Valley Sanitary District Indio, California Comprehensive Annual Financial Report Year Ended June 30, 2013
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Valley Sanitary District Indio, California Comprehensive Annual Financial Report Year Ended June 30, 2013 VALLEY SANITARY DISTRICT INDIO, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2013 Prepared by: Administration and Finance Department Valley Sanitary District Annual Audit Report Year Ended June 30, 2013 TABLE OF CONTENTS PAGE I. INTRODUCTORY SECTION Letter of Transmittal i - iii Organizational Chart iv List of Elected Officials v Certificate of Achievement for Excellence in Financial Reporting vi II. FINANCIAL SECTION Independent Auditor's Report 1 – 3 Management's Discussion and Analysis 4 – 11 Basic Financial Statements Statements of Net Position 12 Statements of Revenues, Expenses and Changes in Net Position 13 Statements of Cash Flows 14 – 15 Statements of Fiduciary Assets and Liabilities - Agency Fund 16 Notes to Financial Statements 17 – 29 Supplementary Information Schedule of Operating Expenses – 2013 30 Schedule of Operating Expenses – 2012 31 III. STATISTICAL SECTION Net position by Component 32 Changes in Net position 33 Customer Type Count Unit Summary 34 Annual Sewer Use Rates and Fiscal Year Revenues 35 Connection Capacity Fees and Fiscal Year Revenues 36 Principal Users 37 Ratio of Outstanding Debt 38 Pledge Revenue Coverage 39 Principal Employers 40 Total Customers and Number of Permits Issued 41 Operating Indicators 42 Demographic and Economic Statistics 43 Capital Assets and Operating Information 44 Annual Flow Data 45 Operating and Capacity Indicators 46 INTRODUCTORY SECTION November 4, 2013 Board of Directors Valley Sanitary District Introduction It is our pleasure to submit the Annual Financial Report for the Valley Sanitary District for the Fiscal years ended June 30, 2013 and 2012, following the guidelines set forth by the Governmental Accounting Standards Board. This report has been prepared by District Staff. The District is ultimately responsible for both the accuracy of the data and the completeness and the fairness of presentation, including all disclosures in this financial report. We believe that the data presented is accurate in all material respects. This report is designed in a manner that we believe necessary to enhance your understanding of the District’s financial position and activities. This report is organized into four sections: (1) Introductory (2) Financial (3) Supplemental Information and (4) Statistical. The introductory section offers general information about the District’s organization and current activities and reports on a summary of significant financial results. The Financial section includes the Independent Auditors’ Report, Management’s Discussion and analysis of the Districts’ basic financial statements, and the District’s audited basic financial statements with accompanying notes. The Supplemental Information section includes schedules for purposes of additional analysis. The Statistical section presents un-audited historical financial, demographic and statistical information pertinent to the Districts operations. Generally Accepted Accounting Principles (GAAP) requires that management provide a narrative introduction, overview and analysis to accompany the financial statements in the form of the Management’s Discussion and analysis (MD&A) section. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The District’s MD&A can be found immediately after the Independent Auditors Report. District Structure and Leadership The Valley Sanitary District is an independent special district, which operates under the authority of the Health and Safety Code, Sanitary District act of 1923, sec 6400 Et. Seq. The District was formed June 1, 1925 and is governed by a five member Board of Directors, elected at large from within the Districts service area. The General Manager administers the day-to-day operations of the District in accordance with policies and procedures established by the Board of Directors. The District employs approximately 27 regular employees organized in three departments. The i District’s Board of Directors meets on the second and fourth Tuesdays of each month. Meetings are publicly noticed and citizens are encouraged to attend. The District provides sewer services to approximately 27,000 connections within its 19.5 square mile service area, located in the eastern desert area of Riverside County. The District encompasses the City of Indio and adjacent unincorporated areas of Riverside County, California. District Services Residential customers represent approximately 97% of the Districts customer base and produce approximately 81% of the sewage. Currently the District can treat approximately 11 million gallons of sewage a day. Economic Condition and Outlook The District Offices are located in the City of Indio in Riverside County. Riverside and San Bernardino Counties (Inland Empire) have witnessed a decrease in economic activity due to the downturn in property values, employment and the continued restrictions on credit. Major Initiatives The District’s Board of Directors and Staff have completed their first year Strategic Plan. The activities outlined within the Strategic Plan developed by the Board and Staff of the District are driven by the Districts Mission Statement: “to collect, treat, and dispose of wastewater in a safe and cost effective manner as prescribed by state and federal law.” The strategic goals adopted by the Board of Directors are: 1. Enhance District Governance. 2. Strengthen and protect District Financial Sustainability. 3. Develop Succession Planning for the District. 4. Strengthen System Planning & District Regulatory Compliance. 5. Implement Locally Adopted Pretreatment & FOG Program. 6. Compliance with Waste Discharge Requirement Permit. 7. Promote Sustainability and Environmental Stewardship. 8. Reduce Carbon Footprint and Green House Gas Emissions. 9. Enhance District Innovation and Use of Technology. 10. Update Corporate Systems and enhance Productivity. Internal Control Structure District Management is responsible for the establishment and maintenance of the internal control structure that ensures the assets of the District are protected from loss, theft or misuse. The internal control structure also ensures adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The Districts internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of the control should not exceed the benefits likely to be derived, and 2) the valuation of costs and benefits requires estimates and judgments by management. Budgetary Control The District Board of Directors annually adopts an operating and capital budget prior to the new fiscal year. The budget authorizes and provides the basis for reporting and control of financial operations and accountability for the District’s enterprise and capital projects. The budget and reporting treatment applied to the District is consistent with the accrual basis of accounting and the financial statement basis. ii Valley Sanitary District Organizational Chart The Citizens of Valley Sanitary District Board of Directors General Manager Administration & Finance Treatment Division Collections Division Division iv Valley Sanitary District Board of Directors The five-member Board of Directors are elected by the citizens whom reside within Valley Sanitary District to set policy and govern the District. The current Board of Directors are: Douglas A York, President Richard Friestad, Vice President Merritt W. Wiseman, Secretary / Treasurer Mike Duran, Director William R. Teague, Director v vi FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT Board of Directors Valley Sanitary District Indio, California Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities and the aggregate remaining fund information of the Valley Sanitary District (the “District”), as of and for the year ended June 30, 2013, and the related notes to the financial statements which collectively comprise the District’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America, this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement