Annual Audit Presentation of Crestline Village Water District 2016-2015

CRESTLINE VILLAGE WATER DISTRICT Annual Audit Presentation For the years ended April 30, 2016 and 2015 Presented by: Rogers, Anderson, Malody & Scott, LLP November 8, 2016 1

Board of Directors Crestline Village Water District Crestline, California 92325 INDEPENDENT AUDITOR S REPORT We have audited the accompanying financial statements of Crestline Village Water District (District), CA as of and for the years ended April 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion 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 State Controller s MinimumAudit Requirements for California Special Districts. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 2

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the District as of April 30, 2016 and 2015, and the respective changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America as well as accounting systems prescribed by the State Controller s Office and state regulations governing special districts. Changes in Accounting Principle As discussed in Note 1 of the financial statements, the District adopted the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions An Amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transaction for Contributions Made Subsequent to the Measurement Date An Amendment of GASB Statement No. 68. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental 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 any assurance. Rogers, Anderson, Malody & Scott, LLP 3

2016 2015 % $ ASSETS Current assets: Cash in bank Cash on hand Local Agency Investment Fund Accounts receivable - water service, net of allowance for doubtful accounts Accounts receivable - other Accrued interest receivable Inventory of materials and supplies Receivable from employees Prepaid expenses Availability assessments receivable Property taxes receivable, net allowance for doubtful accounts Total current assets $ 1,601,962 145,487 $ 2,129,452 146,522 -1% 0% -25% (1,035) - (527,490) $ 500 500 102,459 12,063 47,597 58,457 181,141 195,736 2,011 -7% (14,595) (2,011) 245 2,483 12,063 (13,528) 7,345 - -100% 54% 700 455 99,976 2% - 100% -22% 14% 61,125 51,112 62,704 2,213,070 57,667 2,744,556 9% (531,486) 5,037 -19% Noncurrent assets: Capital assets Utility plant in service Less accumulated depreciation Construction in progress 23,311,208 (12,841,388) 112,120 22,788,676 (12,295,814) 123,877 2% 4% -9% 522,532 545,574 (11,757) Total noncurrent 10,581,940 10,616,739 0% (34,799) Total assets 12,795,010 13,361,295 -4% (566,285) DEFERRED OUTFLOWS OF RESOURCES Pension related $ 736,280 $ 321,421 129% 414,859 4

2016 2015 % $ LIABILITIES Current liabilities: Accounts payable Deposits Accrued payroll Accrued overtime leave Accrued paid time off Net OPEB Obligation Retirement plan contribution payable $ 72,885 2,480 30,269 4,009 63,172 282 5,167 $ 61,398 2,480 28,942 1,725 48,976 44,063 8,026 19% 0% 5% 132% 29% -99% -36% $ 11,487 - 1,327 2,284 14,196 (43,781) (2,859) Total current liabilities 178,264 195,610 -9% (17,346) Non current liabilities: Net pension liability Total non current liabilities 1,720,595 1,720,595 1,533,442 1,533,442 12% 12% 187,153 187,153 Total liabilites 1,898,859 1,729,052 10% 169,807 DEFERRED INFLOWS OF RESOURCES Pension related 224,074 305,675 -27% (81,601) NET POSITION Invested in capital assets Unrestricted 10,581,940 826,417 10,616,739 1,031,250 0% (34,799) (204,833) -20% Total net position 11,408,357 $ 11,647,989 $ -2% (239,632) 5

2016 2015 % $ Operating revenues: Water sales: Residential Business Other 1,901,010 $ 191,593 2,094,227 $ 1,990,872 243,485 4,215 2,238,572 -5% -21% -61% -6% $ (89,862) (51,892) (2,591) (144,345) 1,624 Water services: Turn-on and shut-off charges 72,800 75,323 -3% (2,523) Total operating revenues 2,167,027 2,313,895 -6% (146,868) Operating expenses: Source of supply: Supervision, labor and expense Maintenance - structures and improvements Purchased water 66,776 5,078 418,872 490,726 62,802 6,218 453,320 522,340 6% 3,974 (1,140) (34,448) (31,614) -18% -8% -6% Pumping: Maintenance - structures, improvements and equipment Power purchased for pumping 9,928 44,359 54,287 14,420 52,076 66,496 -31% -15% -18% (4,492) (7,717) (12,209) 6

2016 2015 % $ Operating expenses (continued): Water treatment: Supervision, labor and expense Maintenance - structure and improvements $ 15,145 5,112 20,257 $ 14,325 2,849 17,174 6% 79% 18% $ 820 2,263 3,083 Transmission and distribution: Maintenance - structures and plant 211,936 205,069 3% 6,867 Customer accounts Supervision, meter readings and other exp. 32,172 33,344 -4% (1,172) Administration and general: Salaries Office supplies and other expense Property insurance, injuries and damages Employees' retirement and benefits Maintenance - general plant Directors' fees 400,589 317,192 72,316 505,570 79,223 7,400 1,382,290 385,155 288,241 90,548 1,001,878 59,042 6,600 1,831,464 4% 10% -20% -50% 34% 12% -25% 15,434 28,951 (18,232) (496,308) 20,181 (449,174) 800 Other operating expenses: Depreciation and amortization 614,510 603,755 2% 10,755 Total operating expenses 2,806,178 (639,151) 3,279,642 -14% (473,464) Operating loss (965,747) -34% 326,596 7

2016 2015 % $ Nonoperating revenues: Interest Taxes and assessments Availability assessments Gain on retirement of plant Other Total nonoperating revenues $ 6,780 218,781 152,778 $ 5,971 211,898 148,635 4,000 10,058 380,562 14% 3% 3% -100% -21% $ 809 6,883 4,143 (4,000) (2,133) 5,702 - 7,925 386,264 1% Income (loss) before contributions (252,887) (585,185) -57% 332,298 Contributions: Capital contributions 13,255 22,050 -40% (8,795) Change in net position (239,632) (563,135) -57% 323,503 Net position - beginning of the year, as restated 11,647,989 12,211,124 -5% (563,135) Net position - end of the year 11,408,357 $ 11,647,989 $ 8

2016 2015 % $ CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers Cash paid to suppliers Cash paid for employee services Other revenue Net cash used for operating activities 2,183,633 $ (836,945) (1,670,804) 2,317,683 (842,103) (1,607,772) $ -6% -1% 4% -21% (134,050) $ 63,032 (5,158) 7,925 10,058 (2,133) (316,191) (122,134) 159% (194,057) CASH FLOWS FROM NON CAPITAL FINANCING: Receivable from employees Taxes and assessments received Availability assessments received Net cash provided by noncapital financing activities (12,063) 213,744 145,433 - 100% -1% -3% (12,063) (1,723) (3,943) 215,467 149,376 347,114 364,843 -5% (17,729) CASH FLOWS FROM CAPITAL AND RELATED FIN: Proceeds on retirement of utility plant Capital contributions Cash purchases of utility plant (579,238) - 6,000 22,050 (776,216) -100% -40% -25% (6,000) (8,795) (196,978) 13,255 Net cash used for capital and related financing activities (565,983) (748,166) -24% 182,183 9

2016 2015 % $ CASH FLOWS FROM INVESTING ACTIVITIES: Investment income Net cash provided by investing activities $ 6,535 $ 6,007 9% $ 528 6,535 6,007 9% 528 Increase (decrease) in cash and cash equivalents (528,525) (499,450) 6% 29,075 Cash and cash equivalents - beginning 2,276,474 2,775,924 Cash and cash equivalents - ending 1,747,949 $ 2,276,474 $ -23% (528,525) Net increase (decrease) Cash 4/30/15 Cash 4/30/16 CURRENT ASSETS Cash in banks Cash on hand Local Agency Investment Fund $ 2,129,452 146,522 (1,035) - (527,490) $ $ 1,601,962 145,487 500 500 Total 2,276,474 $ (528,525) $ 1,747,949 $ 10

Note 2: Utility plant A summary of changes in utility plant is as follows: April 30, 2016 Beginning balance Ending balance Additions Deletions Land an other land rights Source of supply plant Pumping plant Water treatment Transmission and distribution plant General plant 298,168 666,844 460,706 90,468 18,420,733 2,851,757 $ $ 572,765 12,035 - - - $ (68,936) - - - - 298,168 666,844 460,706 97,136 18,924,562 2,863,792 $ 6,668 Utility plant in service Less accumulated depreciation Construction in progress 22,788,676 (12,295,814) 123,877 591,468 (614,510) 558,735 (68,936) 68,936 (570,492) 23,311,208 (12,841,388) 112,120 10,616,739 $ 535,693 $ (570,492) $ 10,581,940 $ 11

Utility plant additions: A summary of current year additions: Amount WATER TREATMENT EQUIPMENT New Analyzer $ 6,668 6,668 RESERVOIRS & TANKS Zurich III Tank 570,492 570,492 SERVICE TAPS New Services (2) 1,678 1,678 METERS New Meters (2) 595 595 OFFICE FURNITURE AND EQUIPMENT Dell Optiplex 9020 w/ Monitor Dell X1026P Switch Dell Sonicwall TZ400 Dell PowerEdge T110 Panasonic TP F G1 1,809 527 1,539 1,277 2,801 7,953 TOOLS, SHOP & GARAGE EQUIPMENT Vivax/Metrotech VM-800 Locator Vivas/Metritech vLoc 9800 Locator 1,002 3,080 4,082 Total additions $ 591,468 12

Utility plant Accumulated depreciation A summary of current year retirements: Cost Sales Price T&D PLANT - RESERVOIRS AND TANKS Zurich Tank I $ 68,936 $ 68,936 $ - Total Retirements $ 68,936 $ 68,936 $ - 13

NOTE 4: General Information about the Pension The Plans operate under the provisions of the California Public Employees Retirement Law (PERL), the California Public Employees Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan s authority to establish and amend the benefit terms are set by the PERL and PEPRA, and may be amended by the California state legislature and in some cases require approval by the CalPERS Board. The Miscellaneous pension plan (Plan) provisions and benefits in effect in effect at April 30, 2016 and 2015 are summarized as follows: Miscellaneous Prior to January 1, 2013 Benefit formula 2.5 % @ 55 Benefit vesting schedule 5 years service Benefit payments monthly for life Retirement age 50 - 55 Monthly benefits, as a % of eligible compensation 2.0% to 2.5% Required employee contribution rates 8% Required employer contribution rates 9.07% DEFINED BENEFIT PENSION PLAN (PERS) On or after January 1, 2013 2% @ 62 5 years service monthly for life 52 - 67 1.0% to 2.5% 6.30% 6.55% Hire date 14

NOTE 4: Proportionate Share of Net Pension Liability The following table shows the Plans proportionate share of the net pension liability over the measurement period. Increase (Decrease) DEFINED BENEFIT PENSION PLAN (PERS) (continued) Plan Total Pension Liability (a) 5,887,544 $ Plan Fiduciary Net Position (b) 4,354,102 $ Plan Net Pension Liability/(Asset) 1,533,442 $ Miscellaneous Plan Balance at: 6/30/2014 (VD) Balance at: 6/30/2015 (MD) Net Changes During 2014-15 6,015,703 128,159 4,295,108 (58,994) 1,720,595 187,153 Proportionate Share of Net Pension Liability The District s proportionate share of the net pension liability for the Plans as of June 30, 2015 and 2016 was as follows: Miscellaneous 0.06205% 0.06272% 0.00067% Proportion Share of NPL - June 30, 2014 Proportion Share of NPL - June 30, 2015 Change - Increase (Decrease) Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the District s proportionate share of the net pension liability for the Plans as of the measurement date, calculated using the discount rate of 7.65 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.65 percent) or 1 percentage-point higher (8.65 percent) than the current rate: Discount Rate - 1% (6.65%) Plan's Net Pension Liability 2,539,853 $ $ Current Discount Rate (7.65%) Discount Rate + 1% (8.65%) 1,720,595 $ 1,044,202 15

Note 7: Change in Accounting Principle Due to the implementation of GASBS 68, equity was restated as follows: 2015 Beginning net position, as previously reported Restatement due to change in accounting principle (1,356,343) 13,567,497 $ Beginning net position, as restated 12,211,154 $ 16

CURRENT ASSETS Investment Fund. The following summary shows the amounts in each of the District's accounts and the designated use of the funds: California Bank & Trust - General account California Bank & Trust - Payroll account Arrowhead Credit Union - Saving Arrowhead Credit Union - Checking Local Agency Investment Fund Total Cash in Banks At April 30, 2016, the District had $1,747,949 in cash in bank, credit union and the Local Agency $ 109,550 5,500 17,085 13,352 1,601,962 $ 1,747,949 17

Planned Improvements CVWD has planned future projects for the improvement of the water system that extends to 2021. The projects are for replacing or adding new water mains, water well exploration and development, improving proposed water storage tanks, building new water storage tanks, and replacing aging heavy equipment. CVWD is endeavoring to pay for these projects on a pay as you go basis over the next five years at the average rate of $176,000 per year ($880,000 / 5 years). The planned costs are as follows: Water main projects, installing 2,500 feet Well Exploration and Development Proposed new storage tanks Heavy Equipment Replacement Office & maintenance facility $ 150,000 300,000 30,000 300,000 100,000 $ 880,000 18

Planned Improvements (continued) For the 2015-16 fiscal year, CVWD has planned the following improvements: Inventory Purchases Mainline Replacement / Extensions Lakeview Approx. 2,500 LF @ $60.00 $ 30,000 150,000 Storage Tank Work Zurich Tanks Paving and Fencing Well Development Valle Vertical Electra Vertical Upgrade Telemetry Equipment Other Improvements Field Equipment General Office & Maintenance Facility Replace Building Roof Office Partitions Board Room Update General Office Equipment Billing Software Office Computer Equipment Total 30,000 150,000 150,000 25,000 20,000 15,000 45,000 20,000 20,000 5,000 45,000 15,000 $ 720,000 19

CRESTLINE VILLAGE WATER DISTRICT Operating Revenues and Expenses 2012 - 2016 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 4/30/2012 4/30/2013 4/30/2014 4/30/2015 4/30/2016 Operating Revenues Operating Expenses 20

CRESTLINE VILLAGE WATER DISTRICT Source of Revenues For the year ended April 30, 2016 Availability Assessments, $152,778 Interest and Other $14,705 Taxes and Assessments, $218,781 Water Sales and Service, $2,167,027 21

CRESTLINE VILLAGE WATER DISTRICT OPERATING EXPENSES FOR THE YEAR ENDED APRIL 30, 2016 Source of Supply, $71,854 Depreciation and Amortization, $614,510 Administrative and General, $1,382,290 Purchased Water, $418,872 Transmission and Distribution, $211,936 Pumping, $54,287 Water Treatment, $20,257 Customer Accounts, $32,172 22

CRESTLINE VILLAGE WATER DISTRICT Cash and Utility Plant 2012 - 2016 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 4/30/2012 4/30/2013 4/30/2014 4/30/2015 4/30/2016 Cash Utility Plant 23

CRESTLINE VILLAGE WATER DISTRICT Current Ratio 2012 - 2016 100% 90% 80% 70% Percent of Total 60% 50% 40% 30% 20% 10% 0% 4/30/2012 $4,218,623 4/30/2013 $3,092,296 4/30/2014 $3,260,670 4/30/2015 $2,744,556 4/30/2016 $2,213,070 Current Assets Current Liabilities Current Ratio $464,846 9.1 $114,280 27.1 $137,034 23.8 $195,609 14 $178,264 12.4 24

CRESTLINE VILLAGE WATER DISTRICT Assessed Valuations 2012 2016 $738,534,986 $740,000,000 $730,000,000 $721,121,367 $720,000,000 $708,429,370 $706,390,917 $704,118,211 $710,000,000 $700,000,000 $690,000,000 $680,000,000 4/30/2012 4/30/2013 4/30/2014 4/30/2015 4/30/2016 4/30/2012 4/30/2013 4/30/2014 4/30/2015 4/30/2016 25