2004 Comprehensive Annual Financial Report

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CITY OF SOUTH BEND NOTES TO FINANCIAL STATEMENTS (Continued) Group 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 em- ployees 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: Unpaid claims, beginning of fiscal year Incurred claims and changes in estimates Claim payments Unpaid claims, end of fiscal year B. Related Party Transactions 2003 2004 $ 929,130 $ 778,500 9,526,621 9,093,235 9,677,251 8,978,920 $ 778,500 $ 892,815 During the period in which financial statements are presented, the primary government had material transactions with Robert Henry, President of the Park Board, in relation to a construction project in the amount of $1,678,855. As of the balance sheet date, the City has paid $805,554 and the unpaid balance on the contract was $873,301. C. Subsequent Events On February 28, 2005, the City approved selling the Main /Colfax parking garage to TRANSPO for $4,000,000. The City will buy back the parking garage with $200,000 lease payments per year over twenty years. On February 23, 2005, the City approved a settlement agreement in which the City will receive $950,000 for possible future environmental claims related to some of the Studebaker properties that the City is purchasing for redevelopment. During 2005, the City approved lease agreements totaling $2,749,505 for equipment purchases. The City is in the final stages of approving an agreement with a building corporation to finance an addition to the O'Brien Center fitness equipment for approximately $900,000. 50