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HomeMy WebLinkAbout; ; Water Utility Fund Financial Statements 1987-1988; 1988-06-30CIT7 OF CARLSBAD Water Utility Fund Financial Statements June 30, 1988 Peat Marwick Certified Public Accountants Peat Marwick Main & Co. 225 Broadway, Suite 1400 San Diego, CA 92101 INDEPENDENT AUDITORS' REPORT The Honorable Mayor and City Council City of Carlsbad, Califomia: We have audited the component unit financial statements of the Water Utility Fund of the City of Carlsbad, Califomia as of and for the year ended June 30, 1988. These component unit financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Water Utility Fund of the City of Carlsbad, Califomia as of and for the year ended June 30, 1987 were audited by other auditors whose report dated October 9, 1987 expressed an unqualified opinion on these statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1988 component unit financial statements referred to above present fairly, in all material respects, the financial position of the Water Utility Fund of the City of Carlsbad, Califomia as of June 30, 1988, and the results of its operations and the changes in its financial position for the year then ended in conformity with generally accepted accounting principles. October 14, 1988 Member Firm of CITY OF CARLSBAD Water Utility Fund Balance Sheets June 30, 1988 and 1987 Assets Current assets; Cash and investments Receivables, net of allowance for doubtful accounts of $61,908 in 1988 and $116,903 in 1987 Due from the City of Carlsbad Accrued interest receivable Inventory, at cost Total current assets Restricted assets: Cash and investments Accmed interest receivable Total restricted assets Property, plant and equipment: Land and water rights Buildings and improvements Wells, reservoirs and dams Transmission and distribution lines Equipment and vehicles Total property, plant and equipment Less accumulated depreciation Property, plant and equipment - net Total assets 1988 $ 893,217 1,527,539 11,274 15,708 156,683 2,604,421 50,816 4,143,883 231,956 37,188 1,212,852 4,014,196 214,005 1987 (3,793) 1,381,132 11,360 152,926 1,541,625 4,093,067 4,052,206 37,348 4,089,554 231,956 37,188 1,289,152 4,068,674 211,994 5,710,197 5,838,964 (2,199,223) (2,126,123) 3,510,974 $ 10,259,278 3,712,841 9,344,020 See accoB^anying notes to financial statements. (Continued) CITY OF CARLSBAD Water Utility Fund Balance Sheets, Continued June 30, 1988 and 1987 Liabilities 1988 1987 Current liabilities; Accounts payable Due to the City of Carlsbad Accmed wages Deposits payable Current portion of revenue bonds payable Accmed interest Total current liabilities $ 1,701,273 88,340 28,227 61,121 157,000 14,131 859,044 76,094 26,097 38,794 150,000 17,283 2,050,092 1,167,312 Long-term liabilities - revenue bonds payable (net of unanaortized discount) Total liabilities Fund equity: Contributed capital Retained eamings; Reserved for debt service Reserved for construction Unreserved Total retained eamings Total fund equity Total liabilities and fund equity 322,532 2,372,624 2,425,080 520,437 4,941,137 5,461,574 7,886,654 $ 10,259,278 478,298 1,645,610 2,425,080 911,291 445,851 3,916,188 5,273,330 7,698,410 9,344,0 20 See accoiqjanying notes to financial statements. CITY OF CARLSBAD Water Utility Fund Statements of Operations and Retained Eamings For the years ended June 30, 1988 and 1987 1988 1987 Operating revenues; Metered water sales Other charges for services Miscellaneous revenue $ 1,056,722 185,982 16 1,007,568 235,126 458 Total operating revenues Operating expenses: Personnel services Repairs and maintenance Office expenses Depreciation and amortization Insurance Professional services Purchased water Bad debt expense Total operating expenses Operating income (loss) Non-operating revenues (expenses): Interest income Interest and fiscal charges Loss on sale of property Non-operating income Net income Retained eamings, beginning of year Retained eamings, end of year 1 ,242,720 634,212 422,436 135,939 123,185 7,330 7,099 4,198 126 1 ,334,525 (91,805) 395,099 (29,096) (85,954) 280,049 188,244 5,273,330 $ 5,461,574 1,243,152 526,336 167,974 91,666 122,146 5,417 8,971 4,191 6,667 933,368 309,784 289,801 (37,299) 252,502 562,286 4,711,044 5,273,330 See accompanying notes to financial statements. CITY OF CARLSBAD Water Utility Fund Statements of Changes in Financial Position For the years ended June 30, 1988 and 1987 Net increase (decrease) in working capital (unrestricted) 1988 1987 Sources of working capital (unrestricted); Operations; Ne t inc ome Items not requiring working capital; Depreciation and amortization Loss on disposal of property, plant and equipment $ 188,244 123,185 85,954 562,286 122,146 Total sources of working capital 397,383 684,432 Uses of working capital; Acquisition of property, plant and equipment Current portion and repayment of revenue bonds payable Increase in restricted assets 6,038 157,000 54,329 9,044 150,000 3,532,033 Total uses of working capital 217,367 3,691,077 Net increase (decrease) in working capital (unrestr ic ted) $ 180^^016 (3,006,645) Net increase (decrease) in elements of working capital (unrestricted); Cash and investments Receivables, net Accmed interest receivable Inventory Accounts payable Accmed wages Deposits payable Current portion of revenue bonds payable Accmed interest payable 897,010 146,321 15,708 3,757 (854,475) (2,130) (22,327) (7,000) 3,152 (3,505,705) 109,691 (23,649) 17,708 402,869 (3,568) 2,027 (10,000) 3,982 $ 180,016 (3,006,645) See accompanying notes to financial statements. CITY OF CARLSBAD Water Utility Fund Notes to Financial Statements June 30, 1988 and 1987 (1 ) Summary of Significant Accounting Policies The Water Utility Fund (the Fund) is an enterprise fund of the City of Carlsbad, Califomia (the City), which is used to account for activities necessary to provide water services to the residents of the City including, but not limited to, operations, maintenance, financing and related debt service, billing and collection, and the acquisition of fixed assets that are utilized in providing these services. As an enterprise fund, its operations are financed and operated in a manner similar to a private business enterprise. The intent of the City Council is that the expenses (including depreciation) of providing goods and services to the general public on a continuing basis be financed or recovered primarily through user charges. The accounting policies of the City with regard to this fund conform to generally accepted accounting principles as applicable to govemments. The following is a suimnary of the more significant accounting policies; (a) Relationship to the City of Carlsbad The Fund is an integral part of the reporting entity of the City of Carlsbad. The accounts of the Fund have been included within the scope of the general purpose financial statements of the City because the City Council exercises oversight responsibility over the operations of the Fund. Only the accounts of the Fund are included herein; therefore, these financial statements do not purport to represent the financial position or results of operations of the City of Carlsbad, Califomia. (b) Measurement Focus The Fund is accounted for on an "income determination" or "cost of services" measurement focus. Accordingly, all assets and liabilities are included on the balance sheet, and the reported fund equity provides an indication of the economic net worth of the Fund. The operating statement for the Fund reports increases (revenues) and decreases (expenses) in total economic net worth. (c) Basis of Accounting The Fund is accounted for using the accmal basis of accounting. Accordingly, revenues are recognized when they are earned and expenses are recognized when the related liability is incurred. (Continued) CITY OF CARLSBAD Water Utility Fund Notes to Financial Statements, Continued (1 ) Suimnary of Significant Accounting Policies, Continued (c) Basis of Accounting, Continued Unbilled water revenue is recognized as eamed when the water is c on sumed. (d) Cash and Investments The Fund participates in the pooled cash and investment fund of the City of Carlsbad. Pooled investments are stated at cost or amortized cost. The Fund's equity in the pooled cash is shown on the financial statements as cash and investments. Interest earned as a result of the pooling is allocated to the Fund based on its average monthly cash balances. Authorized deposits and investments include demand and time deposits, obligations of the U.S. Treasury, its agencies and instmmentalities, commercial paper rated A-1 by Standard and Poor's Corporation or P-l by Moody's Commercial Paper record, banker's acceptances with a maximum maturity of 270 days, repurchase and reverse repurchase agreements, certificates of deposit insured by national and state licensed or chartered banks or federal or state savings and loan associations, money market and mutual funds whose portfolios consist of one or more of the foregoing investments, and the state treasurer's investment pool. ( e) Inventories Inventories consist of materials and supplies which are stated at historical cost. ( f) Property, Plant and Equipment Property, plant and equipment is stated at cost, or if donated, at estimated fair market value at the date of contribution. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. ( Continued) CITY OF CARLSBAD Water Utility Fund Notes to Financial Statements, Continued (1 ) Suimnary of Significant Accounting Policies, Continued (f) Property, Plant and Equipment, Continued; The estimated useful lives of the assets are as follows; Years Buildings and improvements 10 - 50 Wells, reservoirs and dams 10 - 100 Transmission and distribution lines 40 - 70 Equipment and vehicles 4-50 (g) Compensated Absences; Vacation pay is payable to employees at the time used or upon termination of employment. Sick leave accmed but unused is cumulative from year to year. The cost of vacation and sick leave is recorded as a liability when earned. (h) Reclassifications; Certain reclassifications have been made to the prior year amounts to conform with the current year presentation. (2) Long-Term Liabilities Revenue bonds payable at June 30, 1988 and 1987 were as follows; 1988 1987 1958 Waterworks Revenue Bonds, principal due July 1, 1988, interest payable on July 1, 1988 at 4.1% per annum $ 47,000 92,000 1960 Waterworks Revenue Bonds, principal due in amounts ranging from $15,000 to $65,000 on July 1 of each year through 1990, interest payable on January 1 and July 1 of each year at rates varying from 3.9% to 4.3% per annum 140,000 155,000 (Continued) CITY OF CARLSBAD Water Utility Fund Notes to Financial Statements, Continued (2) Long-Term Liabilities, Continued 19 70 Waterworks Revenue Bonds, principal due in amounts ranging from $95,000 to $100,000 on July 1 of each year through 1990, interest payable on January 1 and July 1 of each year at rates varying from 6.0% to 6.8% per annum 295,000 385,000 Total revenue bonds payable 482,000 632,000 Less unamortized discount (2,468) (3,702) Less current portion (157,000) (150,000) Total long-term liabilities $ 322,532 478,298 At June 30, 1988, aggregate maturities of revenue bonds payable were as follows: Year Ending June 30 1989 $ 157,000 1990 160,000 1991 165,000 Total $ 482,000 At June 30, 1988, the City was in compliance with all debt covenants required by the Waterworks Revenue Bonds. (3) Pension Plan The Water Utility Fund employees are included in the City of Carlsbad's pension plan which is administered by the Califomia Public Employees Retirement System (PERS). PERS is an agent milt iple-einp loy er public employee retirement system that acts as a coimnon investment and administrative agent for participating public entities within the State of Califomia. (Continued) CITY OF CARLSBAD Water Utility Fund Notes to Financial Statements, Continued (3) Pension Plan, Continued All full-time employees are eligible to participate as menibers of the PERS. Benefits vest after an employee has been a meniber of the plan for five years. Employees are eligible to retire after the age of 50 with 5 years of credited service. Annual retirement benefits are determined based on age at retirement, the length of membership service and the amount of eamings based on the highest thirty-six consecutive months average for safety employees, and based on the highest twelve consecutive months average for miscellaneous employees. The PERS also provides death and disability benefits. These benefit provisions and all other requirements are established by state statute. Employees are required to make contributions ranging from 7 to 9 percent of gross pay. The City is required to contribute the remaining amounts necessary to fund the benefits for its members, using the actuarial basis recommended by the PERS actuaries and actuarial consultants and adopted by the PERS Board of Administration. Additional disclosures required by Govemmental Accounting Standards Board Statement No. 5 are not available for the Water Utility Fund as a separate entity. This information for the City's reporting entity is presented in the Comprehensive Annual Financial Report of the City of Carlsbad. (4) Transactions with the City of Carlsbad The Water Utility Fund has borrowed $88,340 from the Sewer fund of the City of Carlsbad and has lent $11,274 to the same fund. The Water Utility Fund pays an intemal service fund of the City for liability and workmen's compensation insurance. The City is self-insured for these claims. The premiums are determined annually based on the insured funds' claims experience. The premium was $7,330 and $5,417 for the Fund for the fiscal years ended June 30, 1988 and 1987, respectively.