-term commercial paper rated within the three highest classifications by at least two standard rating services, Illinois Funds (created by the Illinois State Legislature under the control of the State Comptroller that maintains a $1 per share value which is equal to the participants fair value), and the Illinois Metropolitan Investment Fund (IMET), a not-for-profit investment trust formed pursuant to the Illinois Municipal Code and managed by a Board of Trustees elected from the participating members. IMET is not registered with the SEC as an investment company. Investments in IMET are valued at IMET s share price, the price for which the investment could be sold. The Agency s investment policy does limit its deposits to financial institutions that are members of the FDIC system and are capable of posting collateral for amounts in excess of FDIC insurance. Deposits in each local arear bank are insured by the FDIC in the amount of $250,000 for time and savings accounts (including NOW accounts) and $250,000 for demand deposit accounts (interest-bearing and non-interest-bearing). In addition, if deposits are held at an institution outside of the state in which the government is located, insured amounts are further limited to a total of $250,000 for the combined amount of all deposit accounts. It is the policy of the Agency 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 Agency 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 objectives of the policy are, in order of priority, legality, safety of principal, liquidity, and rate of return. Deposits with Financial Institutions Custodial credit risk for deposits with financial institutions is the risk that in the event of financial institution failure, the Agency s deposits may not be returned to the Agency. The Agency s investment policy requires pledging of collateral for all bank balances in excess of federal depository insurance, at an amount not less than 110% of the fair market value of the funds secured. The Agency does not have any deposits exposed to custodial credit risk

38 NOTES TO FINANCIAL STATEMENTS (Continued) 2. DEPOSITS AND INVESTMENTS (Continued) Investments The following table presents the investments and maturities of the Agency s debt securities as of April 30, 2015: Investment Type Fair Value Investment Maturities (in Years) Less than Greater than 10 U.S. Treasury obligations $ 90,642 $ 90,642 $ - $ - $ - U.S. agencies 8,753,890-7,516, ,765 1,045,734 TOTAL $ 8,844,532 $ 90,642 $ 7,516,391 $ 191,765 $ 1,045,734 Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. In accordance with its formal investment policy, the Agency limits its exposure to interest rate risk by structuring the portfolio to provide liquidity for short and long-term cash flow needs while providing a reasonable rate of return based on the current market. Credit risk is the risk that an issuer of a debt security will not pay its par value upon maturity. To limit its exposure to credit risk, the Agency s investment policy requires that it primarily investing in U.S. Treasury and agency obligations and external investment pools. Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to the investment, the Agency will not be able to recover the value of its investments or collateral securities that are in possession of an outside party. To limit its exposure, the Agency s investment policy requires all security transactions that are exposed to custodial credit risk to be processed on a delivery versus payment (DVP) basis with the underlying investments held by an independent third party custodian and evidenced by safekeeping receipts. The Agency does not have any investments exposed to custodial credit risk. Concentration of credit risk is the risk that the Agency has a high percentage of its investments invested in one type of investment. The Agency s investment policy requires diversification of investments to avoid unreasonable risk