ILLINOIS MUNICIPAL LEAGUE

Financial Statements
and
Independent Auditor's Report
Years Ended December 31, 1988 and 1987

INDEPENDENT AUDITOR'S REPORT

Illinois Municipal League:

We have audited the accompanying consolidated balance sheets of the Illinois Municipal League as of December 31, 1988 and 1987, and the related consolidated statements of revenues, expenses and changes in fund balance and cash flows for the years then ended. These financial- statements are the responsibility of the League's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence also includes assess ing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Illinois Municipal League and subsidiary as of December 31, 1988 and 1987, and the results of their consolidated operations and cash flows for the years then ended in conformity with generally accepted accounting principles.

May 31, 1989

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1988 AND 1987
	1988	1987
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$ 575,735	$ 890,088
Short-term investments	450,994	400,000
Accrued interest	10,749	6,200
Accounts receivable:
Loan program fee	62,601	370,011
Insurance service charges	17,107	24,602
Other	22,818	4,972
Prepaid pension expense	10,000	10,000
Other	6,025	4,880
Total current assets	1,156,029	1,710,753
FIXED ASSETS	1,743,500	704,540
PREPAID PENSION EXPENSE	60,000	70,000
TOTAL ASSETS	$2,959,529	$2,485,293
LIABILITIES AND FUND BALANCE
CURRENT LIABILITIES
Accounts payable	$ 146,273	$ 21,402
Unearned income:
Dues	181,789	180,765
Advertising	4,783	5,412
Other	413	2,271
Total current liabilities	333,258	209,850
FUND BALANCE	2,626,271	2,275,443
TOTAL LIABILITIES AND FUND BALANCE	$2,959,529	$2,485,293
See the accompanying notes.

CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND BALANCE YEARS ENDED DECEMBER 31, 1988 AND 1987
	1988	1987
REVENUE
Membership dues	$ 327,694	$ 326,037
Illinois Municipal Review:
Advertising	38,634	30,775
Subscriptions	2,360	2,187
Foreign fire insurance service charges	293,215	285,856
Conferences	186,626	217,112
Publications	24,779	29,177
Interest	173,274	128,500
Services and facilities fee	480,024	332,099
Other	1,178	2,100
Total revenue	1,527,784	1,353,843
EXPENSES
Salaries - excluding legal services	306,394	288,899
Payroll taxes and contributions to
Illinois Municipal Retirement Fund	64,611	62,717
Automobile maintenance	1,968	1,946
Office supplies	13,023	18,585
Office expense	54,629	52,212
Travel	47,044	51,418
Postage	19,369	23,922
Memberships	565	621
Insurance	40,601	31,078
Illinois Municipal Review	83,945	83,150
Conference expense	185,626	178,572
Legal services	109,522	117,297
Publications	34,465	26,927
Duties - National League of Cities	45,218	27,264
Library	2,959	1,927
Accounting and auditing	23,441	21,505
Depreciation	28,051	32,949
Meetings and committees	50,999	45,053
Building repairs and maintenance	10,877	8,174
Equipment leasing and maintenance	43,738	23,823
Other	9,911	5,224
Total expenses	1,176,956	1,103,260
EXCESS OF REVENUE OVER EXPENSES	350,828	250,583
FUND BALANCE - BEGINNING OF YEAR	2,275,443	2,024,860
FUND BALANCE - END OF YEAR	$2,626,271	$2,275,443
See the accompanying notes.

CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1988 AND 1987
	1988	1987
CASH FLOWS FROM OPERATING ACTIVITIES
	$ 350,828	$ 250,583
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation	28,051	32,949
(Increase) decrease in:
Accounts receivable	297,059	122,094
Prepaid expenses	10,000	10,000
Other current assets	( 5,694)	( 6,492)
Increase (decrease) in:
Accounts payable	( 1,967)	6,829
Unearned income	395	28,823
Other current liabilities	( 3.755)	2,956
Net cash provided by operations	674,917	47,741
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to fixed assets	( 940,776)	( 481,915)
Proceeds from sales and maturities of short-term investments	400,000	306,223
Purschase of short-term investments	( 450,994)	( 400,000)
Sale of fixed assets	2,500
net cash used by investing activities	( 989,270)	( 575,692)
NET DECREASE IN CASH	( 314,353)	(127,951)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR	890,088	1,018,039
CASH AND CASH EQUIVALENTS - END OF YEAR	$ 575.735	$ 890,088
NON-CASH INVESTING TRANSACTION
accounts payable	$ 128,735	$ 0
See the accompanying notes.

Page 28 / Illinois Municipal Review / September 1989

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1988 AND 1987

1. SIGNIFICANT ACCOUNTING POLICIES

a. Principles of consolidation. The financial statements include the accounts of the Illinois Municipal League (League) and its wholly-owned subsidiary, the Illinois Municipal League Building Corporation.

b. Cash equivalents and short-term investments. Cash equivalents consist primarily of U.S. Treasury obligations, federal agency obligations, and short-term investments are carried at amortized cost, which approximates market value.

c. Income recognition. Dues are considered earned pro rata over the dues year for each member-municipality, or one-twelfth of the annual amount each month.

d. Property and depreciation. Property is carried at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets.

2. SHORT-TERM INVESTMENTS

Short-term investments include a U.S. Treasury note in 1988 and certificates of deposit in 1987.

3. FIXED ASSETS

Fixed assets at December 31 are as follows:
	1988	1987
Land	$ 49,865	$ 49,865
Building	175,995	175,995
Furniture and equipment	123,603	108,194
Automobiles	61,841	61,841
Construction in progress	1,510,758	459,156
Total	1,922,062	855,051
Accumulated depreciation	178,562	150,511
Fixed assets - net	$1,743,500	$704,540
Construction in progress relates to a new headquarters building at Fifth and Capitol, Springfield, Illinois, which was occupied in January 1989. The above amounts include approximately $205,000 allocable to Land.

4. POOLED MUNICIPAL LOAN PROGRAM

The League sponsors the Illinois Municipal League Pooled Municipal. Loan Program League, acting as the Program Administrator, represents the Village of Woodridge by coordinating the process of making loans and managing the Program. The League is to receive an annual administration fee based on the amount of outstanding loans to participants. No such loans were outstanding as of December 31, 1988 or December 31, 1987.

5. PENSION PLAN

The League is a member of the Illinois Municipal Retirement Fund ("IMRF"), an agent-multiple-employer public employee retirement system. Substantially all employees are covered by the defined benefit plan with benefits based upon years of service and final compensation. Employees contribute 4.5% of their annual salary to IMRF and the League is required to contribute the remaining amounts necessary to fund the system using the actuarial basis specified by state statute.

At December 31, 1988, the actuaries for IHRF determined that the present value of the total pension benefit obligation, including vested benefits of $1,239,602, was $1,241,240. Net assets available for benefits at cost total $1,488,699 (market value is $1,596,741). The assumed rate of return used to compute the above was 7%.

Total contributions by the League to IMRF for 1988 was $34,828 which consisted of $11,463 normal cost, $19,237 amortization of the unfunded accrued liability, and $4,128 death and disability costs. The unfunded liability is being amortized over a 10-year period. In addition to the funding of the pension costs accrued, the League elected to fund an additional $100,000 in 1985. The prepaid pension contribution is being amortized to future periods since such prepayment reduces future funding requirements of the plan.

Certain changes in actuarial assumptions, benefit provisions and methodology were made in 1986 in determining the pension benefit obligation. Separate dollar effects of each change were not economically determinable.

RELATED PARTY TRANSACTIONS

The League provides services and facilities to a related organization, the Illinois Municipal League Risk Management Association. The Association, which has a common board of directors with the League, is an unincorporated not-for-participating Illinois municipalities. The League's fee is based on contributions and Interest earned by the Association. In 1988, an additional $100,000 fee was collected to assist with the cost of the new headquarters building.

7. INCOME TAXES

The League is exempt from income taxes and therefore no provision for income taxes is required.

6. CHANGE IN PRESENTATION

In 1988, the League adopted Statement of Financial Accounting Standards No. 95 which requires a statement of cash flows in place of a statement of changes in financial position. The statement of changes in financial position for the year ended 1987 has been restated to conform to the 1988 presentation.

September 1989 / Illinois Municipal Review / Page 29