Annual Water District Audit Report Concerns PRWID Board Members
The Price River Water Improvement District will likely begin exploring methods to raise revenues or lower expenditures after a report regarding the annual financial audit on Tuesday indicated that PRWID was operating in the red.
However, what was not represented at the PRWID board meeting is the fact that the actual expenses paid and revenues received put the district well into the black.
The audit, which was presented to board members on Aug. 1, reported the total deficit for the district just more than $240,000. The figure comes after the water district issued a mil levy on property taxes last year.
By increasing property taxes, the district was able to generate $150,000 in new revenues this year.
Despite the increase, the audit still showed an overall shortfall for the district.
"I think we're on a reckless course," said board member Mike Dalpiaz.
However, the situation may not be as bad as it appeared to board members on Tuesday.
A more detailed breakdown of the revenues and expenditures shows that more than $906,000 of the reported expenditures are in the area of depreciation and amortization, a figure that does not reflect an actual payment or cash amount.
For accounting purposes, the figure represents the depreciation of infrastructure, equipment and other capital assets.
In the long term, the district will need to cover the costs of depreciation.
As a vehicle comes to the end of its useful life or a water line requires replacement, the district will need to replace it.
The depreciation figure in an attempt by accounting standards to show how much of those future costs are incurred by the district each year.
As far as actual operating costs, the picture for the district is more positive than what was presented Tuesday.
The area of concern for the district is the sewer department, though the water department also showed an overall deficit, including depreciation.
With water generating $1.0 million and sewer generating $1.7 million, the district saw more than $2.7 million in operational revenues for its enterprise funds. Administrative activities had more than $1.3 million in revenue.
Expenses in the sewer department, including depreciation, totaled $1.2 million with an additional $1.8 million in the sewer department.
All of the $1.3 million in administrative revenues was spent.
With depreciation, the district had a net loss in its operational expenses. Without depreciation, however, the district was in the black by almost $750,000.
Revenues reported include back payments and outstanding income such as Wellington's backlog of payments and the emergency water rate situation in Helper. The outstanding balances do not affect the overall revenues of the district, and for accounting purposes, the outstanding payments are considered as if they had been paid.
The missing payments are reflected in the cash flow of the district, which actually shows a positive balance for PRWID.
The district saw a net increase in cash totaling more than $43,000, with an increase in water more than $56,000 and a decrease in sewer of just over $13,000. Had the outstanding balances in Helper and Wellington been paid, cash flows would have been even greater.
As a result of the picture presented in the audit, the district board began to look at how to increase revenues and reduce expenditures. Revenues can be brought up be any combination of increasing sewer rates, water rates or repeating the property tax mil levy from last year. The other option is to cut expenses, whether by limiting major purchases, cutting back on labor costs or any other expense.
District manager Phil Palmer told the board that the district's financial advisers were reviewing the current financial situation and would be making a recommendation soon regarding the district's finances. Despite the outcome of the audit and other financial statement, gas prices continue to climb and labor and insurance costs continue to rise. The district, along with many agencies funded by public monies, will need to look for ways to keep expenses in check while keeping the cost to the public as minimal as possible.
Earlier in the year, the district asked its bond counsel and other financial advisers for a financial assessment.
Palmer said much of that assessment has been completed and that he hoped their report would be available at the time of the audit.
"We're in a critical enough state that the board and staff should have as much information as we can," said Palmer.
Assistant district manager Jeff Richens added that the advisers were waiting for the information contained in the audit.
The board expressed an interest in expediting the financial analysis and encouraged the administration to expedite the report.
Nick Sampinos, PRWID attorney, suggested that the board review the financial status of each department. By looking at how each department spends and generates funds, the board may be able to make a better decision on what areas can be improved.
Presently, the district does not track how resources are spent. Many government entities require employees to track how they spend time and categorize hours throughout the day. Similarly, equipment usage and consumption of resources can be tracked.
Board member Karl Houskeeper suggested that if district employees accounted for their time and resources then the district would be able to better follow Sampinos' suggestion.
To a limited extent, the district can currently track how resources are put to use by tracking work orders. The district already does this, said Richens.
Board member Richard Tatton made the suggestion that the board request a financial report at every board meeting.
Richens added that the district processes many of its finances on a monthly basis and suggested that the report be made monthly.
The board agreed that more information regarding the financial outlook for the district is in order and that once such information is available, the district can make an informed decision regarding how to proceed.