HomeMy WebLinkAbout03.d. Accept financial status and budget of Self-Insurancxe Fund, etc.Central Contra Costa Sanitary District 36 440,
' BOARD OF DIRECTORS
POSITION PAPER
Board Meeting Date: A P R I L 7, 2011
Subject: REVIEW THE FINANCIAL STATUS AND BUDGET OF THE SELF -
INSURANCE FUND AND APPROVE THE ALLOCATION OF $850,000 TO THE
FUND FOR INCLUSION IN THE FISCAL YEAR 2011 -12 OPERATIONS &
MAINTENANCE BUDGET
Submitted Bj(. Initiating Dept. /Div.:.
Shari Deutsch, Safety & Risk Administrative /Safety & Risk Management
Management Administrator
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
rr Wsgrave-s
+
Jam Kelly,
Gener I Manager
ISSUE: The Self - Insurance Fund (SIF) is to be reviewed each year by the Board of
Directors with staff presenting funding recommendations for the upcoming fiscal year.
The Budget and Finance Committee reviewed this position paper at the April 4, 2011
Committee meeting.
RECOMMENDATION: Receive the fiscal year 2011 -12 SIF Budget and authorize the
allocation of $850,000 to the fund from the fiscal year 2011 -12 Operations &
Maintenance (O &M) Budget for inclusion in the budget.
FINANCIAL IMPACTS: The impact of this action requires the allocation of $850,000
from the fiscal year 2011 -12 O &M Budget to the SIF.
ALTERNATIVESICONSIDERATIONS: The alternatives to this action are to provide
less funds than recommended, to not fund the SIF, decrease the fund balance, or to
increase the fund balance by transferring more than $850,000.
BACKGROUND: The District has self- insured most of its liability and some of its
property risks since July 1, 1986, when the Board approved the establishment of the
Self- Insurance Fund. The District currently self- insures liability risks within its
$1,000,000 retention. At this time, the District does not purchase insurance coverage
for earthquake or flood losses because insurance programs currently available in
California are too expensive for the scope and limits of coverage provided. As a result,
the District essentially self- insures these risks as well. The - SIF has effectively funded
District losses over its twenty -five year history.
Each year funds are transferred from the O &M Budget to the SIF. According to the ten
year plan, the O &M contribution for fiscal year 2011 -12 is $850,000.
POSITION PAPER
Board Meeting Date: April 7, 2011
subject REVIEW THE FINANCIAL STATUS AND BUDGET OF THE SELF -
INSURANCE FUND AND APPROVE THE ALLOCATION OF $850,000 TO THE
FUND FOR INCLUSION IN THE FISCAL YEAR 2011 -12 OPERATIONS &
MAINTENANCE BUDGET
Fund Allocation
In 1094, a new Government Accounting Standards Board Statement No. 10 (GASB-1 0)
set forth requirements on how public agencies must fund their self- insured risks. To
assure compliance with GASB -10, the District restructured the SIF into three sub - funds.
Each of the three (3) sub -funds was established .to fund specific risks.
SUB -FUND A: GASB- 10 Actuarial ly -Based risks These include general liability and
automobile liability risks. Under the requirements of GASB -10, risks that can be
actuarially studied must be funded based on an actuarial study to be performed .every
two years. General liability and automobile liability are readily studied throughout the
insurance and self- insurance industry to determine funding levels for these liabilities.
The District obtained an actuarial review of its self- insured general liability and
automobile liability in November 2010 that projected losses for these risks. The
actuary, Aon Risk Consulting (formerly ARM Tech) recommended the Sub -Fund A
reserve for fiscal year 2011 -12 claims be $395,000 based on insurance industry
statistics, the District's actual claims experience and a self insured retention (SIR) of
$1,400,000. However, given the increased likelihood and cost of litigation of claims
paid from this fund, the Board increased the target reserve to $1,000,000. Sub -Fund A
is used to self- insure these risks based on the District having a $15,000,000 excess
liability policy and a $1,000,000 self - insured retention.
The average annual expense for Sub -Fund A over the last three fiscal years has been
approximately $315,000, offset by average revenue of approximately $18,000 for an
average draw down of reserves of $297,000 annually. The budgeted revenue for fiscal
year 2011 -12 is $4,200 with expenses of $380,000 for an estimated reduction in Sub -
Fund A reserves of $355,800. A transfer of $355,800 from Sub -Fund C is necessary in
order to maintain the reserve at $1,000,000.
SUB -FUND B: GASB -10 Non-actuarially-based risks. These include employment -
related and pollution - related risks. Because employment - related and pollution- related
losses occur infrequently and the costs of the claims vary widely, the frequency and
severity of these losses are less predictable than those addressed by Sub Fund A.
For this same reason, GASB -10 does not require a biennial actuarial review of these
risks. However, GASB -10 requires that such potential risks be adequately funded even
though they are not actuarially reviewed. With guidance from risk management and
insurance specialists, the District established Sub -Fund B at $2,400,000, to fund
POSITION PAPER
Board Meeting Date: April 7, 2011
subject. REVIEW THE FINANCIAL STATUS AND BUDGET OF THE SELF-
INSURANCE FUND AND APPROVE THE ALLOCATION OF $850,000 TO THE
FUND FOR INCLUSION IN THE FISCAL YEAR 2011 -12 OPERATIONS &
MAINTENANCE BUDGET
employment - related and pollution- related risks based on the purchase of an
Employment Practices Excess Liability insurance policy.
SUB -FUND C: Non -CASB 10 risks This Sub -Fund covers all risk management
program insurance premiums, potential losses from uninsurable risks, and the costs of
initiating claims and lawsuits against others who have damaged the District. The
District established this Sub -Fund to fund non -CASB 10 risks under our risk
management program. Specific costs include: insurance premiums for a $15,000,000
excess general liability policy; $5,000,000 excess general liability and $1 0,940,990
pollution liability policy for the Household Hazardous Waste facility, $1,900,000
employment practices liability with $15,000 retention, a crime policy which includes
coverage for computer fraud and insurance premiums for insuring District properties for
fire, explosion, water damage, etc. for losses above $250,000.
Staff is anticipating an approximate increase in general liability insurance premiums of
at least five percent and a ten percent increase in property insurance premiums.
The annual average expense for Sub -Fund C over the past three fiscal years has been
approximately $415,000 offset by average revenue of approximately $1,053,000 for a
average increase of $545,000 to reserves. When reduced by the average annual
transfer from Sub -fund C to other Sub -funds over the past three fiscal years the annual
average increase to Sub -fund C reserves is approximately $219,000. The budget for
fiscal year 2011 -12 revenue is $880,800 with expenses of $549,500 for an estimated
addition to Sub -Fund C reserves of $331,3000 However, $415,800 is anticipated to be
transferred to Sub -Funds A and B for a net decrease in Sub -fund C reserves of
$84,500. This leaves a reserve balance of $1,295,388.
Exhibits and Charts
Exhibit I presents a recent financial history and projection of the SIF and shows the
2011 -12 SIF budget estimates total revenues of $904,000 and total expenses of
$979,500, decreasing the projected fiscal year 2011 -12 total SIF reserves by $84,500 to
$4,895,389 on June 30, 2012. The budgeted revenues include the recommended
allocation of $850,040 from the fiscal year 2011 -12 9 &M budget to the SIF.
Exhibits 11, 111 & IV present the projected Sub -Fund A, Sub -Fund B and Sub -Fund C
fiscal year 2011 -12 budget summary.
POSITION PAPER
Board Meeting Date: April 7, 2011
subject REVIEW THE FINANCIAL STATUS AND BUDGET OF THE SELF-
INSURANCE FUND AND APPROVE THE ALLOCATION OF $850,000 TO THE
FUND FOR INCLUSION IN THE FISCAL YEAR 2011 -12 OPERATIONS &
MAINTENANCE BUDGET
Chart 1 shows the revenue, expense and reserve history for the entire SIF. chart 2
shows the history of loss payments and insurance premiums. chart 3 shows historical
and projected SIF reserves for each Sub -Fund. Chart 4 shows the individual Sub -
Funds and combined SIF historical and projected reserves. chart 5 summarizes the
District's current insurance program.
A presentation on the Self- Insurance Fund will be made to the Budget & Finance
Committee on April 4, 2011. If the Committee has any concerns this item will be
removed from the Consent Calendar for discussion. If the Committee agrees with
staff's analysis and recommendations, the item will remain on the consent calendar.
RECOMMENDED BOARD ACTION: Receive the proposed fiscal year 2011 -12 Self-
Insurance Fund Budget and approve the allocation of $850,000 to the fund for inclusion
in the fiscal year 2011 -12 O&M Budget.
CENTRAL CONTRA COSTA, SANITARY DISTRlic"I'll"Ir
SELF111111 NSU RANCE FUND ( SIF)
Jt,il 1, 20,05 - JUne 30,, 20 12
Actua�l
ACALial
ActLial
Actual
ACtUal
I I
F'ro
B u d 1,
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
201 C)-.20'1'1
2011-2012
Revenues
SIF Allocatbnfr'or ri O&M FUnd
2 5 0,
r DO
700,000
1 , "1 -17, 00 0
8510,000
"1 8 3 0 0 0
850,000
850,000
llTSLjran(-.e Allocafion frorn HFiVV
32 32F)
33,278
29 3,34
0
52,47"1
30, 000
25,( )00
Subro Recover
14,
-1 8�03-1
0
0
In'tet"est Incorne
'1241771
1621627
1 �59,501
87 10 6'
29,8115
20�O�00
20,000
Total Rev(-'.'�.,
, nue
4 c
,
1320,479
955 1 137
"1 , 1" 65 ;, 2 B 6
9W 00o
895�000
Expenses
Clainis Adjt,isfiri
1,217
0
0
0
0
1,00(-)
Insurarice CO�-ISLJ[thl
0
�O
01
0
0
4X()
0
Loss Pa
198
43,013
399,956,
166,040
4.5 347
250,000
250,000
LeO Services
200,568
3711
69,371
200
3 163
77" 500
85,000
Technical Services
26,577
27,569
75,355
83,962
1 5,482
205,000
'1 '1 10, 000
Insurance Preri,iii.iiiis
485,185
47,8
401 X 292
388,0113
404
420,000
533, 500
Totial Expenses
91 1 , 839
552,562
945
838,725
496,612
957,500
979, 500
Revenue Over Expense
(5104742)
343,343
374,5015
116
968,674
(57,5010)
(84,500)
Reserves
Be of Year
3,539,197
3,034,455
3,377,798
3,752,303
3,868,715
4,8371389
4, 779,889
Reveriue over Expense
(504,�742)
34-3,343
�374,505
-116,4,12
968,674
(57�500)
(84,500)
End of Year Reservles
53 71 9�T
752,303
3,868
4,837,389
7
4,,791889
4,695,389
Uncommitted Reserves
Act Uarial Reserves -- GAS,B 10 (FUnd A)
881,500
629,8210
629,820
'75000
1,00(),000
1 1 0 Mw,
.1 $ 0c)(),000
Non- ActUarW Reserves - GASB 10 (Fund B)
2,152955
2 152,955
2,4100,000
2,400,1000
2,400,0100
2,400,000
2,400,000
Non,.,GASB 10 Reserves (Furid C)
595,023
722 483
718, 71 5
"1,4,37
1,379,889
1,2195,389
Re,rves
Total
3
3,,37"'17,7"'c")8
3752
3,,868,7-15
4,83713 89
4 , 779,889
4,695,3819
Chan in Reserves
4-42
(510117
3431343
374,505
116�412
, 74
98 6
6
. . . ......... M)
0
(75
(84,500)
SELF-INSURANCE FUND
Actual 2009Im2010, Pro 2010-11 and Buid III t 2011-2012
SUB-FUND A.- GASB-10 ACTUARIALLYBASED RISKS
GENERAL LIABILITY AND,AUT,OMOBILE LIABILITY
Actual Pro BUd
2009-2010 2010-2011 20,11-2012
Actuarial Reserves - GASB 10 1- Be of Year- $ '750,000 $ 17,000,0100 $ I 0001000
Revenues-,
O&M
Subra Recover
fi,'itei'es't'
Total Revenues
Expenses:
[..osses
Le
Technical
lnsi,i�i,'ance C011SLI[fin Services
Total Expenses
Revenue over Expense
, 1 , 1 '�� V
CD :;, ' Z� .
R e g"', f, e
Ti ,ma i'isfer' (to n SuI::),FLjr-id C
Transfei- (to)/from Stila-Fund C"';
7 49,200 4
7 412 4200
4,5934-7
2501000
250,000
301513
20,000
25,000
15,482
175,000
85,000
0
0
0
. ..... . ...... . . ...... _ ............... -
.................... . ............ 91,342
4.4511000
360,000
(83,6,038)
(440�800)
(355�800)
83,638 4 4 RE 0'' o" 355,800
250,'000
wlwl
rotial Reserves Pro End of Year 19000,000 $ 419000 $ 11 1000YO100
S 115%
EL1.,F,.1NSURANCE FUND
ActUal 2009-2010, Pro 2010-11 and Bud 20,11,11-20,12
SUB-FUND B: GASB-10 NOWACTUARIALLY BASED RISKS
EMPLOYMENT RELATED AND POLLUTION RISKS
Actual Pro �Bud
2009-2010 2010-2011 2011-20,12
l Be, innim Reserves 29400,0010 $ 214001000 $ 27400000
_
Reveiiiues.-
O&M
Recover
hi,iterest 181493 '10,,0100
Total Revenues '185493 10,000 10000
Expei,isesl-
1-osses
Le 509000 50,0100
r'e(J,irii "fin a] 2 000 20,M)o
Total Expenses 751000 70�000
Revenue over Expense 1 8,493 (65,,000) (60,1000)
F-1 es e rves.
, rr,aris,fer (t0M11`1 SLjb-,Fi..uid A
Trar')afei,- ( to ) /from & i b F u d C ( '1814,93 ) 657000 60000
1 lotal Reserves Pro End of "Year $ 2,1400 $ 2 $ 29400,000
SELY-INSURANCE FUND
ActUal 2009-20 Pro 201011 and Bud 20
SUB-FUND C: NON GASB-10 RISKS
RISK MANAGEMENT PROGRAM INSURANCE PREMIUMS AND
COSTS OF INITIATING CLAIMS/LAWSUITS AGAINST' OTHERS
Actual Pro Bud
2009-2010 20,10-2,011 2011-2012
$ 718,715 $ 1 43-71,389 $ 1 3791889
1,383,1000 850MO, 8510y000
52�471 30,000 25�000
37618 57800 5
1 14319,089 885 880,800
1 1000 1 7000
Revenue over Expense
Reserves.,,
Trw,iafer (to)/fram Si,,jb,-Fi.,jr-ids A
Tra s (to)/from SUb-FLE"ids A
"T'rariSfElff (to)/fi,orn Sub-Ftirids B
650 7,5010 10 � 000
- 51000 5,000
4041620 4,20,000 533,500
405527C) 4 3 7 111 0 0 54,9 00
1703381 9 21, 4 8 3 0 0 3311300
(2,90
1 8,49 `3
(6,91000) (60000)
Tatal Reserves Pro"e,cteld End of Year 1 )4371 1389
$ 389 $ 1 53799889 $ 11295
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