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HomeMy WebLinkAbout08.b. Receive and accept audited financials and extend Cropper contractCentral Contra Costa Sanitary District ' BOARD OF DIRECTORS POSITION PAPER Board Meeting Date: October 20, 2011 subject: RECEIVE AND ACCEPT THE AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2011, AND APPROVE EXTENDING THE CONTRACT WITH CROPPER ACCOUNTANCY CORPORATION FOR A SIXTH YEAR Submitted By: Initiating Dept. /Div.: Debbie Ratcliff, Controller Administrative / Finance & Accounting REVIEWED AND RECOMMENDED FOR BOARD ACTION: D. Ratcliff . Mu aves James M. K Ily, General Manager ISSUE: The audited financial statements of the Central Contra Costa Sanitary District for the Fiscal Year ended June 30, 2011, are being submitted to the Board of Directors. RECOMMENDATION: Receive and accept the audited financial statements for the Fiscal Year ended June 30, 2011 and approve extending the contract for audit services with Cropper Accountancy Corporation for a sixth year. FINANCIAL IMPACTS: None ALTERNATIVES /CONSIDERATIONS: None BACKGROUND: The firm of Cropper Accountancy Corporation, Certified Public Accountants, has completed its examination of the District's financial statements for the Fiscal Year ended June 30, 2011, and has submitted the audited financial statements and auditor's opinion thereon. In the performance of their examination of the financial statements, the auditors evaluate the District's internal accounting controls to determine the nature and extent of the auditing procedures required. Based on their observations during the course of the examination, the auditors are to advise District management of any significant deficiencies or material misstatements and any recommendations to improve the system of internal accounting controls. There were no recommendations for improvements in internal controls this year. There was one recommended audit entry to reverse a revenue accrual in the Capital Fund which reduces total Capital Revenue by $600,000. The audited financial statements were reviewed in detail by John Cropper from Cropper Accountancy Corporation at the Budget and Finance Committee meeting on October 3, 2011. A copy of the audited financial statements has been received by the Board under separate cover. N :\ADMINSUPWDMIN \POSPAPER\Audited Financial Statements 10- 20- 11.doc Page 1 of 2 . 7-6 POSITION PAPER Board Meeting Date: October 20, 2011 subject. RECEIVE AND ACCEPT THE AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2011, AND APPROVE EXTENDING THE CONTRACT WITH CROPPER ACCOUNTANCY CORPORATION FOR A SIXTH YEAR In accordance with Government Code Section 53891, information from the audit will be used to prepare a report to the State Controller's office. The report will be sent electronically by the annual deadline of October 18, 2011. The audited financial statements are also sent to the County Auditor - Controller, Contra Costa County Board of Supervisors, and the Bond Rating Agencies. The original contract with Cropper Accountancy Corporation was for a four year term with an optional fifth year. Last year staff recommended an extension of the contract with Cropper Accountancy Corporation for a fifth year. Again this year, staff recommends extending the contract for a sixth year to maintain continuity due to potential staff turnover next year. This recommendation was discussed with the Budget and Finance Committee on October 3,.2011 and they concurred. The Board is being asked to consider and take action to extend the contract for one year. RECOMMENDED BOARD ACTION: The Board is being asked to take two separate actions: 1) Receive and accept the audited financial statements for the Fiscal Year ended June 30, 2011 and 2) Extend the contract for audit services with Cropper Accountancy Corporation for a sixth year through November 30, 2012. N: \ADMINSUP\ADMIN \POSPAPER\Audited Financial Statements 10- 20- 11.doc Page 2 of 2 Central Contra Costa Sanitary District October 14, 2011 TO: BOARD OF DIRECTORS VIA: JAMES KELLY, GENERAL MANAGER FROM: DEBBIE RATCLIFF, CONTROLLER SUBJECT: JUNE 30, 2011 AUDITED FINANCIAL STATEMENTS Attached are the final June 30, 2011 audited financial statements prepared by Cropper Accountancy Corporation. The results of the audit were reviewed in detail with the Budget and Finance Committee. John Cropper will provide a brief review of the results with the full Board on October 20, 2011. H:Wudited Financials- Cover Memo- 201 1doc.doc Tw �� I • II CERTIFIED PUBLIC ACCOUNTANTS CENTRAL CONTRA COSTA SANITARY DISTRICT FINANCIAL STATEMENTS JUNE 309 2011 �5., professio service. mt< TABLE OF CONTENTS Page No. Independent Auditors' Report 1-2 Management's Discussion and Analysis 3-8 Statement of Net Assets 9 Statement of Revenues, Expenses, and Changes in Net Assets 10 Statement of Cash Flows 11 Notes to Financial Statements 12-33 Supplementary Information: Combining Schedule of Net Assets 34 Combining Schedule of Revenues, Expenses, and Changes in Net Assets 35 Schedule of Running Expense — Comparison of Budget and Actual 36 Expenses by Department Running Expense — Schedule of Supplemental Net Assets Analysis 37 re • a CERTIFIED PUBLIC ACCOUNTANTS Office tixaw 2700 Ygnacio Valley Rd, Ste 230 Walnut Creek, CA 94598 (925)932- 3860let marling addtm 2977 Ygnacio Valley Re, PMB 460 Walnut Greek, CA 94598 (925) 476 -9930 efax INDEPENDENT AUDITORS' REPORT To the Board of Directors of Central Contra Costa Sanitary District Martinez, California I mw, cropperaccountancy. com We have audited the accompanying financial statements of the Central Contra Costa Sanitary District as of and for the year ended time 30, 2011, as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the State Controller's Audit Requirements for Califomia Special Districts. 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 financial statements referred to above present fairly, in all material respects, the financial position of the Central Contra Costa Sanitary District as of June 30, 2011, and the changes in financial position and cash flows thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America, as well as accounting systems prescribed by the California State Controller's office for Special Districts. Accounting principles generally accepted in the United States of America require that the Management's Discussion and Ana /vsis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Govemmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide assurance., professiortaV QaU. service. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Central Contra Costa Sanitary District's financial statements as a whole. Management's Discussion and Analvsis, budgetary comparison information, and supplemental information on pages 34 — 37 are presented for purposes of additional analysis and are not a required part of the financial statements. Managements Discussion and Analysis. budgetary comparison information, and supplemental information on pages 34 — 37 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves. and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole. September 30, 2011 2 C.r ., /'[uq,-6cy &FW,4c.4\ CROPPER ACCOUNTANCY CORPORA'T'ION 11IANAGEMENT'S DISCUSSION AND ANALYSIS This section of the District's annual financial report presents an analysis of the District's financial performance during the fiscal year ended June 30; 2011. This information is presented in conjunction with the audited financial statements, which follow this report. FINANCIAL HIGHLIGHTS The District's 2010 -11 financial highlights are listed below. These results are discussed in more detail later in the repots. • The District's total ending net assets increased by $1.3 million or 0.22% in 2010 -11 when compared to fiscal year 2009 -10; when comparing 2010 -11 to 2008 -09, net assets have increased by $11.1 million or 1.82 %. This is mainly due to capital project asset additions. • Total revenues in 2010 -11 increased by $02 million or 0.33% when compared to 2009 -10, when comparing 2010 -11 to 2008 -09, total revenue has increased by $5.0 million or 7.26 %. Although there was no Sewer Service Charge (SSC) rate increase in 2009 -10 and 2010 -11, a larger portion of the internal SSC allocation was shifted from Capital Contributions to Operating Revenue. • Total 2010 -11 expenses increased by $2.0 million or 2.55% compared to 2009 -10; when comparing 2010 -11 to 2008 -09, total expenses increased by $2.6 million or 3.28 %. This is mainly due to higher cost of labor and benefits. • Capital Contributions were significantly lower in 2010 -11 compared to 2009 -10 and 2008 -09. Capital Contributions decreased by $6.6 million or - 42.29% comparing 2010 -11 to 2009 -10. When comparing 2010 -11 to 2008 -09, Capital Contributions decreased by $11.1 null ion or - 55.10 %. This is mainly due to the volatile housing market that resulted in lower connection fees along with a smaller SSC revenue allocation to Capital Customer Contributions. OVERVIEW OF THE FINANCIAL STATEMENTS This amoral report includes the management's discussion and analysis report, the independent auditor's report and the basic financial statements of the District.. The financial statements also include notes that explain information in the financial statements in more detail. REQUIRED FINANCIAL STATEMENTS The Financial Statements of the District report information utilizing methods similar to those used by private sector companies. These statements offer short and long -tern financial information about its activities. • Statement of Net Assets — reports the District's current financial resources (shod -tetra spetidable resources) with capital assets and long -term obligations • Statement of Revenues, Expenses and Changes in Net Assets — reports the District's operating and non - operating revenues by major source along with operating and non- operating expenses and capital contributions • Statement of Cash Flows — reports the District's cash flows front operating activities, non - capital financing activities, capital and related financing activities, and investing activities STATEMENT OF NET ASSETS The following table shows the condensed statement of net assets of the Central Contra Costa Sanitary District for the past three years: Condensed Statement of Net Assets Fiscal Year Fiscal Year Fiscal Year 2n1nan11 2009 -2010 2008 -2009 Current Assets $ 80,407,120' $ 77,968,736 $ 73,083,764 Capital Assets 593,461,791 586,785,155 578,889,989 Other Non - current Assets 12,456,011 27,196,507 5,361,834 Total Assets 686,324,922 691,950,398 657,335,587 Current Liabilities 10,682,746 11,255,377 15,098,030 Non - Current Liabilities 52,844,305 59,243,809 30,557,514 Total Liabilities 63,527,051 70,499,186 45,655,544 Invested in Capital Assets, Net of Related Debt 541,613,208 531,324,187 552,165,498 Restricted - Debt Service 4,612,103 4,565,970 3,163,956 Unrestricted 76,572,560 85,561,055 56,350,589 Total Net Assets $ 622,797,871 $ 621,451,212 $ 611,680,043 The total net assets of the District increased from $611.7 million in 2008 -09 to $621.5 mullion in 2009- 10 and to $622.8 million in 2010 -11. The increase in net assets over the 3 -year period totals $11.1 million and is the result of both net income and capital contributions, $9.8 million in 2009 -10 and $13 million in 2010 -11 (shown in the next table). By far the largest portion of the District's net assets (86.9% percent) reflects its investment in capital assets (e.g. land, buildings, machinery, equipment, intangible assets, and sewer line infrastructure), less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide services to its ratepayers: consequently, these assets are not available for firhue spending_ Although the District's investment in its capital assets is reported net of debt; it should be noted that the fiords needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. There is currently $4.6 million restricted for debt service and is higher than in 2008 -09 due to the District refinancing current debt in addition to raising $30 million in new bond proceeds in 2009 -10. The remaining balance of $76.6 million in unrestricted net assets may be used to meet the District's ongoing obligations to its ratepayers and creditors. These unrestricted net assets may also be used for payment of long -tern unfimded liabilities. 4 REVIEW OF REVENUES. EXPENSES. AND CRANGES IN NET ASSETS The table below shows the condensed statement of revenues, expenses, and changes in net assets for the Central Contra Costa Sanitary District for the past 3 years: Condensed Statement of Revenues, . Expenses, and Changes in Net Assets Fiscal Year Fiscal Year Fiscal Year 2010 -2011 2009 -2010 .2008 -2009 Sewer Service Charges SSC $ 58,320,822 $ 57,357,188 $ 51,843,311 Other Service Charges and Miscellaneous 1,575,738 1,474,898 1,540,833 Total Operating Revenue 59,896,560 58,832,086 53,384,144 Property Tax 12,213,624 12,260,123 12,539,375 Permit & Inspection Fees 895,825 776,348 1,093,756 Interest and All Other 673,990 1,568,235 1,672,618 Total Non-Operating Revenues 13,783,439 14,604,706 15,305,749 Total Revenues 73,679,999 73,436,792 68,689,893 Total Labor and Benefits 41,705,131 39,986,763 39,440,034 Chemicals & Utilities 5,664,360 6,268,343 7,414,467 Repairs and Maintenance 2,972,395 2,868,675 3,057,540 Professional, Legal and Outside Services 2,425,612 2,129,552 2,832,001 Materials & Supplies 1,944,767 1,705,649 1,954,288 Hauling and Disposal 944,394 939,960 880,589 Self- Insurance Expense 1,003,115 746,612 958,906 All Other 1,575,905 1,223,191 1,437,429 Depreciation Expense 20,580,061 20,969,429 19,417,941 Total Operating Expenses 78,815,740 76,838,174 77,393,195 Non-Operating Expense - Interest Expense 2,585,112 2,539,383 1,421,686 Total Expenses 81,400,852 79,377,557 78,814,881 Income Before Capital Contributions 7,720,853 5,940,765 10,124,988 Customer Contributions SSC 5,018,092 6,793,040 13,938,421 Contributed Sewer Lines 533,616 1,840,259 1,231,022 Capital Contributions - Connection Fees 3,515,804 7,078,635 5,025,493 Total Capital Contributions 9,067,512 15,711,934 20,194,936 Change in Net Assets 1,346,659 9,771,169 10,069,948 Beginning Net Assets 621,451,212 611,680,043 601,610,095 Ending Net Assets $ 622,797,871 $ 621,451,212 $ 611,680,043 In 2010 -11, operating revenues increased by $1.1 million or 1.81 %; however, non - operating revenue decreased by $0.8 million or -5.62% when comparing 2010 -11 to 2009 -10. The change in total revenue resulted in a small increase of $0.2 million or .33% when comparing 2010 -11 to 2009 -10. Comparing 2010 -11 to 2008 -09, total revenue has increased by $5.0 million or 7.26 %q, mainly due to the internal SSC allocation. There was no SSC rate increase nn 2010 -11 and 2009 -10; each year a portion of SSC revenue is shifted from Capital Contributions to Operating Revenue to cover Operating Expenses. Property Tax revenue has basically remained flat for the 3 -year period due to small growth to the tax base, in spite of the sub -prime mortaage crisis and recession. Permit and inspection fees have decreased in the 3 -year period reflecting the slower housing market. Interest and all other revenue continue to drop, mainly due to lower investment rates on District investments_ In 2010 -11, total expenses increased by $2.0 million or 2.55% compared to 2009 -10. Comparing 2010- 11 to 2008 -09, total expenses were $2.6 mullion or 3.28% higher. Increases are mainly due to higher labor and benefit costs offset by plamred cost savings and lower chemical and utility costs. Labor costs increased due to cost -of- living adjustments, merit increases, filling of vacant positions, and increased employee benefit costs. Depreciation expense increased due to new capital additions. Non- Operating Expense is mainly driven by debt service interest expense. Total income before capital contributions went fi-onn -$10.1 trillion in 2008 -09 to -$6.0 million in 2009 -10 and then increased to $ -7.7 million in 2010 -11. Capital contributions in 2010 -11 were $9.1 million compared to $15.7 million in 2009 -10 and $20.2 million in 2008 -09_ This was mainly due to less contributed sewer lilies and connection fees due to the constntction and housing slowdown, except for one large complex connection that was delayed but then paid early in 2009 -10_ The total change in net assets decreased by $8.7 million or - 86.63% when comparing 2010 -11 to 2008 -09. CAPITAL ASSETS Capital assets include the District's entire major infrastructure including wastewater treatment facilities, sewers, land, buildings, pturping stations, vehicles, intangible assets and furniture and equipment exceeding our capitalization policy limit of $5,000, net of depreciation. As of June 30, 2011, the District's investment in capital assets totaled $593.5 million, which is an increase of $6.7 million or 1.14% over the capital asset balance of $586.8 million at June 30, 2010. Capital Assets increased by $14.6 million or 2.52% comparing 2010 -11 to 2008 -09. A comparison of the District's capital assets over the past 3 fiscal years is presented below: Canital Assets Fiscal Year Fiscal Year Fiscal Year 2n1n-2n11 2009 -2010 2008 -2009 Land $ 17,114,720 $ 17,114,720 $ 17,114,720 Sewage Collection System 290,317,724 286,351,576 273,333,617 Contributed Sewer Lines 149,110,351 148,580,734 146,757,520 Outfall Sewers 8,518,443 8,518,443 8,518,443 Sewage Treatment Plant 287,537,513 275,413,411 268,399,708 Recycled Water Infrastructure 12,300,131 12,281,480 11,936,662 Pumping Stations 54,412,730 53,750,940 52,404,387 Buildings 31,317,466 21,206,981 19,997,044 Intangible Assets 2,058,921 1,806,272 1,521,424 Furniture & Equipment 13,243,330 13,756,662 14,523,054 Motor Vehicles 6,038,527 5,759,209 5,983,539 Construction In Progress 22,632,142 26,735,297 24,645,390 Subtotal '2' 871,275,725 845,135,508 Less Accumulated Depreciation 301,140,207 284,490,570 266,245,519 Total Capital Assets (net of depreciation) $ 593,461,791 $ 586,785,155 $ 578,889,989 M The major reasons for the increase in capital assets, net of depreciation, of $6.7 nmllion from 2009 -10 to 2010 -11 and $14.6 million from 2008 -09 to 2010 -11, areas follows: • Treatment plant infrastructure renovations, upgrades, equipment, and improvements increased by $12.1 million comparing 2010 -11 to 2009 -10 and $19.1 million comparing 2010 -11 to 2008 -09. • Buildings increased by $10.1 million comparing 2010 -11 to 2009 -10 and $11.3 [trillion comparing 2010 -11 to 2008 -09. This mainly reflects the Walnut Creek Collection System Operations new building construction (90% of the cost), along with improvements to the Household Hazardous Waste Facility and other smaller structures_ • Sewer pipe ongoing renovations, pumping station improvements, and contributed sewer lines increased by $5.2 million comparing 2010 -11 to 2009 -10 and $21.3 million comparing 2010 -11 to 2008 -09. • All other asset categories, including constitution in progress, decreased by $4.1 million comparing 2010-1 1 to 2009 -10 and $2.3 million comparing 2010 -11 to 2008 -09. • Capital Asset increases are offset by an increased subtraction of accumulated depreciation of $16.6 million comparing 2010 -11 to 2009 -10 and $34.9 million comparing 2010 -11 to 2008 -09 due to our increasing capital asset investment and its associated depreciation expense. See Note 4 in the audited financial statements. DEBT ADMINISTRATION The District has the following outstanding debt as of June 30, 2011: Revenue Bonds Water Reclamation Loan Total $ 50,665,000 1,183,583 $ 51,848,583 See Note 6 in the audited financial statements. ECONOMIC AND OTHER FACTORS The Federal and State of California economies have failed to recover fully from the 2008 recession. The housing market is still volatile, which impacts user fees. Changes in the state budget have a significant impact on the District. Federal and State economic challenges will continue into the future and will have a pickle -down effect on local governments. Some potential impacts may be: Continuation of the slow recovery and associated impacts Employee Memorandum of Understanding contract negotiations; current contracts end as of April 17, 2012 • Increased cost of employee benefits, mainly pension costs and healthcare • CmTent and future legislation impacting public employee pensions • Other Post - Employment benefit required contributions based on actuarial analyses using lower interest rates • Possibility of continued reduced new connections and connection fees • Regulatory requirements becoming more stringent, causing the District to spend more on compliance, both for operations and maintenance costs and capital projects • Continued low interest rates negatively impact interest eamings In addition to making efforts to reduce spending and improve process efficiencies, the District has the ability to raise the Sewer Service Charge to meet our long -teen commitments. The District has a Standard and Poors AAA rating, and can obtain bond financing if necessary. FINANCIAL CONTACT The financial report is designed to provide our customers and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact: Controller, Central Contra Costa Sanitary District, 5019 Imhoff Place, Martinez, CA 9455 1. 3 FINANCIAL STATEMENTS CENTRAL CONTRA COSTA SANITARY DISTRICT Statement of Net Assets June 30, 2011 Restricted cash and equivalents 2011 ASSETS 5,318.908 Current Assets 570,829,649 Cash and cash equivalents . $ 48.081,743 Short temu investments 14.992,660 Accounts receivable. net 13,746,665 Interest receivable 61.841 Parts and supplies 1,841468 Prepaid expenses 1,681.743 Total Current Assets 80,407.120 Noncurrent Assets Restricted cash and equivalents 3,440.592 Restricted investments 5,318.908 Land. property. plant and equipment net 570,829,649 Construction at progress 22,632,142 Contractual and Alhambra Valley assessment districts receivable 2,425,078 OPEB asset (obligation) 916,736 Revenue bond issuance costs, net 354.697 Total Noncurrent Assets 605.917.802 Total Assets 686.324.922 LIABILITIES Current Liabilities Accounts payable and accrued expenses 4,519,541 Interest payable 800,397 Current portion of refunding revenue bonds 3,465,000 Current portion of water reclamation loan contract 156.345 Current portion of accrued compensated absences 515.000 Liability for uninsured clauns 1.000,000 Refundable deposits 226,463 Total Current Liabilities 10.682.746 Noncurrent Liabilities Revenue bonds, net of current portion 47,200.000 Accrued compensated absences, net of current portion 4,617.067 Water reclamation loan contract, net of current portion 1.027.238 Total Noncurrent Liabilities 52,844,305 Total Liabilities 63.527.051 IM MA-11-MV Invested in capital assets. net of related debt 541,613.208 Restricted for debt service 4.6127103 Unrestricted 76,572.560 Total Net Assets $ 622.797.871 The accompanying notes are an integral part of the financial statements CENTRAL CONTRA COSTA SANITARY DISTRICT Statement of Revenues, Expenses, and Changes in Net Assets Year Ended June 30, 2011 OPERATING EXPENSES Sewage collection and pumping stations 11,468.189 Sewage treatment 21.360,065 Engineering 6,855,745 Administrative and general 18,551,680 Depreciation 20,580,061 Total operating expenses 78,815,740 OPERATING LOSS (18.919,180) NON - OPERATING REVENUES (EXPENSES) Taxes 2011 OPERATING REVENUE , 895.825 Sewer service charges (SSC) $ 49,095.870 Service charges - City of Concord 9,224.952 Other service charges 913.017 Miscellaneous charges 662.721 Total operating revenue 59.896.560 OPERATING EXPENSES Sewage collection and pumping stations 11,468.189 Sewage treatment 21.360,065 Engineering 6,855,745 Administrative and general 18,551,680 Depreciation 20,580,061 Total operating expenses 78,815,740 OPERATING LOSS (18.919,180) NON - OPERATING REVENUES (EXPENSES) Taxes 11213,624 Pemtit and inspection fees , 895.825 Interest earnings 673,990 Interest expense (2,061,903) Allowance for doubtful accounts Other income (expense) (523,209) Total non - operating revenues (expenses) 11,198.327 Income before contributions and transfers (7,720,853) City of Concord contributions to capital costs 3.216.190 Customer contributions to capital cost (SSC) 1.801.902 Contributed sewer lines 533.616 Capital contributions - connection fees 3.515.804 CHANGE IN NET ASSETS 1,346,659 Total Net Assets - Beginning 621,451,212 Total Net Assets - Ending $ 622.797,871 The accompanying notes are an integral part of the furancial statements 10 CENTRAL CONTRA COSTA SANITARY DISTRICT Statemeut of Cash Flows Year Ended June 30, 2011 The accompanying notes are an integral pmt of the financial statements 11 2011 Cash Flows From Operating Activities: Receipts from customers and users $ 60,640.501 Payments to suppliers (107.076x88) Payments to employees and related benefits 45.076.530 Net cash used in operating activities (1,359.157) Cash Floes From Noncapital Financing Activities: Receipt of taxes 12.213.624 Inspection/pernit fees and other non - operating income 372.615 Interest paid on reimbursements payable - Net cash provided by non capital and related financing activities 12.586.239 Cash Floes From Capital And Related Financing Activities: Capital contributions 5.551.708 Connection fees 3.515.804 Acquisition and construction of capital assets (28,417.102) Proceeds from bond issuance - Principal paid on bonds (3.5927680) Interest paid on bonds (2.110.106) Net cash provided by (used in) capital and related financing activities (25.052.376) Cash Floes From Investing Activities Purchases of short tenn investments (3.492,320) Interest received 704.524 Net cash provided by (used in) investing activities (1787.796) Net increase (decrease) in cash and cash equivalents (16.613.090) Cash and cash equivalents. July 1 68.135.425 Cash and Cash equivalents, June 30 $ 51.522335 Reconciliation of operating loss to net cash provided _ (used) by operating activities . Operating gain (loss) (18.919.180) Adjustments to reconcile operating income to net cash used in operating activities: Depreciation expense 207580.061 Net book value on capital assets retired 1,60.405 Allowance for doubtfid accounts - - (hncrease) decrease in: Accounts receivable 743.941 Parts and supplies (109.156) Prepaid expenses (586,946) Increase (decrease) in: Accounts payable and accrued expenses (458.666) Refundable deposits (17,222) Liability for uninsured clai as - OPEB obligation (3.159.777) Accrued compensated absences (591617) Net cash provided by (used in) operating activities $ (1,359.15 i) Noncash investing, capital, and financing activities Contributions of capital assets $ 533,616 End of Period: Unrestricted cash and equivalents $ 48.081.743 Restricted cash mid equivalents 3.440.592 t $ 51,522.335 The accompanying notes are an integral pmt of the financial statements 11 NOTES TO THE FINANCIAL STATEMENTS CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 1. DESCRIPTION OF DISTRICT AND SIJMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reomline Entitv The Central Contra Costa Sanitary District, a special district and a public entity established under the Sanitary District Act of 1923, provides sewer service for the incorporated and unincorporated areas under its jurisdiction. A Board of Directors comprised of five elected members governs the District. As required by accounting principles generally accepted in the United States of America, these basic financial statements present the financial statements of Central Contra Costa Sanitary District and its component trait. The component trait discussed in the following paragraph is blended in the District's reporting entity because of the significance of its operational or financial relationship with the District. Blended Component Unit — Component units are legally separate organizations for which the District is financially accountable. Component units may also include organizations that are fiscally dependent on the District, in that the District approves their budget, the issuance of their debt or the levying of their taxes. In addition, component tints are other legally separate organizations for which the District is not financially accountable but the nature and significance of the organization's relationship with the District is such that exclusion would cause the District's financial statements to be misleading or incomplete. For financial reporting put-poses, the component trait discussed below is reported in the District's financial statements because of the significance of its relationship with the District. The component unit, although a legally separate entity, is reported in the financial statements using the blended presentation method as if it were part of the District's operations because the Governing Board of the component unit is essentially the same as of governing board of the District and because its purpose is to finance facilities to be used for the direct benefit of the District. The Central Contra Costa Sanitary District Facilities Financing Authority was organized solely for the purpose of providing financial assistance to the District. The authority does this by acquiring, constructing, improving and financing various facilities, land and equipment purchases, and by leasing or selling certain facilities, land and equipment for the use, benefit and enjoymeint of the public served by the District. The Corporation has no members and the Board of Directors of the Corporation consists of the same persons who are serving as the Board of Directors of the District. There are no separate basic financial statements prepared for the Corporation. Basis of Accotuitiva The District's financial statements are prepared on the accrual basis of accounting. The District applies all applicable GASB pronouncements for certain accounting and financial reporting guidance. In December of 2010, GASB issued GASBS No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre- November 30, 1989 FASB and AICPA Pronouncements. This statement incorporates pronouncements issued on or before November 30, 1989 into GASB authoritative literature. This includes pronouncements by the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinions (APB), and the Accounting Research Bulletins of the American Institute of Certified Public Accountants' (.AICPA) Conuuittee on Accounting Procedure, unless those pronouncements conflict with or contradict with GASB pronouncements. 12 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 1. DESCRIPTION OF DISTRICT AND SUNDIARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The District is a proprietary entity; it uses an enterprise fund format to report its activities for financial statement purposes. Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that the cost and expenses, including depreciation, of providing goods or services to its customers be financed or recovered primarily through user charges; or where the governing body has decided that periodic determination of revenues earned, expense. inured, mid net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Enterprise fiends are used to account for activities similar to those in the private sector, where the proper matching of revenues and costs is important and the Rill accrual basis of accomiting is required. With this measurement focus, all assets and liabilities of the enterprise are recorded on its statement of net assets, all revenues are recognized when earned and all expenses, including depreciation, are recognized when incurred. Enterprise. fiends distinguish operating revenues and expenses from non- operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with an enterprise fluid's principal ongoing operations. The principal operating revenues of the District are charges to customers for services. Operating expenses for the District include the costs of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non - operating revenues and expenses. For internal operating purposes, the District's Board of Directors has established four separate sub - funds, each of which includes a separate self - balancing set of accounts and a separate Board approved budget for revenues and expenses. These sub -fiuids are combined into the single enterprise fiord presented in the accompanying financial statements. The nature and purpose of these sub -funds are as follows: Running Expense Running expense accounts for the general operations of the District. Substantially all operating revenues and expenses are accounted for in this sub -fined. Sewer Constrviction Sewer construction accounts for non - operating revenues, which are to be used for acquisition or construction of plant, property and equipment. Self Insurance Self insurance accounts for* interest earnings on cash balances in this sub -find and cash allocations from other sub - funds, as well as for costs of insurance premiums and claims not covered by the District's insurance coverage. li r- CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Debt Service Debt service accounts for activity associated with the payment of the District's long term bonds and loans. That portion of the District's net assets which is allocable to each of these sub -finds has been shown separately in the accompanying supplementary information to the financial statements. Tine District's Board of Directors adopts annual budgets oil a basis consistent with accounting principles generally accepted in the United States of America. Investments Investments held at Ame 307 2011, with original maturities greater than one year, are stated at fair value. Fair value is estimated based on quoted market prices at year -end. All investments not required to be reported at fair value are stated at cost or amortized cost. Prepaids Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. Bank Escrow Deposit Ann escrow agreement was formed between the District and the National Park Service for the Right of Way through the John Muir National Historic Site, in lien of issuing a.perfornance bond. "I1ne current Right of Way Permit is 10 years, but is renewable and must remain in effect so long as there is sewerage running through the area; therefore, it is unlikely that the escrow funds will ever be released to the District. These fiords are listed as restricted cash in the financial statements. See note 2. Parts and Supplies Parts and supplies are valued at average cost and are used primarily for internal purposes. Property, Plant, and Equipment Purchased capital assets are stated at historical cost. Capital assets contributed to the District are stated at estimated fair value at the time of contribution. The capitalization threshold for capital assets is $5,000. Expenditures which materially increase the value or life of capital assets are capitalized and depreciated over the remaining useful life of the asset. The term depreciation includes amortization of intangible assets. 14 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 1. DESCRIPTION OF DISTRICT AND SUMA4ARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Depreciation of exhaustible capital assets has been provided rising the straight -line method as follows: Years Sewage Collection Facilities Intangible Assets Sewage Treatment Plant and Pumiping Plants Buildings Furniture and Equipment Motor Vehicles Defined Contribution Retirement Plans n 75 40 50 5 -15 6 -15 District employees may defer a portion of their compensation under a District sponsored Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. Under this Plan, participants are not taxed on the deferred portion of their compensation until it is distributed to them; distributions may be made only at tennination, retirement, death, or in an emergency as defined by the Plan. The District does not make contributions to the plan. The plan's 457 assets are held in trust for the exclusive benefit of the participants and are not included in the District's financial statements. The District also contributes to a money purchase plan created in accordance with Internal Revenue Code section 401(a). Contributions to the plan are made in accordance with a memorandum of understanding stating that in lieu of making payments to Social Security, the District contributes to the 401(x) Plan an amount equal to that which would have been contributed to Social Security on behalf of its employees as long as the District is not required to participate in Social Security. The assets are held in trust and are not recorded on the books of the District. The District contributed $1,527,289 to the plan during the year ended June 30, 2011. Reclassifications Certain iterns in the prior year financial statements have been reclassified to match their presentation in the current year financial statements. Property Taxes Property tax revenue is recognized in the fiscal year for which the tax is levied. The County of Contra Costa levies, bills and collects property taxes for the District; all material arnounts are collected by Jime 30. 15 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 1. DESCRIPTION OF DISTRICT AND SUAJAIARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) General County taxes collected are the same as the amount levied since the County participates in California's alternative method of apportionment called the Teeter Plan. The Teeter Plan as provided in Section 4701 at seq. of the State of Revenue and Taxation Code establishes a mechanism for the county to advance the full amount of property tax and other levies to taxing agencies based on the tax levy, rather than on the basis of actual tax collections. Although this system is a simpler method to administer, the County assumes the risk of delinquencies. The County in return retains the penalties and accrued interest thereon. Secured Property tax bills are mailed once a year, during the month of October on the current secured tax roll, to the owner of the property as of the lien date (January 1). Payments can be made in two installments, and are due on November 1 and February 1. Delinquent accounts are assessed a penalty of 10 percent. Accounts which remain unpaid on June 30 are charged all additional 1 '/2 percent per month. Unsecured property tax is due on July I and becomes delinquent on August 31 _ The penalty percentage rates are the same as secured property tax. Compensated Absences The liability for vested vacation, compensatory time, and sick pay is recorded as an expense when earned. District employees have a vested interest it 100 percent of accrued vacation time and 85 percent of accrued sick time for employees hied before May 1, 1985. Employees hired after May 1, 1985 have a vested interest in up to 40 percent of their sick time, based upon length of employment with the District. In fiscal 2011, accrued compensated absences decreased from $5,724,684 to $5,132,067, or by $592,617. The current portion of the liability to be used within the next year was estimated by management to be approximately $515,000 at June 30, 2011. Tire change of $592,617 during fiscal 2011 consists of increases of $486,841 and decreases of $1,079,458. Statement of Cash Flows For purposes of the statement of cash flows, all highly liquid investments, including restricted assets, with maturities of three months or less when purchased, are considered to be cash equivalents. Included therein are petty cash, bank accounts, and the State of California Local Agency Investment Fund (LAIF). Restricted assets are debt service amounts maintained by fiduciaries and not available for general expenses. Use of Estimates The preparation of financial statements in confornhity.with accounting principles generally accepted in the United States of America requires management to make estimates and assumnptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 16 Y CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOU, TING POLICIES (continued) New Accounting Pronouncements In March of 2009, GASB issued GASBS No. 54, Fund Balance Reporting and Gove"inlental Ftmd Tipe Definitions. This Statement will improve financial reporting by providing fiord balance categories and classifications that will be more easily understood. Elimination of the reserved component of find balance in favor of a restricted classification will enhance the consistency between information reported in the govermrient -wide statements and information in the governmental fluid financial statements and avoid confusion about the relationship between reserved fimd balance and restricted net assets. The find balance classification approach in this Statement will require governments to classify amounts consistently, regardless of the find type or colunm in which they are presented. As a result, an amount cannot be classified as restricted in one find but unrestricted in another. The find balance disclosures will give users information necessary to understand the processes under which conswurits are imposed upon the use of resources and how those constraints may be modified or eliminated. The clarifications of the govenmmental find type definitions will reduce uncertainty about which resources call or should be reported in the respective find types. The provisions of the Statement are effective for fiscal years beginning after June 30, 2011. The District is classified as an Enterprise Fund and not a Governmental Fund Type. As such, this standard will not have an effect on the financial statements of the District. In December of 2009, GASB issued GASBS No. 57. OPEB Measurements br Agent Employers and Agent Multiple - Employer Plans. This Statement amends Statement No. 45, Accowiting and Financial Reporting by Employers for Postemplo ment Benefits Other Than Pensions, to pennit an agent employer that has an individual- employer OPEB plan with fewer than 100 total plan members to use the alternative measurement method, at its option, regardless of the number of total plan members in the agent multiple - employer OPEB plan in which it participates. Consistent with this change to the employer- reporting requirements, this Statement also amends a Statement No. 43, Financial Reporting for Postemploinnent Benefit Plans Other Than Pension Plans, requirement that a defined benefit OPEB plan obtain an actuarial valuation. The amendment penmmits the requirement to be satisfied for an agent multiple- employer OPEB plan by reporting an aggregation of results of actuarial valuations of the individual- employer OPEB plans or measurements resulting from use of the alternative measurement method for individual- employer OPEB plans that are eligible. The District is required to implement the provisions of the Statement for the year ended June 30, 2012 (effective for periods beginning after Ame 15, 2011). This Statement will not result in a change in current practice, since the District does not use the alternative measurement method. hi November of 2010, GASB issued GASBS No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The objective of this Statement is to improve financial reporting by addressing issues related to service concession arrangements (SCAB), which are a type of public - private or public - public partnership. 17 Y CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accounting Pronouncements (continued) As used in this Statement, an SCA is an arrangement between a transferor (a govenmient) and an operator (governmental or nongovernmental entity) in which (1) the transferor conveys to an operator the right and related obligation to provide services through the use of infiastructrue or another public asset (a "facility ") nn exchange for significant consideration and (2) the operator collects and is compensated by fees from third parties. The District is required to implement the provisions of this Statement for the year ended June 30, 2013 (effective for periods beginning after December 15, 2011). The District has no known SCAB that would require disclosure or have a material effect on the financial statements of the District- In November of 2010, GASB issued GASBS No. 61, The Financial Reporting Entity: Omnibus. This Statement amends Statements No. 14 and 34, to modify certain requirements for inclusion of component units in the financial reporting entity. For organizations that previously were required to be included as component units by meeting the fiscal dependency criterion, a financial benefit or burden relationship also would need to be present between the primary government and that organization for it to be included in the reporting entity as a component unit. Further, for organizations that do not meet the financial accountability criteria for inclusion as component units but that, nevertheless, should be included because the primary governnnent's management determines that it would be misleading to exclude them, this Statement clarifies the manner in which that determination should be made and the types of relationships that generally should be considered in making the detennnnnation. This Statement also amends the criteria for reporting component units as if they were part of the primary govennuent (that is, blending) in certain circumstances and clarifies the reporting of equity interests in legally separate organizations. It requires a primary government to report its equity interest in a component unit as an asset. The District is required to implement the provisions of this Statement for the year ended June 30, 2013 (effective for periods beginning after June 15, 2012). This Statement will not result in a change in current practice, or have a material effect on the financial statements of the District. In December of 2010, GASB issued GASBS No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre - November 30, 1949 FASB and AICPA Pronouncements. Time objective of this Statement is to incorporate into the GASB's authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements: 1. Financial Accounting Standards Board (FASB) Statements and Interpretations 1 Accounting Principles Board Opinions 3. Accounting Research Bulletins of the American Institute of Certified Public Accountants' (AICPA) Committee on Accounting Procedure 18 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 1. DESCRIPTION OF DISTRICT AND SUit1NIARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accountine Pronouncements (continued) This Statement also supersedes Statement No. 20, Accounting and Financial Reporting for Proprietary Fronds and Other Governmental Entities That Use Proprietmy Fund Accounting, thereby eliminating the election provided in paragraph 7 of that Statement for enterprise fiords and business -type activities to apply post - November 30, 1989 FASB Statements and Interpretations that do not conflict with or contradict GASB pronouncements. However, those entities can continue to apply, as other accounting literature, post - November 30, 1989 FASB pronouncements that do not conflict with or contradict GASB pronouncements, including this Statement. The District is required to implement the provisions of this Statement for the year ended June 30, 2013 (effective for periods beginning after December 15, 2011). This Statement will not result in a change in current practice, or have a material effect on the financial statements of the District. In June of 2011, GASB issued GASBS No. 63, Financial Reporting and Deferred Outflows of Resources, Deferred Blows of Resources, and Neu Position. This Statement provides financial reporting guidance for deferred outflows of resources and deferred inflows of resources. Concepts Statement No. 4, Elements of Financial Statements, introduced and defined those elements as a consumption of net assets by the government that is applicable to a fare reporting period, and an acquisition of net assets by the government that is applicable to a future reporting period, respectively. Previous financial reporting standards do not include guidance for reporting those financial statement elements, which are distinct from assets and liabilities. Concepts Statement 4 also identifies net position as the residual of all other elements presented in a statement of financial position. This Statement amends the net asset reporting requirements in Statement No. 34, Basic Financial Statements —and Management's Discussion and Analysis for State and Local Governments, and other pronouncements by incorporating deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and by renaming that measure as net position, rather than net assets. The District is required to implement the provisions of this Statement for the year ended June 30, 2013 (effective for periods beginning after December 15, 2011). -1-his Statement should not result in a change in cu rem practice, or have a material effect on the financial statements of the District. In hme of 2011, GASB issued GASBS No. 64, Derivative firstrmnents: Application of Hedge Accounting Termination Provisions. This Statement amends Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. Some governments have entered into interest rate swap agreements and commodity swap agreements in which a swap counterparty, or the swap counteuparty's credit support provider, commits or experiences either an act of default or a temination event as both are described in the swap agreement. Many of those governments have replaced thew swap countenparty, or swap coumterparty's credit support providers, either by amending existing swap agreements or by entering into new swap agreements. When these swap agreements have been reported as hedging inshuunents, questions have arisen regarding the application of the termination of hedge accounting provisions in Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. Those provisions require a govermuent to cease hedge accounting upon the termination of the hedging derivative instnnnent, resulting in the inuuediate recognition of the deferred outflows of resources or deferred 'inflows of resources as a component of investment income. 19 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accounting Pronouncements (continued) The objective of tlus Statement is to clarify whether an effective hedging relationship continues after the replacement of a swap cotnterparty or a swap cotmterparty's credit support provider. This Statement sets forth criteria that establish when the effective hedging relationship continues and hedge accounting should continue to be applied. The District is required to implement the provisions of this Statement for the year ended June 30, 2012 (effective for periods begimring after June 15, 2011). This Statement will not result in a change in current practice, or have a material effect on the financial statements of the District. 2. CASH AND CASH EQUIVALENTS Sunuuary of Cash and Investments Investments as of June 30 are classified in the accompanying financial statements as follows: Cash and cash equivalents Short tern investments Restricted cash and investments Total Cash and Investments * Includes $100,000 bank- escrow deposit- see note 1. Policies and Practices $ 48,081,743 14,992,660 8,759,500 $ 71,833,903 Tire District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies, commercial paper; certificates of deposit placed with conrrnercial banks and/or savings and loan companies; and certificates of participation. State code and the District's investment policy prohibit the District from investing in investments with a rating of less than A or equivalent. District policy limits investments in conmtercial paper to prime quality with corporate assets over $500,000,000. 20 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 2. CASH AND CASH EOUIVALENTS (continued) General Authorizations Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below: Authorized Investment Type U.S. Treasury Obligations Banker's Acceptance Coinnuercial Paper (1) Collateralized Certificates of Deposit (2) County Pooled htvestmeut Funds Local Agency Investment Fund (LAIF) California State Limits Maturity District Policy Maximltm Maximum MaxilllAln Maximum Remaining Percentage Investment Percentage Maturity of Portfolio In One Issuer of Portfolio 5 years None None 100% 180 40% 30% 15% 270 25% 10% 15% 5 years 30% None 15% N/A None None 100% N/A None None 100% (1) Prime quality; limited to corporations with assets over $500,000,000 (2) Prior approval of the Board of Directors must be obtained to acquire maturities beyond one year Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment; generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates_ It is the District's policy to manage exposure to interest rate risk by purchasing a combination of shorter term and longer teen investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. District policy is that investment maturities do not exceed one year, with the exception of Treasury Notes or Local Agency Investment Fund, however investments can be held longer with Board approval. The District's investments at year end with the exception of the U.S Treasuries and Commercial Paper below are held in external investment pools which are liquid investments. Information about the sensitivity of the fair values of the District's investments to nnarket interest rate fluctuation is provided by the following schedule that shows the distribution of the District's investment by maturity: Investment Tvne Commercial Paper Commercial Paper Treasury Bills Total 21 Fair Value Maturity $ 47997,068 07/25/11 4,997,166 07/25/11 4,998.426 10/20/11 $ 14,991660 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 2. CASH AND CASH EQUIVALENTS (continued) Credit Risk Credit risk is the risk that an issue of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by the California Government Code, the District's investment policy, and the actual rating as of the year -end for each investment type. Not Minimum Required Rating at Year -End Fair Legal To Be Investment Type Valtie Rating Rated Aaa Urrated Cash $ 4,370,278 N/A $ 4,370278 $ - $ Money Markets 5,523.965 Aaa - 5.523,965 Connnercial Paper 9.994,234 Aaa - 9,994,234 Treasuries 4,998,426 Aaa 4.998,426 State Investment Pool 46.947.000 N/A 46.947,000 Total $ 71.833.903 $ 4.370.278 $20.516.625 $ 46.942000 Concentration of Credit Risk The investment policy of the District contains the limitation that no more that 15% of the District's investment portfolio will be invested in a single issuer. Dining the current fiscal year the District invested 65% of its monies in the State Investment Pool (LA1F) which is not lunited by the California Government Code or District Investment Policy. brvesdnents in County Treasmy — The District is considered to be a voluntary participant ill an external investnent pool. Tire fair value of the District's investment in the pool is reported in the accounting financial statements at amounts based upon the District's pro -rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to amortized cost of that portfolio). The balance available for withdrawal is based oil the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis. Investment in the State Investment Pool — The District is a voluntary participant in the Local Agency Investment Fumd (LAIF) that is regulated by California government code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the District's investment in the pool is reported in the accompanying financial statement at amounts based upon the District's pro -rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which is recorded on the amortized cost basis. 22 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 2. CASH AND CASH EQUIVALENTS (continued) . Custodial Credit Risk — Investments Custodial risk for investments is the risk that, in the event of the failure of the counterparty (e.g. the broker - dealer) to a transaction, a govemmnient will not be able to recover the value of its investment or collateral securities that are un the possession of another party. The California Government Code does not contain legal or policy requirements that would limit the exposure to custodial credit risk. The District's policy is to use the services of the Treasurer's Office of the County of Contra Costa, which will transact the District's investment decisions in compliance with the requirements of the District's policy. The Cotmty Treasurer's Office will execute the District's investments through such broker - dealers and financial institutions as are approved by the County Treasurer, and through the State Treasurer's Office for investment in the Local Agency hrvestment Fund. 3. ACCOUNTS RECEIVABLE At June 30, 2011, accounts receivable are comprised of the following: City of Concord (see Note 8) $ 12,441,142 Household Hazardous Waste Partners 791,533 Proposition IA loan 985,916 All other 513,990 Total Accounts Receivable 14,732,581 Allowance for Doubtfid Accounts (985,916) Net Accounts Receivable $ 13.746.665 Proposition I Loan Receivable Under the provisions of Proposition IA, and.as part of the 2009 -10 budget package passed by the California state legislature on July 28, 2009, the State of California borrowed 8% of the amount of property tax revenue, including those property taxes associated with the supplemental property tax apportioned to special districts. The state is required to repay this borrowing, plus interest; by June 30, 2013. After repayment of this initial borrowing, the California legislature may consider only one additional borrowing within a ten -year period. The amount of this borrowing pertaining to the District was $ 985,916. Tile borrowing by the State of California was recognized as a receivable in the accompanying financial statements, with an equal amount set up as an allowance for doubtful accounts. In the Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets, the tax revenues were recognized in the fiscal year for which they were levied (fiscal year 2010). Due to the current economic climate, and the current budget difficulties of the State of California, District management has decided to reserve the entire Proposition IA loan of $985,916. This amount is tracked as a loan receivable on the books, with a corresponding contra account on the Statement of Net Assets, which effectively eliminates the receivable. The Statement of Revenues, Expenses, and Changes in Net Assets also includes The property tax revenue connected to the receivable. The revenue is offset by the provision for losses. 23 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 4. LAND PROPERTY, PLANT AND EQUIPMENT, AND CONSTRUCTION IN PROGRESS Property, plant. and equipment, and construction in progress are sunnnanzed below for the year ended June 30, 2011: 24 Balance Beginning Transfer Balance of Year Additions Retirements from CIP End of Year At Cost Capital assets not being depreciated Land $ 17,114320 S - $ - $ - $ 17,114.720 Constntction in progress 26.735296 27.576.766 - (31.679.920) 22,632.142 Total nondepreciated assets 43.850.016 27,576.766 - (31.679.920) 39.746.862 Capital assets being depreciated Sewage collection system 286.351.576 - (7,500) 3.973.648 290.317,724 Contributed sewer lines 148580.734 533,617 (4.000) - 149,110351 Outfall sewers 8.518.443 - - 8518,443 Sewage treatment plant 275.413,411 - (1.000000) 13.124.102 287.537,513 Recycled water infrasinichnre 12,281,480 - - 18,651 12,300.131 Pumping stations 53.750.940 - (2507000) 911.790 54,412330 Buildings 21.206.981 - (2.471.408) 12.581,893 31.317.466 Intangibles 1.806.272 - 252,649 2.058.921 Furnihue and equipment 13.756.662 - (1330.519) 817,187 13:243,330 Motor vehicles 5,759.209 306.720 (27.402) - 6,038.527 Total depreciated assets 827,425,708 840337 (5.090.829) 31.679.920 854.855.136 Less accumulated depreciation Sewage collection system 41,065,360 3,890.436 (7,500) - 44,948,296 Contributed sewer lines 45.117.562 1.997.540 (4,000) 47,111,102 Outfall sewers 2.653.619 113,353 2.766,972 Sewage treamnent plant 153.113,414 9.686.994 (1.000.000) - 161,800408 Recycled water infrastntcture 4.354.327 494,208 - 4.848.535 Pumping stations 18,079.813 2.161.492 (250.000) - 19,991.305 Buildings 6,565.186 777,616 (1.311,125) - 6.031.677 Intangibles 32.327 25,768 - - 58,095 Furniture and equipment 9.987.708 1,118.038 (1330397) - 9.7753349 Motor vehicles 3.521.254 31016 (27.402) - 1808.468 Total accunmlated depreciation 284.490.570 20.580.061 (3.930.424) - 301.140.207 Total capital assets being depreciated. net 542.935, IN (19.739.724) (1.160.405) 31.679.920 553,714,929 Capital assets, net $ 586.785.154 S 7,837.042 $ (1.160.405) $ - $ 593,461.791 24 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 5. ASSESSMENT DISTRICTS The District established the Contractual Assessment District (CAD) program to help homeowners finance the cost of connecting to. the District. The construction costs associated with the project within the program are capitalized and depreciated. Individual homeowners are assessed an amount equal to their share of the construction costs and connection fee. The assessments plus interest are generally payable over 10 years. At year -end, the CAD receivable balance was $606,964. The District also established the Alhambra Valley Assessment District (AVAD) to provide services to residents in the Alhambra Valley in Martinez. Residents have the choice to pay cash or finance the construction costs and connection fees. At year -end the AVAD receivable balance was $1,818,114. The total receivable balance for the CAD and AVAD is $2,425,078, and is shown as a non - current asset on the Statement of Net Assets. 6. LONG -TERM DEBT 2009 Wastewater Revenue Certificates of Participation On November 12, 2009 and December 3, 2009 the District issued two Certificates of Participation (COP). The 2009 Wastewater Revenue Certificates of Participation, Series A and Series B were issued for $19,635,000 and $34,490,000, respectively. The Series A COP are federally taxable `Build America Bonds" which have a direct 35% interest rate subsidy from the Federal Govermnent. Yields on this series range from 3.45% to 3.78% net of the subsidy. The Series B COP are tax exempt bonds that were used to refund tine 1998 and 2002 bond issues and raise an additional $30 million in new proceeds with yields ranging from .4% to 3.79 %. The two bonds total $54,125,000, and are secured by a pledge of revenue. Principal payments begin annually on September 1, 2010 with semi- annual payments due on September 1 and March I of each year. Both bonds will be fully amortized as of September 1, 2029. The refunded portion of the original bonds will be paid off based on the original amortization schedule. Sunnnary The changes in the District's long -temr obligations during the year consisted of the following Balance Balance Due in July 1.2010 Deductions Additions hme 30.2011 One Year Revenue bonds $ 54,125,000 $ 3,460,000 $ $ 50,665,000 $ 3,465,000 Water Reclamation Loan 1 335.968 152.385 1.183,583 156,345 $ 55.460.968 $ 3.612.385 $ L-51 .848.583 $ 3.621345 25 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 6. LONGTERM DEBT (continued) Debt Service Requirements In 2009, the District issued Certificates of Participation (COP), which retired the 2002 and 1998 debt. The 2009 Revenue COP debt service requirements are as follows: Fiscal Year Ending June 30, 2012 2013 2014 2015 2016 2017-2021 2022— 2026 2027— 2030 Total Arnomrt representing interest Principal outstanding Short-tenn portion of, revenue bonds Long -teen portion of revenue bonds Series A Series B Ending June 30, Series A 2012 Debt Service Debt Service Gross 35% Tax Net Requirement Requirement Total Subsidy Total $ 1.IW840 $ 4,559,850 $ 5.750.690 $ (416,794) $ 5,333,896 1,190,840 4,586,625 5.777.465 (416,794) 5,360,671 1.19U40 4,571,683 5,762,523 (416,794) 5345,729 1,190,840 4,565,467 5,756,307 (416,794) 5,339,513 1,190,840 2,811,033 4.001,873 (416,794) 3,585,079 7,527,880 12,461,878 19,989,758 (2,058,793) 17,930,965 13;223527 3.665;721 16,889,248 (1,437,405) 15,451.843 9.661,148 95,719 9,756.867 (345,404) 9,411.463 36,366,755 37,317,976 73,684,731 (5925,572) 67.759,159 (16,731,755) (6,2877976) (23,019,731) - (23,019.731) 19,635,000 31,030.000 50,665,000 (5,925,572) 44.7397428 - (3,465,000) (3,465,000) 416,794 (3,048,206) $ 19,635,000 $ 27,565.000 $ 47,200,000 $(5,508778) $ 41.691222. Water Reclamation Loan Contract The District has entered into a contract with the State of California State Water Resources Control Board (the Board), which advanced the District $2,916,872 for design and construction costs for projects related to recycled water treatment programs. The District must repay advances from the Board over a 20 -year period beginning March 31, 1999, with an interest rate of 2.60 %. Debt service requirements are as follows: Fiscal Year Debt Service Ending June 30, Requirements 2012 $ 187,119 2013 187,119 2014 187,119 2015 187,119 2016 187,119 2017-2018 374,240 Total 1,309,835 Arnount representing interest (126,252) 1,183,583 Less: Current portion of Water Reclamation Loan Contract (156,345) Long tern portion of Water Reclamation Loan Contract $ 1,027,238 26 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 6. LONG -TERM DEBT (continued) Local Innrovennent District Bonds Within the District's boundaries, there exist several Improvement Districts, which were formed for the sole purpose of financing sewer system improvements. The District has no oversight responsibility for these Districts and is not liable for repayment of any bonds issued to finance these local improvement districts. Contra Costa County acts as the agent for the property owners fit these districts in collecting assessments, forwarding collections to bondholders, and initiating foreclostue procedures, if appropriate. The outstanding balance on these bonds was $30,000 at Jute 30, 2011. 7. RISK MANAGEMENT The District is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets, errors and omissions; injuries to employees; and natural disaster. The District joined with other entities to form the California Sanitation Risk Management Authority (CSRMA), a public entity risk pool currently operating as a common risk management and insurance program for the member entities. The purpose of CSRIvfA is to spread the adverse effects of losses among the member entities and to purchase excess insurance as a group, thereby reducing its cost. Through CSRMA, the District purchases property insurance and workers' compensation insurance_ Insurance Coverage The District's insurance coverage is as follows: Self Insured Deductible Per Type of Insurance Coverage Insurer Limits Occurrence All -Risk Property Fire Public Entity Property Instuance Program ( PEPIP) $528.621,210 $ 250.000 Boiler & Machinery PEPIP $ 50,000 to (Shared Limits per Occurrence) $100.000,000 $ 250,000 Crime Travelers $ 1,000,000 $ 25,000 LiabillN Errors and Omissions Insurance Company of the State of Pennsylvania (Chartis) $ 15,000,000 $ 1,000.000 Employment Practices Liability Chartis $ 15.500,000 S 1,000,000 Employment Practices Liability Admiral Insurance Company $ 1,000,000 $ 15,000 General Liability Chartis $ 15,500,000 $ 1,000.000 Auto Liability Chartis $ 15,500,000 $ 1,000,000 Pollution (General Aggregate) Chartis Specialty Insurance Co. $ 5,000,000 $ 5,000 General Liability (Occurrence) Pollution (Legal Liability Chartis Specialty Insurance Co. Aggregate) $ 10,000,000 $ 50,000 Fiduciary Liability RLI Insurance Company $ 1,000,000 - Workers' Compensation CSRIYIA $ 500,000 - Excess Workers' Compensation Safety National Casualty Corporation Statutory $ 750,000 27 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 7. RISK MANAGEMENT (continued) Liabilitv for Uninsured Claims The Governmental Accounting Standards Board (GASB) requires state and local governments to record their liability for uninsured claims in thew financial statements. The District's uninsured claims activity and exposure relates primarily to its general and automobile liability program. The District records its estimated liability for lurinsured claims in this area based on the results of periodic actuarial evaluations. The actuarial evaluations are typically performed every two years. For intervening years, the liability for tinsured claims is reviewed for adequacy based on claims activity during the intervening period. For the fiscal years ended June 30, 2011, 2010, and 2009, settlements have not exceeded insurance coverage. Changes in the District's estimated liability for uninsured claims for fiscal years 2011, 2010. and 2009 are summarized as follows: Beginning balance Provisions for claims incurred in the current year and changes in the liability for uninsured — claims incurred in prior years Claims and claim adjustment expenses paid Ending balance 8. AGREEMENT WITH THE CITY OF CONCORD 2011 2010 2009 $1,000,000 $ 750,000 $ 629,820 240,844 295,348 286,220 (240,844) (45,348) (166.040) $1,000,000 $1,000,000 $ 750,000 In 1974, the District and the City of Concord (the City) entered into a cost - sharing agreement under which the District became responsible for providing sewage treatment facilities and services to the City. Under this agreement, the City pays -a service charge for its share of operating, maintenance and administrative costs and,makes a contribution for its share of facilities capital costs expended. Service charges and contributions to capital costs from the City totaled $9,224,952 and $3,216,190 respectively, for the year ended June 30, 2011, for a total of $12,441,142. 28 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 9. PENSION PLAN Plan Description Substantially all District full -time employees are required to participate in the Contra Costa County Employees' Retirement Association (CCCERA), a cost - sharing multiple - employer public employee defined benefit retirement plan (Plan), governed by the County Employee's Retirement Law of 1937, as amended. The latest available actuarial and financial information for the Plan is for the year ended December 31, 2010. The Contra Costa Employees' Retirement Association issues a publicly available financial report that includes financial statements and supplemental information of the Plan. That report is available by writing to Contra Costa County Employees' Retirement Association, 1355 Willow Way, Suite 221, Concord, CA 94520 -5728 or by calling (925) 521 -3960. The Plan provides for retirement, disability, and death and survivor benefits. Annual cost of living (COL) adjustments to retirement allowances can be granted by the Retirement Board as provided by State statutes. Retirement benefits are based on age, length of service and final average salary. Subject to vested status, employees can withdraw contributions plus interest credited, or leave them as a defened retirement when they tenninate, or transfer to a reciprocal retirement system. Plan Contribution Requirement The Plan requires employees to pay a portion of the basic retirement benefit and a portion of future COL costs. However, the District has paid the employee's basic contributions in accordance with the Memorandrmn of Understanding (MOU). Employees must pay the COLA portion of the employee rate. The contribution requirement and payment from the District for the plan years ended June 30, 2011, 2010 and 2009 was as follows: The District pension plan covered 245 participants during the year. 29 2011 2010 2009 Covered payroll for fiscal years ended June 30 $ 24,709,477 $ 25,080,233 $ 24,202,098 Employer required contributions to pension 8,950,938 8,804,127 9,084,809 Employee (COLA) required contributions to pension 930,648 939,388 913,027 Total required contributions $ 9,881,586 $ 9,743,515 $ 9,997,836 Percentage of payroll 40% 39% 41% The District pension plan covered 245 participants during the year. 29 CENTRAL CONTRA COSTA SANITARY DISTRICT Votes to Financial Statements Year Ended June 30, 2011 10. POST EMPLOYMENT HEALTH CARE BENEFITS Plan Description The District's defined benefit post employment healthcare plan, (DPHP), provides medical benefits to eligible retired District employees and beneficiaries. DPHP is part of the Public Agency portion of the Public Agency Retirement System (PARS), an agent nultiple- employer plan administered by PARS, which acts as a conurron investment and administrative agent for participating public employees within the State of California. A menu of benefit provisions as well as other requirements is established by the State star te,with the Public Employees' Retirement Law. DPHP selects optional benefit provisions from the benefit menu by contract with PARS and adopts those benefits through District resolution. PARS issues a separate Comprehensive Armual Financial Report. Copies of the PARS annual financial report may be obtained from PARS, 4350 Von Kanuran Ave., Suite 100, Ne,.vport Beach, CA 92660; by calling 1(800) 540 -6369; or by enrailing info@pars.org. Funding Policy Statement No. 45 sets rules for computing the employer's expense for retiree benefits other than pension, called OPEBs. The expense, called the annual OPEB Cost (AOC), is detenrined similarly to pensions. The annrrol required contribution (4RC) of the employer, represents a level of funding that, if paid on an ongoing basis, is projected to cover normal annual costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. Mien an agency contributes more than the ARC, there is a net OPEB asset; when the contribution is less, a net OPEB obligation results. There is a net OPEB asset of $916,736 and $746,931 as of hue 30, 2011 and 2010, respectively. Because of the volatility of the investment market, the District Board voted to make monthly urstalhnents into the OPEB Trust to take advantage of dollar- cost - averaging. Armual OPEB Cost For 2011, the District's annual OPEB cost (expense) was equal to the ARC of $6,976,364. The District contributed $7,146,169; $3,571,141 for retiree health care premiums and $3,575,028 to the PARS trust. The following table shows the components of the District's annual OPEB costs for the years 2011 and 2010, the arnomrt actually contributed to the plan, and changes in the District's net OPEB obligation: 30 2010 $1,611,622 6,976.364 (2,614,917) (61720,000) $ (746.931) 2011 Net OPEB Obligation (Asset) — Beginning of Year $ (746,931) Annual Required Contribution 6,976,364 Contributions Made: Health care premiums paid (3,571,141) Contributions to PARS Lust (3,575,028) Net OPEB Obligation (Asset) —End of Year $ (916,736) 30 2010 $1,611,622 6,976.364 (2,614,917) (61720,000) $ (746.931) CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 10. POST EMPLOYMENT HEALTH CARE BENEFITS (continued) The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the OPEB obligation for 2011 and the preceding year are presented below: Funding Status and Fmrdina Progress The funded status of the plan as of July 1, 2009 was as follows: Overfunded Annual Cost Method (Underfunded) Current OPEB Annual Percentage Year AOC Net OPEB Cost Employer of AOC Obligation Obligation Fiscal Year (AOC) Contribution Contributed (Asset) (Asset) June 30, 2011 $6,976,364 $ 7,146,169 102% $ (169,805) $ (916,736) June 30, 2010 $6,976,364 $ 9.334,917 134% $(2,358,553) $ (746,931) June 30, 2009 $6,2247478 $ 4,612,856 74% $ 1,611,622 $ 1,611,622 Funding Status and Fmrdina Progress The funded status of the plan as of July 1, 2009 was as follows: Overfunded Per PARS, actuarial assets as of June 30, 2011, including host contributions and interest, total $18,077,303 ($9,305,798 at June 30, 2010). Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assrmnptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. The funded status of the plan and the annual required contributions of the employer are subject to continual revision, as actual results are compared with past expectations and new estimates are made about the future. The schedule of fimding progress, presented as required supplementary information, presents multiyear trend information that shows whether the actuarial value of the plan assets is increasing or decreasing over time, relative to the actuarial liabilities for benefits. 31 Cost Method (Underfunded) Actuarial Actuarial Actuarial UAAL as Actuarial Valuation Accrued Accrued Funding Covered Payroll a % of Valuation of Assets Liability Liability Ratio (Active Plan Covered Date (A) (B) (A -B) UAAL (A/B) Members) Payroll June 30, 2009 $ 2,341,251 $ 68,769,305 $ (66,428,054) 3.40% $ 25.080.233 265% June 30, 2007 $ 2,341,251 $ 68.447,956 $ (66,106,705) 3.42% $ 22,648,230 292% Per PARS, actuarial assets as of June 30, 2011, including host contributions and interest, total $18,077,303 ($9,305,798 at June 30, 2010). Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assrmnptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. The funded status of the plan and the annual required contributions of the employer are subject to continual revision, as actual results are compared with past expectations and new estimates are made about the future. The schedule of fimding progress, presented as required supplementary information, presents multiyear trend information that shows whether the actuarial value of the plan assets is increasing or decreasing over time, relative to the actuarial liabilities for benefits. 31 CENTRAL CONTRA COSTA SANITARY DISTRICT Votes to Financial Statements Year Ended June 30, 2011 10. POST EMPLOYD4ENT HEALTH CARE BENEFITS (continued) Actuarial Methods and Assumptions Projections for benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation as well as the historical pattern of sharing benefit costs between the employer and plan members. The actuarial methods and assumptions used include techniques that are designed to reduce short -term volatility in actuarial accrued liabilities and actuarial value of assets, consistent with the long term perspective of the calculations. In August 2011, the District had ail additional actuarial valuation prepared as of July 1, 2010. This additional valuation was not required at the tune, but was prepared in order to begin a completion schedule that allows the District to have data available for future budget cycles, in this case for the 2011 — 2012 and 2012 — 2013 fiscal years. The ARC in 2011 — 2012 and 2012 — 2013 will increase to $8.3 million per year. The neat actuarial valuation is scheduled to be performed by December 31, 2012 to be applied to the 2013 — 2014 fiscal year. The following is a sunmrary of the actuarial assumptions and methods: Valuation Date Actuarial Cost Method Amortization Method Average Remaining Period Actuarial Assumptions: Investment Rate of Return Inflation Financial Statements July 1, 2009 Entry Age Nonnal Cost Method Level Dollar /Closed 30 Years as of the Valuation Date 8% Medical — 9% grading to 5% in 2017 Medicare Part B — 5% Dental — 5% The District has deposited monies to the PARS oust in excess of the actuarial determined arnual required contribution (ARC), therefore, under the provisions of GASB 45, the District has an OPEB asset of $916,736 for reporting purposes. Tire provision for the GASB 45 OPEB obligation is an asset of $916,736 at June 30, 2011. The actuarial determined liability, which is being paid over the next 30 yeas, is $68,769,305 at July 1, 2009, of which, $18,077,303 (or 26 %) has been funded. 32 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2011 11. LEASE COMMITMENTS The District leases various facilities and equipment under operating leases. Following is a summary of operating lease cormnitnrents as of June 30, 2011: Fiscal Year Office Endive Equipment Facilities 2012 $ 229,097 $ 55,200 2013 249,924 56,784 2014 249,924 58,416 2015 249,924 2,400 Thereafter 270,751 4,800 Total $ 1,249,620 $ 177,600 Total $ 284,297 306,708 308,340 252,324 275,551 $ 1,427,220 Total rental expense for the fiscal year ended June 30, 2011 was $428,877. 12. COMMITMENTS AND CONTINGENCIES Commitruents and contingencies, undeterminable in amount, include normal recurring pending claims and litigation. In the opinion of management, based upon discussion with legal counsel, there is no pending litigation which is likely to have a material adverse effect on the financial position of the District. Claims and losses are recorded when they are reasonably probable of being incurred and the amount is estimable. Insurance proceeds and settlements are recorded when received. The District has purchase commitments relating to construction projects at June 30, 2011 of $12,088,330. 13. SUBSEQUENT EVENTS Management has evaluated subsequent events through September 30, 2011, the date on which the financial statements were available to be issued. 33 S UPP L E M E N TA R Y I NF O R MA T I O N CENTRAL CONTRA COSTA SANITARY DISTRICT Combining Schedule of Net Assets for the Year Ended June 30, 2011 . Running Seure Self Debt Expense Constriction Insurance Service ECunination Total ASSETS Current Assets Cash and cash equivalents $ 1.092.529 $ 42.223.914 $ 4.653.835 $ 111.465 $ - $ 48.081.743 Short tens investments - 14.992.660 - - - 14.992.660 Accounts receivable. net of allowance for Sesser Construction Fund of $985.916 10.389.742 3.356.923 - - - 13.746.665 Interest receivable - 56.669 5.172 - - 61.841 Due from other sub -hinds 106.590.755 79.679.343 2.030.784 56.547.633 (244.848.515) - Parts and supplies 1.842.468 - - - - 1.842.465 Prepaid expenses 1.681.743 - - - 1.681.743 Total Current Assets 121,597.237 140.309.509 6.689.791 56.659.098 (244.848.515) 80.407.120 Noncurrent Assets Restricted cash mid equivalents 100.000 3.242000 - 93.592 - 3.440.592 Restricted investments - - - 5.318908 5.313.903 Laud. property. plant and equipment, net 570.829.649 - - - - 570.829.649 Construction in progress 22.632.142 - - - - 22.632.142 Contractual assessrmcut district and Alharnbra Valley Assessment District receivable - 2.425.078 - - - _ 2.425.075 OPEB liability- medical insurance prenuitmrs 916.736 - - - - 916.736 Revenue bond issuance costs net of tunortization 354,697 354.697 716,075.764 145.981,587 6.689.791 62.426.295 (244.343.515) 636,324.922 LIABILITIES ' Current Liabilities Accounts payable and accrued expenses 2.288.397 2.127.862 103.232 - - 4.519.541 Due to other stub -fiords - 116.159,533 117.067.317 1.844.300 9.777.315 (244.348.515) - I serest payable - - - 800.397 - 800.397 Current portion of refunding waw revenue bonds - - - 3.465,000 - 3.465,000 Curmu portion of water reclamation loan contract - - - _ 156,345 - .156,345 Liability for uninsured claims - - 1.000.000 - - 1.000.000 Accrued compensated absences 515.000 - - - . - 515.000 Refundable deposits 134.425 92.038 - - 226.463 Total Current Liabilities 119.097.405 119.237.217 1947.582 14.199.057 (244,843.515) 10.632.746 NONCURRENT LIABILITIES - Revenue bonds. net of current portion - - - 47.200.000 - 47.200.000 Accrued cormpensated absences 4.617.067 - - - - - 4.612067 Water reclamation loan contract net of current portion - —719287217 - 1.027238 - 1.027138 Total Liabilities 123.714.472 2.947.582 62.426195 (24-0.848.515) 63.527.051 NET ASSETS Invested in capital assets. net of related debt 593,461.791 - - (51.848.583) - 541.613.208 Restricted for debt service - - - 4.612,103 - 4.612.103 Unrestricted (1.100.499) 26.694.370 3.742209 47236.450 76.572.560 Total Net Assets - $ 592,361 292 $ 26. 694,370 $ 3.742209 $ $ - $ 622.797,571 The accompanying notes are an integral par of the fuua rcial statements 34 CENTRAL CONTRA COSTA SANITARY DISTRICT Combining Schedule of Revenues, Expenses and Changes in Net Assets for the Year Ended June 30, 2011 Running Sewer Expense Constntction Operating Revenues Self Debt Insurance Senice Efi ni nation Total Sewer Senice Charges (SSC) $ 49.095.870 S - $ - $ - $ - S 49.095.870 Service charges - City of Concord 9. 224.952 - - - - 9.224.952 Other service charges 913.017 - - - - 913,017 Miscellaneous charges 662,721 - - - - 662,721 Total operating revenues 59.896.560 - - - - 59.896.560 Operating Expenses Sewage collection and pmnping stations 11.468.189 - - - - I1.J68.189 Sewage treatment 21.360.065 - - - - 21.360.065 Engineering 6.855,745 - - - - 6.855.745. Adrnunisnative and general 18.431629 - 1.003.115 - (8847064) 18.551,680 Depreciation 20,580.061 - - - - 20.580,061 Total operating expenses 78,696.689 - L003.115 - (884.064) 78.815.740 Operating Loss (18.800329) - (1,003.115) - 884.064 (18.919.180) Non - Operating Revenues (Expenses): Taxes - 6,759,618 - 5,454.006 - 12.213.624 Pemdt and inspection fees 715.121 180.704 - - - 895.825 Interest earnings 131.677 298,159 23.873 220.281 - 673,990 Interest expense - - - (2.061,903) - (2.061.903) Allowance for doubtful accotans - - - - - - Other income (expense) (563.557) 40.348 884.064 - (884.064) (523209) Total non - operating revenues (expenses) 283.241 7278.829 907.937 3.612.384 (884.064) 11.198.327 Income (loss) before contributions and nans£ets (18,516.888) 7.278,829 (95.178) 3.612.384 - (7,720,853) City of Concord contributions to capital costs - 3,216.190 - - - 3-216.190 Customer contributions to capital cost (SSC) - 1,801.902 - - - 1.801,902 Contributed sewer lines 533.616 1 - - - - .533.616 Capital contributions - connection fees - 3.515.804 - - - 3.515.804 Transfers 28.005.448 (24.393.064) (3.612.384) - - Chanee in Net Assets 10,022.176 (8.580339) (95.178) - - 1.346,659 Total Net Assets - Beginning 582.339,116 35.274.709 3.837.387 - - 621.451,212 Total Net Assets - Ending $ 592.361.292 s726 694,70 773 742 7-59 $ - - $ - $ 622.797,871 The accompanying notes are an integral part of the financial statements 35 G N H3 V3 'n 'n N p N M O Obi S P b lc r h O oc S lO N N 7 Vl N3 V? ♦.r C R N M b O °—' oc a � $ - z r M cn vmi a�i 'n <°v N C1 coo C O m r _ V C R � �" Z � � ✓n � t` vi N � M -- N C � O F r✓ G h h C O � vt 'n �O oo O � O+ �O O� F = t CC x F L Z � G � O M S ' '/Ni 1 � � p � D• N � O O N Q V3 fR tG, N G N M 9 N u � e} C v c � O m G CENTRAL CONTRA COSTA SANITARY DISTRICT Running Expense Schedule of Supplemental Net Assets Analysis June 30, 2011 , Prior Year Balance 2010 - 2011 Revenue 2010 - 2011 Expense Add Back Depreciation Expense Net Assets Attributed to General Operations All Other Net Assets Running Expense Net Assets $ 60,743,358 (79,260,246) 20,580,061 $ 7,855,585 2,063,173 9,918,758 582,442,534 $ 592,361,292 The accompanying notes are an integral part of the financial statements 37