HomeMy WebLinkAbout; ; 1961-62 Report of Audit; 1962-09-28CITY OF CARLSBAD WATER DEPARTMENT
Audit Report
For the year ended June 30, 1962
PEAT. MARWICK, MITCHELL & CO.
CERTIFIED PUBLIC ACCOUNTANTS
PEAT, MARWICK, MITCHELL & Co.
CERTIFIED PUBLIC ACCOUNTANTS
(INCORPORATING EVERTS AND ESENOFF)
?O5 THIRD STREET
OCEANSIDE, CALIFORNIA
ACCOUNTANTS' REPORT
The Honorable Mayor and City Council
City of Carlsbad, California
We have examined the balance sheet—all funds of the City of
Carlsbad Water Department, Carlsbad, California as of June 30, 1962 and
the related statements of revenues, expenditures and unappropriated
surplus for the year 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 accompanying balance sheet—all funds and
statements of revenues, expenditures and unappropriated surplus present
fairly the financial position of each fund of the City of Carlsbad Water
Department at June 30, 1962, and the results of Its operations for the
year then ended, In conformity with generally accepted principles of fund
accounting applied on a basis consistent with that of the preceding year0
Oceanslde, California
September 28, 1962
CITY OF CARLSBAD WATER DEPARTMENT
Balance Sheet - All Funds
June 30, 1962
E- ' 'bit A
Waterworks Revenue Bonds,Waterworks Revenue Bonds,
Assets
Current assets:
Cash with treasurer, City of Carlsbad
Cash In Security-First National Bank -
coupon account
Cash In Security-First National Bank -
time deposlts
Cash in Bank of America - time deposits
Investments In U. S. Government securities
Accounts receivable - water accounts (net
of reserve for losses)
Accounts receivable - other
Accrued interest receivable
Warehouse stock
Construction deposit
Work in progress
Prepaid expenses
Total current assets
Property and equipment
Less accumulated depreciation
Net property and equipment
Future bond principal requirements
Liabilities, Reserves, and Surplus
Current liabilities:
Accounts payable
Matured bond interest coupons
Pipeline, meter, and service deposits
Credit due for stored meters
Total current liabilities
Waterworks revenue bonds payable:
Series of 1958
Series of I960
Reserves and surplus:
Reserve for capital invested in property
and equipment
Reserve for bond principal and interest
Reserve for authorized expenditures
Unappropriated surplus—exhibit C
Total -
all Water
Funds Fund
$ 141,743 114,893
21,874
165,000
8,000
45,231
24,837 24,837
4,201 125
976 117
129,471
32,298'
2,034
128
647,793 139,972
1,406,370
1,067,000
$3,121.163 139,972
$ 53,166
21,873
35,563
579
1 1 1,181
767,000
300,000
1958
Bond Service Reserve Bond Service
Fund Fund Fund
6,193 2,311 14,347
15,660 6,214
35,000 45,000
20,000 5,046
256
77,109 52,357 20,561
767,000 300,000
844,109 52.357 320.561
15,660 6,213
15,660 6,213
767,000
300,000
I960 Maintenance
Reserve Construction and Operations
Fund Fund Fund
1,495 2,504
165,000
20,185
4,076
603
129,471
32,298
2,034
128
21,680 200,405 135,709
2,040,027
633,657
1, 406 f 370
21.680 200.405 1.542.079
53,166
35,563
579
89,308
1,406,370
149,834 61,449
200,405
186,373 139,972
52,357 14,348 21,680
200,405
1,406,370
46,401
$3.121.163 139.972 844.109 320.561 21,680 200.405 1.542.079
-" v,y Exhibit B
CITY OF CARLSBAD WATER DEPARTMENT
Statement of Revenues and Expenditures
For the year ended June 30, 1962
Revenues - Pledged to requirements of Resolutions #397 and #71 Is
Water sales $273,586
Penalties for late payment of water accounts 2,667
Rent received 1,820
Pipeline fees / 613
Charges for turning on water 4-91
Interest earned 2,526
Loan meter charges 380
Miscellaneous revenues 300
Total 282,383
Less reduction for water charges to
disputed accounts 269
Total revenues 282,114
Expenses:
Maintenance and operations expense—schedule 8-1:
Water production and purification $77,784
Water transmission and distribution 47,733
General and administrative 34,885
Total expenses - except interest and
depreciation deducted below 160,402
Net revenues before interest and
depreciation 121,712
Deduct:
Interest on bonds:
1958 series 31,319
I960 series 12,338
Depreciation 44,149
Total 87.806
Net revenues after deducting current
expenses, interest, and depreciation 33,906
Add:
Provision for depreciation, an expense which did not
require a current cash outlay 44,149
Net revenues available for retirement
of bonds, capital outlay, and other
water department purposes—to exhibit C $ 78,055
Exhibit Cv,.,- v >
CITY OF CARLSBAD WATER DEPARTMENT
Statement of Unappropriated Surplus
For the year ended June 30, 1962
Unappropriated surplus, July I, 1961 $138,992
Additions:
Net revenues for yeai exhibit B 78.055
Total available 217,047
Deductions:
Correction of accounts payable at June 30, 1961 $ 2,489
Transfers to bond service funds In excess of
current payment requirements on Interest
and principal:
1958 series $14,112
I960 series 7,174 21,286
Transfers to bond reserve funds:
1958 series -o-
1960 series 1.440 1,440
Capital outlay:
Automotive equipment 3,130
Shop toots and equipment 1,558
Office equipment 93
Distribution line 673 5.459
Total deductions 30,674Total deductions
Unappropriated surplus, June 30, 1962—exhibit
EXPLANATORY COMMENTS
The following supplementary Information has been subjected to the
tests and other auditing procedures applied In the examination of the finan-
cial statements mentioned above and, In our opinion, Is fairly stated In all
respects that are material as related to the financial statements taken as a
whole.
COMMENTS RESPECTING FINANCIAL POSITION
The balance sheet—all funds of the City of Carlsbad Water Depart-
ment is presented In exhibit A. A condensed comparative statement of finan-
cial position at June 30, 1962 and June 30, 1961 follows:
June 30 Increase
1962 1961 (Decrease)
Current assets:
Cash $ 408,617 419,628 (11,011)
Marketable Investments 45,231 90,236 (45,005)
Accounts receivable and
accrued Interest 30,014 32,810 ( 2,796)
Warehouse stock 129,471 38,235 91,236
Construction deposits 32,298 32,298
Work In progress 2,034 219 1,815
Prepaid expenses 128 126 2
Total current assets 647,793 581,254 66,539
Current liabilities I I 1,181 42,217 63,964
Net working capital 536,612 539,037 ( 2,425)
Property and equipment - net 1,406,370 1,348,160 58,210
Future bond principal /
requirements I,067,000 I,067,000
Total 3,009,982 2,954,197 55,785
Waterworks revenue bonds payable I,067,000 I,067,000 ______
Reserves and surplus $ I.942.982 1,887,197 55,785
Following are comments regarding each fund shown In exhibit A:
Water Fund:
In accordance with Resolutions #397 and #711, the gross revenues of
the enterprise are placed In the water fund and monthly transfers are made to
the bond service funds, the reserve funds, and the maintenance and operations
fund. Cash transfers during the year were as follows:
Bond service funds:
1958 series
I960 series
Reserve funds:
1958 series
I960 series
-Maintenance and operations fund
Total
$ 45,431
19,511
-o-
1,440
187.638
$254.020
Two water accounts receivable have been in dispute for several
years on which legal action is pending. These disputed amounts have risen
sharply since a ten per cent penalty has been added monthly on previously ac-
cumulated penalty and water charges. These accounts had the following activity
during the year:
Balance, July I, 1961
Additions:
Water charges
Penalties
Balance, June 30, 1962
$ 269
17,217
$ 7,933
17,486
$ 25.419
A reserve for possible loss of $25,419 has been provided to remove
this amount from the asset structure of the water department. The water accounts
may be shown as follows:
Total water accounts receivable
Less reserve for disputed accounts
$ 50,256
25,419
Net - per exhibit A $ 24.837
Bond Service Fund, Bonds of 1958:
The following Is a summarization of the transactions within this fund
during the year.
Cash with treasurer, July I, 1961 $ 26,143
Transfers from water fund 45,431
Interest received on time deposits and
Investments 938
Total 72,512
Paid to fiscal agent for payment of
matured bond coupons $31,319
Invested In time deposit 35,000 66.319
Cash with treasurer, June 30, 1962 $ 6.193
The waterworks bonds of 1958 are dated July I, 1958 and are due as
follows:
Years Due Each Year Total
1964-69 $20,000 $120,000
1970-74 25,000 125,000
1975-78 30,000 120,000
1979-81 35,000 105,000
1982-85 40,000 160,000
1986-87 45,000 90,000 s
;
1988 47,000 47.000
Total $767.000
The fiscal agent redeemed Interest coupon numbers five and six during
the year and had on deposit $15,660 for the payment of coupon number seven due
July I, 1962.
Reserve Fund, Bonds of 1958:
The maximum accumulation required In this fund had been attained prior
to the current year. Therefore, no cash transfers from the water fund were
necessary during the year. Interest received on Investments In this fund was
transferred to the water fund as required by Resolution #397.
Bond Service Fund, Bonds of I960:
The funds accumulated are used for the payment of Interest and princi-
pal on the waterworks revenue bonds, I960. The fiscal agent held funds necessary
to redeem outstanding Interest coupons at June 30, 1962. Until principal pay-
ments become due In 1965 the annual Interest due on these bonds Is $12,338.
The cash transactions of this fund during the year may be summarized
as follows:
Cash with treasurer, July I, 1961 $ 19,511
Transfers from water fund 19,511
Total 39,022
Paid to fiscal agent for payment of
matured bond coupons / 24,675
Cash with treasurer, June 30, 1962 $ 14,347
The waterworks revenue bonds of I960 are dated July I, I960 and are
due as follows:
Total
$ 75,000
70,000
30,000
60,000
65,000
Total $300,000
Reserve Fund, Bonds of I960:
Resolution #711 requires monthly transfers of $120 to this fund from
the water fund until sufficient cash Is accumulated to equal the maximum annual
Interest and principal requirements. The year of maximum requirements is 1990,
when $67,519 will be payable.
As required by Resolution #711 the Interest received on investments
In this fund was transferred to the water fund.
Construction Fund, Bonds of I960:
The waterworks revenue bonds, I960 were authorized to provide fvtfds
/ :
for construction and improvements to the waterworks system of the Cfty of
Carlsbad. The following is a summary of revenues and expenditure* during the year:
Years
1965-79
1980-86
1987-88
1989
1990
Due Each Year
$ 5,000
10,000
15,000
60,000
65,000
Reserve for authorized expenditures,
July I, 1961 $274,187
Add: Interest earned on Investments 5,489
Total 279,676
Deduct:
New water lines Installed $ 3,737
Replacement of old water lines 42,496
Clean and cement mortar lining
of old lines 33,048 79,271
Reserve for authorized expenditures, June 30, 1962 $200,405
The maintenance and operations fund has been Installing these lines
for the construction fund. At June 30, 1962 the construction fund had $32,298
deposited with the maintenance and operations fund to apply as payment when
pending work had been completed.
Maintenance and Operations Fund:
Included In the warehouse stock at June 30, 1962, was approximately
$100,000 of translte pipe which was purchased for water line Installations to
be financed by the construction fund.
Property and equipment shown In exhibit A are composed of the following:
Land, water rights, and rights of way $ 123,503
Wells, reservoirs, and dams 223,359
Purification system 27,687
Booster pumps and stations 78,225
Transmission and distribution lines 1,011,986
Buildings 18,234
Autos and trucks 22,081
Equipment 13,850
Office fixtures and equipment 15,446
Terramar property and equipment (unclassified) 163,566
Meters and services 342,090
Total—per exhibit A $2.040.027
Additions during the year were as follows:
Capital outlay—per exhibit C $ 5,459
Add: Trade-in allowance on truck 110 $ 5,569
Pipelines contributed by consumers and
subdlvlders 10,200
Improvements financed by construction
fund 79,271
Less meter and service replacements Included
below 2,965 76,306
Meters and services Installed 32,228
Total $ 124.303
Disposals were as follows:
Distribution lines removed $ 7,101
Meters and services removed from the ground 21,271
Trucks sold or traded 4TOf9
Total $ 32.391
The accounts payable at June 30, 1962 included purchases of translte pipe
totaling $40,972. Pipeline, meter, and service deposits Include the aforementioned
$32,298 advanced from the construction fund.
CO/WENTS RESPECTING OPERATIONS
The statement of revenues and expenditures is shown on exhibit B. A
condensed statement of revenues and expenditures for the years ended June 30,,1962
and June 30, 1961 follows:
Year Ended June 30 Increase
1962 1961 (Decrease)
Revenues $282,114 299,694 (17,580)
Operating expenses 160,402 169,550 I 9,148)
Net revenues before interest
and depreciation 121,712 130,144 ( 8,432)
Interest on bonds 43,657 35,021 8,636
Depreciation 44,149 43,890 259
Total 87,806 78,911 8 ,,895
Net revenues after interest
and depreciation 33,906 51,233 (17,327)
Depreciation, a non-cash outlay 44,149 43,890 259
Net revenues-—to surplus $ 78.055 95.123 (17.068)
The decrease In net revenues may be attributable to three major factors:
(I) Decrease In quantity of water sold.
12) Use of more purchased water as opposed to the
less costly pumped water.
(3) Increased Interest on bonds, since a full year's
Interest on the I960 bonds became an expense.
Following fs a computation of the requirements of the gross revenues of
the enterprise, In accordance with Covenant No. 9, Section 21, of Resolution #397
and
Gross revenues of enterprise — exhibit B $282,114
Current expenses for necessary and
reasonable maintenance and operations
costs 160,402
Net revenues — year ended
June 30, 1962 121,712
Carryover of excess of net revenues over
requirements — previous years 98, 139
219,851
Net revenues required for the year ended
June 30, I962S
Interest and principal requirements $43,657
Reserve funds I ,440
Total 45,097
Multiplication factor (per
resolutions) I ,35
60,881
Capital outlay 5,459
Total net revenues
required
Excess of net revenues over requirements at
June 30, 1962
The excess of net revenues over requirements should continue to Increase
at a rapid rate until principal payments become due on the bonds In 1964 and years
following.
Schedule B-l
CITY OF CARLSBAD WATER DEPARTMENT
Schedule of Maintenance and Operations Expense
For the year ended June 30, 1962
Water production and purification:
Salaries and wages $ 5,871
Power 5,491
Supplies and expense 1,518
Maintenance -water production facilities 446
Purchased water 64,416
Miscellaneous 42
Total $ 77,784
Water transmission and distribution:
Salaries and wages 28,695
Power 9,447
Maintenance:
Pump station and reservoirs 2,033
Meters and services 7,366
Transmission and distribution lines 192
Total 47,733
General and administrative:
Salaries and wages 16,909
Operation and maintenance -mobile equipment 2,533
Professional services 2,236
Office supplies and expense 921
Small tools and shop supplies 3,103
Maintenance and supplies - buildings 646
Taxes and Insurance 15,767
Contribution to retirement and group insurance 5,631
Sick leave and vacation salaries 2,281
Equipment rental 110
Collection fees 639
Other general and administrative expense I,373
Total 52,149
Less portion applied to construction work I~l,264
Net 34.885
Total-—exhibit B $160.402