HomeMy WebLinkAbout1979-11-06; City Council; 6044; 1978-79 audit reports presentationThe final Audit reports for the City of Carlsbad and City Water
submitted to the City and are herewith submitted to the Council f o r ac c ep t an ?e ..
. Department for the fiscal year.ended June 30, 1979 have been
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Exhibits .
: . 1978-79 City of Carlsbad-Audit Report dated June 30, 1979
1978-.79'
l?lemo.randum from .Finance Director to the City Manager dated 10-24-79
Memorandum from-Finance Director to 'the City Manager date8- 10- 26-79
'a City of Carl'sbad ilrater Department. Audit .Report. dated 'June 30, -1979
,Auditors Memorandum.of Advisory Comments, 1979. . .
c ..
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Recommerl da t i o ns
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If Council 'concurs, accept' 1978-*79 Audit Reports .for the City of' .Carlsbad
and Water Department for the period ending June 30; 1979. *.
' Coun'cil Action:
l'l'-6-79 Council accepted the 1978-79 Aud.it .Reports for .the City of'
'Carlsbad -and the Water Department for the perib'd ending Ju.ne 30, 1979
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DATE : OCTOBER 26, 1979
TO : CITY MANAGER
FROM: Finance Director
SUBJECT: 1978-79 AUDIT REPORT
INTRODUCTION
The Audit of City of Carlsbad financial records for fiscal
year 1978-79 has been completed and is presented herewith for
your review. The auditors would like to meet with you, at your
convenience, to answer any questions you may have regarding the audit process and procedures or the audit report.
As you can see, the audit report has been prepared in two sections. The "City of Carlsbad" report includes audited statements for all city funds, including the water enterprise funds, as of June 30, 1979. The second report is a detailed audit of the Water Department operations for 1978-79. Although the first report provides most of the necessary information for determining the financial position of the city, the water audit is necessary to fully assess the water operation and to meet the
water revenue bond requirements.
THE CITY OF CARLSBAD AUDIT REPORT
Although the audit reports include a great deal of information, only a few major points will be covered in this summary. Any detailed questions can be answered through written or oral responses as they arise.
The auditors opinion as stated on page one of the report is important from the standpoint that no "exceptions" have been taken in the offering of the opinion. An exception, although not necessarily negative, may indicate that some deviations in the accounting procedures or some major change in accounting policies exist that should be considered when using the report as a reflection of the financial position.
CASH
As of June 30, 1979, the City of Carlsbad had a credit (negative) cash balance of $180,179. At the same time, the City had a total
investment portfolio of $12,836,378. The negative cash balance
comes about in situations where checks have been issued but not yet cleared the bank. Although the book balance has been re- duced to reflect these checks, the bank balance will not be reduced until the checks clear. It is not the City Treasurer's policy to invest the float on a regular basis, however, it does occasionally happen in closely managed investment plans. If
desired, a detail analysis of the city's cash balance and the
October 26, 1979
Page 2
restrictions thereon can be prepared for your information. The
scope of that analysis is beyond the intent of this report.
REVENUES
The City of Carlsbad received a total of $10,870,126 in revenue
from all sources in 1978-79. The audit report reflects this in
several places rather than in one figure since the total revenue in each fund is most important to the financial statements. This
is an increase of $644,041 or about 6.3% over the final estimates
used during the preparation of the 1979-80 Budget. The attached schedule of actual vs estimated revenues, Schedule A, indicates
that the primary increases were found in the General Fund -$277,605,
Gasoline Tax - $36,205, Federal Revenue Sharing - $20,133, Water
Funds - $24,138 and other grant funds not normally reflected in the City of Carlsbad Budget - $260,968.
Of the total $644,041 increase in revenues, over $240,000 or 37% was due to additional interest received due to higher than
anticipated rates on the investment of public funds. About
$261,000 or 40% of the total increase is due to grant type funds
that the City of Carlsbad has historically excluded from the
budget process. Such funding sources as CETA, State grants to Parks and Recreation and anti-recession funds are included in this
category. The remaining 23% or $143,000 is the net effect of
increases and decreases in the other sources of funds. This $143,000 represents about 1.3% of the total $10,870,126 revenue
realized by the city in 1978-79.
EXPENDITURES
The Audit Report reflects a total expenditure of $11,572,115
from all sources during 1978-79. This figure includes $476,005
of expenditures from funds such as CETA, Local Transportation
Funds and Park and Recreation grants that have not historically
been reflected in the city budget process.
Although the total appropriations for all funds during this
period were $15,987,619, this figure includes the establish-
ment of the General and Gas Tax capital and operating reserve
funds of $3,521,138 as well as about $2,286,000 in appropriations
carried over from prior years.
comparison of expenditures to appropriations on a fund by fund
basis.
The Audit Report provides a direct
The expenditure estimates prepared early in 1978-79 were used
in determining the beginning fund balance for the 1979-80
Budget. As Schedule B shows, for the funds normally reflected
on the comparative statement of funds, the actual expenditures
for 1978-79 were $485,672 under the budget estimates. This amounts to an under expenditure of 4.2% on a total basis.
gives a comparison of estimated vs actual expenditures for 1978-79.
The major variations in the Gas Tax, Sewer Construction and Federal
Schedule C
October 26, 1979 Page '3
Revenue Sharing funds are due to changes in the capital expenditure
plan during the year. The variation in the Sanitation fund is
primarily due to the timing of accounting for revenues and ex- penditures for the Encina Sewer Treatment Plant and a savings in the Sewer Department.
FUND BALANCE
Schedule B has been included primarily to give a general picture of the beginning fund balance for 1979-80 as presented in the Audit Report compared to the balances shown in the 1979-80 Budget. By definition, a Fund Balance is the excess of assets over liabil- ities for any given fund, Therefore, it represents that funds's
ability to pay outstanding obligations and support future operations.
The fund balance at the end of a fiscal year is directly affected
by the revenues and expenditures that take place within that fund.
As Schedule B shows a relatively small over or under estimate of
revenues or expenditures can have a marked impact on the fund
balance. For example, the estimated beginning fund balance for
1979-80 in the General Fund was $2,386,975. The audit figure
(adjusted for continuing appropriations) is $2,833,736 or
$446,761 over the estimate. This increase is due to a $277,605
or 4% under estimate of revenues and a $169,156 or 2% over estimate
in expenditures. Even though both estimates were very close to
the actual outcome, the ending fund balance was underestimated
by $446,761.
RECOMMENDATION
Although I have tried to touch on the four major areas of concern
at audit time, I'm sure there are other questions I have not
covered. An audit for a City of our size contains a considerable
amount of information and requires more than just a brief over-
view for complete understanding. If any additional information
is desired either the audit staff or the Finance Department will
respond.
I recommend that the audit reports be presented to the City Council at the next Council meeting. Both the Auditors and City Staff
will be available to respond to whatever questions the Council
might have,
S F. ELLIOTT / bnance Director
JFE : gb
Schedule A - 1 -
CITY OF CARLSBAD
COMPARISON OF ESTIMATED AND
ACTUAL REVENUES
1978- 79
1978- 79 1978-79
DESCRIPTION ESTIMATED ACTUAL INCREASE PERCENT
(per 1978- 79 audit) REVENUE REVENUE (DECREASE) CHANGE
GENERAL FUND
Taxes
Property Tax Sales and Use Tax
Transient Lodging Tax
Franchises Business Licenses Real Property Transfer Tax
1,450,000
2,300,000
580,000
14U,000
205,500
120.000
1,460,418 10 , 418
2,389,832 89 , 832
499 , 448 (80,552)
141 , 189 1,189
186 , 845 (18,655)
142,971 22,971
TOTAL 4,795.500 4,820,703 25,203 0.5
Licenses and Permits
Construction Permits 150,000 119 , 202 (30,798) (20.5)
Intergovernmental Revenue
Alcohol Beverage License Vehicle License-In-Lieu
Grants
Homeowners 6 Bus. Inv. Tax
Highway Users Tax
Cigarette Tax
16 , 500
400,000
85,500 135 , 000
4,000
132 .OOO
13,357
494 , 190 (3,143) 94,190
19,502 (65,998)
152,900 17,900
4,042 42
167,484 35,484
TOTAL 773,000 851,475 78,475 10.2
Charges for Services
Zoning 6 Subdivision Fees Sale of Maps 6 Publications Plan Checking Fees Engineering Fees
Library Fees
Ambulance Fees
Refuse Disposal Charges Recreation Fees
2 , 413
2,394
26,895
352
2,182
11,000
10,000
60,000
71,000
6,000
30 , 000
300 , 000
12,000
13,413
12,394
86,895
71 , 352
8,182
28 , 638
300,222
10 , 711
(1;362)
222
TOTAL 500,000 31,807 6.4 531,807
Fines and Forfeitures
Vehicle Code Fines 110,000
450,000
129,504
621,493
19 , 504
171 , 493
17.7
2 /" i- Earnings on Investments
Miscellaneous
Reimbursed Expenditures 0 the r Revenues 39,000 38,769 (231) 86,000 68,152 (17,848)
TOTAL 125.000 (18 , 079) (14.5) 106,921
TOTAL REVENUES 6,903,500 7,181,105 277,605 4.0
4 ,- . Page 2
Schedule A _. CITY OF CARLSBAD
COMPARISON OF ESTIMATED AND
ACTUAL REVENUES
1978-79
1978-79 1978-79 ESTIMATED ACTUAL INCREASE PERCENT DESCRIPTION (per 1978- 79 audit) REVENUE REVENUE (DECREASE) CHANGE
OTHER FUNDS
Gas Tax
Gasoline Taxes
Interest
TOTAL
Sanitation
Sewer Service Charges 6 Fees Interest
TOTAL
Street Lighting
Assessments
Interest
TOTAL
Sewer Construction
Sewer Const. Revenues
Interest
TOTAL
Federal Revenue Sharing.
Grants
Interest
TOTAL
Park-In-Lieu Fees
250,000
42,000
292,000
321,500
22,000
343,500
209 , 500
500
210,000
240,000
100,000
340,000
420,800
66,585
487,385
Fees
Library Bonds
Property Tax Interest
TOTAL
25,200
28,000
4,000
32,000
Sewer Bonds
Property Tax Interest
TOTAL
140,000
2,500
275,307
52,898
328,205
319,658
23,675
343.333
209,643
934
210,577
208,115
134,774
342,889
423,095
84,423
507,518
37,970
28,656
5,205
33,861
144,864
4,698
142 , 500 149,562
25,307
10,898
36,205
(1,842) 1,675
I1671
143
434
577
(31,885)
34,774
2,889
2,295
17,838
20,133
12 , 770
656
1,205
1,861
4,864
2,198
7,062
12.4
0.0
8.3
0.8
4.1
50.7
5.8
5.0
CITY OF CARLSBAD
COMPARISON OF ESTIMATED AND
ACTUAL REVENUES
1978-79
1978-79 1978-79
DESCRIPTION ESTIMATED ACTUAL (per 1978-79 audit ) REVENUE REVENUE -
WATER (all sources)
OTHER GRANT FUNDS
TOTAL ALL FUNDS
1,450,000 1,474,138
-0- 260,968
10,226,085 10,870,126
Page 3
Schedule A
INCREASE PERCENT
(DECREASE) CHANGE
24,138 1.7
260,968 -
644 , 041 6.3
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CITY OF CARLSBAD
Schedule C
Estimated vs Actual Expenditures
1978-79
Estimated Actual Active Percent
Expenditures Expenditures Over (Under) Active Over
1978-79 1978-79 Estimate (Under) Estimate
General 8,333,239 8,164,083 ( 169,856) ( 2.0)
Gas Tax 377,270 245,000 ( 132,270) (35.1)
Sanitation 463,035 326,662 ( 136,373) (29.5)
Street Lighting 195,042 200,087 5,045 2.6
Sewer Const. 289,000 410,347 121,347 42.0
Revenue Sharing 98,353 74,738 ( 23,615) (24.0)
Park-In-Lieu 164,887 178,690 13,833 8.5
Library Bond 19,001 19,285 284 1.5
Sewer Bonds 130,892 121,780 ( 9,112) ( 7.0)
Water 1,511,093 1,355,438 ( 155,655) (10.3)
Total 11,581,782 11,096,110 ( 485,672) ( 4.2)
CITY OF CARLSBAD
MEMORANDUM OF ADVISORY COMMENTS
1979
I
GEORGE A. PETTRS0N.C P. A.
RICHARD E. EVANS, C P. A
THOMAS J. BRACY. C. P. A.
GEORGE A.PETERSON & Co
CERTIFIED PUBLIC ACCOUNTANTS
7516 IVANHOE AVENUE
LA JOLLA, CALIFORNIA 92037
TELEPHONE (7141 454-6176
MEMBERS
AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS
CALIFORNIA SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS
September 4, 1979
Honorable City Council
City of Carlsbad
In connection with our recent examination of the City
of Carlsbad's financial statements for the year ended June 30,
1979, we tested the City's internal accounting controls,
reviewed significant accounting policies and procedures and
certain financial and administrative practices for the purpose
of determining the scope of our examination. Since our review
of the system of internal control was made to enable us to
express an opinion on the financial statements, it would not
necessarily disclose all weaknesses in the system which may
exist. The following comments and observations relate to the
City's accounting and practices that came to our attention
during the course of our work.
COMPUTER OPERATIONS AND CONTROLS
We reiterate our prior year's recommendation that con-
sideration should be given to additional data processing equip-
ment and applications and,in order to assure that all input
and output data is properly controlled, the City should have
an Electronic Data Processing Manager who would control the
input data, processing and data files.
COMPUTER OUTPUT -
Computer generated output required for the audit was
obtained from the computer at various dates,resulting in data
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sources not being in agreement with one another. This resulted
in a myriad of journal entries, which required a continuous
reconciliation of year-end balances.
We recommend that the City establish a year-end cutoff
date and obtain all required computer output data required
for the audit at that time.
We have also prepared the enclosed memorandum relating
to our tests of internal accounting controls and suggestions
for improvements. These matters were not of such magnitude
that they significantly affect the fair presentation of the
financial statements. However, they do require management's
review and evaluation. A copy of this letter and the attached
memorandum is being sent to Mr. Jim Elliot, Finance
Director. Copies of the attached memorandum should also be
made available to appropriate individuals responsible for
maintaining the City's internal accounting control methods,
procedures and other matters for study and implementation.
We appreciate the outstanding cooperation from your staff
that our personnel received during the examination of the City's
financial statements.
Very truly yours,
GEOBGE A. PETERSON & CO.
Richard E. Evans, Partner
i
- - CITY OF CARLSBAD
MEMORANDUM RE INTERNAL CONTROL AND ACCOUNTING PROCEDURES
Year ended June 30, 1979
For the purpose of determining the scope of our recent
examination of the City's financial statements for the year
ended June 30, 1979, we reviewed and tested compliance with
the City's system of internal accounting control.
As a result of such review and compliance tests, we.
recommend the following revisions for improving and strengthen-
ing the existing internal accounting control:
CASH
The City's outstanding checklist was grouped together
by series of checks. This resulted in additional work
in verifying the clearing of the outstanding checklist
at year-end.
the outstanding checklist.
We recommend that checks be listed individually on
The City had a check run which covered checks written
in both June, 1979 and July, 1979. The entire check run was
picked up as accounts payable. This required preparation
of a detail analysis to transfer June checks from year-end
accounts payable to a reduction of cash.
We recommend that a check run be generated at year-
end to record expenses in the proper period.
The City had not been receiving adequate information
concerning disbursements out of the workmen's compensation
cash account from the insurance management company.
Considerable time was spent in analyzing and reconciling
this account.
We recommend that the City should make sure that
the insurance management company provides all the
necessary information as needed.
INVENTORY
The Water Department's perpetual inventory system has
not been effective during the year ended June 30, 1979.
Total reliance has been placed on physical inventory resul-
ting in an inability to determine from the perpetual inventory
records the balance of an item at any point in time.
We recommend that employees responsible for inventory
control be given the training to ensure the proper use of a
perpetual inventory system.
ENCUMBRANCES
During the course of the audit, we observed that improve-
ments could be made in the implementation and utilization of
the encumbrance system. The balance sheet accounts 0620
Encumbrances, 0621 Reserve for Encumbrances, and 0622 Prior
Year's Encumbrances, could not be reconciled to supporting
detail. The computer listing of encumbrances (encumbrance
journal) required pages of purchase order adjustments to get
it to agree to the actual open purchase orders at year-end as
determined by the purchasing department. This required a
very complex and time-consuming reconciliation by the auditors
to get the information required. The encumbrance method of
accounting is a basic part of governmental accounting.
We recommend that the encumbrance method of accounting
be properly implemented. The City may want to consider sending
personnel involved to governmental accounting seminars to insure
familiarity with the concepts and mechanics of encumbrances
accounting. We also recommend a review of computer input data
prior to its being entered into the computer system to ensure
proper coding and application of encumbrance accounting mechanics.
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FIXED ASSETS
There is inadequate control over transfers, disposals
and sales of fixed assets. It is not possible to identify
such sales or transfers with certainty as to department or
cost basis.
We recommend that a fixed asset inventory be taken in
the near future. A new complete listing of assets owned
would enable the City to institute policies which would
give it control over additions, reductions, and transfers.
However, some assets would have to have their cost basis
estimated or assigned a zero value, as the real cost basis
would not be determinable from the existing records.
Water Department fixed asset records are kept on a
manual basis. We recommend that these records be set up
on the computer.
ACCOUNTING RECORDS
Our observation from the past two audits indicates
that several years records are maintained to satisfy various
requirements.
These records take up considerable storage space. If
they were microfilmed, space could be conserved and time
would be saved in retrieval.
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DATE : OCTOBER 26, 1979
TO : CITY MANAGER
FROM : Finance Director
SUBJECT: RESPONSE TO MEMORANDUM OF ADVISORY COMMENTS FROM GEORGE A. PETERSON AND COMPANY
Upon completion of the financial portion of the City's Audit Report, it is customary for the auditor to prepare a summary
of administrative findings that do not directly affect the
financial position of the City. The City's auditors, George A. Peterson and Company, have prepared the attached memorandum
of advisory comments to be presented to the City Manager and
Council.
In the past the City Manager has asked the Finance Director to respond to the auditors' comments in the management letter be-
fore transmittal to the City Council. Based on this precedent,
I have prepared the following comments.
COMPUTER OPERATIONS AND CONTROLS
I believe the City Manager, City Council and former Finance
Director recognized the need to improve the data processing system in use in the Finance Department. In response to that
need, the City Council instructed the City staff to begin the
process of choosing a consulting firm to aid in the selection
of a substitute data processing system. The Council also appro- priated a total of $42,000 ($27,000 from 1979-80 and $15,000
from continuing appropriations) to cover the consulting costs
and first year system costs. This process is underway and it
is anticipated that a new system can be installed by the end of
the fiscal year.
As for the need for a data processing manager, under the current system, management of the system has not been a serious problem. As long as responsibilities do not significantly expand I do
not feel a separate position needs to be created.
data processing system is expected to serve other departments,
some consideration should be given to hiring a computer operator/ manager as the responsibilities expand.
Probably more important than the question of a data processing manager, is the requirement for controls over the system data
input and data files. There should be one centralized source for control of the data that goes into the system and the manage-
ment of the data stored within the system.
If the new
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* October 26, 1979
I, Page 2
Under the current Finance Department structure, no one person has
ultimate responsibility for data integrity. Although this is a
shortcoming of the present system, I would recommend waiting until
the administrative branch of City Hall has been reorganized and
the Assistant Finance Director's position has been filled before
any restructuring takes place. Also, the type of system chosen
to replace the present computer may have some impact on the final
assignment of responsibilities.
COMPUTER OUTPUT
The auditors' recommendation of instituting a fixed year-end cutoff
date is well taken. Although it makes the year-end operations slightly more demanding on the individual departments, it will significantly improve the audit process, and in the long run the
total accounting system. Where possible this year, all books will
be closed as of June 30, rather than leaving the accounts open to
collect straggling entries. We will discuss this further with
representatives of George A. Peterson and Company to insure that
the proper procedures are established.
CASH
Three comments were made regarding the keeping of the City's cash records. First, bank reconciliations have been prepared manually taking advantage of several accounting shortcuts. Basically, the auditors have asked that rather than combining the total amount of
sequential outstanding checks, the checks should be listed separately on all bank reconciliations.
This is relatively easy to accomplish and will be implemented
immediately. The replacement of the computer system should improve
the overall handling of bank reconciliations by offering computer
generated listings of outstanding checks.
Second, the year-end cuttoff process has caused considerable con-
fusion. As indicated in a previous response the Finance Depart-
ment will work with the auditors to establish a better control
over year-end reports and cutoff dates.
bank accounts, particular attention will be paid to establishing
a feasible method for recording checks within the proper period.
In the case of cash or
Third, the City has entered into an agreement with R. L. Kautz,
a workers compensation management firm, for the administration of the City's workers compensation claims. Until recently, Kautz
had not been supplying sufficient documentation of checks written
on the City's special workers compensation checking account.
to the end of fiscal year 1978-79, Kautz began supplying all docu-
mentation necessary to satisfy the auditors by adding a check register to their monthly reports.
the audit staff and they now feel confident that sufficient docu-
mentation does exist.
Prior
This has been discussed with
- October 26, 1979
Page 3
INVENTORY
During the last quarter of 1978-79 the Water Department lost several
key employees who were directly responsible for the keeping of the water inventory system. This did have an affect on the integrity of the inventory records kept between April and June of 1979. As
of the end of the fiscal year these employees had been replaced
and were relatively well acquainted with the requirements of the
sys tem .
I will confirm with Mr. Greer that the water inventory system is
now operating as it should. Both Mr. Greer and I will see that
the appropriate employees have been trained in their functions.
ENCUMBERANCES
As of July 1, 1979, the Finance Department has amended its method
of accounting for encumbered items as directed in the auditors'
memo. We agree that this change is long overdue. Also, as the
opportunity arises, we will be sending key department employees to
relevant accounting classes
Governmental Accounting Systems.
to improve the level of knowledge of
The revised encumberance system does require a considerable amount
of additional effort due to the programs used by the Singer com-
puter system. Hopefully, we will be able to improve this system
through modifications to programs supplied with the proposed re-
placement system.
FIXED ASSETS
There is no question that the present fixed asset system is severely
lacking in controls.
if kept up at the required level.
if sufficient staff time could be invested to monitor the fixed
asset files, record purchases, deletions or transfers, or tag
new equipment. Of the many accounting functions, the fixed asset
system has generally seemed to be the least pressing.
I agree that a fixed asset inventory should be taken and that it
would be desirable to perform this inventory in the near future.
I do not, however, feel that the present functions of the Finance
Department can be set aside long enough to do justice to the task at hand. I also do not feel that the issue is pressing enough to
recommend that a consulting firm be retained as was done in 1975.
Not that the system cannot work efficiently
The system could be effective
At this point in time, I recommend that this project be temporarily postponed until the reorganization of the administrative branch
of City Hall has taken place and the ambulance billing and business license functions have been transferred to the Finance Department.
I am sure that these moves will require some reorganization of the
Finance Department and reassignment of duties.
the Assistant FinanceDirector's position should be filled and
functioning sufficiently to supervise the inventory process.
Also by this time
A - * October 26, 1979
F Page 4
ACCOUNTING RECORDS
The microfilming of accounting records has been a subject of interest to our department for some time. During the past several years, the auditors have suggested this as a solution to the growing flood of paper our office has to store for varing lengths of time. There is no question that microfilmed records would save space. There is also the fact that if these records were microfilmed, we would be able to give up a storage shed now used for paper storage, thereby saving about $500 per year.
I do not know the cost of a microfilming program and, therefore, cannot recommend that we enter into this as a solution to the problem. I would like to investigate this further and come back
to the Manager with an analysis of the costs of a useable micro- filming system and present my recommendations at that time.
I would like to express the department's thanks to Mr. Fil Rinoso
and Mr. Steve Rice for their valuable assistance and patience during
the course of this audit, Their professional knowledge and approach
was a key factor in the success of the audit process,
JAMES F, ELLIOTT
Finance Director
JEF : gb
attachment
CITY OF CARLSBAD
REPORT ON FINANCIAL STATEMENTS
(WITH SUPPLEMENTAL MATERIAL)
YEAR ENDED JUNE 30. 1979
CITY OF CARLSBAD
TABLE OF CONTENTS
Exhibit
Auditors' Report
Financial Statements:
Combined Balance Sheet - All Funds
Combined Statement of Changes in Fund Balances
General Fund - Statement of Revenues,
Expenditures and Encumbrances
Special Revenue Funds - Combined Balance Sheet
Other Special Revenue Funds -
Combined Balance Sheet
Special Revenue Funds - Combined
Statement of Revenues, Expenditures
and Encumbrances
Other Special Revenue Funds - Combined
Statement of Revenues, Expenditures
and Encumbrances
Special Revenue Funds - Combined
Statement of Changes in Fund Balances
Other Special Funds - Combined
Statement of Changes in Fund Balances
Debt Service Funds - Combined
Balance Sheet
Debt Service Funds - Combined Statement
of Revenues, Expenditures and
Fund Balances
Sewer Construction (Capital Projects
Fund) Statement of Revenues,
Expenditures and Fund Balance
Water Department (Enterprise Fund)
Statement of Operations
Water Department (Enterprise Fund) Statement of Changes in Retained
Earnings
Water Department (Enterprise Fund)
Statement of Changes in
Financial Position
A
B
C
D- 1
D-la
D- 2
D-2a
D- 3
D-3a
E-1
E-2
F
G- 1
G- 2
G- 3
Page
1
2- 3
4
5
6
6a
7
7a
8
8a
9
10
11
12
13
14
TABLE OF CONTENTS (CONTINUED)
Exhibit
Trust and Agency Funds
Combined Balance Sheet
Summary of Accounting Policies
Notes to Financial Statements
Supplemental Schedules:
Combined Schedule of Investments
Schedule of Utility Plant in Service
Schedule of General Fixed Assets
Schedule of General Obligation Bonds Payable
Schedule of Water Revenue
Bonds Payable
Schedule of Revenues - General Fund
Schedule of Expenditures and Encumbrances - General Fund
H
AA
BB
cc
DD
EE
FF
GG
Page
15
16-17
18-23
24
25
26
27
28
29
30
GEORGE A. PETERSON. C. P. A
RICHARD E. EVANS, C. P, A.
THOMAS J. BRADI, C. P. A.
GEORGE A.PETERSON & Co.
CERTIFIED PUBLIC ACCOUNTANTS
7816 IVANHOE AVENUE
LA JOLLA, CALIFORNIA 92037
TELEPHONE (714) 454-6176
MEMBERS
AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS
CALIFORNIA SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS
AUDITORS' REPORT
Honorable City Council
City of Carlsbad, California
We have examined the financial statements of the various
funds and account groups of the City of Carlsbad for the year
ended June 30, 1979, listed in the foregoing table of contents.
Our examination was made in accordance with generally accepted
auditing standards and accordingly, included such tests of the
accounting records and such other auditing procedures as we
considered necessary in the circumstances.
In our opinion, the aforementioned financial statements
present fairly the financial position of the various funds and
account groups of the City of Carlsbad at June 30, 1979, and
the results of operations of such funds and the changes in
financial position of the Water Department Fund for the year
then ended, in conformity with generally accepted accounting
principles applied on a basis consistent with that of the
preceding year.
The accompanying supplemental schedules and the columns
on the accompanying combined balance sheet and combined state-
ment of changes in fund balances captioned "Total - Memorandum
only", are not necessary for a fair presentation of the financial
statements, but are presented as additional analytical data. The
supplemental schedules have been subjected to the tests and othkr
auditing procedures applied in the examination of the financial
statements listed in the foregoing table of contents and, in
our opinion, are fairly stated in all material respects in
relation to the financial statements taken as a whole.
GEORGE A. PETERSON & CO.
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EXHIBIT B
CITY OF CARLSBAD COMBINED STATEMENT OF CHANGES IN FUND BALANCES - ALL FUNDS
Year ended June 30, 1979
General
Fund
Special
Revenue
Funds
Balances, June 30, 1978 $3,855,776
Adjustment to prior year's
accounts and
taxes
receivable
Res tat ed
Balances
June 30, 1978
Excess
(deficiency)
of revenues
over expen-
ditures and encumbrances
Adjustment
to prior
year's en-
cumbrances
$1,114,839
Sewer
Construction
Debt (Capital Total
Service Projects (Memorandum
Funds Fund) Only)
$104,107 $1,261,341 $6,336,063
116,011 116,011 --
3,971,787 1,114,839 104,107 1,261,341 6,452,074
(982,978) 187,389 42,358 (67,458) (970,689)
(23,728) 45,946
Change in
reserve for continuing
appropria- tion 255,963 (228,972)
Inter f und
transfers (3,241,397) 3,091,397
Balances,
June 30, 1979 $ (20,353)$ 4,210,599
22,218
26,991
$146,465 $1,193,883 $5,530,594
See accompanying summary of accounting policies and notes to financial statements.
-4-
\
. ,', . EXHIBIT C
CITY OF CARLSBAD
GENERAL FUND STATEMENT OF REVENUES EXPENDITURES AN11 ENCUMBRANCES
Year ended June 30, 1979
Revenues: (Exhibit FF)
Taxes Licenses and permits
Intergovernmental revenue
Charges for services Fines and forfeitures Earnings on investments Miscellaneous
Total revenues
Final
Budget
$ 4,795,500
150,000
769 , 000
420,000
110 , 000
450,000
209,000
6,903,500
Expenditures and encumbrances:
(Exhibit GG),
General government
Public Safety
Public works
Leases
6,209,759
2,700,391
1,333,670
231,658
Total expenditures
and encumbrances
Excess (deficiency) of revenues
over expenditures and
encumbrances
Actual
$ 4,820,703
119,202
851 , 475
531,807
129 , 504
621,493
106,921
7,181,105
3,945,326
2,634,839
1,366,437
217,481
Over
(Under)
Budget
$ 25,203
(30,798)
82 , 475
111,807 19,504
171,493
(102,079)
277,605
(2,264,433)
(65 , 552)
32,767
(14,177)
10,475,478 8,164,083 (2,311,395)
$(3,571,978) $ (982,978) $2,589,000
See accompanying summary of accounting policies and notes to financial
statements.
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EXHIBIT E-1
CITY OF CARLSBAD DEBT SERVICE FUNDS
COMBINED BALANCE SHEET
June 30, 1979
Library Sewer
Bond Bond
Total Fund Fund
ASSETS
Cash
Investments, at cost
Accounts and taxes receivable
Accrued interest receivable
Total
FUND BALANCES
$(96,614) $(1,985) $(94,629)
239,000 89,000 150,000
2,565 486 2,079
1,514 735 779
$146,465 $88,236 $ 58,229
$146,465 $88,236 $ 58,229
See accompanying summary of accounting policies and notes to
financial statements.
-9-
EXHIBIT E-2
CITY OF CARLSBAD
DEBT SERVICE FUNDS COMBINED STATEMENT OF REVENUES, EXPENDITURES AND FUND BALANCES
Year ended June 30, 1979
Revenues :
Taxes
Earnings on investments
Total revenues
Estimate
Over (under) budget
Expenditures:
Debt service
Appropriation
Over (under) budget
Library
Bond
Total Fund
$173,520 $ 28,656
9,903 5,205
183,423 33,861
174,500 32,000
$ 8,923 $ 1,861
$141,065 $ 19,285
149,893 19,000
Excess of revenues over expenditures $ 42,358 $ 14,576
Fund balances, June 30, 1978 104,107 73 , 660
Fund balances, June 30, 1979 $146,465 $ 88,236
Sewer
Bond
Fund
$144,864
4.698
149,562
142,500
$ 7,062
$121 , 780
130,893
$ (9,113)
$ 27,782
30,447
$ 58,229
See accompanying summary of accounting policies and notes to financial statements.
-10-
EXHIBIT F
CITY OF CARLSBAD SEWER CONSTRUCTION (CAPITAL PROJECTS FUND)
STATEMENT OF REVENUES, EXPENDITURES AND FUND BALANCE
Year ended June 30, 1979
Revenues :
Capital contributions
Sewer line costs
Earnings on investments
Total revenues
Estimate
Over (under) budget
Expenditures:
Sewer construction
Appropriation
Over (under) budget
$ 204,264
3 , 851
134 , 774
342 , 889
$ 2,889
410,347
715.400
$ (305,053)
Excess of revenues over expenditures
Fund balance, June 30, 1978
$ (67,458)
1,261,341
Fund balance, June 30, 1979 $1,193,883
See accompanying summary of accounting policies and notes to
financial statements.
-11-
EXHIBIT G-1
CITY OF CARLSBAD
WATER DEPARTMENT (ENTERPRISE FUND)
STATEMENT OF OPERATIONS
Year ended June 30, 1979
Operating revenues:
Water sales
Connection charges and other fees
Total operating revenues
\
Operating expenses:
Water production and purification
Water transmission and distribution
General and administrative
Total operating expenses
Operating income
Non-operating revenue:
Earnings on investments
Non-operating expenses:
Interest and fiscal agents' fees
$1,308,601
12,240
1,320,841
711 , 563
291,996
266,277
1,269,836
51,005
153,297
204,302
85,602
Net income $ 118,700
See accompanying summary of accounting policies and notes to
financial statements.
-12-
EXHIBIT G-2
CITY OF CARLSBAD
WATER DEPARTMENT (ENTERPRISE FUND)
STATEMENT OF CHANGES IN RETAINED EARNINGS
Year ended June 30, 1979
Balance at beginning pf year
Add: net income for the year
$2,731,749
118,700
Deduct :
Increase in reserve for bond debt service
Balance at end of year
2,850,449
66,190
$2,784,259
See accompanying summary of accounting policies and notes to
financial statements.
-13-
EXHIBIT G-3
CITY OF CARLSBAD
WATER DEPARTMENT (ENTERPRISE FUND)
STATEMENT OF CHANGES IN FINANCIAL POSITION
Year ended June 30, 1979
SOURCE OF FUNDS
Operations :
- Net income
Items not requiring current
outlay of funds:
Depreciation and amortization
Total operations
Decreases in restricted assets
Increase in reserve for construction
Contributions
Decrease in working capital
Total
APPLICATION OF FUNDS
Additions to utility plant in service
Retirement of revenue bonds
Increase in construction in progress
Increase in restricted assets
Total
VARIOUS ELEMENTS OF NET DECREASE
IN WORKING CAPITAL Cash Investments
Accounts receivable
Accrued interest receivable
Inventory
Prepaid expenses
Accounts payable
Due to general fund
Bonds payable--current portion
Accrued interest payable
Deposits
$118 , 700
133,743
252,443
47 350
30 185
119,968
14,412
$464,358
$197,402
95,000
29,157
142,799
$464 358
$ (31,471) 40,010
(9,481) 708
(30,928) 1,554
20,240
-0-
(5,000) 2 806
(2,850)
Total
See accompanying summary of accounting policies and notes to
financial statements.
-14-
EXHIBIT H
Total
ASSETS
CITY OF CARLSBAD TRUST AND AGENCY FUNDS
COMBINED BALANCE SHEET
June 30, 1979
Cash $ 283,814
Investments,
at cost ~,249,000
Accounts receivable
Accrued interest
receivable 4,145
Total assets $1,536,959
LIABILITIES
Accounts payable $ 74,619
Deposits 1 , 462,340
Total
liabilities $1,536,959
Trust Trust Sewer Funds Funds-
Revolving Payroll Miscel-
Fund (Note 9) laneous
$ 884 $214,814 $ 67,332
57 , 000 294,000
4,145
$ 57,884 $214,814 $365,477
$ 81 $ 64,814 $ 2,983
57,803 150,000 362,494
$ 57,884 $214,814 $365,477
Contractors
$ 784
898,000
$898,784
$ 6,741
892,043
$898,784
See accompanying summary of accounting policies and notes to financial
statements.
-15-
CITY OF CARLSBAD
SUMMARY OF ACCOUNTING POLICIES
The accounting policies of the city conform to generally
accepted accounting principles as applicable to governmental
units. The following is a summary of the significant policies.
BASIS OF ACCOUNTING
The General, Special Revenue and Debt Service Funds are
maintained on the modified accrual basis of accounting. Under
this method, revenues are generally recorded when considered
to be both measurable and available, otherwise when received
in cash. Expenditures are generally recorded when incurred or
encumbered, except prepaid expenses, which normally are not
recorded and interest on long-term debt, which is considered
an expenditure when due.
The Capital Projects, Enterprise and Trust and Agency
Funds are maintained on an accrual basis of accounting. Such
method provides an accruate matching of revenues with asso-
ciated benefits.
UTILITY PLANT IN SERVICE
The Water Department utility plant in service is stated
at cost. Expenditures for additions, renewals and betterments
are capitalized; expenditures for maintenance and repairs are
charged to expenses as incurred. Upon retirement or disposal
of assets, the cost and accumulated depreciation are eliminated
from the accounts and the resulting gain or loss is included in
income. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets.
GENERAL FIXED ASSETS
General fixed assets purchased are recorded as expenditures
in the respective funds at time of purchase. Such assets are
capitalized at cost in the general fixed assets group of accounts
except for streets and sidewalks. No depreciation has been pro-
vided on general fixed assets.
-16- (Continued)
CITY OF CARLSBAD
SUMMARY OF ACCOUNTING POLICIES
GENERAL FIXED ASSETS (Continued)
In recognition of current interpretations of accounting
principles relative to leasehold interests, certain lands and
buildings being leased by the City under lease contracts con-
sidered to be noncancellable, were capitalized at cost in
General Fixed Assets. The unpaid portions of lease rentals
allocable to cost (principal) are set up in the appropriate
liability accounts.
-17-
CITY OF CARLSBAD
NOTES TO FINANCIAL STATEMENTS
NOTE 1--CASH AND INVESTMENTS
The City maintains one general bank account for all funds.
Investments are purchased through this account and are then
allocated to the respective funds based upon excess cash balances.
Included in the general fund cash of $(188,336) is $3,399 kept
in a separate checking account which is used for workmen's com-
pensation payments administered by an agent.
NOTE 2--RESTRICTED ASSETS
At June 30, 1979 the use of certain Water Department assets
is restricted as follows:
For construction:
Cash
Investments
Accrued interest receivable
$ -0-
375,982
4,290
Total
For debt service:
Cash
Cash with fiscal agent
Investments
Accrued interest receivable
Total
For customers' meter deposits:
Cash
Total restricted assets
380,272
-0-
137 , 799
557 , 864
4,130
699,793
25,144
$1,105,209 -
(continued)
-18-
CITY OF CARLSBAD
NOTES TO FINANCIAL STATEMENTS
NOTE 3--WATER REVENUE BONDS PAYABLE
Water revenue bonds payable are special obligations of
the City and are secured by a lien on gross revenues of the
Water Department. At June 30, 1979 authorized but unissued
1970 revenue bonds amounted to $575,000.
The bond resolutions require the City to impose taxes
and charges sufficient to maintain net revenue coverage of
1.35 times maximum debt service requirements in any future
year and 1 times any other obligations payable by the Water
Department. Net revenues for these purposes in the year ended
June 30, 1979 fulfilled these requirements. Also, pursuant
to the bond resolutions, the City has maintained the required
insurance coverage to the extent reasonably necessary to pro-
tect the City and the bondholders.
NOTE 4--RETIREMENT PLAN
The City's trusteed retirement plan is mandatory for all
full-time and regular part-time employees from the first day
of employment. For the year ended June 30, 1979 the City
contributed 9.406% of salary for miscellaneous employees and
17.878% of salary for safety employees. Miscellaneous employees
contribute 7% of the remainder of total salary less $61 for all
salaries over $184. Those with salaries less than $184 contri-
bute 7%. The safety employees contribute 5.64% to 11.65% based
on age upon beginning service with 'the City, of 100% of monthly
salary. The charge to expenditures for the plan was $550,586
for the year ended June 30, 1979.
NOTE 5--VACATION AND SICK PAY BENEFITS
As of June 30, 1979, employees of the City had earned but
not taken vacation and sick leave benefits which, at their
current salary rates on such date, amounted to approximately
(Continued)
-19-
CITY OF CARLSBAD
NOTES TO FINANCIAL STATEMENTS
NOTE 5--VACATION AND SICK PAY BENEFITS (Continued)
$536,000.
their employment, the City is committed to make cash payments
to them on termination or retirement at the salary rates then
in effect. Under existing policy , Police and Fire Department
employees are eligible to receive one-fourth to one-half of
their accumulated and unused sick leave for those retiring
employees who have worked over ten years and over fifteen
years, respectively.
If annual leave is not taken by the employees during
NOTE 6--LEASED PROPERTY UNDER CAPITAL LEASE
The City participated with the County of San Diego in the
Carlsbad Building Authority under a joint-powers agreement,
dated October 1, 1967, for the construction of a Civic Center
and its subsequent use by the City. The City is obligated to
pay an annual base rental of $36,000 plus amounts necessary
for other specified expenses of the Authority as provided for
by the lease. The lease shall remain in effect for forty years
from the date of the agreement or until all revenue bonds assumed
by the Authority and interest due on the bonds have been paid or
provided for, whichever shall occur first. The property shall
automatically vest to the City at the end of the term of the
lease. The City's leasehold interest has been valued at $460,201
which represents the discounted value of the total lease payments
to be paid under the lease. The lease obligation has beenmlued
at the discounted value of the remaining annual lease payments
as of June 30, 1979 at $334,619.
The City participated with the City of Oceanside under an
agreement dated May 16, 1978, for the purchase of an automated
circulation system for their respective libraries. The City's
share of the purchase price is $102,025. The lease obligation
has been valued at the discounted value of the total remaining
(Continued)
-20-
CITY OF CARLSBAD
NOTES TO FINANCIAL STATEMENTS
NOTE 6--LEASED PROPERTY UNDER CAPITAL LEASE (Continued)
annual lease payments (5-year lease purchase agreement) as of
June.30, 1979 at $79,225.
The City is currently negotiating a lease with the City
of Oceanside whereby the City will lease public parking near
a major shopping center from the City of Oceanside for a
total rental of $700,040 ($70,000 annually for each of the
first ten years and $1 annually for each of the remaining
forty years of a fifty-year lease.)
NOTE 7--RENTALS UNDER OPERATING LEASES
On August 18, 1969, the City entered into an agreement
with Rancho La Costa, Inc. to lease the Fire Station No. 2
for a monthly rental of $775, plus taxes and certain operating
costs. The lease terminated August 17, 1979.
Under an agreement, dated August 21, 1969 with the Parking
Authority of the City of Carlsbad, the City has leased the
off-street parking facilities surrounding the Plaza Camino
Real Shopping Center. The City has agreed to pay an annual
rental of $138,400, plus taxes, insurance and other operating
costs. The lease terminates on the date the revenue bonds
issued by the Parking Authority have been retired or provision
for payments made. The last of the bonds mature October 1,
1995, but are callable from October 1, 1979.
On November 21, 1972, the City entered into an agreement
with the Tri-City Auto Dealers Association for the construction
of a road and its subsequent use by the City. The City is
obligated to pay an annual rental of $54,658 through 1983,
subject to certain conditions to be met by the Association.
The following is a schedule by years of minimum future
rentals on non-cancellable operating leases as of June 30, 1979:
(Continued)
-21-
CITY OF CARLSBAD
NOTES TO FINANCIAL STATEMENTS
NOTE 7--RENTALS UNDER OPERATING LEASES (Continued)
Year ending June 30,
1980
1981
1982
1983
1984
Later years
Total minimum future rentals
NOTE 8--PARK-IN-LIEU FUND
$ 194,220
193 , 058
193 , 058
193,058
138,400
1,557,000
$2,468,794
The Fund requires subdividers of land to dedicate a portion
of the land or pay a fee for the purpose of providing park and
recreational facilities.
The amount of land required to be dedicated is based on
the gross area of the subdivision determined by a density
formula.
In some instances a fee is required to be paid in lieu of
land dedication. The amount of the fee is based upon the fair
market value of land required to be dedicated.
As of June 30, 1979, eleven park lands have been dedicated
for which values have not been assigned. Ten park lands have
been designated for dedication.
NOTE 9--SELF-INSURANCE/WORKERS' COMPENSATION
The City adopted a self-insurance/workers' compensation
plan which went into effect September 1, 1978. An initial
reserve of $150,000 has been set up for this purpose and
included with deposits in the payroll trust fund.
(Continued)
-22-
CITY OF CARLSBAD
NOTES TO FINANCIAL STATEMENTS
NOTE 10--FUNDS ESTABLISHED IN FISCAL YEAR 1978-1979
Maintenance and Operation Reserve Fund
This fund was created to meet the City's fluctuating
need for operating funds. The sum of $1,000,000 has been
appropriated from the unappropriated General Fund balance.
Capital Construction Reserve Fund
This fund was created to accumulate long-term capital
improvement program developed by the City. The initial
funding was provided by appropriations of $800,000 from
the unappropriated Fund balance and $1,380,138 from the
continuing appropriation account of the General Fund.
Gas Tax Construction Reserve Fund
This Fund was created to carry over funds from year
to year for the purpose of accumulating funds for capital
projects. The initial funding was provided by appropria-
tions of $190,000 from the unappropriated Fund balance
and $151,000 from the continuing appropriation account
of the Special Gas Tax Street Improvement Fund.
-23-
EXHIBIT AA
CITY OF CARLSBAD COMBINED SCHEDULE OF INVESTMENTS
June 30, 1979
Description
Certificates of Deposit:
Rancho Santa Fe Savings & Loan
Glendale Federal Savings
Allstate Savings & Loan Association
San Diego Federal Savings & Loan The Chartered Bank of London First National Bank of San Diego County Bank of America Security Pacific National Bank Coast Federal Savings & Loan Association La Jolla Bank & Trust La Jolla Bank & Trust
La Jolla Bank & Trust
La Jolla Bank & Trust
Central Federal Savings & Loan Association Crocker National Bank Crocker National Bank Crocker National Bank
First Federal Savings & Loan Association
Southwest Bank
Southwest Bank
Southwest Bank
Southwest Bank
Southwest Bank
Southwest Bank
Southwest Bank
Southwest Bank Southwest Bank
Southwest Bank Hawthorne Savings & Loan Association
First Federal Savings & Loan Association
Gibraltar Savings & Loan Association
California Federal Savings
of Santa Monica
of San Diego
Savings Account:
Bank of America
Total investments
Interest
Rate Amount
10.750
10.750
10.600
10.875
10.375
10.000
10.375
10.000
10.750
10.750
10.500
10.300
10.000
10.500
10.250
10.250
11.375
10.625
9.900
11.000
10.600
10.600
10.650
10.650
10.250
10.250
10.250
10.375
11.500
9.000
10.875
10.500
$ 100,000
100,000
100,000
100,000
200,000
150,000
500,000
900 , 000
100,000
300,000
100,000
500,000
600 , 000
100,000
600,000
2,000,000
100,000
100,000
600 , 000
1,200,000
500 ,000
300,000
500,000
500 , 000
500,000
375,000
500,000
800,000
100 , 000
100,000
100 , 000
100 , 000
5.000 11,378
$12,036,378
See accompanying summary of accounting policies and notes to
financial statements.
-24-
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EXHIBIT CC
Land
Buildings
Other improvements
Furniture
and equipment
Leased property
under capital lease (Note 6)
Total general
fixed assets
CITY OF CARLSBAD
SCHEDULE OF GENERAL FIXED ASSETS
Year ended June 30, 1979
Balance Balance June 30, 1978 Additions Disposals June 30, 1979
$ 336,174 $ $2,289 $ 333,885
689,985 689,985
2,432,224 47,915 2,480 , 139
1,481,188 470,761
460,201 102,025
$5,399,772 $620,701
4,660
$6,949 -
1,947,289
562,226
$6,013,524
See accompanying summary of accounting policies and notes to financial
statements.
-26-
EXHIBIT DD
1962 Sewer Bonds
Series A
1962 Sewer Bonds
Series B
1962 Sewer Bonds
Series C
CITY OF CARLSBAD SCHEDULE OF GENERAL OBLIGATION BONDS PAYABLE
June 30, 1979
1966 Library
Bonds
Years of
Maturity
July 1
1980-82
1983-87
1988
July 1,
1980-86
1987-88
1989-90
1991
July 1
1980-81
1982-84
1985-86
1987
1988-91
Interest
Rate
Principal
Due each Year
Amount
Due on
June 30,
1979
3.50%
3.50
3.50
3.50
3.60
3.60
3.60
3.60
3.60
3.70 3.70
3.75
January 1,
1980-82 4.50
1983-89 4.50
1990-91 4.50
1992 4.50
$ 30,000
40,000
50,000
40,000
40,000
90,000
100,000
15,000
20,000
20,000
25,000
25,000
10,000
15,000
20,000
25,000
Total general obligation bonds payable
$ 90,000
200,000 50,000
280,000
80,000
180,000
100,000
30,000
60,000
40,000
25,000
100,000
30,000
105,000
40,000
25,000
Total
$ 340,000
640,000
255,000
200,000
$1,435,000
See accompanying summary of accounting policies and notes to financial statements.
-27-
EXHIBIT EE
CITY OF CARLSBAD
SCHEDULE OF WATER REVENUE BONDS PAYABLE
June 30, 1979
Amount
Principal Due on
Years of Interest Due each June 30,
Maturity Rate Year 1979 Total
WATERWORKS REVENUE
BONDS, 1958
July 1,
1979-81 4.25% $ 35,000 $105,000
1982-84 4.25 40,000 120,000
1985 4.10 40,000 40,000
1986-87 4.10 45 , 000 90,000
1988 4.10 47,000 47,000
Total $ 402,000
WATERWORKS REVENUE
BONDS, 1960 July 1,
1979 4.25 5 , 000 5,000 1980-86 4.25 10 , 000 70,000
1987-88 4.00 15,000 30 , 000 1989 4.00 60,000 60 , 000
1990 3.875 65 , 000 65,000
Total
WATERWORKS REVENUE
BONDS, 1970 -
Series A July 1,
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989-90
Total
7.00
6.00
6.15
6.30
6.40
6.50
6.60
6.70
6.80
6.90
6.00
Total water revenue bonds payable
55,000
55,000
60,000
60,000
65,000
75,000
80,000
85,000
90,000
95,000
100,000
230,000
55 , 000
55,000
60,000
60,000
65,000
75,000
80 , 000
85 , 000
90,000
95,000 200,000
920,000
$1,552,000
See accompanying summary of accounting policies and notes to financial
statements.
-28-
P
EXHIBIT FF
CITY OF CARLSBAD
Year ended June 30, 1979
SCHEDULE OF REVENUES - GENERAL FUND
Taxes : Property taxes
Sales and use taxes Transient lodging taxes Franchises
Business licenses
Real property transfer taxes
Total
$1,460,418
2 , 389 , 832
499,448
141,189
186 , 845
142,971
4.820.703
Licenses and Permits:
Construction permits 119,202
Intergovernmental Revenue:
Alcoholic beverage licenses
Vehicle licenses-in-lieu
Grants
Homeowners and business property taxes
Highway users tax
Cigarette taxes
13 , 357
494,190 19 , 502
152 , 900
4,042
167,484
Total
Charges for Services: Zoning and subdivision fees
Sale of maps and publications Plan checking fees
Engineering fees Library fees
Ambulance fees
Refuse disposal charges
Recreation fees
Total
Fines and Forfeitures:
Vehicle code fines
Earnings on Investments
Miscellaneous:
Reimbursed expenditures
Other revenues
Total
Total Revenues
851 , 475
13 , 413
12,394
86 ,'895
71 , 352
8,182
28,638 300 , 222
10,711
531 , 807
129 , 504
621,493
38 , 769
68,152
106 , 921
$7,181,105
See accompanying summary of accounting policies and notes to
financial statements.
-29-
CITY OF CARLSBAD EXHIBIT GG
SCHEDULE OF EXPENDITURES AND ENCUMBRANCES - GENERAL PUND
Year ended June 30, 1979
General Government: City Council
City Manager City Clerk General government City Finance Director
City Treasurer City Attorney
Personnel administration
Planning
Purchasing
Parks and Recreation
Library
Non-departmental:
Capital improvements
Insurance and bonds
Community promotion Auditing
Dues and memberships
1911 Act expense
Senior citizens
Retirement
Community assistance
Final
Budset Actual
$ 24,147 108 , 094
76 , 656
201,465
51,206
3,470 163,132
79 , 106 321,587
22 , 307 737,492
604 , 242
2,344 , 026
789,366
34,000
3,000
14 , 050
5,800
28 , 361
594 , 172
4,080
$ 23,769
108,735
72,414
185,978
51,915
2,491
159,646
76,087
230 , 708
21,292
542,116
573,523
Over
(Under)
Budget
476,720 (1,867,306)
689,525 (99 , 841)
34,958 958
3,025 25
10 , 058 (3,992)
5,621 (179)
30 , 219 1,858
4 , 800 720
641,726 47,554
Total 6,209,759 3,945,326 (2,264,433)
Public Safety: Police protection
Fire protection Building regulation Civil defense
1,382,881 1,378,237 (4 , 644)
1,074,003 1,055,814 (18,189) 241,807 198 , 827 (42,980)
1 , 700 1,961 261
Total 2,700,391 2,634,839 (65,552)
Public Works:
Engineering 352 , 263 317,589 (34,674) Streets 575,028 517,852 (57,176) Mechanical maintenance 16 , 613 36 , 576 19,963 Public works administration 100,813 108,814 8,001
Utilities maintenance director 25,428 30 , 839 5,411 Waste collection 222 , 185 321 , 459 99,274
General government buildings 41,340 33,308 (8 , 032)
Total 1,333,670 1,366,437 32,767
Leases -____ 231,658 217 , 481 (14 , 177)
Total Expenditures and Encumbrances $10,475,478 $8,164,083 $(2,311,395)
See accompanying summary of accounting policies and notes to financial
statements.
-30-
CITY OF CARLSBAD WATER DEPARTMENT
REPORT ON FINANCIAL STATEMENTS (WITH SUPPLEMENTAL MATERIAL)
TWO YEARS ENDED JUNE 30, 1979
i
Auditors' Report
Financial Statements:
CITY OF CARLSBAD
WATER DEPARTMENT
TABLE OF CONTENTS
Exhibit Page
Balance Sheet
Statement of Operations
Statement of Changes in Retained Earnings
Statement of Changes in Financial Position
Summary of Accounting Policies
Notes to Financial Statements
Supplemental Schedules:
Analysis of Restricted Funds
Analysis of Changes in Utility
Plant in Service
Schedule of Revenue Bonds Payable
Analysis of Reserve for Construction
Analysis of Reserves for Bond
Debt Service
Schedule of Operating Expenses
AA
BB
cc
DD
EE
FF
1
8
9
10
11
12
13
GEORGE A. PETERS0N.C. P, A.
RICHARD E. EVANS, C. P, A.
THOMAS J. BRADY, C. P. A.
GEORGE A.PETERSON & Co.
CERTIFIED PUBLIC ACCOUNTANTS
7816 IVANHOE AVENUE
LA JOLLA, CALIFORNIA 92037
TELEPHONE (714) 454-6176
MEMBERS
AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS
CALIFORNIA SOCIETY OF
CERTIFIED PUELIC ACCOUNTANTS
AUDITORS' REPORT
Honorable City Council City of Carlsbad, California
We have examined the balance sheet of the City of Carlsbad
Water Department as of June 30, 1979 and 1978, and the related
statements of income and retained earnings, and changes in financial position for the years then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and
such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the aforementioned financial statements present fairly the financial position of the City of Carlsbad Water
Department as of June 30, 1979 and 1978, and the results of
operations and changes in financial position for the years then
ended, in conformity with generally accepted accounting princi-
ples applied on a basis consistent with that of the preceding
year.
The accompanying supplemental schedules are not necessary for a fair presentation of the financial statements, but are pre-
sented as additional analytical data. The supplemental schedules
have been subjected to the tests and other auditing procedures
applied in the examination of the financial statements listed in
the foregoing table of contents and, in,our opinion, are fairly
stated in all material respects in relation to the financial
statements taken as a whole.
GEORGE A. PETERSON & CO.
September 4, 1979
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EXHIBIT B CITY OF CARLSBAD
WATER DEPARTMENT STATEMENT OF OPERATIONS
Year ended June 30,
1979 1978
OPERATING REVENUES
Water sales $1,308,601 $1,238,171
Connection charges and other fees 12 , 240 43,527
Total operating revenues 1 , 320,841 1,281,698
OPERATING EXPENSES (Exhibit FF)
Operating income
NON-OPERATING REVENUE
Earnings on investments
1,023 , 717
51,005 257 , 981
1,269 , 836
153,297 106,497
204,302 364,478
NON-OPERATING EXPENSES
Interest and fiscal agent's fees 85,602 91,245
NET INCOME $ 118,700 $ 273,233
See accompanying summary of accounting policies and notes to financial statements.
-3-
CITY OF CARLSBAD
WATER DEPARTMENT STATEMENT OF CHANGES IN RETAINED EARNINGS
Balance at beginning of year
Add net income for the year
Deduct
Amount appropriated for
property acquisition
Increase in reserve for
bond debt service
Balance at end of year
EXHIBIT C
- Year ended June 30,
1979 1978
$2,731,749 $2,865,234
118 , 700 273,233
2,850,449 3,138 , 467
-0- 350 , 000 1
66 , 190 56,718
66 , 190 406,718
See accompanying summary of accounting policies and notes to
financial statements.
-4-
EXHIBIT D CITY OF CARLSBAD
WATER DEPARTMENT STATEMENT OF CIIANGES IN FINANCIAL POSITION
Year ended June 30,
1979 1978
SOURCE OF FUNDS
Operations:
Net income
Items not requiring current
outlay of funds:
Depreciation and amortization
$ 118,700
133,743
$ 273,233
119,331
Total operations
Decrease in restricted assets
Increase in reserve for construction Increase in contributions
Decrease in working capital
252,443
47 , 350
30,185
119 , 968
14,412
392,564
23,334
20,855
202,916
-0-
Total $ 464,358
APPLICATION OF FUNDS Additions to utility plant
Retirement of revenue bonds
Increase in construction in
Increase in restricted assets
Increase in working capital
in service
progress
Total
VARIOUS ELEMENTS OF NET INCPIEASE
(DECREASE) IN WORKING CAPITAL
Cash
Investments
Accounts receivable
Accrued interest receivable
Inventory Prepaid expenses
Accounts payable Due to general fund
Bonds payable - current portion Accrued interest payable Deposits
Total
$ 197,402
95,000
29 , 157
142,799
-0-
$ 464,358
$ (31,471) 40,010
(9,481) 708 (30,928) 1,554 20,240
-0-
2,806
(2,850)
(5,000)
$ 639,669
$ 337 , 830
90,000
15,905
94 , 390
101,544
$ 639,669
$ 19,018
16,000
69,163
(805) 16,976
(3 , 801)
(3,119) (13,337)
3,452
2,997
(5,000)
$ 101,544
See accompanying summary of accounting policies and notes to
financial statements.
-5-
CITY OF CARLSBAD
WATER DEPARTMENT
SUMMARY OF ACCOUNTING POLICIES
The accounting policies of the Department conform to
generally accepted accounting principles. The following is
a summary of the significant policies.
BASIS OF ACCOUNTING
The Department's accounts are maintained on an accrual
basis of accounting. Accordingly, revenues are recorded when
earned and expenditures when incurred.
UTILITY PLANT IN SERVICE
Utility plant in service is stated at cost. Expenditures
for additions, renewals and betterments are capitalized; expen-
ditures maintenance and repairs are charged to expenses as
incurred. Upon retirement or disposal of assets, the cost
and accumulated depreciation are eliminated from the accounts
and the resulting gain or loss is included in income. Depre-
ciation is computed on the straight-line method over the esti-
mated useful lives of the assets.
-6-
CITY OF CARLSBAD
WATER DEPARTMENT
NOTES TO FINANCIAL STATEMENTS
NOTE 1--CASH AND INVESTMENTS
The Department, in conjunction with the City, maintains
one general bank account for all funds. Investments are
purchased through this account and are then allocated to the
respective funds based upon excess cash balances.
NOTE 2--REVENUE BONDS PAYABLE
Revenue bonds payable are special obligations of the City
and are secured by a lien on gross revenues of the Water Depart-
ment. At June 30, 1979, authorized but unissued 1970 revenue
bonds amounted to $575,000.
The bond resolutionsrequire the City to impose rates and
charges sufficient to maintain net revenue coverage of 1.35
times maximum debt service requirements in any future year and
1 times any other obligations payable by the Water Department.
Net revenues for these purposes in the year ended June 30, 1979
fulfilled these requirements.
Also, pursuant to the bond resolutions, the City has
maintained the required insurance coverage to the extent reason-
ably necessary to protect the City and the bondholders.
NOTE 3--VACATION AND SICK PAY BENEFITS
As of June 30, 1979, employees of the Water Department
had earned but not taken vacation and sick leave benefits which,
at their current salary rates on such date, amounted to approx-
imately $37,000. If annual leave is not taken by the employees
during their employment, the Water Department is committed to
make cash payments to them on termination or retirement at the
salary rates then in effect. Under existing policy, Water
Department employees are not paid for their accumulated and
unused sick leave upon termination or retirement.
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P EXHIBIT CC
CITY OF CARLSBAD
WATER DEPARTMENT
SCHEDULE OF REVENUE BONDS PAYABLE June 30, 1979
Years of
Maturity
WATERWORKS REVENUE
BONDS, 1958 July 1,
1979-81
1982-84
1985
1986-87
1988
TOTALS
WATERWORKS REVENUE
BONDS, 1960 July 1,
1979
1980-86 1987-88
1989
1990
TOTALS
WATERWORKS REVENUE
BONDS, 1970 -
Series A July 1,
1979
1980
1981
1982
1983
1984
1985 1986
1987
1988
1989-90
TOTALS
BONDED INDEBTEDNESS,
JUNE 30, 1979
Interest
Rate
4.25
4.25
4.10
4.10
4.10
4.25
4.25 4.00
4.00
3.875
Principal
Due Each
Year Long-Term
$ 35,000 $ 70,000
40,000 40,000
47,000 47,000
40,000 120,000
45,000 90,000
367,000
5,000 -0- 10,000 70,000
15,000 30,000
60,000 60,000
65,000 65,000
225,000
7.00
6.00
6.15
6.30
6.40
6.50
6.60
6.70
6.80
6.90
6.00
55,000
55,000
60,000
60,000
65,000
75,000
80,000
85,000
90,000
95,000
100,000
-0-
55,000
60,000
60,000
65,000
75,000
80,000
85,000
90,000
95,000 200,000
865,000
$1,457,000
Current
$35,000
-0-
-0-
-0-
-0-
35,000
5 , 000
-0-
-0-
-0-
-0-
5,000
55,000
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
55,000
$95,000
See accompanying summary of accounting policies and notes to financial statements.
-10-
I
CITY OF CARLSBAD WATER DEPARTMENT
ANALYSIS OF RESERVE FOR CONSTRUCTION
Year ended June 30, 1979
Balance at beginning of year
Add: earnings on investments
Balance at end of year
$350,087
30,185
EXHIBIT DD
$380 , 272
See accompanying summary of accounting policies and notes
to financial starements.
-11-
EXHIBIT EE
CITY OF CARLSBAD
WATER DEPARTMENT
ANALYSIS OF RESERVES FOR BOND DEBT SERVICE
Year ended June 30, 1979
Revenue Bonds
1958 1960 1970 Total
Balances at beginning
of year: Bond debt service $ 19,702 $ 42,193
52 , 357 67,519 Bond retirement --
Totals 72,059 109,712
Add revenues:
Earnings on investments 444 3 , 602 Transfers from water fund 46,682 19,511
Totals
Less expenses: Interest and fees Principal payments
Totals
47,126 23,113
16,991 9,307
30,000 5,000
46,991 14,307
Balances at end of year: Bond debt service 19,837 50,999
67 , 519 Bond retirement 52 , 357 --
Totals $ 72,194 $118,518
$290,911
118,205
409.116
22,844
148,710
171,554
59 , 305
55,000
114,305
348,160
118,205
$352,806
238,081
590,887
26,890
214.903
241,793
85,603
90,000
175,603
418,996
238,081
$466,365 $657,077
See accompanying summary of accounting policies and notes to financial
statements.
-12-
EXHIBIT FF
CITY OF CARLSBAD
WATER DEPARTMENT SCHEDULE OF OPERATING EXPENSES
Year ended June 30,
1979 1978
WATER PRODUCTION AND PURIFICATION Salaries and wages
Power
Supplies and expense
Purchased water
Depreciation
Totals
WATER TRANSMISSION AND DISTRIBUTION Salaries and wages
Power
Communications
Maintenance
Pump station and reservoirs
Meters and services Transmission and distribution lines
Depreciation
Totals
GENERAL AND ADMINISTRATIVE
Salaries and wages
Operation and maintenance-
mobile equipment
Professional services
Office supplies equipment maintenance
Small tools and supplies
Maintenance and supplies, buildings
Taxes and insurance
Contributions to retirement plans
General expense
Collection fees
Depreciation
Cost applied to utility plant in service
Totals
TOTAL OPERATING EXPENSES
$ 38,661
1,234 1,649 645,110
24,909
711,563
144,009
6,313
584
9,839 29,002
81,967 20,282
291,996
100,617
8 , 035 8,183 32,497 2,991
257
51,776 43,023
2,597 238 26,470
(10,407)
266,277
$1,269,836
.$ 31,376
1,422 2,601 522 , 950 24,909
583,258
125,408
3,352
818
5,217
16,898
4,496
78,177
234.366
64,414
6,575
6,249 28,916
5,442
396
34,531
45,071
10,640
220
15,519
(11,880)
206,093
$1,023,717
See accompanying summary of accounting policies and notes to financial
statements.
-13-