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Home My WebLink About; ; 1971-72 Audit Report of Examination; 1972-09-27CARLSBAD MUNICIPAL WATER DISTRICT REPORT ON EXAMINATION FOR THE YEAR ENDED JUNE 30, 1972 *********** JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS JAMES M. GAISER, C.P. A. HAROLD D. HICKEY, C.P. A. JAMES GAISER <& Co. CERTIFIED PUBLIC ACCOUNTANTS P. O. BOX 39, 2965 ROOSEVELT STREET CARLSBAD, CALIFORNIA 92OOS (714) 729-H343 M EM B ERS AMERICAN INSTITUTE OF C.P. A'S CALIFORNIA SOCIETY OF C.P A'S CARLSBAD MUNICIPAL WATER DISTRICT CARLSBAD, CALIFORNIA BOARD OF DIRECTORS JUNE 30, 1972 MEMBER FRED W. MAERKLE DONALD A. MAC LEOD W. D. CARMICHAEL ALLAN O. KELLY HAROLD M. ENGELMANN OFFICE PRESIDENT VICE-PRESIDENT SECRETARY TREASURER ASSISTANT SECRETARY AND ASSISTANT TREASURER TERM EXPIRES 1-1977 1-1977 1-1975 1-1975 1-1975 GENERAL MANAGER - WINDER F. FRIDAY JAMES M. GAISER.C.P. A. HAROLD D. HICKEY, C.R A. JAMES GAISER & Co. CERTIFIED PUBLIC ACCOUNTANTS P. O. BOX 39, 2965 ROOSEVELT STREET CARLSBAD, CALIFORNIA 92OOS (71-4) 729-2343 MEMBERS AMERICAN INSTITUTE OF C. P. A'S CALIFORNIA SOCIETY OF C-P A'S THE BOARD OF DIRECTORS CARLSBAD MUNICIPAL WATER DISTRICT CARLSBAD, CALIFORNIA We have examined the balance sheet of CARLSBAD MUNICIPAL WATER DISTRICT as of June 30, 1972 and the related statements of revenues and expenses, and changes in fund balances and re- serve for construction for the year then ended. Our exam- ination 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, such financial statements present fairly the financial position of CARLSBAD MUNICIPAL WATER DISTRICT at June 30, 1972 and the results of its operations for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year. The supplementary data included in schedules 1 through 6 and in the comments have been subjected to the same auditing procedures and, in our opinion, are stated fairly in all material respects in relation to the basic financial statements taken as a whole. September 27, 1972 16. EXHIBIT A .CARLSBAD MUNICIPAL WATER DISTRICT BALANCE SHEET - ALL FUNDS JUNE 30, 1972 WITH COMPARATIVE FIGURES FOR 1971 - - - ASSETS - - - CURRENT ASSETS: Cash (Note 1) Time Certificates of Deposit (Note 1) Accounts receivable - water customers Accounts receivable - other (Note 2) Agricultural rebates receivable Inventories - water, pipe, etc. - it cost (Note 3) Prepaid insurance Total Current Assets PROPERTY AND EQUIPMENT, NET - at cost { No te 4 ) OTHER ASSETS AND OTHER DEBITS: Long-term contract and notes receivable (;;ote 5} Work in progress (Note 6) Future revenue required to retire loanand bonded dobt Unaraortized bond discount Bonds authorized, unissued Total Other Anr.etra and Other Dobita TOTALS TOTAL ALL FUNDS 1971 $ 135,953 $ 272,400 54,423 8,606 14,090 31,508 300 517,280 3,497,366 136,937 22,066 2,974,000 4,211 300,000 "J 437,214 -1_Z.*45_1.860 $ - - - LIABILITIES, RESERVES, AND FUND BALANCES- - - CURRENT LIABILITIES: Accounts payable $ 65,270 $ Current installment due on notes (Note 6) 20,000 Current installment due on bonds (Note 7) 85,000 Unredeemed bond coupons 6,276 Accrued payroll taxes and benefits 2,863 Accrued interest 35,946 Cor.au.-r.crs* deposits 9,993 Total Current Liabilities LONG-TERM DEBT, EXCLUDING CURRENT PORTION: Notes payable (Note 6) Bonds payable (Note 7) Total Long-Term Debtf Excluding Current Portion RESERVES FOR: Construction (Schedule 6) U.-ia.Tortizod bond discount Work in progress Authorized expenditures Long-term receivables Investment in property and equipment Total Reserves FUND BALANCES (Exhibit C) TOTALS NOTE : The 225,353 80,000 2,789,000 2,869,000 15,171 4,211 22,066 300,000 136,937 3,497,366 3.975,751 381,756 $ 7.451.860 |_ 1972 303,149 172,400 51,074 77,552 21,138 44,900 300 670,513 3,474,194 132,114 205,832 2,902,000 3,860 300,000 3 , r> ^ ^ , ft 0 6 2^688. 5 13 117,271 53,703 145,000 5,950 4,813 36,159 25,722 388,618 161,110 2,677,000 2,838,110 47,384 3,860 205,832 300,000 132,114 3,474,194 4,163,384 298,401 7,688,513 GENERAL DISTRICT GENERAL REVOLVING FUND FUND $ 70,877 $ 4,164 5,000 51,074 77,237 21,138 43,832 300 264,458 9,164 346,108 5,703 205,832 00,000 201,535 S_902^101 ,£_9*1§£ $ 117,271 $ - 53,703 4,813 3,256 25,722 204,765 161,110 161,110 205,832 5,703 346,108 557,643 (21,417) 9,164 $ 902.101 ? 9 164 accompanying notes to financial statements are IMPROVEMENT DISTRICTS NO. 1 (SCHEDULE 2) $ 61,813 26,000 87,813 840,388 126,411 880,000 100,000 1 , 1 or,,. Ill $ 2,034.612 $ 85,000 774 10,897 96,671 795,000 795,000 100,000 126,411 840, 388 1,066,799 76,142 $ 2,, 03,4, 6.^ NO. 2 (SCHEDULE 3) $ 83,355 21,000 315 1,068 105,738 993,946 705,000 3,860 70;"! , T'GO S 1,803.544 $ 35,000 2,753 9,425 47,178 670,000 670,000 47,384 3,860 993,946 1,045,190 46, 176 $ l.ROa.5.14 NO . 3 (SCHEDULE 4) $ 64,939 101,400 166,339 662,610 687,000 200,000 087.000 ^_lj.715,q49 $ 5,000 1,169 10,721 16,890 682,000 682,000 200,000 662,610 862,610 154,449 5 1,7 IS. 94 9 KG . 4 (SCHEEUL- 51 $ 16,001 19,000 37,001 631,142 550,000 S 1 ? , 0 0 0 ? \,?~ * - -r ? $ :o,coo 1,254 ^ ? , "~ 14 530,000 530,000 631,142 G 3 1,142 33,887 $ 1,21? '4" an integral part of this statement. EXHIBIT B .CAJJL.SBAD MUNICI PA L_WATER_DIS TRICT_ STATEMENT OF REVENUES AND EXPENSES FOR THE YEAR ENDED JUNE 30, 1972 WITH COMPARATIVE FIGURES FOR 1971 TOTAL ALL FUNDS 1971 REVENUES : Water sales Less cost of water sold Net water sales District property taxes Interest income Miscellaneous Total Revenues OPERATING EXPENSES: Total Operating Expenses (Schedule 1) INCOME BEFORE OTHER EXPENSES AND EXTRAORDINARY ITEMS OTHER EXPENSES: Interest expense Provision for depreciation (Note 4) Total Other Expenses ? 542, 304, 237, 309, 12, 10, 570, 124, 446, 135, 69, 204, 754 793 961 986 138 890 975 763 212 430 476 906 1972 $ 600 370 230 272 10 12 525 163 361 130 77 208 ,659 ,640 ,019 ,420 ,947 ,089 ,475 ,497 ,978 ,402 ,720 ,122 GENERAL GENERAL FUND $ 345, 213, 132, 101, 8, 3, 245, 163, 82, 5, 11, 17, 460 188 272 076 374 880 602 497 105 748 895 643 DISTRICT REVOLVING FUND $ 6,032 3,704 2,328 2, 328 2,328 - - IMPROVEMENT DISTRICT NO. ? is, 11, 6, 58, 3, 68, 68, 33, 20, 54, - BOND AND INTEREST FUNDS - - I NO. 2 NC. 3 NO. 096 114 982 740 265 987 987 762 616 378 $ - 49, 3, 53, 53, 34, 21, 55, 744 887 63] 631 090 059 149 $ 66,723 41,123 25,600 26,911 2,573 1, 057 56_, 14] 56,141 34,196 14,226 48,424 S 24 15 9 35 4 3 45 2 2 9 "• 2 S 4 ,493 , '90 , 303 , 049 ,2^7 ,257 ,605 ,922 , 5 2 S CONSTRUCTION FUND (SCKErVIE ^ $ 135, .-53 53,529 q ; ; -* n 53,5:- - INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS EXTRAORDINARY ITEMS: Loss on disposition of fixed assets - net Reimbursement of engineering fees, etc. from County of San Diego NET INCOME (LOSS) (Exhibit C) 241,306 (26,861) 153,856 $ 214.445 $.,163.828 64,462 9,972 74 434. 2,328 14,609 (1,518)7,717 12,729 53,529 2f328 $ 14.609 S (1.518) NOTE: The accompanying notes to financial statements are an integral part of this statement. JAMES GAISER S. CO. CERTIFIED PUBLIC ACCOUNTANTS EXHIBIT C CARLSBAD MUNICIPAL WATER DISTRICT STATEMENT OF CHANGES IN FUND BALANCES AND RESERVE FOR CONSTRUCTION FOR THE YEAR ENDED JUNE 30, 1972 TOTAL ALL FUNDS Fund balances, July 1, 1971 Reserve for construction, July 1, 1971 Additions or (Deductions) : Net income (loss) for the year (Exhibit B) Amortization of bond discount - a non-cash exncnse Deoreciacion - a non-cash expense (Note 4) Pot irc-r.c-nt of long-term debt - bonds Settlement on lav/suit (Note 5) Capital expenditures for investment in prooorty and equipment Payment on note payable (Note 6) Capital expenditures for work in progress Fund balances, June 30, 1972 (Exhibit A) $ 381 15 163 77(52 1 (201 (20 (21 $ 298 ,756 ,171 ,828 351 ,720 ,000) ,558 ,283) ,000) ,316) j-iPl GENERAL DISTRICT GENERAL REVOLVING FUND FUND $ 111,979 $ 6,836 - 74,434 2,328 - 11,895- 1,558 (201,283) (20,000) _ _ $ (21,417) $ 9,164 - - _ - BOND AND NO .1 NO . $ 40,917 $ 41, - 14,609 (1, _ 20,616 21, (15,_ - - - — — § 76,142 S 46, IMPROVEMENT DISTRICTS CONSTRICTION INTEREST FUNDS ----- FUND 2 NO. 3 NO. 4 ;SC!~E-U'~ ~) 284 $ 154,504 $ 26,236 ? - 15,171 518) 7,717 12,729 53,?29 351 - - 059 14,228 9,922 000) (22,000) (15, COO)_ _ _ _ — - ( T 1 , 7 1 G * 176 S 154,449 f 33,667 Reserve for construction, June 30, 1972 (Schedule 6)$ 47.384 NOTE: The accompanying notes to financial statements are an integral part of this statement. JAMES GAISER S. CO. .CARLSBAD MUM£CIgAL-J^TgJL-D-IgTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 1972 (1) CASH The District maintains one general bank account for all of its funds. As a result, when investments are made, they are not set up in separate investment accounts unless it can be determined that the cash for an investment came from a specific fund. At June 30, 1972, the investment in Time Certificates of Deposit was allocated to the various funds on the basis of available cash in excess of normal require- ments in each fund. The balance in the sinking fund in Improvement District No. 3 was $ 57,400 at June 30, 1972. (2) ACCOUNTS RECEIVABLE - OTHER Included in accounts receivable - other is $ 72,178 repre- senting the accumulated costs to date of a pipeline project, which will be reimbursed by La Costa Land Company, An Illinois Corporation* (3) INVENTORIES The inventories consist of water and materials. The inven- tory of water is valued at the lower of cost (last-in, first- out) or market. The materials inventory is valued at the lower of cost (first-in, first-out) or market. (Continued - 1) JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS CARLSBAD MUNICIPAL_WATER DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 1972 (4) DEPRECIATION The property and equipment owned by the District at June 30, 1972 is valued at cost and may be summarized as follows: Cost of participation - San Diego County Water Authority $ 33,174 Land and easements 120,848 Reservoirs and dam 1,409,447 Pipelines and pump stations 2,294,637 Chlorination stations 56,730 Meters and accessories 78,315 Buildings 117,671 Machinery and equipment 52,356 Office fixtures and equipment 17 ,454 Total 4,180,632 Less accumulated depreciation (706,438) Net Property and Equipment $ 3.4|74.|194 Depreciation of the property and equipment is provided by the straight-line method and is based on the estimated useful lives of the related assets as follows: ESTIMATED ASSETS USEFUL LIVES Reservoirs and dam 75 years Pipelines and pump stations 50 years Chlorination stations 25 to 40 years Meters and accessories 25 to 40 years Buildings 40 years Machinery and equipment 5 to 20 years Office fixtures and equipment 10 years The District has consistently taken a full year's depreciation during the year of disposition of an asset and no depreciation is taken during the year of acquisition. The cost of participation - San Diego County Water Authority and the land and easements are not being depreciated. (Continued - 2) JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS NOTES TO FINANCIAL STATEMENTS JUNE 30, 1972 (5) LONG-TERM RECEIVABLES The District received $ 1,558 during the year on its long- term notes receivable in settlement of two price-fixing anti-trust suits. American Pipe and Construction Company paid $ 979 leaving a balance of $ 4,478 to be paid. United Concrete Pipe Corporation and U. S. Industries paid $ 579, leaving a balance of $ 1,225 to be paid. The District received $ 3,265 during the year on its long-term contract receivable with the San Marcos County Water District, leaving a balance of $ 126,411 to be paid. Payments are due annually within 90 days after June 30 of each year until paid in full. The annual payments are the equivalent of $ 1.00 per acre foot of water purchased by the San Marcos County Water District, within the fiscal year preceding the date of payment. No interest is provided in the contract. (6) NOTES PAYABLE Included in notes payable is a note payable to Security Pacific National Bank bearing interest at 7%, payable quarterly be- ginning November 5, 1970. Principal is to be paid in annual installments of $ 20,000 or more on the fifth day of August each year, beginning August 5, 1971. The District may prepay any unpaid principal balance of the note at any time, without any penalty. As of June 30, 1972, all payments due under the note had been timely paid. (Continued - 3) JAMES GAISER S. CO. CERTIFIED PUBLIC ACCOUNTANTS CARLSBAD MUNICIPAL WATER_DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30. 1972 (6) NOTES PAYABLE (CONTINUED) On April 10, 1972, the District exercised its option to purchase approximately 56 acres of real estate for the Squires Dam Expansion Program. The cost of the option was applied toward the purchase price with the balance evidenced by an Q% note payable to Mrs. Ida Dawson in the amount of $ 134,813, secured by a first deed of trust. The note is payable in principal installments of $ 8,426 on October 1, 1972, $ 25,277 on April 1, 1973, and semi-annual installments of $ 16,852 thereafter until paid. Interest is payable semi-annually commencing September 1, 1972. The cost of the land, in the amount of $ 173,459, which includes capitalized interest and taxes in the amount of $ 4,785 is presently included in work in progress. (7) BONDS PAYABLE On March 1, 1972, the District called $ 56,000 of 5% bonds of Improvement District # 3, which had a maturity date of March 1, 1991. Of this amount $ 39,000 had not been presented for payment at June 30, 1972. The redemption price is the face value of the bond. (Concluded - 4) JAMES GAISER S. CO. CERTIFIED PUBLIC ACCOUNTANTS SCHEDULE 1 CARLSBAD MIfflIC_I£AL WATER DISTRICT SCHEDULE OF OPERATING EXPENSES - GENERAL FUND FOR THE YEAR ENDED JUNE 30, 1972 WITH COMPARATIVE FIGURES FOR 1971 PUMPING: Supervision, labor, and expense Fuel and power Totals WATER TREATMENT: Chlorine Supervision, labor, and expense Power usage Chlorine equipment - repairs and maintenance Laboratory services - testing Totals TRANSMISSION - DISTRIBUTION: Supervision, labor, and expense Repairs and maintenance - pipelines Meter repairs Telemetering Valve repair and greasing Repairs and maintenance - plant Utilities Miscellaneous supplies Totals CUSTOMER ACCOUNTS: Meter reading and supervision ADMINISTRATIVE AND GENERAL: Salaries Legal, auditing, and accounting Directors ' fees Payroll taxes and employee benefits Utilities and telephone Insurance Auto and truck expense Engineering Office Meetings, conventions, and dues Advertising and promotion Maintenance - general plant Small tools and equipment maintenance Printing and reproduction Bond service Miscellaneous Totals Total Operating Expenses (Exhibit B) 1972 $ 980 601 1.581 3,466 2,288 784 262 160 6,960 18,317 19,971 7,607 1,368 924 661 236 152 49,236 1,997 43,040 11,313 5,750 9,218 4,776 3,361 4,085 5,513 2,611 2,939 4,328 3,589 874 1,029 716 581 103,723 _£_163_,497 1971 $ 894 800 1.694 3,069 2,178 739 327 103 6,416 17,822 9,953 6,617 724 452 315 240 56 36,179 1,902 31,705 11,730 5,950 5,303 4,613 3,302 2,757 2,644 2,643 2,300 2,200 2,003 455 454 451 62 78,572 $ 124,763 JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS SCHEDULE 2 £A.RLSBAD^MUNICIPALJWATER DISTRICT IMPROVEMENT DISTRICT NO. 1 BALANCE SHEET JUNE 30, 1972 ASSETS - - - Cash Time Certificates of Deposit Long-term contract receivable Property and equipment. net - at cost Future revenue required to retire bonded debt Bonds authorized, un- issued Totals COMBINED FUNDS $ 61,813 26,000 126,411 840,388 880,000 100,000 $ 2.034.612 BOND AND INTEREST FUND $ 61,813 26,000 126,411 - - - $ 214.224 PROPERTY AND BONDED EQUIPMENT DEBT $ - $ - _ - - 840,388 880,000 100,000 $ 840.388 $ 980.000 LIABILITIES, RESERVES, AND - - - FUND BALANCE - - - Unredeemed bond coupons Accrued interest on bonds Bonds payable Reserves for: Authorized expenditures Long-term receivable Investment in property and equipment Fund balance Totals (Exhibit A) J_ 2.034.612 $ 214.224 _1_840,388 $ 980.000 $774 10,897 880,000 100,000 126,411 840,388 76,142 $ 774 10,897 126,411 76,142 $ - $ - 880,000 100,000 840,388 JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS CARLSBAD MUNICIPAL WATER DISTRICT IMPROVEMENT DISTRICT NO. 2 BALANCE SHEET JUNE 30, 1972 - - - ASSETS - - - Cash Time Certificates of Deposit Inventory - at cost (first-in, first-out) Accounts receivable - other Property and equipment, net - at cost Future revenue required to retire bonded debt Unamortized bond discount Totals COMBINED FUNDS 5 83,355 21,000 1,068 315 993,946 705,000 3,860 S_ 1.808.544 BOND AND INTEREST FUND $ 37,354 21,000 3,860 BOND CONSTRUCTION FUND $ 46,001 1,068 315 PROPERTY AND EQUIPMENT $ - 993,946 BONDED DEBT 705,000 $47,384 LIABILITIES, RESERVES, AND - - - FUND BALANCE - - - Unredeemed bond coupons Accrued interest on bonds Bonds payable Reserves for: Construction (Schedule 6) Unarriortized bond discount Investment in property and equipment Fund balance Totals (Exhibit A) 2,753 9,425 705,000 47,384 3,860 993,946 46,176 $ 1.803., 544 $ 2,753 9,425 3,860 46,176 $ 62.214 $ -$ - 705,000 47,384 $ 47.384 993,945 $993,946 $705,000 JAMES GAISER S. CO. SCHEDULE 4 .CARLSBAD MUNICIEAL WATER DISTRICT IMPROVEMENT DISTRICT NO. 3 BALANCE SHEET JUNE 30, 1972 - ASSETS - - - Cash $ Time Certificates of Deposit (see note below) COMBINED FUNDS 64,939 101,400 BOND AND INTEREST FUND $ 64,939 101,400 PROPERTY AND EQUIPMENT $ ~ BONDED DEBT $ Property and equipment, net - at cost Future revenue required to retire bonded debt Bonds authorized, un- issued Totals 662,610 687,000 200,000 662,610 687,000 200,000 $ 1.715.949 $ 166.339 $ 662.610 $ 887.000 LIABILITIES, RESERVES, AND - - - FUND BALANCE - - - Unredeemed bond coupons Accrued interest on bonds Bonds payable Reserves for: Authorized expenditures Investment in property and equipment Fund balance (see note below) Totals (Exhibit A) $ 1.715,949 $1,169 $ 1,169 10,721 10,721 687,000 200,000 662,610 154,449 154,449 <; £•? V 687,000 200,000 662,610 — — $ 662.610 $887,000 NOTE: The fund balance includes a sinking fund in the amount of $ 57;,400 represented by Time Certificates of Deposit. JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS SCHEDULE 5 .CARLSBAD MUNJ£J£AL WATER DISTRICT IMPROVEMENT DISTRICT NO. 4 BALANCE SHEET JUNE 30, 1972 A QqpprnQ/\OD.Cj J.O Cash Time Certificates of Deposit Property and equipment, net - at cost Future revenue required to retire bonded debt Totals COMBINED FUNDS $ 18,001 19,000 631,142 550,000 $ 1,218.143 BOND AND INTEREST FUND $ 18,001 19,000 $ 37.001 PROPERTY AND BONDED EQUIPMENT DEBT $ - $ - 631,142 550,000 $ 631.142 $ 550.000 LIABILITIES, RESERVES, AND - - - FUND BALANCE - - - Unredeemed bond coupons $ 1,254 Accrued interest on bonds 1,860 Bonds payable 550,000 Reserve for investment in property and equipment 631,142 Fund balance 33,887 $ 1,254 $ 1,860 33,887 550,000 631,142 Totals (Exhibit A) $ 1.218.JL43 _$ 37.001 $ 631.142 $ 550.000 JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS SCHEDULE 6 CARLSBAD_ MU^CIPAj^WATER DISTRICT ANALYSIS OF CHANGES IN RESERVE FOR CONSTRUCTION FOR THE YEAR ENDED JUNE 30, 1972 BOND CONSTRUCTION FUND IMPROVEMENT DISTRICT NO. 2 BALANCE, JULY 1, 1971 $ 15,171 REVENUE: Water sales 139,850 Less cost of water sold (86,321) Net water sales 53,529 Total Funds Available 68,700 EXPENDITURES: Engineering, supplies, and progress payments to construction contractor 21,316 Total Expenditures 21,316 BALANCE, JUNE 30, 1972 (Exhibit C) $ 47.384 JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS CARLSBAD MUNICIPAL WATER DISTRICT COMMENTS HISTORY AND ORGANIZATION Carlsbad Municipal Water District was formed on March 22, 1954, under the provisions of the Municipal Water District Act of 1911 to provide water for the City of Carlsbad and the adjacent, surrounding areas. On May 20, 1954, the District became a member of the San Diego County Water Authority and thus a member of the Metropolitan Water District of Southern California. The District functions as a wholesaler to the City of Carlsbad, which maintains its own facilities for distribution within the City, and also retails its water to consumers in the La Costa development and rural areas. One dam, seven reservoirs, and numerous transmission lines are owned and operated by the District, which constitutes the major portion of its waterworks system. At June 30, 1972, there was one reservoir site in the La Costa area landscaped and available for future use. ACCOUNTS AND RECORDS The District employs a fund system of accounting and maintains its accounts on the accrual basis. The District's chart of accounts conforms to the Uniform System of Accounts for Water Utility Districts as prescribed by the Controller of the State of California. The accounting records maintained were suitable and well kept, reflecting reasonably adequate JAMES GAISER &. CO. CERTIFIED PUBLIC ACCOUNTANTS internal control. Monthly financial statements and information are prepared and presented to the Board of Directors by the Accounting Officer. We found the minutes of the Board of Directors in excellent condition. INSURAMCE COVERAGE The District had the following insurance coverage at June 30, 1972: Primary comprehensive liability - all business, including $ 5,000 medical payments, owned automobiles, uninsured motorists and non-owned automobiles: Bodily injury $ 500,000/$ 500,000 Property damage 500,000 Excess comprehensive liability 500,000 excess of 500,000 Fire insurance coverage on buildings including extended coverage, vandalism, and malicious mischief 134,500 Employee dishonesty 50,000 Equipment and records - all risks 25,000 Depositors forgery coverage 10,000 Fire insurance - caretaker's trailer 5,000 Comprehensive - glass panes and doors 75 The District also has the statutory amount of Workmen's Compensation Insurance and carries group medical insurance for its employees. — 2 — JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS JBUDGEJARY PROCEDURES The operating budget for the year under review, which was approved by the Board of Directors, was based on the actual operations of the preceding year. A comparison of the budgeted revenues and expenses and the actual revenues and expenses resulting from the year's operations are shown with the comments on budget comparison and operations appearing later in this report. BUDGET COMPARISON A comparison of the budgeted revenues and expenses, as adopted by the Board of Directors, and the actual revenues and expenses resulting from operations for the year under review, is shown below: (OVER) UNDER BUDGET BUDGET ACTUAL REVENUES: Water sales, net of cost $ 219,000 $ (11,019) $ 230,019 District property taxes 270,950 (1,470) 272,420 Bond proceeds and other 219,000 136,899 82,101 Total Revenues 708,950 124,410 584,540 Totals Forward $ 708,950 $ 124,410 $ 584,540 — 3 — JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS Totals Forward OPERATING EXPENSES: PUMPING: Supervision, labor, and expense Fuel and power Maintenance - structures WATER TREATMENT: Supervision, labor, and expense Chlorine Power usage Chlorine equipment - maintenance Chlorination station - maintenance Laboratory services - testing TRANSMISSION - DISTRIBUTION: Supervision, labor, and expense Repairs and maintenance - pipelines Meter repairs Telemetering Valve repair and greasing Repairs and maintenance - plant Utilities Miscellaneous supplies CUSTOMER ACCOUNTS: Meter reading and supervision Uncollectible accounts ADMINISTRATIVE AND GENERAL: Salaries Legal, auditing, and accounting Directors' fees Payroll taxes and employee benefits Utilities and telephone Insurance Office expense Advertising and promotion Auto and truck expense Meetings, conventions, and dues Maintenance - general plant Small tools and equipment maintenance Printing and reproduction Engineering Bond service Miscellaneous Total Operating Expenses EXCESS OF REVENUES OVER OPERATING EXPENSES Totals Forward BUDGET $ 708,950 1,000 850 100 2,000 3,000 1,000 500 200 200 22,000 130,000 578,950 (OVER) UNDER BUDGET $ 124.410 20 249 100 (288) (466) 216 238 200 40 3,683 (33,497) 157,907 ACTUAL $ 584.540 980 601 2,288 3,466 784 262 160 18,317 10,000 3,500 1,000 500 1,000 300 100 2,000 200 31,860 9,600 6,000 7,300 4,800 4,200 2,990 3,500 2,500 3,000 2,000 500 500 1,000 700 100 (9,971) (4,107) (368) (424) 339 64 (52) 3 200 (11,180) (1,713) 250 (1,918) 24 839 379 (828) (1,585) 61 (1,589) (374) (529) (4,513) (16) (481) 19,971 7,607 1,368 924 661 236 152 1,997 — 43,040 11,313 5,750 9,218 4,776 3,361 2,611 4,328 4,085 2,939 3,589 874 1,029 5,513 716 581 $ 578,950 $ 157,907 163,497 421,043 $ 421,043 JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS Totals Forward NON-OPERATING EXPENSES: Debt service - principal and interest Capital expenditures and work in progress Total Non-Operating Expenses TOTALS BUDGET (OVER) UNDER BUDGET ACTUAL $ 578,950 $ 157,907 $ (61.929) J. 61.742 $ 421.043 241,479 399,400 640,879 39,077 57,088 96,165 202,402 342,312 544,714 $(123.671) During the year, decreased revenues resulted from only a partial reimbursement ($ 47,535 from the La Costa Land Company/ An Illinois Corporation) on the Alga Road project where the full reimbursement of $ 210,000 had been budgeted. JQPERAT IONS A summary of the results of operations for the year ended June 30, 1972 is shown below: Operating revenues (net) Operating expenses Income from operations Other revenue (primarily District property taxes) Income before interest, depre- ciation, and extraordinary item Interest Provision for depreciation Income before extra- ordinary item Extraordinary item - Reimbursement of engineering fees, etc. from the County of San Diego Net income $ 130,402 77,720 $ 230,019 163,497 66,522 295,456 361,978 208,122 153,856 9,972 $ 163.828 — 5— JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS .CASH -__$ 303. 149 The fund cash balances at June 30, 1972, were as follows: On deposit: General fund $ 70,827 General revolving fund 4,164 Improvement District No. 1 fund 61,813 Improvement District No. 2 fund 83,355 Improvement District No. 3 fund 64,939 Improvement District No. 4 fund 18,001 On hand: Petty cash fund 50 Total $ 3Q3.|149 The cash on deposit was verified by direct correspondence with the depositary banks and by reconciliation of the amounts confirmed to the amounts as shown by the records of the District, Cash on hand was verified by count. .TIME CERTIFICATES QF_DEPOSIT - $ 172.400 Time Certificates of Deposit in the amount of $ 172,400 were held by Security Pacific National Bank, Carlsbad, at June 30, 1972. Details of these deposits were confirmed by the depositary bank and are presented below: PURCHASE SETTLEMENT INTEREST INTEREST FACE DATE TERM RATE PAYABLE AMOUNT 11-30-71 1 year 5.00% Quarterly $ 100,000 5-30-72 90 days 4.25% Quarterly 72,400 Total $ 172.400 We confirmed directly with the agent of the above-named depositary bank that they held securities in a pool having a market value of at least 10% in excess of all deposits reported by the bank. -6- JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS ACCOUNTS RECEIVABLE _- WATER CUSTOMERS - $ 51.074 Requests for confirmation of accounts receivable were mailed to 224 water consumers, consisting of two positive con- firmations and 222 negative confirmations, and totaled approxi- mately 99% of the dollar amount of accounts receivable. One positive confirmation, in the amount of $ 26,306, was received and no differences were reported. No reply was received on the other positive confirmation, in the amount of $ 6,998; however, alternate procedures were used to satisfy ourselves. Of the 222 negative confirmations sent, in the total amount of $ 18,060, only one was received and was investigated and explained to our satisfaction. The District does not provide for an allowance for doubtful accounts on the books since all accounts are considered collect- ible and prior experience has not indicated a necessity for such a valuation account. ACCOUNTS RECEIVABLE - OTHER $ 77.552 The accounts receivable - other consist of meter and service installations and repairs for various consumers in the District in the amount of $ 5,374, and a pipeline project for which the La Costa Land Company, An Illinois Corporation, will reimburse the District in the amount of $ 72,178. RECEIVABLE - $ .21.. 138 The agricultural rebates receivable represent the amount due the District from the San Diego County Water Authority for water consumed for agricultural purposes during the period April 1, 1972 through June 30, 1972. —7 — JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS _IJWENTC)RIES -_$_J4. 900 Inventories of water and materials at June 30, 1972 are shown below: Water $ 16,145 Materials (meters, pipe, etc.) 28,755 Total The water inventory is valued at the lower of cost (last-in, first-out) or market and the materials inventory is valued at the lower of cost (first-in, first-out) or market. We were present to observe the taking of the water and materials inventories by the District personnel at the end of the fiscal year. We tested the valuations and the arithmetical accuracy of the inventory amounts. JPROPERTY AND EQUIPMENT - $ 3.474.194 Changes during the year under review to property and equip- ment accounts, which are stated at cost, are summarized as follows: BALANCE BALANCE ACCOUNTS 7-1-71 ADDITIONS RETIREMENTS 6-30-72 Cost of partici- pation - San Diego County Water Authority $ 33,174 $ $ - $ 33,174 Land and easements 120,848 - - 120,848 Reservoirs and dam 1,388,131 21,316 - 1,409,447 Pipelines and pump stations 2,292,606 2,031 - 2,294,637 Chlorination stations 56,730 - - 56,730 Meters and accessories 62,601 15,714 - 78,315 Buildings 115,947 1,724 - 117,671 Machinery and equipment 41,028 11,328 - 52,356 Office fixtures and equipment 15,160 2,436 (142) "' 17,454 Totals j_4. 126.225 JL=JI4=«JL4J J (142) 4,180,632 Less accumulated depreciation (706,438) Net property and equipment $3.474.194 -8- JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS The property and equipment are being depreciated on the basis of the estimated useful life of each individual item on the straight-line method. The District has consistently taken a full year's depreciation during the year of disposition of an asset and no depreciation is taken during the year of acquisition. The estimated useful lives of the property and equipment groups that are being depreciated are shown below: ESTIMATED ASSETS USEFUL LIVES Reservoirs and dam 75 years Pipelines and pump stations 50 years Chlorination stations 25 to 40 years Meters and accessories 25 to 40 years Buildings 40 years Machinery and equipment 5 to 20 years Office fixtures and equipment 10 years The cost of participation - San Diego County Water Authority and the land and easements are not being depreciated. LONG-TERM CONTBACT_AND NOTES__£gCE_IVABLE - $ 132.114 The long-term receivable balances at June 30, 1972 were as follows: Contract receivable - San Marcos County Water District $ 126,411 Notes receivable - United Concrete Pipe Corporation and U. S. Industries, Inc. 1,225 Note receivable - American Pipe and Construction Co. 4, 478 Total $ 132.114 We confirmed the contract receivable directly with the San Marcos County Water District and verified the notes re- ceivable by alternate procedures. -9- JAMES GAISER &. CO. CERTIFIED PUBLIC ACCOUNTANTS The $ 126,411 represents the balance due on the sale of a pipeline to the San Marcos County Water District; the sale was consummated on November 6, 1963. Payments are due annually within 90 days after June 30 of each year until paid in full. The annual payments are the equivalent of $ 1.00 per acre foot of water purchased by the San Marcos County Water District within the fiscal year preceding the date of payment. No interest is provided in the contract. The notes receivable in the amount of $ 1,225 are seven year, 5% notes which constitute the District's interest in notes issued by United Concrete Pipe Corporation and U. S. Industries, Inc. in settlement of an anti-trust suit. The note receivable in the amount of $ 4,478 is a six year, 5% note which con- stitutes the District's interest in a note issued by American Pipe and Construction Co. in settlement of an anti-trust suit. WORKJEN PROGRESS. - $_ 205.832 The work in progress at June 30, 1972 consists of the following: Squires Dam Expansion $ 200,448 Water System Planning Study 1,829 Tri-City Pipeline Project 3,002 Headquarters Addition 553 Total A 205.JJ32 The Squires Dam Expansion includes the cost of approxi- mately 56 acres of land in the amount of $ 173,459 which sum includes interest and taxes capitalized in the amount of $ 4,785. -10- JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS ACCQUNTS,_PAYABLE - $__117.271 Accounts payable generally represent amounts due to trade creditors in the ordinary course of business and to the con- struction contractor at June 30, 1972. The accounts payable balance at June 30, 1972 consisted of the following: Accounts payable - trade creditors $ 47,680 Accounts payable - construction contractor 69,591 Total _$_ 117.271 .CONSUMERS' DEPOSITS - $ 25.722. At June 30, 1972, consumers' deposits consisted of the following items: Performance deposits and inspection deposits $ 16,285 Refunds due and deposits on meter installations 9, 437 Total .$_ 25.722 The performance deposits and inspection deposits represent the unused portion of deposits received by the District, gen- erally for construction. The refunds due and deposits on meter installations include amounts owing to consumers for the excess of their deposits over the actual cost of installation and deposits for meters not yet installed. NOTES PAYABLE CURRENT - $ 53,703 LONG-TERM -, $ 161.110 At June 30, 1972, notes payable consisted of the following: -11- JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS CURRENT LONG-TERM Security Pacific National Bank Mrs. Ida Dawson Totals $ 20,000 $ 60,000 33,703 101,110 $ 161.110 The note payable to Security Pacific National Bank bears interest at 7%, payable quarterly. Principal is to be paid in annual installments of $ 20,000 or more on the fifth day of August each year. The District may prepay any unpaid principal balance of the note at any time without any penalty. As of June 30, 1972, all payments due under the note have been timely paid. On April 10, 1972, the District exercised its option to purchase approximately 56 acres of real estate for the Squires Dam Expansion Program. The cost of the option was applied toward the purchase price with the balance evidenced by an 8% note payable, secured by a first deed of trust, to Mrs. Ida Dawson in the amount of $ 134,813. Principal is payable in eight semi- annual installments commencing October 1, 1972 and interest is payable in eight semi-annual installments commencing September 1, 1972. BONDS PAYABLE - CONSTRUCTION CURRENT - $ 145,000 LONG-TERM - _$_JL-677 .J1QO ... Bonds in the principal amount of $ 85,000 matured during the year under review, $ 35,000 of which were redeemed by the District. The remaining $ 50,000 have not been presented for payment at June 30, 1972. In addition, $ 56,000 of 5% bonds of Improvement District # 3, which had a maturity date of March 1, 1991, were called by the District as of March 1, 1972. Of these -12- JAMES GAISER & CO. CERTIFIED PUBLIC ACCOUNTANTS bonds, $ 39,000 had not been presented for payment at June 30, 1972. The remaining bonds are due and payable as follows: Improvement District No. 1: Improvement District No. 2: Series 1: Series 2: Series 3: Improvement District No. 3 : Improvement District No. 4: YEARS OF MATURITY 1972-only 1973-only 1974-1975 1976-1977 1978-1980 1981-1982 1983-only 1984-1986 1987-only 1973-only 1974-1976 1977-1983 1984-1987 1988-only 1972-only 1973-only 1974-1975 1976-1982 1983-1987 1988-1991 1972-only 1973-only 1974-1983 1973-only 1974-1990 1991-only 1972-only 1973-1977 1978-only 1979-1982 1983-1986 1987-1989 1990-1991 RATE OF INTEREST 4.00% 4.00% 4.00% 4.00% 3.85% 3.85% 3.85% 3.85% 3.85% 5.00% 5.00% 5.00% 5 . 00% 5.00% 4.25% 4.25% 4.50% 4.50% 4.50% 4.50% 5.00% 5 . 00% 5.00% 4.75% 4 . 7 5% 5.00% 4.50% 4.50% 4.50% 4.00% 4.00% 4.00% 3.50% AMOUNT DUE EACH YEAR 40,000 45,000 45,000 50,000 55,000 60,000 65,000 70,000 45,000 10,000 10,000 15,000 20,000 25,000 10,000 10,000 10,000 15,000 20,000 25,000 5,000 5,000 10,000 5,000 5,000 597,000 20,000 20,000 25,000 25,000 30,000 35,000 40,000 CURRENT PORTION LONG-TERM PORTION $ 40,000 45,000 10,000 10,000 10,000 5,000 5,000 20,000 -0- -0- 90,000 100,000 165,000 120,000 65,000 210,000 45,000 -0- 30,000 105,000 80,000 25,000 -0- -0- 20,000 105,000 100,000 100,000 -0- 5,000 100,000 -0- 85,000 597,000 -0- 100,000 25,000 100,000 120,000 105,000 80,000 Total bonds outstanding at June 30, 1972 -13- JAMES GAISER S. CO. CERTIFIED PUBLIC ACCOUNTANTS The legal debt margin, assessed valuations and corresponding tax rates of the District for the fiscal year ended June 30, 1972 were as follows: Assessed valuation, 1971-72, less all exemptions $ 71.519.689 Debt limit, 10% of assessed valuation $ 7,151,969 Amount of debt applicable to debt limit: Current portion $ 145,000 Long-term portion 2,677,OOP Total bonded debt 2,822,000 Legal debt margin $ 4.329.969 The tax rates for the fiscal year ending June 30, 1972, were: SECURED UNSECURED TAX TAX DISTRICT RATE RATE General District .140 .140 Improvement District No. 1 .080 .090 Improvement District No. 2 .290 .400 Improvement District No. 3 .450 .900 Improvement District No. 4 .050 .050 At June 30, 1972, $ 300,000 in construction bonds, which were authorized by the voters of the various Improvement Districts, remained unissued. -14- JAMES GAISER S, CO. CERTIFIED PUBLIC ACCOUNTANTS