Department of Energy. Small Scale Energy Loan Program

Transcription

1 Enterprise Fund of the Stte of Oregon Deprtment of Energy Smll Scle Energy Lon Progrm For the Fiscl Yers Ended June 3D, 2012 nd June 3D, 2011 Lis Schwrtz Director OREGON DEPARTMENT OF ENERGY

2 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditor's Report Finncil Sttements Blnce Sheets-June 30, 2012 nd June 30, Sttements of Revenues, Expenses nd Chnges in Fund Net Assets- For the Fiscl Yers Ended June 30, 2012 nd June 30, Sttements of Csh Flows- For the Fiscl Yers Ended June 30, 2012 nd June 30, Notes to the Finncil Sttements SUPPLEMENTARY INFORMATION Combining Schedules of SELP Progrm Activities Combining Schedule of SELP Progrm Blnce Sheet Activities-June 30, Combining Schedule of SELP Progrm Revenues, Expenses nd Chnges in Fund Net Assets- For the Fiscl Yer Ended June 30, Combining Schedule of SELP Progrm Csh Flow Activities- For the Fiscl Yer Ended June 30, OTHER REPORTS Report on Internl Control Over Finncil Reporting nd on Complince nd Other Mtters

3 FINANCIAL SECTION

4 2

5 Office of the Secretry of Stte Kte Brown Secretry of Stte Brin Shipley Deputy Secretry of Stte Audits Division Gry Blckmer Director 255 Cpitol St. NE, Suite 500 Slem, OR (503) fx (503) The Honorble John Kitzhber Governor of Oregon Lis Schwrtz, Director Oregon Deprtment of Energy INDEPENDENT AUDITOR'S REPORT We hve udited the ccompnying finncil sttements of the Smll Scle Energy Lon Progrm, n enterprise fund of the Stte of Oregon, Deprtment of Energy, s of nd for the yer ended June 30, 2012 nd 2011, s listed in the tble of contents. These finncil sttements re the responsibility of the deprtment's mngement. Our responsibility is to express n opinion on these finncil sttements bsed on our udit. We conducted our udit in ccordnce with uditing stndrds generlly ccepted in the United Sttes of Americ nd the stndrds pplicble to finncil udits contined in Government Auditing Stndrds, issued by the Comptroller Generl of the United Sttes. Those stndrds require tht we pln nd perform the udit to obtin resonble ssurnce bout whether the finncil sttements re free of mteril missttement. An udit includes considertion of internl control over finncil reporting s bsis for designing udit procedures tht re pproprite in the circumstnces, but not for the purpose of expressing n opinion on the effectiveness of the deprtment's internl control over finncil reporting relting to the Smll Scle Energy Lon Progrm. Accordingly, we express no such opinion. An udit lso includes exmining, on test bsis, evidence supporting the mounts nd disclosures in the finncil sttements, ssessing the ccounting principles used nd the significnt estimtes mde by mngement, s well s evluting the overll finncil sttement presenttion. We believe tht our udit provides resonble bsis for our opinion. As discussed in Note 1, the finncil sttements of the Smll Scle Energy Lon Progrm re intended to present the finncil position, nd the chnges in finncil position nd csh flows tht re ttributble to the trnsctions of the Smll Scle Energy Lon Progrm. They do not purport to, nd do not, present firly the finncil position of the Deprtment of Energy or the Stte of Oregon s of June 30, 2012 nd 2011, the chnges in their finncil position or their csh flows for the yers then ended in conformity with ccounting principles generlly ccepted in the United Sttes of Americ. In our opinion, the finncil sttements referred to previously present firly, in ll mteril respects, the respective finncil position of the Smll Scle Energy Lon Progrm s of June 30, 2012 nd 2011, nd the respective chnges in finncil position nd csh flows thereof for the yers then ended in conformity with ccounting principles generlly ccepted in the United Sttes of Americ. 3

6 In ccordnce with Government Auditing Stndrds, we hve lso issued our report dted My 31, 2013, on our considertion of the Deprtment of Energy's internl control over finncil reporting relting to the Smll Scle Energy Lon Progrm nd on our tests of its complince with certin provisions of lws, regultions, contrcts, nd grnt greements nd other mtters. The purpose of tht report is to describe the scope of our testing of internl control over finncil reporting nd complince nd the results of tht testing, nd not to provide n opinion on the internl control over finncil reporting or on complince. Tht report is n integrl prt of n udit performed in ccordnce with Government Auditing Stndrds nd should be considered in ssessing the results of our udit. Tht report is presented seprtely in the Other Report section s listed in the tble of contents. Our udit ws conducted for the purpose of forming opinions on the finncil sttements tht collectively comprise the Smll Scle Energy Lon Progrm finncil sttements. The combining schedules re presented for purposes of dditionl nlysis nd re not required prt of the finncil sttements. Such informtion is the responsibility of mngement nd ws derived from nd reltes directly to the underlying ccounting nd other records used to prepre the finncil sttements. The combining schedules hve been subjected to the uditing procedures pplied in the udit of the finncil sttements nd, in our opinion, re firly stted in ll mteril respects in reltion to the finncil sttements tken s whole. OREGON AUDITS DIVISION Kte Brown Secretry of Stte My 31,

7 STATE OF OREGON DEPARTMENT of ENERGY SMALL SCALE ENERGY LOAN PROGRAM ENTERPRISE FUND BALANCE SHEETS JUNE 30, 2012 AND JUNE 30, ASSETS Current Assets: Csh nd Csh Equivlents $ 4,338,196 $ 2,915,354 Csh nd Csh Equivlents--Restricted 26,690,521 37,152,248 Accounts Receivble 27,316 97,184 Lon Interest Receivble 2,490,643 2,184,387 Stte Owned Property for Resle 802,100 Due from Other Funds/Agencies 1,077,349 1,077,723 Totl Current Assets 35,426,125 43,426,896 Noncurrent Assets: Csh nd Csh Equivlents--Restricted 12,235,400 9,408,572 Deferred Bond Issunce Costs 1,858,303 1,827,417 Lons Receivble (Net) 203,791, ,434,335 Totl Noncurrent Assets 217,885, ,670,324 TOTAL ASSETS $ 253,311,549 $ 256,097,220 LIABILITIES AND NET ASSETS Current Libilities: Accounts Pyble $ 34,670 $ 24,113 Bond Interest Pyble 3,055,704 2,878,953 Compensted Absences Pyble 26,055 24,248 Deferred Income 175,785 68,230 Bonds Pyble 16,827,755 21,097,957 Totl Current Libilities 20,119,969 24,093,501 Noncurrent Libilities: Compensted Absences Pyble 13,422 12,492 Borrower Deposit libility 6,199,771 2,958,269 Other Postemployment Benefits Obligtion (Net) 11,191 9,695 Bonds Pyble 235,351, ,269,730 Totl Noncurrent Libilities 241,576, ,250,186 TOTAL LIABILITIES 261,696, ,343,687 Net Assets: Restricted for Debt Service 884,272 Unrestricted (8,384,534) (3,130,739) Totl Net Assets (Deficit) (8,384,534) (2,246,467) TOTAL LIABILITIES AND NET ASSETS $ 253,311,549 $ 256,097,220 The ccompnying notes re n integrl prt of /lie finncil sttements. 5

8 STATE OF OREGON DEPARTMENT of ENERGY SMALL SCALE ENERGY LOAN PROGRAM ENTERPRISE FUND STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND JUNE 30, OPERATING REVENUES Interest on Lons $ 11,549,239 $ 10,616,474 Interest on Csh Blnces 222, ,576 Appliction nd Disbursement Fees 10,379 36,193 Lon Fees 278, ,453 Holding Cost Fees 297, ,492 Other Fees nd Chrges 21, ,023 Miscellneous Revenue 53,756 31,321 TOTAL OPERATING REVENUES 12,433,097 12,183,532 OPERATING EXPENSES Bond Interest 10,102,916 9,878,965 Bond Expenses 22,265 23,028 EEAST Specil Pyments 2,313, ,821 Slries nd Other Personl Services 725, ,951 Services nd Supplies 559, ,370 Amortiztion of Deferred Bond Issunce Costs 226, ,978 Bd Debt Expense 5,281,845 5,638,995 TOTAL OPERATING EXPENSES 19,232,462 17,652,108 OPERATING INCOME (LOSS) (6,799,365) (5,468,576) Trnsfers from Other Funds/Agencies 661,298 1,077,723 CHANGE IN NET ASSETS (6,138,067) (4,390,853) NET ASSETS - BEGINNING (2,246,467) 2,144,386 NET ASSETS (DEFICIT) - ENDING $ (8,384,534 ) $ (2,246,467) The ccompnying notes re n integrl prt of Ihe finncil sttements. 6

9 STATE OF OREGON DEPARTMENT of ENERGY SMAll SCALE ENERGY LOAN PROGRAM ENTERPRISE FUND STATEMENTS OF CASH flows FOR THE FISCAL YEARS ENDED JUNE 30,2012 AND JUNE 30, CASH FLOWS FROM OPERATING ACTIVITIES Csh Received from Customers 731,457 $ 1,230,444 Lon Principl Repyments 19,743,100 14,863,811 Lon Interest Received 11,222,080 9,598,498 Lons Disbursed to Borrowers (28,184,430) (63,899,501) Csh Credited to Borrowers on Deposit Net of Withdrwls 3,369,960 1,426,180 Csh Pid to Vendors for Goods nd Services (310,537) (596,559) Csh Pid to EEAST Grntees (2,313,974) (578,821) Csh Pid for Employees (705,837) (768,980) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 3,551,819 (38,724,928) CASH HOWS FROM NONCAPITAl FINANCING ACTIVITIES Proceeds from Bonds 21,208,234 84,890,816 Principl P id on Bonds (21,332,957) (29, 104,532) Interest Pid on Bonds (10,461,188) (9,928,287) Bond Issue Costs Pid (61,904) (267,953) Trnsfer from other Funds 661, ,587 NET CASH PROVIDED (USED) BY NONCAP ITAL FINANCING ACTIVITIES (9,986,144) 46,106,631 CASH FLOWS FROM INVESTING ACTIVITIES Interest Received on Cs h Blnces 222, ,576 NET CASH PROVIDED BY IN VESTING ACTIVITIES 222, ,576 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,212,057) 7,670,279 CASH AND CASH EQUIVALENTS - BEG INNING 49,476,174 41,805,895 CASH AND CASH EQUIVALENTS - ENDING $ 43,264,117 $ 49,476,174 Csh nd Cs h Equivlents 4,338,196 2,915,354 Cs h nd Cs h Equivlents--Restricted 38,925,921 46,560,820 TOTAL CASH AND CASH EQUIVALENTS $ 43,264,117 $ 49,476,174 Tile ccompnying notes re n integrl prl of tile finncil sttements. 7

10 STATE OF OREGON DEPARTMENT of ENERGY SMALL SCALE ENERGY LOAN PROGRAM ENTERPRISE FUND STATEMENTS OF CASH FLOWS (continued) FOR THE FISCAL YEARS ENDED JUNE 30, 2012 AND JUNE 30, RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES OPERATING INCOME (LOSS) $ (6,799,365) $ (5,468,576) Adjustments to Reconcile Operting Income (Loss) to Net Csh Prvided (Used) by Operting Activities: Bd Debt 5,281,845 5,638,995 Amortiztion of Deferred Bond Issue Costs 226, ,978 Interest Received on Csh Blnces Reported s Operting Revenue (222,268) (288,576) Bond Interest Expense nd Debt Service Amortiztion Reported s Operting Expense 10,097,214 9,878,965 {lncrese}/oecrese in Assets: Accounts Receivble 69,868 (48,038) Lon Interest Receivble (306,256) (999,755) Lon Receivble (7,357,386) (49,035,690) Foreclosed nd Deeded Property (802,100) Increose/(Oecreose} in Libilities: Accounts Pyble 10,558 4,156 Compensted Absences Pyble 2,737 (20,621) Deferred Income (20,903) (18,222) Net OPEB Obligtion 1,496 1,276 Borrower Deposits 3,369,960 1,426,180 TOTAL ADJUSTMENTS 10,351,184 (33,256,352) NET CASH PROVIDED (USED) BY OPERATIONS $ 3,551,819 $ (38,724,928) The ccompnying notes re n integrl prt of the finncil sttements. 8

11 STATE OF OREGON DEPARTMENT of ENERGY SMALL SCALE ENERGY LOAN PROGRAM Notes to the Finncil Sttements ENTERPRISE FUND JUNE 30, 2012 AND JUNE 30, 2011 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The ccompnying finncil sttements of the Oregon Deprtment of Energy Smll Scle Energy Lon Progrm- (5ELP) hve been prepred in conformity with Generlly Accepted Accounting Principles (GAAP) s prescribed by the Governmentl Accounting Stndrds Bord (GASB) nd the Finncil Accounting Stndrds Bord (FASB). Under GASB Sttement 20, SELP does not pply privte-sector stndrds of ccounting nd finncil reporting issued fter November 30, 1989 for proprietry fund ctivities, unless GASB mends its pronouncements to specificlly dopt FASB pronouncements issued fter tht dte. A. Reporting Entity The Smll Scle Energy Lon Progrm (SELP) ws creted through the doption of Oregon Constitution Article XI-J by sttewide vote in My 1980 nd is implemented under the provisions of Oregon Revised Sttutes Chpter 470. Article XI-J uthorizes the sle of Stte Generl Obligtion Bonds to finnce fixed-rte, secured lons for the development of energy conservtion, renewble energy nd recycling projects within Oregon. SELP ws designed s self-supporting lon progrm tht is prt of the Stte of Oregon nd the Deprtment of Energy (Deprtment). The 2009 legisltive session creted the Energy Efficiency nd Sustinble Technology progrm (EEAST) s prt of the SELP progrm. The EEAST progrm ws creted s new finnce tool to ssist investment in energy efficiency nd renewble energy projects with the repyment of lons mde through the customer's utility bill. The Deprtment is in the pilot phse of the EEAST progrm implementtion. The finncil sttements nd footnotes include only the bonded debt finncil ctivity of the Deprtment of Energy lon progrm. The Deprtment opertes other governmentl fund progrms, which re not included in this report. B. Bsis of Presenttion The ccounts of the Deprtment re orgnized on the bsis of funds, ech of which is seprte ccounting entity. The funds utilize seprte set of self blncing ccounts to record the ssets, libilities, net ssets, revenues, nd expenses of their progrm ctivities. SELP is clssified s proprietry fund. Proprietry funds contin two types of funds: Enterprise Funds nd Internl Service Funds. SELP is ccounted for s n Enterprise Fund. Enterprise funds re used for opertions tht re finnced nd operted in mnner similr to privte business enterprises, where the costs of providing goods nd services to the generl public on continuing bsis is intended to be finnced or recovered primrily through user chrges. Enterprise fund reporting focuses on the determintion of operting income, chnges in net ssets, finncil position nd csh flows. 9

12 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 C. Mesurement Focus nd Bsis of Accounting The ccounting nd finncil reporting tretment pplied to fund is determined by its mesurement focus. Enterprise funds re ccounted for using the flow of economic resources mesurement focus nd re mintined on the ccrul bsis of ccounting. Under the ccrul bsis of ccounting, revenues re recognized when erned nd expenses re recognized when the libilities re incurred. All ssets nd libilities ssocited with the opertions of these funds re included on the Blnce Sheet. Totl net ssets re segregted into the ctegories of Invested in Cpitl Assets, Restricted Net Assets, nd Unrestricted Net Assets. The Sttement of Revenues, Expenses nd Chnges in Fund Net Assets present increses (e.g., revenues) nd decreses (e.g., expenses) in totl net ssets. The Sttement of Csh Flows provides informtion bout how SELP finnces nd meets the csh flow needs of its proprietry ctivities. D. Budgetry Process The Oregon Legislture pproves budgets for biennil period. Operting expenses re subject to budget limittion nd bond relted expenses re subject to dministrtive limittion. The Emergency Bord of the Legislture pproves ny increse in the budget tht my be necessry during the interim. Both types of limittion re funded from revenues of self-supporting ctivities nd lpse t the end of the biennium. Budgets re dopted on bsis tht differs from generlly ccepted ccounting principles nd finncil reporting stndrds. For budgetry purposes, trnsctions relted to the tretment of bond proceeds, lon disbursements nd other operting revenues nd expenditures re recorded on csh bsis nd converted to the ccrul bsis for finncil reporting purposes. E. Csh nd Csh Equivlents Csh nd csh equivlents re defined s csh held in the Stte Tresury nd csh on deposit outside the Stte Tresury. All SELP monies re held in the Oregon Short Term Fund (OSTF), csh nd investment pool tht is vilble for use by ll funds nd locl governments. The OSTF pool opertes s demnd deposit ccount nd funds held in the OSTF re considered csh equivlents. F. Restricted Assets Use of ll csh nd csh equivlents of SELP re restricted s to purpose nd use by Article XI-J of the Oregon Constitution, Bond Indenture, nd Stte sttute. SELP's funds re restricted to funding lons nd pying bond debt service nd operting costs. Individul borrower reserve ccounts hve been estblished to meet certin lon requirements nd the blnces ohhese ccounts s of June 30, 2012 nd 2011 were sufficient to meet ll contrctul greements. Any csh on deposit with fiscl gent is held on behlf of bondholders nd is the result of unclimed monies from mtured bonds nd coupons. 10

13 Notes to the Finncil Sttements (Continued) Enterprise Fund June 3D, 2012 nd June 3D, 2011 G. Cpitl Assets Cpitl ssets re reported t historicl cost or estimted historicl cost if the originl cost cnnot be determined. Cpitl ssets costing less thn $5,000 nd hving n estimted useful life of less thn one yer re not cpitlized. Mintennce tht does not dd to the vlue of ssets or significntly extend sset lives is expensed rther thn cpitlized. Deprecition or mortiztion of cpitl ssets is chrged s n expense ginst opertions over the estimted useful life using the stright-line method of deprecition. Once plced into service the estimted useful life of cpitl ssets will be determined using criteri outlined in the Oregon Accounting Mnul (OAM), section Cpitl ssets re recorded net of ccumulted deprecition. H. Receivbles Receivbles reported re mounts due tht represent revenues erned or ccrued in the pplicble period. Types of receivbles included in this clssifiction relte to interest, lons receivble, nd other miscellneous receivbles. Interest receivble on lons is recorded t the net recoverble mount by mngement policy. Lons receivble re recorded net of n llownce for uncollectible ccounts bsed on percentge of receivbles s determined by mngement. I. Operting Revenues nd Expenses Operting revenues include interest nd fees on progrm lons s well s ernings on csh nd ny investments relted to SELP's lon progrm. Administrtive expenses nd bond progrm relted expenses re considered operting expenses. J. Compensted Absences Employees ccrue vction leve t vrious ccrul rtes nd my generlly be pid for up to mximum of 250 hours ccrued vction leve t termintion. Accumulted vction leve is recorded s n expense nd libility of those funds s the benefits ccrue to the employees. There is no libility for unpid ccumulted sick leve since the Stte does not py ny mounts when employees seprte from Stte service. K. Arbitrge Rebte Libility Internl Revenue Code Section 148(f) requires issuers of tx-exempt bonds to rebte income from the investment of bond proceeds tht exceeds limits estblished for ech bond issue. These limits re bsed on the bond yield clculted for federl tx purposes for ech bond issue nd re subject to certin exceptions. Arbitrge rebte pyments re due not lter thn 60 dys fter the end of the fifth nniversry of ech bond issue nd every five yers therefter in n mount equl to t lest 90 percent of the clculted rbitrge libility. Finl rbitrge rebte pyments re due not lter thn 60 dys fter the finl retirement of ll bonds in n issue in n mount equl to 100 percent of the clculted rbitrge libility. SELP records rbitrge rebte s reduction of investment revenue. 11

14 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 L. Bond Expenses Bond issunce costs re cpitlized s deferred chrges nd mortized over the term of the relted bond issue. Bond premiums nd discounts rising from the sle of prticulr bond issue re deferred nd chrged or credited to interest expense over the term of the bond issue, using the bonds-outstnding method of mortiztion. Deferred mounts relted to debt refunding re reflected s reduction to bonds pyble nd re mortized over the shorter of the term of the refunding or refunded bonds using the bonds-outstnding method of mortiztion. The bondsoutstnding method of discount nd deferred chrge mortiztion most closely pproximtes the effective-interest method. M. Borrower's Deposit Libility Accounts SELP holds reserve investments for certin borrowers in ccordnce with contrctul obligtions. All interest erned on these reserve ccounts is credited to the borrower's ccount when received. Funds in the reserve ccount in excess of contrctul requirements re remitted to the borrowers upon request. N. Comprtive Dt Comprtive finncil sttements re presented in order to provide n understnding of the chnges in SELP's finncil position nd opertions. NOTE 2. CASH AND CASH EQUIVALENTS SELP deposits re held in demnd ccounts with the Stte Tresurer nd re clssified s csh nd csh equivlents. The Stte's investment policies re governed by Oregon Revised Sttutes, nd the Oregon Investment Council. The Stte Tresurer is the investment officer for the Orego n Investment Council nd is responsible for the funds entrusted to the Oregon Stte Tresury. In ccordnce with Oregon sttutes, the investment funds re invested, nd the investments of those funds mnged, s would prudent investor, exercising resonble cre, skill nd cution. The Stte Tresurer mintins the Oregon Short Term Fund (OSTF), csh nd investment pool tht is vilble for use by ll funds nd locl governments. Investments in the OSTF re further governed by portfolio guidelines recommended by the Oregon Short Term Fund Bord, with Oregon Investment Council pprovl, estblishing diversifiction percentges nd specifying the types nd mturities of investments. The OSTF pool opertes s demnd deposit ccount nd ernings re llocted on pro-rt bsis on dily ccount blnces. A seprte finncil report for the OSTF my be obtined from the Oregon Stte Tresury, Finnce Division, 350 Winter Street NE, Suite 100, Slem, OR or from the Tresury's website t lnvestment/. 12

15 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 The custodil credit risk for csh deposits is the risk tht, in the event of bnk filure, the Stte's deposits my not be recovered, or the Stte will not be ble to recover collterl securities tht re in the possession of n outside prty. The Deprtment does not hve forml policy regrding custodil credit risk for deposits; however, bnking regultions nd Oregon lw estblish the insurnce nd collterl requirements for deposits in the OSTF. Blnces tht exceed the Federl Deposit Insurnce (FDIC) mount of $250,000 re covered by multiple finncil institution collterl pool (ORS ) dministered by the Oregon Stte Tresury. At June 30, 2012, the book blnce of csh nd csh equivlents held by the Tresury ws $43,258,793. The undjusted bnk blnce ws $43,211,464, ll of which ws held in demnd ccounts with the Stte Tresurer invested in the OSTF. At June 30, 2011, the book blnce of csh nd csh equivlents held by the Tresury ws $49,056,513. The undjusted bnk blnce ws $49,766,994, ll of which ws held in demnd ccounts with the Stte Tresurer invested in the OSTF. At June 30, 2012, the bnk blnce of csh nd csh equivlents held by Wells Frgo in its cpcity s the Stte's trustee ws $5,323. These funds represent lottery bond debt service reserves nd re held in the Stte's nme nd invested in the OSTF through Wells Frgo. At June 30, 2011, the bnk blnce of csh nd csh equivlents held by Wells Frgo in its cpcity s the Stte's trustee ws $419,661. These funds represent lottery bond debt reserves nd re held in the Stte's nme nd invested in the OSTF through Wells Frgo. Bond Indenture nd Stte sttute require SELP csh be segregted into seprte funds. The 2009 Legisltive Assembly creted dditionl funds to further ssist investment in energy efficiency nd renewble energy projects under the Energy Efficiency nd Sustinble Technology progrm (EEAST), which is prt of SELP. The following tble itemizes csh blnces by funds t June 30, 2012 nd 2011: June 30, 2012 June SELP Lon Fund $11,289,793 $17,950,978 SELP Sinking Fund Progrm Account 9,997,391 8,570,411 Principl & Interest 7,586,974 9,091,816 Extrordinry Expense 6,030,642 6,030,642 Borrower Deposit Libility 6,199,434 2,958,269 EEAST Lon Offset Grnt Fund 2,154,559 4,450,227 EEAST Supplementl Fund 4,170 TOTALS $43, ~,056,513 13

16 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 NOTE 3, LOANS RECEIVABLE The composition of the lons receivble portfolio includes stte gency lons. The lon portfolio vlue nd ssocited sttewide concentrtion of credit risk is: Borrower Type Commercil nd residentil Cities, counties, school nd specil districts Stte gencies Not-for-profit orgniztions Totl Lons Receivble Lons June 30, 2012 $ 84,390,659 29,825,574 96,876,551 6,542,203 $217,634,987 Lons June 30, 2011 $ 78,168,388 33,488,867 91,470,878 7,280,229 $210,408,362 Stte gency lons ( 96,876,551) ( ,878) Net credit risk exposure S 12Q,Z Sll8.93ZA84 SELP uses the llownce method to estimte un collectible lons rece ivble. The llownce for lons is bsed primrily upon percentge of new lons mde during the fi sc l yer. The llownce is periodiclly djusted by mngement to ccommodte chnges in economic conditions, non-performing ssets, historicl loss experience, industry prctice, risk rting ssigned nd other conditions tht my ffect the ultimte collectbility of the lons. In 2012 nd 2011, SELP mngement determined tht the blnce of the llownce ccount ws sufficient to cover projected losses for the lon portfolio bsed on segmented risk ctegory nlysis. The current loss llownce ssocited with the lon portfolio represents pproximtely six percent of the gross lons re ceivble in 2012 nd four percent in The following tble detils Net Lons Receivble s of June 30, 2012 nd 2011: Lons Receivble Allownce for uncollectible principl Net Lons Receivble June 30, 2012 $217,634,987 ( 13,843,267 ) $ 2Q3 791.Z2Q June 30, 2011 $210,408,362 ( 8,974,027) $ 2Q NOTE 4, BONDS PAYABLE AND DEBT SERVICE Since SELP's inception in 1980, it hs issued Stte of Oregon Generl Obligtion (G.O.) bonds totling $787,640,000, of which $242,445,000 ws outstnding t June 30, G.O. bonds re secured by the full fith nd credit of the Stte. Bond proceeds re loned to individul residents, businesses, nonprofit orgniztions, stte gencies, school districts nd locl governments in Oregon for energy conservtion, renewble re so urce energy, recycling nd lternte fuels projects. In ddition, the 2009 Legisltive Assembly directed portion of the proceeds of the My 2010 lottery reve nue bond sle to SELP for use in the EEAST progrm. $5,472,107 ws issued during fisc l yer 2010, nd $4,119,618 ws outstnding s of June 30, The lottery bonds re pyble from lottery revenues trn sferred to SELP from the Deprtment of Administrtive Services over the life of the bonds. 14

17 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 The following tble provides summry of bond trnsctions s presented on the blnce sheets for the fisc l yers ended June 30, 2012 nd June 30, 2011: Bonds Pyble-beginning Bonds issued-g.o. Bonds issued-lottery Bonds Bonds mtured nd defesed Bonds Pyble-ending Premium on Bonds Pyble Discount on Bonds Pyble Deferred Loss on Bond Refunding June 30, 2012 $246,847,575 21,050, ,957) 246,564,618 5,819, ,364) 47,153) June 30, 2011 $194,077,107 81,875,000 29,104,532) 246,847,575 5,780,507 ( 193,651) ( 66,744) Net Bonds Pyble $ 252,179,485 $ Debt Service Requirements to Mturity The following tble summrizes the mounts necess ry to py ll future bonded debt principl nd interest requirements s of June 30, 2012, for ech fiscl yer during the next five yers period ending June 30, 2017, nd in five yer increments therefter: Yers Ending June 30 Bond Principl Bond Interest Totl Debt Service ,827,755 10,373,894 27,201, ,243,472 9,848,661 26,092, ,632, 148 9,153,516 28,785, ,656,742 8,382,343 28,039, ,494,501 7,583,339 24,077, ,330,000 27,539, ,869, ,135,000 13,258,598 61,393, ,735,000 3,516,238 35,251, ,000 24, ,900 TOTALS $246,564,618 89,681,Q36 338,

18 Notes to the Finnci l Sttements (Continued) Enterprise Fund Jun e 30,2012 nd June 30, 2011 The fohowing tble summrizes the outstnding bond issues by series s of June 30, 2012: SCHEDULE OF DEBT ISSUED AND OUTSTANDING Generl Obligtion Bonds Originl Issue Bonds Outstnding Finl Coupon Interest Rnge Beginning Ending Due Within Series Dted Dte Mturity From To Amount Blnce Increses Decreses 1998 A Mr-98 Jn % 4.900% 3,000, C E 1999 A 1999 B 2000 A 2001 A E 2001 F 2002 A 2004 A 2004 C A 2005 B 2006A 2006 B 2006 C 2007 A 2007 B 2007 C 2008 A 2008 B 2009 A 2009 B 2009 C 2010 A 2010 B Oct 98 Jul % 4.800% Oct-98 Jn-28 4_100% 4.800% Oct-98 Jn % 4.900% Oct-99 Jn % 5.100% Apr-99 Jn-IS 4.000% 4.750% Apr-OO Jul % 5.500% My-01 Jul % 5.000% Oct-01 Apr % 4.500% Oct-Ol Oct % 4.850% Oct-Ol Oct % 6.000% My-02 Oet % 4.250% Apr-04 Jul % 3.500% Nov-04 Oct % 5.000% Nov-04 Oct % 5.000% Aug-OS Oct % 4.375% Aug-OS Oct % 5.290% My-06 Apr % 5.750% Nov-06 Oct % 5.000% Nov-06 Oct % 5.510% My-07 Oct % 4.375% My-07 Oct % 4.500% My-07 Oct % 5.380% Apr-OB Oct % 5.000% Oct-08 Oct % 6.000% Nov-09 Apr % 5.000% Nov-09 Apr % 5.000% Nov-09 Apr % 4.710% Ju l-10 Apr % 4.000% Jul-lO Apr % 4.800% 5,500,000 14,535,000 2,000,000 25,995,000 9,100,000 7,320,000 2,000,000 4,000,000 1,600,000 11,500,000 10,950,000 11,035,000 3,850,000 8,845,000 1,470,000 4,500,000 12,000,000 24,200,000 3,750,000 8,000,000 10,570,000 5,000,000 18,000,000 15,445,000 23,850,000 16,430,000 3,525,000 33,015,000 10,000, ,000 4,265, ,000 2,135,000 1,250,000 1,750,000 1,500,000 4,980,000 2,555,000 2,385,000 1,490,000 2,135,000 1,070,000 2,960,000 8,080,000 22,670,000 3,360,000 7,565,000 8,960,000 3,730,000 17,000,000 15,025,000 23,850,000 16,430,000 3,525,000 33,015,000 10,000,000 o Bl nce 285, ,000 4,135,000 o 220, , ,000 1,880, ,000 1,005, ,000 1,430,000 1,500,000 1,170,000 3,810,000 1,250,000 1,305,000 1,465, , ,000 1,145, ,000 1,455,000 90, , ,000 2,625,000 1,000,000 7,080,000 1,105,000 21,565, ,000 3,150, ,000 7,300, ,000 8,260, ,000 3,225,000 1,300,000 15,700, ,000 14,585,000 23,850,000 4,850,000 11,580, ,000 3,180,000 33,015, ,000 9,565,000 One Yer 140, , , , , ,000 1,305, , , ,000 90, , ,000 1,150, , , , ,000 1,400, , , , ,000 1,005, ,000 16

19 Notes to the Finncil Sttements (Continued) Enterprise Fu nd June 30, 2012 nd June 30, 2011 SCHEDULE OF DEBT ISSUED AND OUTSTANDING (Con't) Generl Obligtion Bonds Se ri es 2011 A I2E 2012F 2012G Originl Issue Bonds Outstnding Finl Coupon Interest Rnge Begin ning Dted Dte Mturity From To Amount Blnce Inc res es Decreses Mr-ll Apr % 4.625% 16,400,000 16,400, ,000 Mr-ll Jn % 4.750% 22,460,000 22,460, ,935,000 Mr-l2 Jn % 3.000% 4,435, ,435,000 0 Mr-l2 J n % 3.250% 4,020, ,020,000 0 Mr-12 Jn % 3.600% 2,520, ,520,000 0 Mr-l2 Jul % 3.200% 10,075, ,075,000 0 Ending Due Within Blnce One Yer 15,900, ,000 20,525,000 2,075,000 4,435, ,000 4,020, ,520, ,000 10,075,000 0 Defesed! Mtured 42,790,000 Pre ,955,000 To tl Generl Obligtion Bonds issued $787,640,000 $241,775,000 $21,050,000 $20,380,000 $242,445,000 $15,860,000 SCHEDULE OF DEBT ISSUED AND OUTSTANDING Lottery Revenue Bonds Alloction to SELP issued by Deprtment of Administrtive Services Originl Issue Bonds Outstnding Series Dted D te Finl Mturity Coupon Interest Rnge Beginning From To Amount Blnce Increses Decreses Ending Blnce Due Wi th in One Yer 2010 B My-l0 Apr % 3.700% 5,472,107 5,072, ,957 4,119, ,755 Totl Alloction of Lottery Revenue Bonds issu ed $5, 472,107 $5,072,575 $ o 952,957 $4,119,618 $967,755 Erly Bond Redemptions SELP exercised the following optionl bond redemptions with lon prepyments n d other funds on hnd: Bond Series Generl Obligtion 2001F Amount Redeemed $ 235,000 Dte Redeemed 6/1/2012 On Mrch 14, 2012, SELP issued the following pr mount Generl Obligtion Alternte Energy Project Bonds: $4,435,000 in 2012 Series D with n verge interest rte of 3_20 percent, $4,020,000 in 2012 Series E with n verge interest rte of 3_31 percent; $2,520,000 in 2012 Series F with n verge interest rte of 2_93 percent, $10,075,000 in 2012 Series G with n verge interest rte of 2_50 percent. 17

20 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 NOTE 5, CHANGES IN LONG TERM LIABILITIES Long term libility ctivity for June 30, 2012 is s follows: Net Bonds Pyble Beginning Ending Due Within Blnce Additions Reductions Blnce One Yer $252,367,687 $21,680,242 $21,868,445 $252,179,484 $16,827,755 Borrower's Deposit Libility 2,958,269 6,557,389 3,315,886 6,199,772 0 OPEB Libility 9,695 1, ,191 0 Compensted Absences Pyble 36,740 2, ,477 26,055 TOTALS $255,322,391 ili,2'11,864 S25,18'1,331 $25/3.' SlJ;i,8S3,81Q NOTE 6, COMMITMENTS As of June 30, 2012 nd June 30, 2011, 5ELP hd committed but undisbursed lon funds of $10,667,115 nd $15,245,219, respectively, for vrious lterntive energy, energy efficiency nd lternte fuel projects within the stte of Oregon. Funds re committed pursunt to legl greements with borrowers. Additionl generl obligtion bond funds were leglly designted for future energy project lons pursunt to federl tx code nd the bond indenture in the mounts of $622,678 nd $2,705,759 s of June 30, 2012 nd June 30, 2011, respectively. Remining lottery revenue bond proceeds of $180,855 nd $4,450,227 s of June 30, 2012 nd 2011, respectively, were committed for the EEAST progrm s lon offset grnt funds pursunt to the 2009 legisltive ssembly. NOTE 7, CAPITAL ASSETS As of June 30, 2012, SELP cpitl ssets consisted of the ccumulted costs of developing new dtbse for the progrm. The Dt Processing Softwre ws plced into service in Jnury The new dtbse rn concurrently,with the old from October 2004 through December SELP hs no outstnding debt relted to cpitl ssets. SELP did not purchse ny cpitl ssets in fiscl yer 2012 nd hd no deprecition. NOTE 8, EMPLOYEE RETIREMENT PLANS The Oregon Public Employees Retirement System (PERS) provides defined benefit nd defined contribution retirement plns for Stte government, school districts, community colleges, nd politicl subdivisions of the Stte. PERS is dministered by the Public Employees Retirement Bord (Bord), s required by Oregon Revised Sttutes (DRS), Chpters 238 nd 238A. PERS issues seprte finncil eport tht includes udited finncil sttements nd required supplementry informtion. The report is vilble publicly nd my be obtined by contcting the Fiscl Services Division, Oregon Public Employees Retirement System, PO Box 23700, Tigrd, Oregon

21 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 PERS Pension SELP employees who were pln members before August 29, 2003 prticipte in PERS, cost-shring multiple-employer defined benefit pension pln. The PERS Pension retirement llownce is pyble monthly for life nd my be selected from severl retirement benefit options s estblished by ORS Chpter 238. Options include survivorship benefits nd lump sum pyments. PERS lso provid es disbility, post-employment helthcre, nd deth benefits to pln members nd beneficiries. SELP is required by sttute to contribute cturilly computed mounts s determined by the Bord. The funding policies provide for monthly employer contributions. Rtes re subject to chnge s result of subsequent cturil vlutions. The rte of ech covered employees slry ws 8.80% through June 30, The mounts contributed by SELP representing the employer contributions for ihe yers ended June 30, 2012, 2011, nd 2010 were $14,082, $5,406, nd $7,338 respectively, equl to the required contributions ech yer. Oregon Public Service Retirement Pln The 2003 Oregon Legislture creted the Oregon Public Retirement Pln (OPSRP), lso cost-shring multiple-employer pln. OPSRP is hybrid pension pln with two components: the Pension Progrm, defined benefit progrm, nd the Individul Account Progrm (lap), defined contribution pln. SELP employees hired fter August 28, 2003 prticipte in OPSRP fter completing six months of service. OPSRP is dministered by the Public Employees Retirement Bord under the guidelines of ORS Chpter 238A. The OPSRP Pension Progrm provides for monthly pension benefit pyble for life nd, fter the deth of the member, pyble to the designted beneficiry t either the sme mount or one-hlf of the mount, depending on the option the member chose t retirement. SELP is required by sttute to contribute cturilly computed mounts s determined by the Bord. Rtes re subject to chnge s resu lt of subsequent cturil vlutions. The rte of ech covered employee's slry for the fiscl yer ended June 30, 2012 ws 7.44%. The mounts contributed by SELP for the yers ended June 30, 2012, 2011, nd 2010 were $22,134, $8,783, nd $6,605, respectively, equl to the required contributions for the yer. The Individul Account Progrm (lap) is the defined contribution portion of OPSRP. PERS members retin their existing PERS ccounts, but beginning Jnury 1, 2004, ny future member contributions were deposited in the member's lap ccount, rther thn into the member's PERS ccount. All covered employees re required by stte sttute to contribute percentge of their slry to the lap. Current lw permits employers to py the 6.00% employee contribution, which SELP does. The mount contributed by SELP for the yers ended June 30, 2012, 2011 nd 2010, were $27,451, $29,085, nd $34,422, respectively, equl to the required contributions for the yer. 19

22 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 NOTE 9. OTHER POSTEMPlOYMENT BENEFIT PLANS SElP employees my be eligible to prticipte in helth insurnce plns nd other benefit plns fter retirement, collectively known s Other Postemployment Benefits (OPEB). OPEB plns re offered through the Public Employees Retirement System (PERS) s estblished by Oregon Revised Sttutes (ORS) nd the Public Employees Benefit Bord (PEBB) estblished by ORS A copy of the Oregon Public Employees Retirement System nnul finncil report my be obtined from PERS Fiscl Services Division, PO Box 23700, Tigrd, Oregon Retirement Helth Insurnce Account The Retirement Helth Insurnce Account (RHIA) is cost-shring multiple-employer OPEB pln which provides pyment of up to $60 towrd the monthly cost of helth insurnce for eligible PERS members. To be eligible for the RHIA subsidy, the member must: (1) hve eight yers or more of qulifying service in PERS t the time of retirement or receive disbility llownce s if the member hd eight yers or more of creditble service in PERS, (2) receive both Medicre prts A nd B coverge, nd (3) enroll in PERSsponsored helth pln. A surviving spouse or dependent of decesed PERS retiree who ws el igible to receive the subsidy is eligible to receive the subsidy if he or she (1) is receiving retirement benefit or llownce from PERS or (2) ws insured t the time the member died nd the member retired before My 1, The legislture hs sle uthority to mend the benefit provisions nd funding policy for the RHIA pln. SElP is required by sttute to contribute cturilly computed mounts s determined by PERS. Rtes re subject to chnge s result of subsequent cturil vlutions. For Tier One nd Tier Two members, SElP contributed 0.09% of PERS-covered slry to fund the norml cost portion of RHIA benefits. In ddition, SElP contributed n dditionl 0.50% of ll PERS-covered slry to mortize the unfunded cturil ccrued libility. The RHIA employer contribution is embedded within the totl PERS contribution rte. SElP's ctul contribution for the yers ended June 30, 2012, 2011 nd 2010, were $933, $1,510, nd $1,651, respectively. Retiree Helth Insurnce Premium Account The Retiree He lth Insurnce Premium Account (RHIPA) is single-employer defined benefit OPEB pln tht provides for pyme.nt of the verge difference between the helth insurnce premiums pid by retired stte employees, under contrcts entered into by the PERS Bord, nd the helth insurnce premiums pid by stte employees who re not retired. PERS members re qulified to receive the RHIPA subsidy if they hd eight or more yers of qulifying service in PERS t the time of retirement or re receiving disbility pension clculted s if they hd eight or more yers of qulifying service, but re not eligible for federl Medicre coverge. A surviving spouse or dependent of decesed retire stte employee is eligible to receive the subsidy if he or she (1) is receiving retirement benefit or llownce from PERS or (2) ws insured t the time the member died nd the member retired on or fter September 29, The legislture hs sle uthority to mend the benefit provisions nd funding policy for the RHIPA pln. SELP is required by sttute to contribute cturilly computed mounts s determined by PERS. Rtes re subject to chnge s result of subsequent cturil vlutions. For Tier One nd Tier Two members, SELP contributed 0.05% of PERS-covered slry to fund the norml cost portion of RHIPA benefits. In ddition, SELP contributed n dditionl 0.11% of ll PERS-covered slry to mortize the unfunded cturil ccrued libility. The RHIPA contribution is embedded within the totl PERS contribution rte. SELP's ctul contribution for the yers ended June 30, 2012, 2011 nd 2010 totled $253, $416, nd $456, respectively. 20

23 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 Both RHIA nd RHIPA re closed to employees hired on or fter August 29, 2003, who hd not estblished membership prior to tht dte. Public Employees Benefit Bord Pln The Public Employees Benefit Bord (PEBB) pln is n gent multiple-employer pln which offers helthcre ssistnce to eligible retired employees nd their beneficiries. Retired employees not eligible for Medicre re eligible for PEBB coverge if the retiree is receiving service or disbility benefit from PERS or nother stte sy"stem, is eligible to receive retirement llownce from PERS nd hs reched the erliest retirement ge under DRS Chpter 238, or is eligible to receive service llownce or pension under ny system offered by the stte nd hs ttined the erliest retirement ge under tht system. The PEBB pln funding policy provides for employer contributions t mounts sufficient to fund benefits on py-s-you-go bsis. Active employees do not mke contributions. Prticipting retirees py their own monthly premiums bsed on blended premium rte since retirees re pooled together with ctive employees for insurnce rting purposes. PEBB ctivity is reported s prt of the Stte of Oregon's Comprehensive Annul Finncil Report nd does not issue seprte finncil report. DRS 243 ssigns PEBB the uthority to estblish nd mend the benefit provisions of the PEBB Pln. As the dministrtor of the PEBB Pln, PEBB hs the uthority to determine post-retirement benefit increses nd decreses. NOTE 10. RISK FINANCING The Oeprtment of Administrtive Services, Enterprise Goods nd Services, Risk Mngement section (Risk Mngement) dm inisters the Stte's property, libility, nd workers' compenstion insurnce progrm. The Insurnce Fund services clims for direct physicl loss or dmge to Stte property; tort libility clims brought ginst the Stte, its officers, employees, or gents; workers' compenstion; nd employees, elected officils, nd members of commissions nd bords for honesty. Fithful performnce coverge is provided for key positions in stte government tht re required by lw to be covered. Risk Mngement purchses commercil insurnce for specific insurnce needs not covered by self-funding. For the Stte of Oregon, the mount of clim settlements did not exceed commercil insurnce coverge for ech of the pst three fiscl yers. As prt of stte gency, SELP prticiptes in the Insurnce Fund. The cost of servicing insurnce clims nd pyments is covered by chrging n ssessment to ech Stte entity bsed on its shre of services provided in prior period. The totl sttewide risk chrges re bsed on independent biennil cturil forecsts nd dministrtive expenses, less ny vilble fund blnce in the Insurnce Fund from the prior biennium. NOTE 11. DEFEASED DEBT During fiscl yer ended June 2012, there were no bonds tht were defesed. 21

24 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 NOTE 12. INTERFUND TRANSACTIONS During fiscl yers ended June 2012 nd 2011, under dvice from the Deprtment of Administrtive Services (DAS). SELP estblished receivbles representing the lottery revenue to be used for lottery bond debt service to be pid by SELP during the subsequent fiscl yer. Trnsfers of lottery revenue were mde from DAS in August of ech yer in the mounts of $1,077,349 nd $1,077,723, respectively, nd were recorded s trnsfer s of the end of ech fiscl yer. The Deprtment of Administrtive Services trnsferred $416,052 on My 15, 2012 from EEAST Lottery Bond Reserves bck to the Deprtment of Administrtive Services. This trnsfer of the Lottery dollrs ws determined to be better solution for funds mngement. Among the sources of the Other Funds revenue to the Deprtment re ssessments on energy nd petroleum suppliers. Interfund trnsctions between other funds of the Deprtment nd SELP were reported s trnsfers. NOTE 13. LITIGATION, TROUBLED DEBT RESTRUCTURINGS AND DELINQUENCIES During the ordinry course of business, SELP becomes involved in litigtion regrding its lending ctivities. The progrm is represented in these ctions by the Attorney Generl of the Stte of Oregon. SELP mkes every resonble effort to work with borrowers tht experience finncil difficulties mking pyments under existing lon greements. A borrower in Oregon City tht produced newsprint nd specilty pper products filed voluntry Chpter 11 bnkruptcy petition on December 31, SELP loned the borrower $4.5 million in 2004 with current principl blnce of little under $1 million. The cse ws converted to Chpter 7 on April 1, 2011 s result of petition filed by one of the other creditors. The Attorney Generl is ssisting SELP in the bnkruptcy proceedings, settlement negotitions nd the ongoing liquidtion proceedings. SELP's lon is secured through first lien position on rel estte ssocited with the project nd mngement expects to recover the lon vlue through the eventul sle nd sset liquidtion without mteril loss to the progrm. At this time, there is reltively no chnge to the bnkruptcy proceedings. On December 16, 2011 SELP took possession of the property used s collterl for $1.4 million solr project in Bend nd the property ws plced on SELP's books with n pprised vlue of $802 thousnd dollrs. The current principl blnce of pproximtely $1.1 million ws written off nd this resulted in loss of $377 thousnd. This loss ws booked ginst the Lon Loss Contr Asset Account. In Februry 2012, SELP entered into rentl greement on the foreclosed lnd. At the time of signing the lese, SELP received lump sum pyment of $36,000. This pyment covered one-time lese considertion pyment of $11,970, rent from Februry 10, 2012 through Mrch 31, 2012, nd security deposit of $6,570. SELP recognized the lese income nd lese deposit libility in April, The lese greement ws to receive monthly lese pyments from My, 2012 through April, 2013 in the mount of $6,570. The property ws sold on December 15, Detils on the sle of the property re discussed in the Subsequent Event section of the footnotes. 22

25 Notes to the Finncil Sttements (Continued) Enterprise Fund June 30, 2012 nd June 30, 2011 SELP hs declred $12 million lon to Millersburg solr component mnufcturer in defult nd hs initited foreclosure proceedings. The current principl blnce of the lon is pproximtely $11.2 million plus ccrued interest nd fees. The Deprtment hs first lien position on project equipment nd ssocited rel estte. The Attorney Generl is ssisting SELP in the ongoing legl proceedings; however; settlement negotitions were not reched with the borrower nd SELP hs elevted the foreclosure proceedings. Due to the lon mount being very high, it is possible the progrm could sustin n undeterminble mount of loss in the event of liquidtion. In ddition to delinquent lons, one other borrower with totl of three lons re currently operting under greements to forber ginst issuing notices of defult or commencing foreclosure litigtion to enforce security interests. While these lons re not currently being restructured, SELP is providing temporry modifictions to their lon greements while the borrowers work through vrious brriers to timely lon repyment. The lons under forbernce greements represent pproximtely 3.32% of the lon portfolio in terms of lon vlue. The borrowers working under these rrngements re currently complying with the terms of their respective greements. NOTE 14. SUBSEQUENT EVENTS The following subsequent events occurred fter June 30, 2012: Legl Updte SELP foreclosed its security interest ssocited with $1.4 million solr project lon in Bend nd on December 16, 2011 nd took possession of rel estte nd equipment tht serviced s collterl for the lon s result of Deschutes County sheriff sle. On December 15, 2012, the property sold for $1.2 million dollrs. SELP relized gin of $398 thousnd from this trnsction. On December 24, 2012, SELP received $5.2 million dollrs from n erly lon pyoff. Of the $5.2 million, the borrower pid $1.1 million in defesnce costs. The funds, less issunce costs, were plced in the reserve ccount. These funds will be used to fund future debt service pyments on the underlying bonds tht this lon ws originlly mde to fund the lon. The defesnce costs were plced in deferred revenue nd mortized nd relized s revenue t the sme rte s the underlying bonds re pid. SELP hs moved forwrd on foreclosure proceedings with the $12 million solr component mnufcturer. As result of further nlysis, SELP determined need to recognize n dditionl bd debt contingency of $5 million retroctive to June 30, 2012 in conformity with GASB 56. SELP feels the loss the progrm will sustin on this lon is pproximtely $9.5 million. A borrower tht ws developing zinc ir bttery for electric vehicles voluntrily surrendered its collterl to SELP in October, The gurntor of the lon hs filed bnkruptcy. The principl mount of the lon is $2 million nd does not reflect ny ccrued interest on the lon. The collterl consists of office nd specilty lb equipment. SELP is working with third prty vendor to uction the office equipment. At this time, SELP cnnot determine the vlue of the collterl nd cnnot project the mount of loss it will sustin on this lon. However, SELP expects the lon loss reserves to be sufficient to cover loss. 23