COOK COUNTY COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED NOVEMBER 30, Toni Preckwinkle P R E S I D E N T BOARD OF COMMISSIONERS

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1 COOK COUNTY COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED NOVEMBER 30, 2013 Toni Preckwinkle P R E S I D E N T COOK COUNTY BOARD OF COMMISSIONERS Ivan Samstein CHIEF FINANCIAL OFFICER Lawrence L. Wilson, CPA COMPTROLLER

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3 COOK COUNTY CHICAGO, ILLINOIS Comprehensive Annual Financial Report For the year ended November 30, 2013 Prepared by: Office of the County Comptroller, Lawrence L. Wilson, CPA, Comptroller

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5 INTRODUCTORY SECTION

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7 COOK COUNTY, ILLINOIS COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended November 30, 2013 TABLE OF CONTENTS A. INTRODUCTORY SECTION Page Table of Contents... i v Members of the Board of Commissioners... vi Letter of Transmittal... vii xi Organizational Chart... xii xiii B. FINANCIAL SECTION Exhibit Page Independent Auditor s Report Management s Discussion and Analysis Basic Financial Statements Government-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet Governmental Funds Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Net Position - Proprietary Fund Statement of Revenues, Expenses and Changes in Net Position - Proprietary Fund Statement of Cash Flows - Proprietary Fund Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Combining Statement of Net Position - Component Units Combining Statement of Activities - Component Units Notes to Basic Financial Statements Required Supplemental Information Schedules of Funding Progress Schedule of Revenues, Expenditures and Encumbrances - General Fund Budget and Actual (Non-GAAP Budget Basis) Schedule of Revenues, Expenditures and Encumbrances - Motor Fuel Tax Fund Budget and Actual (Non-GAAP Budget Basis) Schedule of Revenues, Expenditures and Encumbrances - Annuity and Benefit Fund Budget and Actual (Non-GAAP Budget Basis) Notes to Required Supplementary Information i

8 Supplemental Combining and Individual Fund Statements and Schedules: Exhibit Page General Fund Combining Balance Sheet by Account... A Combining Schedule of Revenues, Expenditures and Changes In Fund Balance by Account... A Combining Schedule of Revenues and Other Financing Sources... A Debt Service Fund Bond and Interest Fund - Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis)... B Capital Projects Fund Combining Balance Sheet by Account... C Combining Schedule of Revenues, Expenditures And Changes In Fund Balance by Account... C Nonmajor Governmental Funds Combining Balance Sheet... D Combining Statement of Revenues, Expenditures and Changes In Fund Balance... D Combining Balance Sheet Nonmajor Special Revenue Funds... D Combining Statement of Revenues, Expenditures and Changes In Fund Balance by Account Nonmajor Special Revenue Funds... D Nonmajor Special Revenue Funds: Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Geographical Information System... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) MFT Illinois First (1 st )... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Election... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) County Law Library... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Animal Control... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) County Recorder Document Storage System... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) County Clerk Automation... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Circuit Court Document Storage... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Circuit Court Automation... D ii

9 Exhibit Page Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Circuit Court Dispute Resolution... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Emergency Telephone System Board... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Adult Probation... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Social Services Probation... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Treasurer Tax Sales Automation... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Chief Judge Juvenile Justice... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Cook County Lead Poisoning Prevention... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) State s Attorney Narcotics Forfeiture... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) State s Attorney Bad Check Diversion... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Suburban TB Sanitarium District... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Clerk of the Circuit Court Administrative... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) GIS Fee... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Recorders of Deeds Rental Housing Support Fee... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Chief Judge Children s Waiting Room... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Chief Judge Mental Health Court... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Chief Judge Peer Jury... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Chief Judge Drug Court... D iii

10 Exhibit Page Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Assessor Special Revenue... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Sheriff s Youthful Offender Alcohol & Drug Education... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Sheriff Women s Justice Services... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Vehicle Purchase... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Circuit Court Electronic Citation... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) State s Attorney Records Automation... D Schedule of Revenues, Expenditures and Encumbrances Budget and Actual (Non-GAAP Budget Basis) Public Defender Records Automation... D Pension & OPEB Trust Funds Combining Statement of Fiduciary Net Position... E Combining Statement of Changes in Fiduciary Net Position... E Agency Funds Combining Statement of Fiduciary Net Position... E Combining Statement of Changes in Assets and Liabilities... E C. STATISTICAL SECTION Schedule Page Statistical Section Contents Schedules of Financial Trends Information Net Position by Component Last Ten Years... S Changes in Net Position Last Ten Years... S Fund Balances, Governmental Funds Last Ten Years... S Changes in Fund Balances, Governmental Funds Last Ten Years... S Schedules of Revenue Capacity Information Assessed Value and Estimated Actual Value of Taxable Property Last Ten Levy Years... S Direct and Overlapping Property Tax Rates Last Ten Years... S Principal Property Tax Payers Current Year and Nine Years Ago... S Property Tax Levies and Collections Last Ten Levy Years... S Schedules of Debt Capacity Information Total Debt and Ratio of General Bonded Debt Outstanding Last Ten Fiscal Years... S Revenue Bond Coverage Last Two Fiscal Years... S Direct and Overlapping Debt... S iv

11 Schedule Page Schedules of Demographic and Economic Information Demographic and Economic Statistics Last Ten Fiscal Years... S Principal Employers (Non-Government) Current Year and Nine Years Ago... S Schedules of Operating Information Full-Time Equivalent County Government Employees by Function Last Ten Fiscal Years... S Operating Indicators by Function, Health Facilities Last Ten Fiscal Years... S Operating Indicators by Function, Circuit Court Caseload Last Ten Fiscal Years... S Operating Indicators by Function, Cook County Corrections Last Ten Fiscal Years... S Operating Indicators by Function, Other Services Last Ten Fiscal Years... S Capital Assets by Category Last Ten Years... S v

12 COOK COUNTY, ILLINOIS HONORABLE TONI PRECKWINKLE President HONORABLE JOHN P. DALEY Chairman, Committee on Finance COOK COUNTY BOARD OF COMMISSIONERS JERRY BUTLER EARLEAN COLLINS JOHN P. DALEY JOHN A. FRITCHEY BRIDGET GAINER JESUS G. GARCIA ELIZABETH Liz DOODY GORMAN GREGG GOSLIN STANLEY MOORE JOAN PATRICIA MURPHY EDWIN REYES TIMOTHY O. SCHNEIDER PETER N. SILVESTRI DEBORAH SIMS ROBERT STEELE LARRY SUFFREDIN JEFFERY R. TOBOLSKI Ivan Samstein Chief Financial Officer Lawrence L. Wilson, CPA Comptroller vi

13 Bureau of Finance Office of the Chief Financial Officer IVAN SAMSTEIN CHIEF FINANCIAL OFFICER 118 N. CLARK STREET Chicago, Illinois (312) May 30, TONI PRECKWINKLE PRESIDENT Cook County Board of Commissioners EARLEAN COLLINS 1st District ROBERT STEELE 2nd District JERRY BUTLER 3rd District STANLEY MOORE 4th District DEBORAH SIMS 5th District JOAN PATRICIA MURPHY 6th District JESUS G. GARCIA 7th District EDWIN REYES 8th District PETER N. SILVESTRI 9th District BRIDGET GAINER 10th District JOHN P. DALEY 11th District JOHN A. FRITCHEY 12th District LARRY SUFFREDIN 13th District GREGG GOSLIN 14th District TIMOTHY O. SCHNEIDER 15th District JEFFREY R. TOBOLSKI 16th District May 30, 2014 To the Honorable President Toni Preckwinkle Members of the Cook County Board of Commissioners, and Citizens of Cook County Ladies and Gentlemen: We are pleased to present the Comprehensive Annual Financial Report ( CAFR ) of Cook County, Illinois (the County ) for the fiscal year ended November 30, The CAFR has been prepared by the County in accordance with the principles and standards for financial reporting set forth by the Government Accounting Standards Board ( GASB ) and audited by various firms of independent auditors retained by the County. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the management of the County. We believe that the data, as presented, is accurate in all material respects, presents fairly the financial position and results of operations of the County, as measured by the financial activity of its various funds, and provides the reader with disclosure of the County s activities. The independent auditors report on the basic financial statements and the supplemental combining and individual funds statements and schedules, is included in the Financial Section of this Report. The goal of the independent audit is to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures contained in the financial statements. The fiscal year 2013 audit of the basic financial statements was performed, and an unmodified audit opinion was issued by the certified public accounting firm of McGladrey LLP. In addition to meeting the requirements set forth, an additional audit designed to meet the requirements of the federal Single Audit Act Amendment of 1996 and related OMB Circular A-133 Audits of State and Local Governments is performed annually. The County has prepared the CAFR in accordance with accounting principles generally accepted in the United States ( GAAP ). GAAP require that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of a Management s Discussion & Analysis ( MD&A ). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A can be found immediately following the report of the independent auditors. PROFILE OF COOK COUNTY GOVERNMENT The County was created on January 15, 1831 by an act of the Illinois State Legislature and became the 54th county established in the State of Illinois (the State ). On May 7, 1831, the County elected its first officials. The population of the County is currently estimated at 5,240,700, making it the second largest county in the United States. Within the County, there are 132 municipalities, including the City of Chicago (the City ), 30 townships, 221 special districts, and 164 school districts. The City and the suburban municipalities account for approximately 85% of the County s 946 square miles, while unincorporated areas make up the remaining 15%. The unincorporated areas of the County are under the jurisdiction of the County Board. vii ELIZABETH ANN DOODY GORMAN 17th District

14 Under the Illinois Constitution, the County is a home rule unit of government and, except as limited by State law, may exercise any power and perform any function relating to its government and affairs, including the power to borrow money and levy taxes. There are no current statutory limitations on the power of the County to levy real property taxes or to issue general obligation bonds or notes. The County s powers are exercised through a 17-member Board of Commissioners. The County Board is the legislative authority which is led by its President. The Commissioners are elected from single member districts to four-year terms, while the President is elected by the voters of the entire County to a four-year term. The County presently performs three principal functions: the protection of persons and property; the provision of public health services; and general governmental services including, among others, the assessment of property, levy, collection and distribution of taxes and maintenance of certain highways. Protection of Persons and Property ( Public Safety Fund ). Protection of persons and property consists mainly of the operation of the Circuit Court of Cook County, prosecution of persons charged with criminal offenses, operation of the County Jail and operation of a Sheriff s police department. The Circuit Court of Cook County is the second largest unified court system in the United States, and the County Jail is the largest single site jail facility in the country. Cook County Health and Hospitals Systems ( CCHHS ) The CCHHS operates a health care delivery system composed of the following elements: John H. Stroger, Jr. Hospital of Cook County, Provident Hospital of Cook County, Oak Forest Health Center, the Ambulatory and Community Health Network of Cook County, Cermak Health Services of Cook County, the Bureau of Health Services, the Ruth M. Rothstein CORE Center and the Cook County Department of Public Health. The CCHHS has also developed partnerships with community hospitals to assure John H. Stroger, Jr. Hospital of Cook County s role for tertiary referrals. These relationships include: St. Anthony Hospital, St. Elizabeth s and Roseland Hospitals (partners in specialty pediatric and maternal services). In addition, partnerships exist with community clinics, the Veterans Administration (services for pregnant veterans), and the Chicago Department of Public Health. General Government Services ( Corporate Fund ). The Corporate Fund includes County revenues and expenditures for government management and supporting services, control of environment, maintenance of highways, economic and human development, the assessment of real property, the levy extension, collection and distribution of taxes and the recording of property transfers. In addition to general governmental services, the County has various component units that are included in its reporting entity, due to the significance of their operational and/or financial relationships with the County: The Forest Preserve District and the Emergency Telephone 911 System. Additional information on these component units can be found in the notes to the financial statements. BUDGET PROCESS The development of the annual budget begins with each department submitting a detailed request for appropriation. Meetings are then held by the President of the County Board, or her designees, with each department to review the requests. Based on department requests and available resources, an Executive Budget Recommendation is prepared for the President of the County Board by the County Budget Director. The Executive Budget, as approved by the President of the County Board, is submitted to the Committee on Finance, which in turn holds hearings involving each department. The Committee on Finance prepares the Annual Appropriation Bill in tentative form, which is made available for public inspection for at least ten days prior to final action. Public hearings on the tentative Annual Appropriation Bill are then held. Amendments to the tentative Annual Appropriation Bill are then approved by the Committee on Finance. Subsequently, the Executive Budget in the form of the Annual Appropriation Bill is approved and adopted by the County Board. The 2013 budget gap of $267.5 million was addressed through structural changes to reduce the cost of personnel, nonpersonnel, as well as increase revenue through implementation of the expansion of Medicaid through a Federal Section 1115 Waiver, targeted new revenues, improved billing, maximizing reimbursements and collections, and taking advantage of incentive and rebate payments. The expenditure savings of $52.4 million was driven primarily from $24.5 million in personnel reductions such as vacancy eliminations and $9 million in health benefit savings. viii

15 LOCAL ECONOMIC CONDITION AND OUTLOOK As the largest of 102 counties in the State, the County is the economic and cultural hub of the State, and is one of the major metropolitan areas in the nation after Los Angeles and New York. The County is the most populous county in Illinois and represents 45% of the State s economic activity. The County is a diverse industrial center and a leading economic center of the Midwest. Income figures for the County exceed State and national rates; the County s 2012 per capita personal income of $48,943 exceeded the State s $45,832. The County s industrial profile resembles that of the U.S., with a slightly larger services sector and somewhat smaller governmental presence. The County has a strong transportation network, with expansion of Chicago O Hare International Airport and the Illinois Tollway both underway. Leading service sector industries in the County include health care and related services. Some of the leading private local employers with regional or national headquarters located in the County are Advocate Health Care, J.P. Morgan Chase & Co., University of Chicago, Walgreens Co., AT&T Inc., United Continental Holdings Inc., Abbott Laboratories, Wal-Mart Stores Inc., Presence Health, University of Illinois at Chicago, and American Airlines. The County s unemployment rate at the end of 2013 was 8.7%, compared with 8.9 % for the State and 7.4% for the nation in the same period. County Sales Tax Rollback On February 25, 2011, the County Board called a special meeting and passed an ordinance amendment to roll back the Home Rule County Retailer s Occupation Tax Law from 1.25 percent to.75 percent. This ordinance took effect on two different dates. The first change reduced the rate by 0.25 percent on January 1, 2012, and reduced County revenues starting on April 1, The change reduced revenue by $69.1 million during FY 2012, on a budget basis, compared to the level of revenues that would have resulted from the previous rate. Positive sales growth softened the impact, and reduced the year over year net budgetary decline to $45.1 million. The second and final reduction of 0.25 percent occurred on January 1, 2013, and began to affect County revenues starting April 1, The rate reductions reduced revenue on a budget basis by $104.9 million during FY 2013, with sales growth lowering the year over year net budgetary decline to $95.7 million. No further reductions in the County sales tax rate are contemplated at this time. The County made key reductions in operating appropriations in 2013 to compensate for the reduction in revenue. DEBT ADMINISTRATION AND BOND RATINGS The County continues to have low-cost access to the debt markets to finance the acquisition, renovation or construction of various long-term assets. It is management s objective to adequately plan to meet the County s ongoing demands for essential capital improvement projects and equipment without overburdening taxpayers with general obligation bonds payable from ad valorem taxes, nor overly leveraging other county revenue sources. The County s underlying rating on its general obligation bonds is currently A1/AA/AA- from Moody s Investors Service, Standard & Poor s and Fitch Ratings respectively. Both Fitch Ratings and Moody s Investors Service currently maintain negative outlooks on their respective ratings. The County also has outstanding Sales Tax Revenue Bonds that are rated AAA by Standard & Poor s. A rating reflects only the views of the rating agency assigning such rating and an explanation of the significance of such rating may be obtained from such rating agency. The County has furnished to the rating agencies certain information and materials relating to the Bonds and the County, including certain information and materials that have not been included in this financial report. ix

16 LONG TERM FINANCIAL PLANNING & MAJOR INITIATIVES The County has implemented the Set Targets, Achieve Results (STAR) Performance Management program in all agencies and offices. The Board of Commissioners passed an ordinance on February 1, 2011, which requires all County agencies, bureaus and departments to collect and report quarterly measures of their performance. Through the STAR program, the County has submitted quarterly reports for the past 12 quarters, which can be found at and has held over 160 weekly accountability meetings with County agencies. The County has begun to implement performance based budgeting tied to performance indicators the agencies identify. STAR has helped the County improve services and reduce expenses by better utilizing existing resources and increasing operational efficiency. The program provides County leaders with the tools and information they need to measure success and make key management and resource allocation decisions based on facts and data. The County forged a partnership with the City of Chicago in Through collaboration with the City of Chicago, the two governments have identified $70.9 million in savings since the start of the collaborative project. The two governments have 60 initiatives across 16 collaboration areas, such as joint procurement, coordinated revenue enforcement, and consolidated workforce development services. The County continues to undertake efforts to play a larger role in regional economic development. The Bureau of Economic Development has implemented strategic initiatives to promote business development and attract new businesses to the region. These initiatives include a $30 million Loan Guarantee Program (HUD Section 108) to spur economic growth, the creation of the Cook County Land Bank, and establishment of the Council of Economic Advisors. Additionally, in April 2013, the County released an Economic Growth Agenda, Partnering for Prosperity, outlining nine strategies to strengthen economic development throughout Cook County and the Chicago metropolitan region. The County is actively committed to implementing the strategies outlined to ensure that we promote competition and increase opportunity for small and minority and women-owned businesses throughout the region. In fiscal year 2008, a new Cook County Health and Hospital System ( CCHHS ) Board was created by the Cook County Board of Commissioners to provide independent oversight of health care operations for a three-year term expiring in In May 2010, the Cook County Board of Commissioners voted to make the CCHHS Board permanent. The CCHHS continues to undertake significant restructuring with a focus on operational efficiency so that the CCHHS can better fulfill its mission of serving the health care needs of the region. In 2012, CCHHS and the Cook County Board Officials collaborated to cut Medicaid costs, to help county taxpayers, and transform Cook County s hospital system by jump-starting national health care reform in Cook County. In October, 2012 the federal government approved a Federal Section 1115 Medicaid Waiver ( Medicaid Expansion ) for the State of Illinois, allowing CCHHS to early enroll certain uninsured patients into Medicaid. Specifically, these are patients who are not currently eligible for Medicaid, but who will be eligible in 2014 under the Federal Affordable Care Act ( ACA ). The Medicaid Expansion is anticipated to generate significant revenue for CCHHS in FY 2014 and serve to position the system for the adoption of ACA in future years. INDEPENDENT AUDIT Portions of the audit were implemented as a subcontractor agreement between McGladrey LLP and a consortium of Cook County-based minority and women-owned certified public accounting firms. In addition to the fiscal 2013 County basic financial statements, McGladrey also conducted the CCHHS audit and the County Treasurer s audit. The Clerk of the Circuit Court audit was conducted by Prado & Renteria. Washington, Pittman & McKeever conducted the Single Audit of the County s various federal grant programs. Baker Tilly Virchow Krause LLP conducted the Forest Preserve District s audit and Legacy Professionals LLP conducted the separate pension fund audits. The Cook County Emergency Telephone System Board audit was performed by Washington, Pittman & McKeever. All of the independent audits have been performed in accordance with generally accepted auditing standards and received unmodified opinions. Copies of each audit report, including the schedule of expenditures of federal awards, findings and recommendations, and the auditors' report on internal control and compliance with applicable laws and regulations, are included in separate annual audit reports. x

17 ACKNOWLEDGEMENTS/AVAilABILTY OF REPORTS The preparation and completion of this CAFR represents the culmination of numerous efforts by many County employees, and the cooperation and assistance of the various accounting firms engaged to audit the County's operations. We would like to express our sincere appreciation to the members of our staffs, the staffs of the certified pub lie accounting firms of McGladrey LLP, Washington, Pittman & McKeever, Prado & Renteria, Legacy Professionals LLP, Baker Tilly Virchow Krause LLP and the staff of the County Auditor and County Treasurer for making this report possible. Copies of this report and all other documents referred to herein, may be obtained from the Comptroller's Office, Cook County Building, 118 N. Clark Street, Room 500, Chicago, Illinois This CAFR reflects our ongoing commitment to the citizens of the County, the Board of Commissioners and all interested readers of this report to provide information in conformance with the highest standards of financial reporting. Respectfully submitted ~ Ivan Samstein Chief Financial Officer Lawrence L. Wilson, CPA Comptroller xi

18 2013 COOK COUNTY SHERIFF OFFICE OF THE CHIEF JUDGE COUNTY TREASURER BOARD OF REVIEW COUNTY ASSESSOR DEPARTMENT OF FISCAL AND SUPPORT SERVICES COURT SERVICES ADULT PROBATION JUDICIARY COUNTY TREASURER TAX AUTOMATION FUND POLICE DEPARTMENT YOUTHFUL OFFENDER ALCOHOL & DRUG EDUCATION FORENSIC CLINICAL SERVICES SOCIAL SERVICE REENTRY AND DIVERSION PROGRAMS WOMEN S SERVICES FUND JUVENILE PROBATION PUBLIC GUARDIAN SHERIFF S WOMEN S JUSTICE PROGRAMS VEHICLE PURCHASE FUND PROBATION SERVICE FEE FUND PROBATION AND COURT SERVICES FUND MERIT BOARD IGA - EMERGENCY TELEPHONE SYSTEMS BOARD CIRCUIT COURT DISPUTE RESOLUTION JUVENILE PROBATION SUPPLEMENTAL OFFICERS CHILDREN S WAITING ROOM MENTAL HEALTH FUND PEER COURT FUND DRUG COURT FUND JUVENILE TEMPORARY DETENTION CENTER (JTDC) Elected and Appointed Officials Agencies reporting to elected officials other than the President Agencies reporting to the President

19 ORGANIZATIONAL CHART COUNTY CLERK COUNTY BOARD PRESIDENT COOK COUNTY BOARD OF COMMISSIONERS RECORDER OF DEEDS STATE S ATTORNEY BOARD OF ELECTION COMMISSIONERS CLERK OF THE CIRCUIT COURT PUBLIC ADMINISTRATOR COUNTY CLERK AUTOMATION FUND BUREAU OF ADMINISTRATION DOCUMENT STORAGE SYSTEM FUNDS NORCOTICS FOFEITURE CIRCUIT COURT AUTOMATION FUND DOCUMENT STORAGE FUND CIRCUIT COURT ADMINISTRATIVE FUND COUNTY CLERK ELECTION DIVISION FUND BUREAU OF ECONOMIC DEVELOPMENT GIS FUND BAD CHECK DIVERSION PROGRAM ELECTION CITATION FUND BUREAU OF FINANCE RENTAL HOUSING SUPPORT FEE FUND BUREAU OF HUMAN RESOURCES BUREAU OF TECHNOLOGY FACILITIES MANAGEMENT COUNTY AUDITOR COOK COUNTY HEALTH & HOSPITALS ADMINISTRATIVE HEARING BOARD PUBLIC DEFENDER INSPECTOR GENERAL DEPARTMENT OF HUMAN RIGHTS, ETHICS, WOMEN'S ISSUES

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21 FINANCIAL SECTION

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23 Independent Auditor's Report The Honorable Toni Preckwinkle, County Board President and Members of the County Board of Commissioners Cook County, Illinois Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Cook County, Illinois (County), as of and for the year ended November 30, 2013, and the related notes to the financial statements, which collectively comprise the County s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the discretely presented component units (the Forest Preserve District of Cook County and the Emergency Telephone System). We also did not audit the financial statements of the County Pension Trust Fund, the County Postemployment Healthcare Trust Fund and the Clerk of the Circuit Court Agency Fund which represent 95 percent, and 82 percent, respectively, of the assets, and revenues/additions of the aggregate remaining fund information. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the discretely presented component units, the Pension Trust Fund, the Postemployment Healthcare Trust Fund and the Clerk of the Circuit Court Agency Fund, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1

24 Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Cook County, Illinois, as of November 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note I to the basic financial statements, the County has elected to change the period reported for its discretely presented component unit the Forest Preserve District of Cook County, and its component unit fiduciary funds the County Employees and Officers Annuity and Benefit Fund (Pension Trust and OPEB Trust funds). The fiscal year reported for each of these entities will be the calendar year ending in the current reporting period. Therefore, the reporting period ended December 31, 2012, is the period presented for these component units. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that management s discussion and analysis on pages 4-26, schedules of funding progress for pensions and other post employment benefit obligations (OPEB) on page 118 and budgetary schedules for the General Fund and major special revenue funds on pages be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County s basic financial statements. The accompanying supplemental combining and individual fund statements and schedules, the introductory section, and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying supplemental combining and individual fund statements and schedules are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America by us and other auditors. 2

25 In our opinion, based on our audit, the procedures performed as described above, and the reports of the other auditors, the accompanying supplemental combining and individual fund statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Chicago, Illinois May 30,

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27 MANAGEMENT S DISCUSSION & ANALYSIS

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29 Cook County, Illinois Management s Discussion and Analysis Year Ended November 30, 2013 As management of Cook County, Illinois (the County ), we offer the readers of the Management s Discussion and Analysis (the MD&A ) section of the County s Comprehensive Annual Financial Report (the CAFR ) a narrative overview and analysis of the financial activities of the County for the fiscal year ended November 30, The reader is encouraged to consider the information presented here in conjunction with the basic financial statements and the accompanying notes, which follow this section. Financial Highlights for FY2013 On February 25, 2011, the County Board called a special meeting and passed an ordinance amendment to roll back the Home Rule County Retailer s Occupation Tax Law from 1.25 percent to.75 percent. This ordinance took effect on two different dates. The first change reduced the rate by 0.25 percent on January 1, 2012 for consumers, and reduced County revenues received beginning April 1, The change reduced revenue by $69.1 million during FY2012, on a budget basis, compared to the level of revenues that would have resulted from the previous rate on a comparable basis. Positive sales growth softened the impact, and reduced the year over year net budgetary decline to $45.1 million. The second and final reduction of 0.25 percent occurred on January 1, 2013, and affected County revenues received beginning April 1, The rate reductions were projected to reduce revenue by $104.9 million during FY 2013, with sales volume growth projected to lower the year over year net budgetary decline to $95.7 million. The actual decline from FY2012 budget to FY2013 budget was $94.4 million. No further reductions in the County sales tax rate are contemplated at this time. The County closed a budget gap of approximately $267.5 million for FY Budget closing measures were incorporated into the 2013 budget and passed by the Board of Commissioners on November 9, 2012, prior to the start of the fiscal year. The Budget solutions focused on structural changes, rather than one-time fixes, which the County believes has direct positive implications for future budget challenges. To solve the $267.5 million gap for FY 2013, the County relied on $3.9 million in nonrecurring solutions, $99 million from Medicaid expansion, $52.4 million in expenditure reductions, $41.7 million in targeted new revenues, $28.3 million in improved health billing and collections, $23 million in reimbursements and collections, $13.5 million in better performing revenues, and $5.7 million in incentive and rebate payments. 4

30 Cook County, Illinois Management s Discussion and Analysis Year Ended November 30, 2013 continued On December 19, 2012, the County issued General Obligation Refunding Bonds, Series 2012C&D in the amount of $409,940,000 at a premium of $79.1 million. The proceeds from the bonds were used to refund a portion of the County s outstanding Series 2002C&D, Series 2004A&B and 2011C bonds and to pay cost of issuance of the bonds. As a result, $457.1 million of bond proceeds and another $11.1 million of cash on hand was deposited in an escrow account to refund Series 2002C&D and 2004A&B. The remaining $29.2 million tendered the Series 2011C Bonds, which consist of the redemption of $24.2 million in principal, $142,111. of accrued interest and $4.9 million in redemption premium. The refunding decreased the County s total debt service by $93.8 million over the next 20 years resulting in an overall economic gain of $85.9 million. On March 15, 2013, the County made a payment of $13 million on the Line of Credit outstanding to J.P Morgan Chase, which represented payment in full of the then outstanding balance. On July 23, 2013, the County issued Sales Tax Revenue Qualified Energy Conservation Bonds, Series 2013 in the amount of $24.9 million. These bonds were rated AAA by Standard and Poor s Rating Agency. These bonds are solely secured by home rule sales tax revenues of the County, and will be used to fund energy conservation and renewable energy projects during the next several fiscal years. On November 13, 2013, the County through a resolution approved by the Board of Commissioners reduced the Line of Credit from $200 million to $100 million and extended the expiration date to November 30, At November 30, 2013, the liabilities of the County exceeded its assets by $3.818 billion (89.0%). The County reported $ million in the restricted component of net position and $ million in net investment in capital assets. The $ million is the County s net capital assets in excess of the capital debt for the County as a whole. The County s total net position decreased by $ million (26.5%) during fiscal year Net position of governmental activities decreased by $731.7 million (20.58%) in fiscal year 2013 to a deficit of $4.287 billion. 5

31 Cook County, Illinois Management s Discussion and Analysis Year Ended November 30, 2013 continued Total fiscal year 2013 expenses for governmental activities were $2.591 billion, which represents an increase of $99.2 million (4%) over fiscal year 2012 expenses for governmental activities of $2.492 billion. At the end of the 2013 fiscal year, the County s governmental funds reported combined fund balances of $886.0 million, a decrease of approximately $196.8 million (18.2%) in comparison with the prior year of $1.083 billion, primarily due to the County Sales Tax rate reduction from 1% to.75%, increases in Capital Projects spending and the cost to maintain the facilities and operations of the court and jail systems. Overview of the Basic Financial Statements This discussion and analysis is intended to serve as an introduction to the County s basic financial statements. The reporting model focuses attention on the County as a whole (government-wide) and on major individual funds. Both perspectives are presented to enable the reader to address relevant questions, broaden the basis of comparison and enhance the County s accountability. Cook County s basic financial statements are comprised of three components: 1. Government-wide financial statements 2. Fund financial statements 3. Notes to the basic financial statements This report also contains other required supplementary information and unaudited statistical data in addition to the basic financial statements. 6

32 Cook County, Illinois Management s Discussion and Analysis Year Ended November 30, 2013 continued Organization of the Cook County, Illinois Comprehensive Annual Financial Report Introductory Section INTRODUCTORY SECTION (unaudited) Management's Discussion and Analysis (unaudited) Governmentwide Financial Statements Fund Financial Statements CAFR Financial Section Statement of net position Statement of activities Governmental Funds Balance Sheet Statement of revenues, expenditures and changes in fund balances Proprietary Funds Statement of net position Statement of revenues, expenses, and changes in fund net position Statement of cash flows Fiduciary Funds Statement of fiduciary net position Statement of changes in fiduciary net position Notes to the Financial Statements Required Supplementary Information Other Than MD&A (unaudited) Information on individual non-major funds and other supplementary information that is not required Statistical Section STATISTICAL SECTION (unaudited) Government-wide Financial Statements The government-wide financial statements are designed to provide the reader with a broad overview of the County s finances, in a manner similar to private sector businesses. The Statement of Net Position presents information on all of the County s assets and liabilities, with the difference between the two reported as net position. Increases or decreases in net position, over time, may serve as a benchmark as to the improvement or deterioration in the County s financial position. Additionally, non-financial factors, such as changes in the County s property tax base or the condition of County facilities, should be considered to assess the overall financial health of the County. 7

33 Cook County, Illinois Management s Discussion and Analysis Year Ended November 30, 2013 continued The Statement of Activities presents information on how the County s net position changed during the fiscal year. All changes in the net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal years, such as revenue pertaining to uncollected taxes and expenses relating to earned, but not used, vacation, sick leave and pension obligations. The government-wide financial statements report the following different types of programs or activities: Governmental Activities The majority of County services are reported under this category. Governmental activities of the County include public safety responsibilities through the operation of the second largest unified court system in the nation and the operation of the largest single site jail complex in the United States. Also included in governmental activities are corporate functions that include the design, operation and maintenance of a highway system; control of the environment; the assessment, levy, collection and distribution of property taxes; and general administration and finance. The major revenue sources of these activities are property taxes, sales taxes and other nonproperty taxes, and various fees. Governmental activities include the primary government composed of the County itself. Business-type Activities The business-type, or enterprise, activities of the County include the operation of the Cook County Health and Hospital System ( CCHHS ). The CCHHS consists of the following entities: John H. Stroger, Jr. Hospital of Cook County, Oak Forest Health Center, Provident Hospital of Cook County, Cermak Health Services, the Department of Public Health, the Ambulatory and Community Health Network of Cook County and the Bureau of Health Services. As an enterprise activity, the intent of these entities is to provide primary, intermediate, acute, and tertiary medical care to patients, without regard to their ability to pay. The CCHHS Board oversees the operational, planning, and policy activities of the CCHHS. Discretely Presented Component Units Component units are entities for which the County is financially accountable. The two discretely presented entities, because of their financial relationship with the County, are the Forest Preserve District of Cook County (the District ) and the Emergency Telephone System, which provides Emergency 911 services primarily in unincorporated areas of the County. Fund Financial Statements The fund financial statements are designed to report groupings of related accounts which are used to maintain control over resources that have been segregated for specific activities or objectives. The County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with budgetary and other financial-related legal requirements. All of the funds of the County can be divided into the following categories: governmental funds, proprietary funds and fiduciary funds. 8