WATERWORKS DISTRICT NO. 2 OF THE PARISH OF ASCENSION, LOUISIANA DARROW, LOUISIANA

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1 3 a. RECEIVED <*:. - '"* r.'ditor JUHI5 AHIM9 WATERWORKS DISTRICT NO. 2 OF THE PARISH OF ASCENSION, LOUISIANA DARROW, LOUISIANA COMPONENT UNIT FINANCIAL STATEMENTS AND ACCOUNTANT'S COMPILATION REPORT AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2004 Under provisions of state law, this report is a public document. A copy of the report has been submitted to the entity and other appropriate public officials. The report is available for public inspection at the Baton Rouge office of the Legislative Auditor and, where appropriate, at the office of the parish clerk of court. Release Date P. J. CABALLERO, CPA GRAHAM STREET WHITE CASTLE, LA 7078B

2 TABLE OF CONTENTS Exhibit Page ACCOUNTANT'S COMPILATION REPORT 1 BASIC FINANCIAL STATEMENTS Proprietary Fund Type - Enterprise Fund Statement of net assets A 3-4 Statement of revenues, expenses and changes in net assets B 5 Statement of cash flows C 6 Notes to financial statements D 7-13

3 P J CABALLERO, CPA GRAHAM STREET WHITE CASTLE, LA ACCOUNTANT'S COMPILATION REPORT The Board of Commissioners Parish of Ascension, Louisiana Waterworks District No. 2 Darrow, Louisiana I have compiled the accompanying basic financial statements of the Parish of Ascension, Louisiana - Waterworks District No. 2, a component unit of the Parish of Ascension, Louisiana, as of and for the year ended 2004, as listed in the table of contents in accordance with the Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of financial statements information that is the representation of management. I have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. White Cast June 1,

4 BASIC FINANCIAL STATEMENTS -2-

5 Exhibit A ASCENSION PARISH WATERWORKS DISTRICT NO. 2 Darrow, Louisiana Proprietary Fund Type - Enterprise Fund Statement Of Net Assets ASSETS Current assets: Cash Accounts receivable and accrued water sales (net of allowance for uncollectable accounts of 4,500 Prepaid insurance Other ,975 21,636 1, ,362 18,517 1, Total current assets 105, ,249 Noncurrent Assets: Restricted Assets: Water reserve fund {savings deposits) Water revenue depreciation & contingency fund Customers' meter deposits (savings deposits) 6,089 5,281 21,874 7,179 6,418 22,987 Total restricted assets 33,244 36,584 Capital Assets: Water distribution system Equipment Less accumulated depreciation 741,921 1, , , ,441 1, , ,117 Total capital assets 494, ,328 Unamortized debt expense 1, Total noncurrent assets 528, ,723 TOTAL ASSETS 634, ,972 The accompanying notes are an integral part of this statement.

6 Exhibit A Continued ASCENSION PARISH WATERWORKS DISTRICT NO. 2 Darrow, Louisiana Proprietary Fund Type - Enterprise Fund Statement Of Liabilities And Net Assets LIABILITIES AND NET ASSETS Current liabilities (payable from current assets) Accounts payable Taxes payable 13, , Total Current Liabilities (payable from current assets) 14,327 19,437 Current liabilities (payable from restricted assets) Accrued interest payable Current portion of water revenue bonds payable Customers' meter deposits ,288 21, ,038 23,459 Total current liabilities (payable from restricted assets) _ Noncurrent liabilities Revenue bonds payable Less: Amount currently due 36, ,940 14,288 38, ,651 15,038 Total noncurrent liabilities 130, ,613 Total liabilities 181, ,767 Net Assets: Invested In capital assets, net of related debt Restricted net assets for Revenue bond and interest retirement Replacements and extensions Unrestricted net assets 246,117 6,089 5, , ,636 7,179 6, ,909 Total net assets 453, ,205 TOTAL LIABILITIES AND NET ASSETS 634, ,972 The accompanying notes are an integral part of this statement. -4-

7 Exhibit B ASCENSION PARISH WATERWORKS DISTRICT NO. 2 Darrow, Louisiana Proprietary Fund Type - Enterprise Fund Statement Of Revenues, Expenses and Changes In Net Assets Operating revenues: Water Sales Forfeited discounts Service Charges ,419 5,755 3, ,019 5,630 4,284 Total operating revenues 186, ,933 Operating expenses: Cost of water Management fees and service charges Repairs and maintenance Professional fees Insurance expense Commission fee Uncollectible accounts Depreciation Taxes, licenses & permits Bank charges Minute publications Publications, subscriptions & dues Miscellaneous 92,600 47,347 16,258 8,646 3,405 3,780 1,001 14,935 1, ,135 49,110 19,923 8,532 2,743 3, ,805 1, ,463 Total operating expenses t * 190, ,440 Operating Income (3,774) 493 Nonoperating revenues (expenses): Interest Income Other Income Interest expense Amortization expense 890 2,352 (8,278) (792) (7,071) (221) Total nonoperating expenses (5,828) (5,932) Changes in net assets (9,602) (5,439) Net assets, beginning Change in contributed capital 462, ,125 1,519 Net assets, ending 453, ,205 The accompanying notes are an integral part of this statement. -5-

8 ASCENSION PARISH WATERWORKS DISTRICT NO. 2 Darrow, Louisiana Proprietary Fund Type - Enterprise Fund Exhibit C Statement Of Cash Flows Cash flows from operating activities: Receipts from customers Payments to suppliers ,525 (171,074) ,053 (158,254) Net cash provided by operating activities 11,451 23,799 Cash flows used by capital and related financing activities Proceeds from meter deposits Interest paid on revenue bonds Principal paid on revenue bonds Capital contributed by customers Acquisition of capital assets 1,140 (8,278) (45,030) 380 (380) 1,929 (7,071) (14,290) 1,520 (1,520) Net cash used by capital and related financing activities (52,168) (19,432) Cash flows from investing activities: Interest received on interest-bearing deposits Other income 890 2, Net cash provided by investing activities 3,242 1,360 Net increase (decrease) in cash and cash equivalents (37,475) 5,727 Cash and cash equivalents, beginning of period 152, ,219 Cash and cash equivalents, end of period 115, ,946 Reconciliation of operating income to net cash provided by operating activities: Operating Income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Changes in assets and liabilities Receivables net Prepaid expenses Accounts and other payables Total adjustments (3,774) 14,935 (4,159) (4) 4,453 15, ,805 3, ,086 23,305 Net cash provided by operating activities 11,451 23,799 The accompanying notes are an integral part of this statement. -6-

9 Exhibit D WATERWORKS DISTRICT NO. 2 OF THE PARISH OF ASCENSION, LOUISIANA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2004 NOTE A: SIGNIFICANT ACCOUNTING POLICIES The Waterworks District No. 2 of the Parish of Ascension, Louisiana was created by an ordinance of the Ascension Parish Police Jury in The governing authority of the District consists of five members of a Board of Commissioners appointed to five-year terms by the Parish Council. Basis of Presentation The accompanying financial statements of the Waterworks District No. 2 of the Parish of Ascension, Louisiana have been prepared in conformity with accounting principals generally accepted in the United States of America as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principals. Reporting Entity Section 2100 of the GASB Codification of Governmental Accounting and Financial Reporting Standards (GASB Codification) established criteria for determining the governmental reporting entity and component units that should be included with the reporting entity. In conformance with GASB Codification Section 2100, the District is a component unit of the Parish of Ascension. The accompanying basic financial statements present only the transactions of the Waterworks District No. 2 of the Parish of Ascension, Louisiana. Fund Structure Water District No. 2 of the Parish of Ascension, Louisiana, a component unit of the Parish, is a proprietary type fund, more specifically an enterprise fund. Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises. The intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. -7-

10 Exhibit D Continued NOTE A: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Method of Accounting On 2002, the District adopted the provisions of Statement No. 34 ("Statement 34") of the Governmental Accounting Standards Board "Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments." Statement 34 established standards for external reporting for all state and local government entities which includes a statement of net assets, a statement of activities and changes in net assets and a statement of cash flows. It requires the classification of net assets into three components - invested in capital assets, net of related debt; restricted and unrestricted. These classifications are defined as follows: Invested in capital assets, net of related debt - This component of net assets consist of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balance of any bonds, mortgages, notes, or other borrowings that are attributable to the unspent related debt proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in the calculation of invested in capital assets, net of related debt. Rather, that portion of the debt is included in the same net assets component as the unspent proceeds. Restricted - This component of net assets consists of constraints placed on net asset as through external constraints imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. Unrestricted net assets - The component of net assets consist of net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." The adoption of Statement No. 34 had no effect on the basic financial statements except for the classification of net assets in accordance with the Statement and the reflections of capital contributions as a change in net assets. The Water District utilizes the accrual basis of accounting. Revenues are recognized in the accounting period in which they are earned and expenses are recognized when they are incurred. Revenues for utility services are accrued through year-end.

11 Exhibit D Continued NOTE A: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash and cash equivalents Under state law, the District may deposit funds within a fiscal agent bank organized under the laws of the State of Louisiana, the laws of any other state in the Union, or the laws of the United States. The District may invest in certificates and time deposits of the state banks organized under Louisiana law and national banks having principal offices in Louisiana. At 2004 the District has cash and interest-bearing deposits totaling 120,946, as follows: 2004 Demand deposits 13,597 Time deposits and money market accounts 107,349 These deposits are stated at cost, which approximates market. Under state law, these deposits, (or the resulting bank balances) must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. The market value of the pledged securities plus the federal deposit insurance must at all times equal or exceed the amount on deposit with the fiscal agent bank. These securities are held in the name of the pledging fiscal agent bank in a holding or custodial bank that is mutually acceptable to both parties. Deposit balances (bank balances) at 2004 were secured as follows: Bank balances 120,946 Federal deposit insurance S 100,000 Pledged securities (Category 3) 232,425 Pledged securities in Category 3 include uninsured or unregistered investments for which the securities are held by the broker or dealer, or by its trust department or agent, but not in the District's name. Even though the pledged securities are considered uncollaterized (Category 3) Louisiana Revised Statute 39:1229 imposes a statutory requirement on the custodial bank to advertise and sell the pledged securities within 10 days of being notified by the District that the fiscal agent has failed to pay deposited funds upon demand..9.

12 Exhibit D Continued NOTE A: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Utility Plant Plant and equipment is stated at cost less accumulated depreciation. Depreciation is recorded on the straight-line method over an estimated useful life of 50 years. Deferred debt expense Amortization of deferred debt expense is recognized on the "bonds outstanding" method over the life of the bond issue. Changes in contributed capital The change in contributed capital for the year ended December, 31, 2004 results from customers' contributions for new services installed. Risk of loss The district is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; and natural disasters. The district purchases commercial insurance for risks of loss. There have been no insurance claims or reduction in insurance coverage for the past three years. NOTE B: FIXED ASSETS AND DEPRECIATION A summary of proprietary fund type property, plant and equipment at 2004 as follows: Capital assets: Water System 741,921 1, ,441 Equipment 1,004 1,004 Total capital assets at historical cost 742,925 1, ,445 Less: Accumulated depreciation for Water System (247,412) (14,779) (262,191) Equipment (900) (26) (926) Total accumulated depreciation (248,312) (14,805) (263,117) Capital assets, net S 494,613 (13,285) S 481,

13 Exhibit D Continued NOTE C: FLOW OF FUNDS - RESTRICTIONS ON USE Under the terms of the bond indenture approved by Rural Economic Development (RECD), acting on behalf of Rural Utilities Service (RUS), formerly Farmers Home Administration/Rural Development Administration (FmHA/RDA) (the "Government"), for the water revenue bonds dated May 19, 1998, all income of every nature, earned or derived from operation of the System are pledged and dedicated to the retirement of the bonds. Revenues which are to be set aside into the special funds include: All revenues shall be periodically deposited in a "Water Revenue Fund" to provide for payment of all reasonable and necessary expenses of operating and maintaining the System. There will be set aside into a fund called the "Water Revenue Bond and Interest Sinkng Fund" an amount sufficient to pay promptly and fully the principal of and interest on the Bond herein authorized. The amount shall be a sum equal to one-twelfth (l/12 th ) of the interest falling due on the next interest payment date during the period the Bonds are outstanding prior to the date of payment of the first amortized payment of both principal and interest which will be due payable one year and one month from the date of the Bond and monthly thereafter in an amount equal to one-twelfth (1/12 1 ) of the total amount of principal and interest falling due on the next principal and interest payment date, together with such additional proportionate sum as may be required to pay said principal and interest as the same respectively become due. There shall also be set aside into a "Water Reserve Fund" an amount equal to five percent (5%) of the annual payment to be made into the Sinking Fund, the payments into said Reserve Fund to continue until such time as there has been accumulated in said Reserve Fund a sum equal to the highest combined principal and interest falling due in any future year on the Bond as a Debt Service Reserve, the money in said Reserve Fund to be retained solely for the purpose of paying the principal of and interest on the Bond payable from the Sinking Fund as to which there would otherwise be default. In addition, there shall be set aside into a "Water Revenue Depreciation and Contingency Fund" an amount equal to 94 per month. Such amounts are to be used for depreciation, extensions, additions, improvements and replacements necessary to operate properly the System. Money in this fund shall also be used to pay the principal of and the interest on any Bond for the payment of which there is not sufficient money in the Sinking Fund or the Reserve Fund, but if so, such moneys shall be required to be used for operation and maintenance of the System or for current principal, interest and reserve requirements. Monthly payments of interest and principal are being made for debt service relating to the bond issue. By agreement with the district USDA Rural Development will not require -11 -

14 Exhibit D Continued NOTE C: FLOW OF FUNDS - RESTRICTIONS ON USE (CONTINUED) the district to establish the "Water Revenue Bond and Interest Sinking Fund" contemplated in the bond issue. NOTE D: CHANGES IN LONG TERM DEBT The following is a summary of debt transactions for the year ended 2004: Water Revenue Bonds Long-term debt payable at ,940 Long-term debt issued Long-tern debt retired (14,289) Long-term debt payable at ,651 Long term debt payable Bonds payable at 2004 are compromised of the following individual issues: Water Revenue Bonds: 360,000 Water Revenue Bonds, Series 1998 dated May 19, 1998 due in amortized installments of principal and interest of 1, per month through May 19, 2038; interest at 5.125% 149,940 This bond issue was used to finance the replacement of water lines and meters throughout the district's distribution system. Although the bond issue was for 360,000 the district required, and was advanced, only 345,000 from USDA Rural Development to complete the project. The monthly repayment amount remains at 1, The effect of a lower principal amount with no change in the monthly payment will result in the final payment being made on July 19, During the year 2003 the district retired a large portion of the outstanding debt changing the final payment being made on May 19,

15 Exhibit D Continued NOTE E: WATER LOSS Water is purchased from a neighboring parish at a rate of 1.81 per thousand gallons. A comparative summary of water purchased and billed for the years ended 2003 and 2004 as reflected in the district's records is as follows: Water purchased 51,163 42,035 Water sold 31,122 28,812 Water unaccounted for 20,041 13,223 Percent unaccounted for 39% 31% Based on the average cost per thousand gallons of water the cost of the water that is unaccounted for amounted to approximately 23, in 2004 and 36, in NOTE F: COMMENTS ON OPERATIONS OF WATER UTILITY SYSTEM 1. A detail of compensation paid to the President of the Board and board members for the year ended 2004 follows: Victor Pedescleaux, President 780 Board Members: Jan Waggenspack 780 Melvin Irvin, Sr. 720 Ty Donovan Graves 720 Yestive Miles 660 3,