2003 Comprehensive Annual Financial Report

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CITY OF SOUTH BEND NOTES TO FINANCIAL STATEMENTS (Continued) Grouo Health Insurance The primary government has chosen to establish a risk financing fund for risks associated with medical benefits of employees and their covered dependents. The risk financing fund is accounted for in the Self- Funded Employee Benefits Fund, an internal service fund, where assets are set aside for benefit costs. An excess policy through commercial insurance covers individual claims in excess of $125,000 per year. Settled claims resulting from this risk did not exceed commercial insurance coverage in the past three years. A premium is charged to each fund bases on the number of employees and estimated costs exceeding the employees' contributions. Provisions are also made for unexpected and unusual claims. Claim expenditures and liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported (IBNRs). Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amounts of pay outs and other economic and social factors. Changes in the balance of claim liabilities during the past two years are as follows 2002 2003 Unpaid claims, beginning of fiscal year $ 676,761 $ 929,130 Incurred claims and changes in estimates 8,728,441 9,526,621 Claim payments 8,476,072 9,677,251 Unpaid claims, end of fiscal year $ 929,130 $ 778,500 B. Subsequent Events On May 24, 2004, the Common Council approved an ordinance authorizing temporary loan tax antici- pation time warrants, not to exceed $25,000,000 for the general fund, $6,000,000 for the park and recreation fund and $2,975,000 for other funds. These temporary loans are needed because of the delay in the tax reassessment, which may delay the normal June tax distribution until at least Septem- ber. C. Contingent Liabilities College Football Hall of Fame Operations The City's General Fund has advanced a total of $1,750,000 to the College Football Hall of Fame Fund in various amounts during the years from 1996 to 1999. The City has always recognized that these advances would be repaid from excess operating revenues of the Hall of Fame. No payment schedule has been established. Beginning with 1996, the first full year of operations, through 2000, the Hall of Fame financial statements show net losses ranging from $521,345 to $1,481,657. During 2001, the City turned over the operations of the Hall of Fame to the National Football Founda- tion and College Football Hall of Fame, Inc., (NFF). The interim agreement authorizing the NFF to operate the Hall of Fame shows that NFF has contributed $1,900,000 to cover operating deficits of the Hall of Fame during the period prior to December 31, 2000. 51