Utility Audit FYE 2005

M. Buddy Johnsey

Description

CITY OF FLORENCE, ALABAMA ELECTRICITY, GAS, AND WATER AND WASTEWATER DEPARTMENTS FINANCIAL STATEMENTS JUNE 30, 2005 and 2004 CITY OF FLORENCE, ALABAMA ELECTRICITY, GAS, AND WATER AND WASTEWATER DEPARTMENTS JUNE 30, 2005 and 2004 TABLE OF CONTENTS PAGEManagement’s Discussion and Analysis i – xii Independent Auditors' Report 1 Financial Statements: Electricity Department Balance Sheets 2 Statements of Revenues, Expenses, and Changes in Fund Net Assets 3 Statements of Cash Flows 4 – 5 Gas Department Balance Sheets 6 7 8 – 9 Water and Wastewater Department Balance Sheets 10 Statements of Revenues, Expenses, and Changes in Fund Net Assets 11 Statements of Cash Flows 12 – 13 Notes to Financial Statements 14 – 34 Required Supplementary Information: Electricity Department Schedule of Revenues, Expenses, and Changes in Fund Net Assets— Budget and Actual (GAAP Budgetary Basis) 35 Gas Department 36 Water and Wastewater Department 37 Pension Schedule Schedule of Funding Progress 38 Supplementary Schedules: Graphical Representation: Source of Funds 39 Use of Funds 40 Electricity Department Schedule of Utility Plant in Service and Accumulated Depreciation 41 Gas Department 42 Water and Wastewater Department Schedule of Revenues and Expenses—Killen System 43 44 ...

Informations

• Publié par: Orgoi
• Nombre de lectures: 12
• Langue: English

Extrait

CITY OF FLORENCE, ALABAMA   ELECTRICITY, GAS, AND WATER AND WASTEWATER DEPARTMENTS   FINANCIAL STATEMENTS   JUNE 30, 2005 and 2004                                                      

 

CITY OF FLORENCE, ALABAMA ELECTRICITY, GAS, AND WATER AND WASTEWATER DEPARTMENTS   JUNE 30, 2005 and 2004   TABLE OF CONTENTS   ’ Management s Discussion and Analysis   Independent Auditors' Report   Financial Statements:  Electricity Department  Balance Sheets  Statements of Revenues, Expenses, and Changes in Fund Net Assets  Statements of Cash Flows    Gas Department  Balance Sheets  Statements of Revenues, Expenses, and Changes in Fund Net Assets  Statements of Cash Flows    Water and Wastewater Department  Balance Sheets  Statements of Revenues, Expenses, and Changes in Fund Net Assets  Statements of Cash Flows    Notes to Financial Statements   Required Supplementary Information:    lectricity epartment E D  Schedule of Revenues, Expenses, and Changes in Fund Net Assets—  Budget and Actual (GAAP Budgetary Basis)  Gas Department  Schedule of Revenues, Expenses, and Changes in Fund Net Assets—  Budget and Actual (GAAP Budgetary Basis)  Water and Wastewater Department  Schedule of Revenues, Expenses, and Changes in Fund Net Assets—  Budget and Actual (GAAP Budgetary Basis)      Pension Schedule  Schedule of Funding Progress   Supplementary Schedules:    Graphical Representation:  Source of Funds  Use of Funds    lectricity epartment E D  Schedule of Utility Plant in Service and Accumulated Depreciation  Gas Department  Schedule of Utility Plant in Service and Accumulated Depreciation  Water and Wastewater Department  Schedule of Revenues and Expenses—Killen System  Schedule of Utility Plant in Service and Accumulated Depreciation  

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CITY OF FLORENCE, ALABAMA ELECTRICITY, GAS, AND W ’ ATER AND WASTEWATER DEPARTMENTS  MANAGEMENT S DISCUSSION AND ANALYSIS FISCAL YEAR 2005     FINANCIAL HIGHLIGHTS   • Electricity individual enterprise funds experienced the following changes in net assets: The increased $.8 million or 1%; Gas increased $.7 million or 2%; Water and Wastewater increased $1.5 million or 3%.   • Electricity individual enterprise funds experienced the following changes in net utility plant: The decreased $.2 million or .3%; Gas decreased $.3 million or .1%; Water and Wastewater decreased $1.5 million or 2%.   • individual enterprise funds experienced the following changes in operating revenues: The Electricity increased $.9 million or 1%; Gas increased $3.1 million or 14%; Water and Wastewater increased $.9 million or 6%.   • individual enterprise  Thefunds experienced the following changes in operating expenses: Electricity increased $.8 million or 1%; Gas increased $2.3 million or 11% with gas cost representing 86% of that increase; Water and Wastewater increased $.2 million or 2%.   • The individual enterprise funds experienced the following changes in nonoperating revenues: Electricity increased about $134,000 or 75%; Gas increased about $28,000 or 112%; Water and Wastewater increased about $47,000 or 40%.   • individual enterprise funds experienced the following changes in nonoperating expenses: The Electricity decreased $19,000 or 4%; Gas decreased about $134,000 or 38%; Water and Wastewater decreased $140,000 or 6%.   OVERVIEW OF THE FINANCIAL STATEMENTS         Florence Utilities is accounted for through three separate enterprise funds – Electricity, Natural Gas, and Water and Wastewater. This annual report contains the financial statements of each of these funds.    This annual report consists of three parts: Management’s Discussion and Analysis, Financial Statements, and Supplementary Information. The financial statements also include notes that explain in more detail some of the information in the financial statements.   REQUIRED FINANCIAL STATEMENTS         The financial statements of Florence Utilities report information about Florence Utilities using accounting methods similar to those used by private sector companies. These statements offer short-term and long-term financial information about its activities.

 

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 The balance sheet includes all of each fund’s assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and the obligations to Florence Utilities’ creditors (liabilities). It also provides the basis for computing rate of return, evaluating the capital structure of Florence Utilities and assessing the liquidity and financial flexibility of Florence Utilities.    All of the current year’s revenues and expenses are accounted for in the Statement of Revenues, Expenses, and Changes in Fund Net Assets. This statement measures the success of Florence Utilities’ operations over the past year and can be used to determine whether Florence Utilities has successfully recovered all its costs through its user fees and other charges, profitability, and credit worthiness.    The other required financial statement is the Statement of Cash Flows. The primary purpose of this statement is to provide information about Florence Utilities cash receipts and cash payments during the reporting period. This statement reports cash receipts, cash payments, and net changes in cash resulting from operations, investing and financing activities; and provides answers to such questions as where did the cash come from, what was cash used for, and what was the change in cash balance during the reporting period.   FINANCIAL ANALYSIS OF FLORENCE UTILITIES         One of the most important questions asked about Florence Utilities’ finances is “Is Florence Utilities, as a whole, better off or worse off as a result of the year’s activities?” The Balance Sheet and the Statement of Revenues, Expenses, and Changes in Fund Net Assets report information about Florence Utilities’ activities in a way that will help answer this question. These two statements report the net assets of each fund and the changes in them. You can think of each fund’s net assets – the difference between assets and liabilities – as one way to measure financial health or financial position. Over time, increases or decreases in net assets are one indicator of whether its financial health is improving or deteriorating. However, you will need to also consider other non-financial factors such as change in economic conditions, weather, customer growth, regulatory and legislative mandates.   Electricity Department    The Electricity Department’s net assets increased from last year by $816,207 or about 1%. The summaries below focus on the Electricity Department’s net assets and changes in net assets during the years presented.   Electricity Department Net Assets

 

Variance FY 2005 FY 2004 Dollars Percent Current Assets $ 20,786,425 $ 20,210,868 $ 575,557 2.85% Capital Assets, Net 63,463,908 63,669,589 (205,681) -0.32% Other Noncurrent Assets 5,537,498 5,576,692 (39,194) -0.70% Total Assets $ 89,787,831 $ 89,457,149 $ 330,682 0.37% Current Liabilities $ 16,497,726 $ 16,641,978 $ (144,252) -0.87% Noncurrent Liabilities 12,801,006 13,142,279 (341,273) -2.60% Total Liabilities $ 29,298,732 $ 29,784,257 $ (485,525) -1.63% Invested in Capital Assets, $ 54,548,908 $ 54,319,589 $ 229,319 0.42% Net of Related Debt Restricted 1,003,130 993,079 10,051 1.01% Unrestricted 4,937,061 4,360,224 576,837 13.23% Total Net Assets $ 60,489,099 $ 59,672,892 $ 816,207 1.37%

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 Changes in the Electricity Department’s net assets can be determined by reviewing the following condensed Statement of Revenues, Expenses, and Changes in Fund Net Assets for the years presented.    As the table below indicates, operating revenues increased approximately $.8 million or about 1% from FY 2004. Most of this increase can be attributed to an increase in sales to large commercial customers due to the improving area economy. The Electricity Department experienced an increase in nonoperating revenues of $134,084 primarily due to increased interest revenues caused by increasing interest rates and increasing cash balances. The Electricity Department experienced a decrease in nonoperating expenses by $18,571 or about 4%, primarily interest expense.   Electricity Department Statements of Revenues, Expenses, and Changes in Fund Net Assets Variance FY 2005 FY 2004 Dollars Percent $ 80,075,130 $ 79,213,943 $ 861,187 1.09%

  

 

Operating Revenues Operating Expenses Cost of Sales Operations Maintenance Depreciation Taxes and Tax Equivalents Total Operating Expenses Operating Income Nonoperating Revenues (Expenses) Nonoperating Revenues Nonoperating Expenses Total Nonoperating Revenues (Exp) Change in Net Assets Total Net Assets - Beginning Total Net Assets - Ending

$ 62,246,942 $ 61,181,820 $ 1,065,122  6,995,553 6,644,534 351,019  2,992,385 3,619,182 (626,797)  4,048,947 4,123,220 (74,273)  2,794,838 2,692,079 102,759 $ 79,078,665 $ 78,260,835 $ 817,830 $ 996,465 $ 953,108 $ 43,357

$ 312,169 $ 178,085 $ 134,084  (492,427) (510,998) 18,571 $ (180,258) $ (332,913) $ 152,655 $ 816,207 $ 620,195 $ 196,012  59,672,892 59,052,697 620,195 $ 60,489,099 $ 59,672,892 $ 816,207  

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1.74% 5.28% -17.32% -1.80% 3.82% 1.05% 4.55%

75.29% -3.63% -45.85% 31.60% 1.05% 1.37%

 

Gas Department    The Gas Department’s net assets increased from last year by $702,438 or about 2%. The summaries below focus on the Gas Department’s net assets and changes in net assets during the years presented.   Gas Department Net Assets

Variance FY 2005 FY 2004 Dollars Percent Current Assets $ 6,813,412 $ 6,062,075 $ 751,337 12.39% Capital Assets, Net 33,914,269 34,181,934 (267,665) -0.78% Other Noncurrent Assets 627,029 631,036 (4,007) -0.63% Total Assets $ 41,354,710 $ 40,875,045 $ 479,665 1.17% Current Liabilities $ 1,919,234 $ 1,902,699 $ 16,535 0.87% Noncurrent Liabilities 4,399,914 4,639,222 (239,308) -5.16% Total Liabilities $ 6,319,148 $ 6,541,921 $ (222,773) -3.41% Invested in Capital Assets, $ 29,584,269 $ 29,611,934 $ (27,665) -0.09% Net of Related Debt Restricted 501,381 495,846 5,535 1.12% Unrestricted 4,949,912 4,225,344 724,568 17.15% Total Net Assets $ 35,035,562 $ 34,333,124 $ 702,438 2.05%    Changes in the Gas Department’s net assets can be determined by reviewing the following condensed Statement of Revenues, Expenses, and Changes in Fund Net Assets for the years presented.    As the table below indicates, operating revenues increased approximately $3.1 million or about 14% from FY 2004. In August 2004, December 2004, January 2005, and February 2005, we implemented rate increases to help recoup the escalating cost of natural gas. Unfortunately, we are experiencing a decreasing profit margin because of increased sales in the interruptible industrial sales class, a lower profit service. Cost of sales increased by $2.0 million or about 14% due to increased gas prices. The Gas Department experienced a decrease of about $50,000 in its tax equivalent payment to the City of Florence General Fund, due primarily to a decrease in the underlying ad valorem rates used in calculating the liability. The Gas Department experienced an increase in nonoperating revenues of $28,000 primarily due to increased interest revenues caused by rising interest rates and increased cash balances. The Gas Department experienced a decrease in nonoperating expenses of $134,000 or 38% due to a slight decrease in interest expense and a decrease in loss on disposition of assets. As the table indicates, we enjoyed a positive change in net assets for FY 2005 after experiencing a negative change in net assets for FY 2004.

 

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Gas Department Statements of Revenues, Expenses, and Changes in Fund Net Assets

Operating Revenues Operating Expenses Cost of Sales Operations Maintenance Depreciation and Amortization Taxes and Tax Equivalents Total Operating Expenses Operating Income Nonoperating Revenues (Expenses) Nonoperating Revenues Nonoperating Expenses Total Nonoperating Revenues (Exp) Change in Net Assets Total Net Assets - Beginning Total Net Assets - Ending  

 

FY 2005 $ 24,684,852

$ 16,610,116  2,626,221  1,448,462  1,517,258  1,612,027 $ 23,814,084 $ 870,768

$ 53,165  (221,495) $ (168,330) $ 702,438  34,333,124 $ 35,035,562

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FY 2004 $ 21,574,954

$ 14,628,054  2,152,035  1,499,847  1,548,851  1,664,992 $ 21,493,779 $ 81,175

$ 25,114  (355,275) $ (330,161) $ (248,986)  34,582,110 $ 34,333,124

Variance Dollars $ 3,109,898

$ 1,982,062  474,186  (51,385)  (31,593)  (52,965) $ 2,320,305 $ 789,593

$ 28,051  133,780 $ 161,831 $ 951,424  (248,986) $ 702,438

Percent 14.41%

13.55% 22.03% -3.43% -2.04% -3 18% . 10.80% 972.70%

111.69% -37.66% -49.02% -382.12% -0.72% 2.05%

 

Water and Wastewater Department    The Water and Wastewater Department’s net assets increased from last year by $1,526,479 or about 3%. The summaries below focus on the Water and Wastewater Department’s net assets and changes in net assets during the years presented.  

Water and Wastewater Department Net Assets

Variance FY 2005 FY 2004 Dollars Percent Current Assets $ 8,669,553 $ 8,992,013 $ (322,460) -3.59% Capital Assets, Net 94,126,933 95,679,889 (1,552,956) -1.62% Other Noncurrent Assets 5,153,460 5,205,135 (51,675) -0.99% Total Assets $ 107,949,946 $ 109,877,037 $ (1,927,091) -1.75% Current Liabilities $ 4,938,395 $ 5,074,324 $ (135,929) -2.68% Noncurrent Liabilities 54,608,883 57,926,524 (3,317,641) -5.73% Total Liabilities $ 59,547,278 $ 63,000,848 $ (3,453,570) -5.48% Invested in Capital Assets, $ 36,427,485 $ 34,775,441 $ 1,652,044 4.75% Net of Related Debt Restricted 4,450,757 4,444,600 6,157 0.14% Unrestricted 7,524,426 7,656,148 (131,722) -1.72% Total Net Assets $ 48,402,668 $ 46,876,189 $ 1,526,479 3.26%    Changes in the Water and Wastewater Department’s net assets can be determined by reviewing the following condensed Statement of Revenues, Expenses, and Changes in Fund Net Assets for the years presented.    As the table below indicates, operating revenues increased approximately $.9 million or about 6% from FY 2004 revenues. Increased operating revenues was largely due to a rate increase implemented effective July 1, 2004. Operating expenses increased by $214,545 or about 2%. The Water and Wastewater Department experienced an increase in nonoperating revenues of $46,970 or 40% primarily due to increased interest revenues caused by increasing interest rates. The Water and Wastewater Department experienced a decrease in nonoperating expenses of $140,067 or 5% due to decreasing interest expense.

 

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Water and Wastewater Department Statements of Revenues, Expenses, and Changes in Fund Net Assets

Variance FY 2005 FY 2004 Dollars Percent $ 14,614,737 $ 13,748,535 $ 866,202 6.30%

$ 1,991,603 $ 1,852,940 $ 138,663 7.48%  1,684,253 1,829,005 (144,752) -7.91%  1,010,041 969,069 40,972 4.23%  835,971 756,005 79,966 10.58%  1,492,360 1,465,004 27,356 1.87%  2,547,116 2,544,900 2,216 0.09%  1,299,539 1,229,415 70,124 5.70% $ 10,860,883 $ 10,646,338 $ 214,545 2.02% $ 3,753,854 $ 3,102,197 $ 651,657 21.01%

Operating Revenues Operating Expenses Water Treatment and Pumping Sewage Disposal Transmission and Distribution Accounting and Collections Administrative and General Depreciation Taxes and Tax Equivalents Total Operating Expenses Operating Income Nonoperating Revenues (Expenses) Nonoperating Revenues $ 164,029 $ 117,059 $ 46,970 40.13% Nonoperating Expenses (2,391,404) (2,531,471) 140,067 -5.53% Total Nonoperating Revenues (Exp) $ (2,227,375) $ (2,414,412) $ 187,037 -7.75% Change in Net Assets $ 1,526,479 $ 687,785 $ 838,694 121.94% Total Net Assets - Beginning 46,876,189 46,188,404 687,785 1.49% Total Net Assets - Ending $ 48,402,668 $ 46,876,189 $ 1,526,479 3.26%   BUDGETARY HIGHLIGHTS         budget for each enterprise fund comprising the Florence Utilities. TheAs required, the City Council adopts a FY 2005 budgets for the Electricity, Gas, and Water and Wastewater Departments were adopted on August 17, 2004. A budget revision was adopted for all of these departments on January 4, 2005. The Electricity Department’s budget was amended on March 1, 2005. A budget comparison statement is prepared monthly for each department for internal use and is distributed to elected officials as well as the appropriate management personnel. A budget comparison report is included for the Electricity Department, Gas Department, and the Water and Wastewater Department in the Required Supplementary Information Section of this annual report. Below is a summarized report and brief explanation of highlights.  

 

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Electricity Department  

Electricity Department Schedule of Revenues, Expenses, and Changes in Fund Net Assets Budget and Actual (GAAP Budgetary Basis) For Year Ended June 30, 2005 Final Variance Budget Actual Dollars Percent Operating Revenues $ 83,014,000 $ 80,075,130 $ (2,938,870) -3.54% Operating Expenses 82,114,400 79,078,665 (3,035,735) -3.70% Operating Income $ 899,600 $ 996,465 96,865 10.77% Nonoperating Revenues (Expenses) (321,200) (180,258) 140,942 -43.88% Change in Net Assets $ 578,400 $ 816,207 $ 237,807 41.11%    As the above budget report shows, the Electricity Department exceeded budgeted Change in Net Assets by approximately $237,807. This represents less than .3% of budgeted operating revenues. As you can see on the budget schedule in the required supplementary information, the overestimation of sales revenue was largely offset by the associated cost of sales. The Department worked hard to obtain the anticipated change in net assets.   Gas Department  

Gas Department Schedule of Revenues, Expenses, and Changes in Fund Net Assets Budget and Actual (GAAP Budgetary Basis) For Year Ended June 30, 2005 Final Variance Budget Actual Dollars Percent Operating Revenues $ 21,016,800 $ 24,684,852 $ 3,668,052 17.45% Operating Expenses 20,468,150 23,814,084 3,345,934 16.35% Operating Income $ 548,650 $ 870,768 322,118 58.71% Nonoperating Revenues (Expenses) (231,200) (168,330) 62,870 -27.19% Change in Net Assets $ 317,450 $ 702,438 $ 384,988 121.28%    The Gas Department exceeded the budgeted Change in Net Assets by approximately $384,988. This represents less than 2% of budgeted operating revenues. As you can see on the budget schedule in the required supplementary information, the gas sales revenues from industrial customers exceeded expectations highlighting improving economic conditions, higher gas prices, and the increase of sales in the lower margin interruptible industrial sales. The cost of sales exceeded expectations due to the increasing cost of natural gas supplies. There was a significant unexpected increase in customer accounts expense due to bankruptcy of a large customer and the subsequent write-off of the receivable.

 

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Water and Wastewater Department   Water and Wastewater Department Schedule of Revenues, Expenses, and Changes in Fund Net Assets Budget and Actual (GAAP Budgetary Basis) For Year Ended June 30, 2005 Final Variance Budget Actual Dollars Percent Operating Revenues $ 14,376,800 $ 14,614,737 $ 237,937 1.66% Operating Expenses 10,653,500 10,860,883 207,383 1.95% Operating Income $ 3,723,300 $ 3,753,854 30,554 0.82% Nonoperating Revenues (Expenses) (2,312,000) (2,227,375) 84,625 -3.66% Change in Net Assets $ 1,411,300 $ 1,526,479 $ 115,179 8.16%    The Water and Wastewater Department exceeded the budgeted Change in Net Assets by $115,179. This represents about .8% of budgeted operating revenues.   CAPITAL ASSETS AND DEBT ADMINISTRATION   Capital Assets    At the end of FY 2005, capital assets comprised the majority of each fund’s assets. Below are summaries highlighting each fund’s changes in capital assets. More detailed information is presented for each department in the supplementary schedules section.   Electricity Department  

Electricity Department Capital Assets, Net FY 2005

Variance FY 2005 FY 2004 Dollars Percent Utility Plant in Service (at Cost) $ 122,430,872 $ 120,103,834 $ 2,327,038 1.94% Construction in Progress 1,425,532 886,493 539,039 60.81% Less: Accumulated Depreciation (60,392,496) (57,320,738) (3,071,758) 5.36% Net Utility Plant $ 63,463,908 $ 63,669,589 $ (205,681) -0.32%

   As the above table shows, the Electricity Department experienced a .32% decrease in net utility plant. The department plans to finance capital expenditures in FY 2006 through cash generated from operations.

 

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