2019 Annual Report Contents
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2019 Annual Report Contents 3 Management Report on Responsibility for Financial Reporting 3 Audit, Legal and Finance Committee Chair’s Letter 4 Independent Auditor’s Report 6 Energy Northwest Management’s Discussion and Analysis (Required Supplementary Information) 16 Current Debt Ratings 17 Statement of Net Position 19 Statements of Revenues, Expenses and Changes in Net Position 20 Statements of Cash Flows 22 Notes to Financial Statements 44 Schedules of Required Supplementary Information Energy Northwest Facts Headquarters www.energy-northwest.com Richland, Wash. and our blog: Employment Figures www.northwestcleanenergy.com Approximately 1,100 full-time employees Projects and Services • Four power generation projects • Environmental and analytical services • Operations and maintenance services • Equipment calibration services • Power system solutions • Project development • Demand-side management services To learn more visit our website: Management Report On Responsibility For Financial Reporting Energy Northwest management is responsible for preparing the accompanying financial statements and for their integrity. They were prepared in accordance with Generally Accepted Accounting Principles (GAAP) (applied on a consistent basis, and include amounts that are based on management’s best estimates and judgments). The financial statements have been audited by Baker Tilly Virchow Krause, LLP, Energy Northwest’s independent auditors. Management has made available to Baker Tilly Virchow Krause, LLP all financial records and related data, and believes that all representations made to Baker Tilly Virchow Krause, LLP during its audit were valid and appropriate. Management has established and maintains internal control procedures that provide reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. These control procedures provide appropriate division of responsibility and are documented by written policies and procedures. Energy Northwest maintains an ongoing internal auditing program that provides for independent assessment of the effectiveness of internal controls, and for recommendations of possible improvements thereto. In addition, Baker Tilly Virchow Krause, LLP has considered the internal control structure in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. Management has considered recommendations made by the internal auditor and Baker Tilly Virchow Krause, LLP concerning the control procedures and has taken appropriate action to respond to the recommendations. Management believes that, as of June 30, 2019, internal control procedures are adequate. Bradley J. Sawatzke Brent J. Ridge Chief Executive Officer Vice President for Corporate Services/Chief Financial Officer Audit, Legal And Finance Committee Chair’s Letter The executive board’s Audit, Legal and Finance Committee (committee) is composed of 11 independent directors. Members of the committee are: July 1, 2018 - Dec. 31, 2018 8: Chair John Saven, Terry Brewer, Arie Callahan, Marc Daudon, Linda Gott, Jack Janda, Sid Morrison, Jim Moss, Skip Orser, Will Purser and Tim Sheldon. Jan. 1, 2019 - Jan. 22, 2019: Chair John Saven, Arie Callaghan, Marc Daudon, Linda Gott, Jack Janda, Sid Morrison, Jim Moss, Skip Orser, Will Purser and Tim Sheldon. Jan. 23, 2019 - June 30, 2019: Chair John Saven, Arie Callaghan, Marc Daudon, Linda Gott, Jack Janda, Jim Malinowski, Sid Morrison, Jim Moss, Skip Orser, Will Purser and Tim Sheldon. The committee held eight meetings during the fiscal year ended June 30, 2019. The committee oversees Energy Northwest’s financial reporting process on behalf of the executive board. In fulfilling its responsibilities, the committee discussed with the performance auditors and the independent auditors the overall scope and specific plans for their respective audits, and reviewed Energy Northwest’s financial statements and the adequacy of Energy Northwest’s internal controls. The committee met regularly with Energy Northwest’s performance auditors and convened periodic meetings with the independent auditors to discuss the results of their audit, their evaluations of Energy Northwest’s internal controls, and the overall quality of Energy Northwest’s financial reporting. The meetings were designed to facilitate any private communications with the committee desired by the performance auditors or independent auditors. John Saven Chair, Audit, Legal and Finance Committee 2019 Annual Report | 3 INDEPENDENT AUDITORS' REPORT To the Executive Board INDEPENDENT AUDITORS' REPORT Energy Northwest Richland, Washington To the Executive Board ReportEnergy on theNorthwest Financial Statements Richland, Washington We have audited the accompanying financial statements of the business-type activities of Energy Northwest, as of andReport for the on y earthe endedFinancial June Statements 30, 2019, and the related notes to the financial statements, which collectively comprise Energy Northwest's basic financial statements as listed in the table of contents. We have audited the accompanying financial statements of the business-type activities of Energy Northwest, as Management’sof and for the Responsibility year ended June for 30, the 2019 Financial, and the Statements related notes to the financial statements, which collectively comprise Energy Northwest's basic financial statements as listed in the table of contents. Management is responsible for the preparation and fair presentation of these financial statements in accordance withManagement’s accounting principles Responsibility generally acceptedfor the Financial in the United Statements States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statementsManagem thatent are is freeresponsible from material for the misstatement, preparation and whether fair presentation due to fraud of orthese error. financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, Auditors’implem Responsibilityentation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our auditAuditors’ in accordance Responsibility with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsOur responsibility are free from is to material express misstatement. opinions 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. Those An auditstandards involves require performing that we procedures plan and perform to obtain the audit audit evidence to obtain about reasonable the amounts assurance and aboutdisclosures whether in thethe financial financialstatements statements. are free The from procedures material selectedmisstatement. depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,An audit involves the auditor performing considers procedures internal control to obtain relevant audit evidenceto Energy about Northwest the amounts's preparation and disclosures and fair in the presentationfinancial statements.of the financial The statements procedures in selected order to dependdesign audit on the procedures auditors’ judgment,that are appropriate including the in theassessment of circumstances,the risks of materialbut not for misstatement the purpose of of the expressing financial anstatements, opinion on whether the effectiveness due to fraud of orEnergy error. Northwest In making's those risk internalassessments, control. Accordingly the auditor, we considers express internal no such control opinion. relevant An audit to Energyalso includes Northwest evaluating's preparation the appropriateness and fair of accountingpresentation policies of the used financial and thestatements reasonableness in order toof designsignificant audit accounting procedures estimates that are madeappropriate by management, in the as wellcircumstances, as evaluating but the not overall for the presentation purpose of ofexpressing the financial an opinionstatements. on the effectiveness of Energy Northwest's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness We ofbelieve accounting that the policies audit evidenceused and we the have reasonableness obtained is sufficient of significant and accountingappropriate estimatesto provide made a basis by for management, our audit opinionsas well. as evaluating the overall presentation of the financial statements. OpinionsWe believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial positionOpinions of the business-type activities of Energy Northwest as of June 30, 2019, and the respective changes