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Regional Transportation Authority
Comprehensive
Annual Financial Report
December 31, 1990
!(!i 1 8 i991
Deloitte & Touche
IRAN HE 4491. C4
3 5556 020 273 181
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT 1
GENERAL PURPOSE FINANCIAL STATEMENTS:
Combined Balance Sheet 3
Combined Statement of Revenues, Expenditures
and Changes in Fund Balances 5
Combined Budgetary Basis Statement of Revenues
and Expenditures 7
Statement of Revenues, Expenses and Changes in
Retained Earnings 9
Statement of Cash Hows 10
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS 11
SUPPLEMENTAL INFORMATION:
Statement of Changes in General Fund Balance 27
Statement of Changes in Assets and Liabilities of the
Agency Fund 28
Combining Statement for Debt Service Fund 29
STATISTICAL SECTION
Statement of Revenues and Expenditures
for All Funds 30
Sales Tax Revenues Source by County/
City of Chicago 31
Retailers' Occupation and Use Tax (Sales Tax)
Revenues by County 31
Distribution of Revenues/Distribution of Expenses 31
Service Division Operating Characteristics 32
Allocation of Capital Funds to Northeast Illinois 32
System Ridership 33
Unlinked Passenger Trips 33
Legal Debt Capacity 34
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Deloitte & Touche
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Two Prudential Plaza Telephone (31 2) 946-3000
180 North Stetson Avenue Telecopier (312)946-2600 Chicago, Illinois 60601 -6779
INDEPENDENT AUDITORS^ REPORT
Board of Directors
Regional Transportation Authority
Chicago, Illinois
We have audited the general purpose financial statements of the Regional Transportation Authority (Authority) as of and for the year ended December 31, 1990, as listed in the table of contents. These financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and "Government Auditing Standards," issued by the Comptroller General of the United States. 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 supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Regional Transportation Authority at December 31, 1990, and the results of its operations and the cash flows of its proprietary fund for the year then ended in conformity with generally accepted accounting principles.
Member
DRTlnternational
Our audit was conducted for the purpose of forming an opinion on the general purpose financial statements of the Regional Transportation Authority taken as a whole. The accompanying supplemental information, as listed in the table of contents, is presented for purposes of additional analysis and is not a required part of the financial statements of the Regional Transportation Authority. This supplemental infoirmation is the responsibility of the Authority's management. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the general purpose financial statements taken as a whole.
The statistical data, as listed in the table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on such statistical data.
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10
REGIONAL TRANSPORTATION AUTHORITY
NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1990
NOTE 1 - REPORTING ENTITY
The Regional Transportation Authority (RTA) was established in 1974 upon the approval of a referendum in its six-county Northeastern Illinois region. The operating responsibilities of the RTA are set forth in the RTA Act. The RTA is a unit of local government, body politic, political subdivision and municipal corporation of the State of Illinois. As initially established, the RTA was an operating entity responsible for providing day-to-day bus and rail transportation services. However, in 1983 the Illinois General Assembly reorganized the structure and funding of the RTA from an operating entity to a planning and oversight entity. The reorganization placed all operating responsibilities in the Chicago Transit Authority (CTA) and two operating divisions of the RTA: A Commuter Rail Division ("Metra"), and a Suburban Bus Division ("Pace"), each having its own independent board. These divisions conduct operations and deal with subsidized carriers.
The RTA Act sets forth detailed provisions for the allocation of receipts by the RTA to the various Service Boards, and imposes a requirement that the RTA's system as a whole achieves annually a "system generated revenue recovery ratio" (i.e., aggregate income for transportation services provided) of at least 50% of the cost of the transportation services. The Service Boards achieve their required recovery ratio by estabUshing fares and related revenue to cover the required proportion of their proposed expenses. The RTA has the responsibility to supervise the budgets and financial condition of the CTA, Metra and Pace.
Governmental accounting and financial reporting standards as estabUshed by Statement 3 and Interpretation 7, "Defining the Governmental Reporting Entity," issued by the National Council of Governmental Accounting and adopted by the Govemmental Accounting Standards Board, require disclosure in the notes of govemmental financial statements of the results of applying Statement 3 and Interpretation 7 criteria to specific affiliated organizations. The assets, liabilities, revenues, and expenditures (or expenses as appropriate) of all affiliated organizations determined under Statement 3 and Interpretation 7 to be part of a govemmental reporting entity generally must be included on the face of its financial statements. Thus, it is necessary to determine whether Metra, Pace and the CTA are part of the RTA Statement 3 and Interpretation 7 reporting entity.
The basic Statement 3 and Interpretation 7 criteria for determining whether an affiliated organization is part of a govemmental reporting entity is the exercise of oversight responsibility. Statement 3 and Interpretation 7 set forth various manifestations of oversight responsibility (responsibility for financing deficits, entitlements to surpluses, guarantees of "moral responsibility" for debt, selection of goveming authority, designation of management, ability to significantiy influence operations, accountabiUty for fiscal matters, etc.) which indicate that an affiliated organization should be included within the Statement 3 and Interpretation 7 reporting entity.
Statement 3 and Interpretation 7 provide that an affiliated organization generally should be included within a govemmental reporting entity, regardless of the degree of oversight responsibility, if its activities are (1) for the benefit of the reporting entity and/or its residents, (2) conducted within the geographic boundaries of the reporting entity, and (3) generally available to the citizens of the reporting entity.
11
In the judgement of RTA management and with the concurrence of the RTA's auditors, analysis and application of Statement 3 and Interpretation 7 criteria indicates that, while the RTA does exercise some fiscal oversight, Metra, Pace and the CTA are not part of the RTA reporting entity for purposes of preparing a comprehensive annual financial report in accordance with governmental accounting and financial reporting standards. Accordingly, financial statements for Metra, Pace and the CTA are not included or combined with the RTA's financial statements in this report. They are combined, however, in the Pro Forma Combining Annual Financial Report. The Pro Forma Combining Annual Financial Report is a statutorily required report and is not required under governmental accounting and financial reporting standards.
In arriving at this conclusion, the following factors were considered:
• The CTA, Metra and Pace maintain separate management, exercise control over all operations (including the passenger fare structure), and are accountable for fiscal matters including: ownership of assets, relations with federal and state transportation funding agencies that provide financial assistance in the acquisition of these assets, and the preparation of operating budgets. The CTA, Metra and Pace are also responsible for the purchase of services and approval of contracts relating to their operation.
• Except for the Chairman of the CTA Board of Directors who is also an RTA Board member, the boards of directors of each service division are completely independent of the RTA Board. The RTA Board has control neither in the selection nor appointment of any Service Board director nor of any of its management. Further, directors of the CTA, Metra, and Pace are excluded from serving on more than one entity's board of directors, including that of the RTA.
• Metra, Pace and the CTA provide services to different geographic areas within the six county region. Metra provides transit service to the six county area with the majority of the transit riders residing in the suburban metropolitan area and commuting into the City of Chicago. Pace's primary service area is the suburban communities with limited service to areas within the City of Chicago. The CTA provides service to the City of Chicago and thirty-eight neighboring suburbs within Cook County. Although programs are underway to increase the transfer of ridership between the service entities, trips of this type presently represent a minority of those taJcen.
NOTE 2 - SUMMARY OF SIGNIHCANT ACCOUNTING POLICIES
The accounting policies of the RTA conform to generally accepted accounting principles as applicable to governments. The following is a summary of the significant policies:
A. Fund Accounting
The accounts of the RTA are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expendimres or expenses, as appropriate. RTA resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be utilized and the means by which spending activities are controlled. In the financial statements, the various funds are grouped into three broad fund types and five generic fund categories as shown below.
12
GOVERNMENTAL FUND TYPES
RTA governmental fund types consist of the General Fund, Debt Service Fund and Capital Projects Fund. The measurement focus is based upon determination of changes in financial position, rather than upon income determination.
General Fund
The General Fund is the general operating fund of the RTA. It is used to account for all financial transactions that are not specifically required to be accounted for in another fund.
Debt Service Fund
Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. The RTA general ordinance also established a Debt Service Reserve Fund to be maintained by the Trustee for the sole benefit of the holders of bonds, and to be applied and used solely for the payment of bond principal and interest. The Debt Service Funds and the Debt Service Reserve Fund are combined for financial statement presentation.
Capital Projects Fund
The Capital Projects Fund was established when 1990A Bonds of $100 million were issued in 1990 for capital projects of the Service Boards. The proceeds will be allocated by the RTA as follows: 50% for capital projects of the CTA; 45% for capital projects of Metra; and 5% for capital projects of Pace. Projects included in any approved five-year capital program will be eligible for reimbursements by the RTA without further review or action by the RTA Board of Directors.
PROPRIETARY FUND TYPE
Proprietary funds are used to account for activities that are similar to those found in the private sector and to account for the financing of goods or services provided by a department or agency to other departments or agencies of the governmental unit, or to other governmental units on a cost reimbursement basis. The RTA has one proprietary (internal service) fund which relates to the activities of the Joint Self-Insurance Fund.
Joint Self-Insurance Fund
The purpose of the Joint Self-Insurance Fund is to provide a source from which to pay substantial damage and other claims incurred by the Service Boards and the RTA and arising out of personal injuries, property damage and certain other losses. The Self- Insurance Agreement provides that the Joint Self- Insurance Fund is not available to pay principal or interest on the Series 1986A Bonds which were issued to establish the Joint Self-Insurance Fund.
To date, the Fund has made one payment in 1990 and has an additional reserve established for a potential claim. These amounts are also recorded as receivables to the Fund because the Fund wUl be reimbursed by the related Service Board. These claims, as well as existing unsubmitted claims and incurred but not reported reserves, have been recorded on the books of the Service Boards.
13
FroUCIARY FUND TYPE
Fiduciary funds account for assets held by a governmental entity in a trustee capacity or as an agent for others. The RTA's fiduciary fund consists of an Agency Fund. Because agency funds are custodial in nature (assets equal liabilities), they do not involve the measurement of results of operations.
Agency Fund
The Agency Fund records the receipt and disbursement of the Retailers' Occupation and Use Tax (sales tax) and the interest on this tax due to the CTA, Metra and Pace. Required sales tax revenues are accrued in the Agency Fund and are equally offset by a liability to the Service Boards. For purposes of the budget, additions to and disbursements from the Agency Fund are considered to be revenues and expenditures, respectively. In accordance with generally accepted accounting principles for governmental entities, these are additions to and deductions from Agency Fund assets and liabilities, respectively.
B . Fixed Assets and Long-Term Liabilities
Account groups are used to establish accounting control and accountability for fixed assets and long-term liabilities. Account groups are not funds and, therefore, are not involved in the measurement of the results of operations. The following are the RTA's account groups:
General Fixed Assets Account Group
Fixed assets used in govemmental-fund-type operations are accounted for in the General Fixed Assets Account Group, rather than govemmental funds. Depreciation is not recognized in accordance with standard govemmental accounting practices. General fixed assets are acquired for the purpose of providing govemmental services at the RTA and not for the production of services that are sold.
General Long-Term Debt Account Group
Long-term liabilities expected to be financed from govemmental funds are accounted for in the General Long-Term Debt Account Group. RTA use of this account group relates to bonds sold in 1986 to establish a Joint Self- Insurance Fund for transit operations and bonds sold in 1990 to estabhsh a capital projects fund