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2006 CAFR
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2006 CAFR
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CITY OF ROSEVILLE <br />NOTES TO FINANCIAL STATEMENTS <br />DECEMBER 31, 2006 <br />NOTE 5 -OTHER INFORMATION (Continued) <br />A. Risk management (Continued) <br />The Risk Management Fund provides comprehensive general liability and comprehensive automotive <br />liability up to the statutory maximum of $ 1,000,000. The City retains the risk of the first $100,000 of <br />each occurrence with an annual maximum exposure of $300,000. Liabilities of the fund are reported <br />when it is probable that a loss has occurred and amount of the loss can be reasonably estimated. <br />Liabilities include an amount for claims that have been incurred but not reported (IBNRs). The result of <br />the process to estimate the claims liability is not an exact amount as it depends on many complex factors, <br />such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated <br />periodically to consider the effects of inflation, recent claim settlement trends (including frequency and <br />amount of pay - outs), and other economic and social factors. The estimate of the claims liability also <br />includes amounts for incremental claim adjustment expenses related to specific claims and other claim <br />adjustment expenses regardless of whether allocated to specific claims. <br />Estimated recoveries, for example from salvage or subrogation, are another component of the claims <br />liability estimate. The City purchased commercial insurance for claims in excess of coverage provided <br />by the Risk Management Fund and for all other risks of loss. Settled claims have not exceeded this <br />coverage in any of the past three fiscal years. There were no significant reductions in the City's <br />insurance coverage in 2006. <br />Enterprise fund charges and the property tax levy are based on a management estimate of claims history <br />and the amount necessary to maintain catastrophic reserves. The reserves as of December 31, 2006, were <br />$ 1,995,596 and $ 627,147 for the Workers' Compensation Fund and Risk Management Fund, <br />respectively. The claims liability of $ 94,261 and $ 134,636, respectively, reported in both funds at <br />December 31, 2006 are based on the requirements of Governmental Accounting Standards Board <br />Statement No. 10. This statement requires that a liability for claims be reported if information prior to <br />the issuance of the financial statements indicates it is probable that a liability has been incurred at the <br />date of the financial statements and the amount of the loss can be reasonably estimated (IBNR). Changes <br />in the funds' claims liability amount in fiscal 2005 and 2006 were: <br />Workers' Compensation Fund <br />Beginning of Current Year Ending of <br />Fiscal Year Claims and Changes Claims Fiscal Year <br />Liability <br />2005 123,750 <br />2006 141,671 <br />in Estimates <br />i/ <br />129,614 <br />45,976 <br />Payments Liability <br />11103 141,671 <br />935386 941261 <br />
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