Audit Report

Audit Report

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Washington State Auditor’s Office Financial Statements Audit Report Public Utility District No. 1 of Benton County Audit Period January 1, 2007 through December 31, 2007 Report No. 74596 Issue Date May 14, 2008 yyyy Washington State Auditor Brian Sonntag May 14, 2008 Board of Commissioners Public Utility District No. 1 of Benton County Kennewick, Washington Report on Financial Statements Please find attached our report on Public Utility District No. 1 of Benton County’s financial statements. We are issuing this report in order to provide information on the District’s financial condition. In addition to this work, we look at other areas of our audit client’s operations for compliance with state laws and regulations. The results of that audit will be included in a separately issued accountability report. Sincerely, BRIAN SONNTAG, CGFM STATE AUDITOR Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388 FAX (360) 753-0646 http://www.sao.wa.gov Table of Contents Public Utility District No. 1 of Benton County January 1, 2007 through December 31, 2007 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards ........................................ 1 Independent Auditor’s Report on Financial Statements .................. ...

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Washington State Auditor’s Office

Financial Statements Audit Report






Public Utility District No. 1 of Benton
County



Audit Period
January 1, 2007 through December 31, 2007


Report No. 74596


Issue Date
May 14, 2008





Washington State Auditor
Brian Sonntag



May 14, 2008

Board of Commissioners
Public Utility District No. 1 of Benton County
Kennewick, Washington


Report on Financial Statements

Please find attached our report on Public Utility District No. 1 of Benton County’s financial statements.

We are issuing this report in order to provide information on the District’s financial condition.

In addition to this work, we look at other areas of our audit client’s operations for compliance with state
laws and regulations. The results of that audit will be included in a separately issued accountability
report.

Sincerely,

BRIAN SONNTAG, CGFM
STATE AUDITOR
Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388
FAX (360) 753-0646 http://www.sao.wa.gov
yyyy
Table of Contents

Public Utility District No. 1 of Benton County
January 1, 2007 through December 31, 2007


Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance
and Other Matters in Accordance with Government Auditing Standards ........................................ 1
Independent Auditor’s Report on Financial Statements ............................................................................... 3
Financial Section........................................................................................................................................... 5

Independent Auditor’s Report on Internal
Control over Financial Reporting and on
Compliance and Other Matters in Accordance
with Government Auditing Standards

Public Utility District No. 1 of Benton County
January 1, 2007 through December 31, 2007


Board of Commissioners
Public Utility District No. 1 of Benton County
Kennewick, Washington


We have audited the basic financial statements of Public Utility District No. 1 of Benton County,
Washington, as of and for the years ended December 31, 2007 and 2006, and have issued our report
thereon dated April 18, 2008.

We conducted our audits in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to the financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States.

INTERNAL CONTROL OVER FINANCIAL REPORTING

In planning and performing our audits, we considered the District’s internal control over financial reporting
as a basis for designing our auditing procedures for the purpose of expressing our opinions on the
financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s
internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness
of the District’s internal control over financial reporting.

A control deficiency exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent or detect
misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control
deficiencies, that adversely affects the District's ability to initiate, authorize, record, process or report
financial data reliably in accordance with generally accepted accounting principles such that there is more
than a remote likelihood that a misstatement of the District's financial statements that is more than
inconsequential will not be prevented or detected by the District's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in
more than a remote likelihood that a material misstatement of the financial statements will not be
prevented or detected by the entity’s internal control.

Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and would not necessarily identify all deficiencies in internal control that
might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal
control over financial reporting that we consider to be material weaknesses, as defined above.

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Washington State Auditor's Office
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COMPLIANCE AND OTHER MATTERS

As part of obtaining reasonable assurance about whether the District’s financial statements are free of
material misstatement, we performed tests of the District’s compliance with certain provisions of laws,
regulations, contracts and grant agreements, noncompliance with which could have a direct and material
effect on the determination of financial statement amounts. However, providing an opinion on compliance
with those provisions was not an objective of our audit, and accordingly, we do not express such an
opinion.

The results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.

This report is intended for the information and use of management and the Board of Commissioners.
However, this report is a matter of public record and its distribution is not limited. It also serves to
disseminate information to the public as a reporting tool to help citizens assess government operations.


BRIAN SONNTAG, CGFM
STATE AUDITOR

April 18, 2008

____________________________________________________________________________________________________________
Washington State Auditor's Office
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Independent Auditor’s Report on Financial
Statements

Public Utility District No. 1 of Benton County
January 1, 2007 through December 31, 2007


Board of Commissioners
Public Utility District No. 1 of Benton County
Kennewick, Washington


We have audited the accompanying basic financial statements of Public Utility District No. 1 of Benton
County, Washington, as of and for the years ended December 31, 2007 and 2006, as listed on page 5.
These financial statements are the responsibility of the District’s management. Our responsibility is to
express opinions on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free 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 audits provide a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Public Utility District No. 1 of Benton County, as of December 31, 2007 and 2006, and
the changes in financial position and, where applicable, cash flows thereof for the years then ended in
conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report on our consideration
of the District’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that
report is to describe the scope of our testing of internal control over financial reporting and compliance
and the results of that testing, and not to provide an opinion on the internal control over financial reporting
or on compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards and should be considered in assessing the results of our audits.

The management’s discussion and analysis on pages 6 through 11 is not a required part of the basic
financial statements but is supplementary information required by the Governmental Accounting
Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of
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Washington State Auditor's Office
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management regarding the methods of measurement and presentation of the required supplementary
information. However, we did not audit the information and express no opinion on it.


BRIAN SONNTAG, CGFM
STATE AUDITOR

April 18, 2008

____________________________________________________________________________________________________________
Washington State Auditor's Office
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Financial Section

Public Utility District No. 1 of Benton County
January 1, 2007 through December 31, 2007


REQUIRED SUPPLEMENTAL INFORMATION

Management’s Discussion and Analysis – 2007 and 2006


BASIC FINANCIAL STATEMENTS

Balance Sheet – 2007 and 2006
Statement of Revenues, Expenses and Changes in Net Assets – 2007 and 2006
Statement of Cash Flows – 2007 and 2006
Notes to Financial Statements – 2007

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Washington State Auditor's Office
5Management’s Discussion and Analysis



This section provides an overview and analysis of key data presented in the basic financial statements for the years
ended December 31, 2007 and 2006, with additional comparative data for 2005. Information within this section
should be used in conjunction with the basic financial statements and accompanying notes.

Overview of the Financial Statements

Public Utility District No. 1 of Benton County (District) accounts for its financial activities within a single
proprietary fund titled the Electric System. The Electric System is used to account for the purchase, generation,
transmission, distribution and sale of electric energy, as well as the sale of wholesale telecommunication services.

In accordance with requirements set forth by the Governmental Accounting Standards Board, the District’s
financial statements employ the accrual basis of accounting in recognizing increases and decreases in economic
resources. Accrual accounting recognizes all revenues and expenses during the year, regardless of when cash is
received or paid.

The basic financial statements, presented on a comparative format for the years ended December 31, 2007 and
2006, are comprised of:

Balance Sheets: The District presents its statement of position using the balance sheet format. The
Balance Sheets reflect the assets, liabilities and net assets (equity) of the District at year-end. The net
assets section of the Balance Sheets is separated into three categories: net assets invested in capital assets,
net of related debt; restricted net assets; and unrestricted net assets. The District had no restricted net assets
at December 31, 2007 or 2006.

Statements of Revenues, Expenses, and Changes in Net Assets: These statements reflect the transactions
and events that have increased or decreased the District’s total economic resources during the period.
Revenues are presented net of allowances and are summarized by major source. Revenues and expenses
are classified as operating or nonoperating based on the nature of the transaction.

Statements of Cash Flows: The Statements of Cash Flows reflect the sources and uses of cash separated
into four categories of activities: operating, noncapital financing, capital and related financing, and
investing. The District does not include cash equivalents within its definition of cash.

The notes to the financial statements, presented at the end of the basic financial statements, are considered an
integral part of the District’s presentation of financial position, results of operations, and changes in cash flows.


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Washington State Auditor's Office
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???Condensed Comparative Financial Information
Provided below is a three year comparison of key financial information:
Balance Sheet (in thousands)
Increase
(Decrease) % Change
2007-2006 2007-20062007 2006 2005
Current & Other Assets $59,576 $56,795 $2,781 5% $66,863
Capital Assets 109,916 119,839 (9,923) -8% 118,503
Totas $169,492 $176,634 ($7,142) -4% $185,366
Other Liabilities $15,685 $25,450 ($9,765) -38% $25,393
Long-Term Liabilities 59,199 60,611 (1,412) -2% 77,412
Total Liabilities $74,884 $86,061 ($11,177) -13% $102,805
Invested in Capital Assets, net of related debt $53,979 $60,652 ($6,673) -11% $47,804
Unrestricted 40,629 29,92 1 10,708 36% 34,757
Total Net Assets $94,608 $90,573 $4,035 4% $82,561
Statement of Revenues, Expenses, and Changes in Net Assets (in thousands)
Increase
(Decrease) % Change
2007 2006 2007-2006 2007-2006 2005
Operating Revenues
Retail Energy Sales $92,388 $95,550 ($3,162) -3% $101,112
Sales for Resale 43,202 46,842 (3,641) -8% 39,589
Other 2,532 2,588 (56) -2% 1,951
Nonoperating Revenues
Interest Income 1,676 1,961 (285) -15% 1,123
Other Income 87 - 87 - 552
Total Revenues 139,885 146,941 (7,056) -5% 144,327
Operating Expenses
y 92,885 98,556 (5,671) -6% 102,442Power Suppl
Operations and Maintenance 16,231 16,826 (596) -4% 15,647
Taxes/Depreciation/Amortization 19,969 20,253 (284) -1% 20,591
Nonoperating Expenses
Other Expense - 9 (9) -100% 419
Interest Expense 2,533 3,310 (776) -23% 3,389
Debt Discount & Expense Amortization 22 553 (532) -96% 209
Loss in Joint Venture/Special Assessments 555 912 (358) -39% 449
Total Expenses 132,195 140,420 (8,225) -6% 143,146
Income (Loss) before Contributions 7,690 6,521 1,169 18% 1,181
Capital Contributions 6,100 1,491 4,609 309% 1,951
Extraordinary Item (9,755) - (9,755) - -
Change in Net Assets 4,035 8,012 (3,977) -50% 3,132
Beginning Net Assets 90,573 82,56 1 8,012 10% 79,429
Ending Net Assets $94,608 $90,573 $4,035 4% $82,561
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Washington State Auditor's Office
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