Port of Vancouver Clark County

Transcription

1 Washington State Auditor s Office Financial Statements and Federal Single Audit Report Port of Vancouver Clark County Audit Period January 1, 2013 through December 31, 2013 Report No Issue Date April 17, 2014

2 Washington State Auditor Troy Kelley April 17, 2014 Board of Commissioners Port of Vancouver Vancouver, Washington Report on Financial Statements and Federal Single Audit Please find attached our report on the Port of Vancouver s financial statements and compliance with federal laws and regulations. We are issuing this report in order to provide information on the Port s financial condition. Sincerely, TROY KELLEY STATE AUDITOR Insurance Building, P.O. Box Olympia, Washington (360) TDD Relay (800)

3 Table of Contents Port of Vancouver Clark County January 1, 2013 through December 31, 2013 Federal Summary... 1 Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... 3 Independent Auditor s Report on Compliance for Each Major Federal Program and on Internal Control over Compliance in Accordance with OMB Circular A Independent Auditor s Report on Financial Statements... 8 Financial Section... 11

4 Federal Summary Port of Vancouver Clark County January 1, 2013 through December 31, 2013 The results of our audit of the Port of Vancouver are summarized below in accordance with U.S. Office of Management and Budget Circular A-133. FINANCIAL STATEMENTS An unmodified opinion was issued on the basic financial statements. Internal Control Over Financial Reporting: Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over financial reporting that we consider to be significant deficiencies. Material Weaknesses: We identified no deficiencies that we consider to be material weaknesses. We noted no instances of noncompliance that were material to the financial statements of the Port. FEDERAL AWARDS Internal Control Over Major Programs: Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over major federal programs that we consider to be significant deficiencies. Material Weaknesses: We identified no deficiencies that we consider to be material weaknesses. We issued an unmodified opinion on the Port s compliance with requirements applicable to its major federal program. We reported no findings that are required to be disclosed under section 510(a) of OMB Circular A

5 Identification of Major Programs: The following was a major program during the period under audit: CFDA No. Program Title ARRA - High-Speed Rail Corridors and Intercity Passenger Rail Service - Capital Assistance Grants The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by OMB Circular A-133, was $300,000. The Port qualified as a low-risk auditee under OMB Circular A

6 Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Port of Vancouver Clark County January 1, 2013 through December 31, 2013 Board of Commissioners Port of Vancouver Vancouver, Washington We have audited, 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, the financial statements of the Port of Vancouver, Clark County, Washington, as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the Port s basic financial statements, and have issued our report thereon dated April 4, As discussed in Note 16 to the financial statements, during the year ended December 31, 2013, the Port implemented Governmental Accounting Standards Board Statement No. 65, Items Previously Reported as Assets and Liabilities. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the Port s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Port s internal control. Accordingly, we do not express an opinion on the effectiveness of the Port s internal control. A deficiency in internal control 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 and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the Port's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 3

7 Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the Port s financial statements are free from material misstatement, we performed tests of the Port 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. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Port s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Port s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 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. TROY KELLEY STATE AUDITOR April 4,

8 Independent Auditor s Report on Compliance for Each Major Federal Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 Port of Vancouver Clark County January 1, 2013 through December 31, 2013 Board of Commissioners Port of Vancouver Vancouver, Washington REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM We have audited the compliance of the Port of Vancouver, Clark County, Washington, with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended December 31, The Port s major federal programs are identified in the accompanying Federal Summary. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Port s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Port s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination on the Port s compliance. 5

9 Opinion on Each Major Federal Program In our opinion, the Port complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of the Port is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Port s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program in order to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Port's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. PURPOSE OF THIS REPORT The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. However, this report is a matter of public record and its distribution is not limited. 6

10 It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. TROY KELLEY STATE AUDITOR April 4,

11 Independent Auditor s Report on Financial Statements Port of Vancouver Clark County January 1, 2013 through December 31, 2013 Board of Commissioners Port of Vancouver Vancouver, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the Port of Vancouver, Clark County, Washington, as of and for the year ended December 31, 2013, and the related notes to the financial statements, which collectively comprise the Port s basic financial statements as listed on page 11. 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 audit. We conducted our audit 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 from material misstatement. 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 Port 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 Port 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. 8

12 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 Port of Vancouver, as of December 31, 2013, and the changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Matters of Emphasis As discussed in Note 16 to the financial statements, in 2013, the Port adopted new accounting guidance, Governmental Accounting Standards Board Statement No. 65, Items Previously Reported as Assets and Liabilities. Our opinion is 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 on pages 12 through 16 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. Supplementary and Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Port s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. This schedule is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 9

13 OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated April 4, 2014 on our consideration of the Port 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Port s internal control over financial reporting and compliance. TROY KELLEY STATE AUDITOR April 4,

14 Financial Section Port of Vancouver Clark County January 1, 2013 through December 31, 2013 REQUIRED SUPPLEMENTARY INFORMATION Management s Discussion and Analysis 2013 BASIC FINANCIAL STATEMENTS Statement of Net Position 2013 Statement of Revenues, Expenses and Changes in Net Position 2013 Statement of Cash Flows 2013 Notes to Financial Statements 2013 SUPPLEMENTARY AND OTHER INFORMATION Schedule of Expenditures of Federal Awards 2013 Notes to the Schedule of Expenditures of Federal Awards

15 PORT OF VANCOUVER Management s Discussion and Analysis December 31, 2013 Introduction As management of the Port of Vancouver (Port), we offer readers of the Port s financial statements this narrative overview and analysis of the financial activities of the Port for the fiscal year ended December 31, 2013, with selected comparative information for the year ended December 31, We encourage readers to consider the information presented here in conjunction with the financial statements and notes to the financial statements which immediately follow this discussion. Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the Port s financial statements. The Port s financial statements include two components: 1) the Port s basic financial statements, and 2) the notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the Port s financial statements. The notes to the financial statements can be found following the financial statements of this report. The Statement of Net Position and the Statement of Revenues, Expenses and Changes in Fund Net Position tell us whether the Port s financial position has improved as a result of the year s activities. The Statement of Net Position provides information on all of the Port s assets, liabilities and deferred inflows and outflows, with the difference between assets and deferred outflows of resources, and liabilities and deferred inflows of resources is called net position. Overtime, increases or decreases in net position may serve as an indicator of whether the financial position of the Port is improving or deteriorating. The Statement of Revenues, Expenses and Changes in Fund Net Position show how the Port s net position changed during the year. These changes are reported as the underlying event occurs regardless of the timing of related cash flows (Accrual Basis). A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Port uses only one fund, an enterprise fund, which is a type of proprietary fund. An enterprise fund reports business type activities. Financial Analysis Condensed Financial Position Information The Statement of Net Position reflects the Port s financial position at year end. Financial position is represented by the difference between assets owned, deferred outflows, and liabilities owed at a specific point in time. The difference between the two is reflected as net position. As previously noted, changes in net position over time can be an indicator of the Port s financial position. Financial Highlights Total assets of the Port and deferred outflows exceeded its liabilities by $ million (reported as total net position). Total net position increased by $ million in comparison with the prior year due to the increase in capital assets. Total current and restricted assets decreased by $9.364 million from 2012, primarily from the results of the continuation of the West Vancouver Freight Access project. As debt is paid down and cost cutting measures are implemented, total liabilities decreased by $9.086 million from the prior year. 12

16 The following condensed financial information provides an overview of the Port s financial position for the fiscal years ended December 31. NET POSITION Assets: Current and restricted assets $ 28,400,873 $ 37,765,252 Capital assets, net 331,070, ,102,966 Other noncurrent assets 25,033,202 25,626,886 Total Assets $ 384,504,579 $ 374,495,104 Deferred Outflows of Resources: Deferred Charge on Refunding 2,677,719 - Total Deferred Outflows of Resources $ 2,677,719 $ - Liabilities: Current liabilities $ 15,322,817 $ 17,608,905 Noncurrent liabilities 96,893, ,693,883 Total Liabilities $ 112,216,623 $ 121,302,788 Net Position: Net Invested in capital assets, net of related de $ 266,191,815 $ 239,000,164 Restricted 776, ,861 Unrestricted 7,997,220 13,440,294 Total Net Position $ 274,965,675 $ 253,192,319 Summary of Operations and Changes in Net Position The Statement of Revenues, Expenses, and Changes in Fund Net Position presents how the Port s net position changed during the current and previous fiscal year as a result of operations. The Port employs an accounting method that records revenue and expenses when they are incurred, regardless of when cash is exchanged. Thus, some revenues and expenses reported in this statement may affect future period cash flows (e.g. uncollected receivables). Revenues: With continuing economic challenges in 2013, the Port s diversified commodity mix resulted in a decrease in marine revenues to $ million. A change of percent or $4.0 million from The Port experienced stable occupancy of its industrial leasehold facilities. Lease occupancy was 99.4 percent in Although market rates have been decreasing, lease revenue was $8.020 million, an increase of 3.44 percent in Total 2013 operating revenues decrease $2.684 million (8.24%) from 2012 operating revenues Expenses: 2013 total operating expenses, before depreciation, decreased by $2.177 million (9.35%) from 2012 expenses. Operating income, after depreciation, was $119,846 at December 31, 2013 as compared to $1.161 million at 2012 year end. Non-Operating: 2013 total nonoperating revenue (expenses) decreased by $ million from 2012 net of change in accounting principle, primarily due the settlement of an insurance policy in 2012, decreased federal and state grant revenue, the surplus of capital assets, and an adjustment to estimated environmental remediation activity costs. The Port continues to be successful in applying for several grants. Grant revenue only decrease by $4.6 million from 2012 to $13.1 million in

17 The table summarizes the operations for fiscal years ending December 31. CHANGE IN NET POSITION REVENUES Operating Revenues: Marine terminal operations $ 18,016,133 $ 22,027,650 Property lease/rental operations 8,019,769 7,753,181 Facilities sales and service 3,458,075 2,304,027 Security sales and service 307, ,219 General and administrative 75, ,697 Nonoperating Revenues: Ad valorem tax revenues 10,014,288 9,711,320 Interest income 229, ,532 Federal and State Grants 13,093,003 17,662,057 Environmental remediation 706,870 6,393,053 Other nonoperating revenues 375,658 27,427,713 Total Revenues $ 54,296,225 $ 93,980,449 EXPENSES Operating Expenses: Marine terminal operations $ 7,201,200 $ 9,509,867 Facilities 5,516,404 5,406,768 Security 1,585,155 1,429,542 General and administrative 6,817,606 6,951,591 Depreciation 8,636,650 8,102,079 Nonoperating Expenses: Interest expense 2,352,292 3,221,932 Other nonoperating expenses 110, ,863 Total Expenses $ 32,219,690 $ 34,776,642 Change in net assets 22,076,535 59,203,807 Total net postion - beginning 253,192, ,151,120 Change in Accounting Principle (571,005) 0 Capital contribution 267, ,392 Total net position - ending $ 274,965,675 $ 253,192,319 Capital Asset and Debt Administration Capital Assets The Port s investment in total capital assets as of December 31, 2013 totaled $ million (net of accumulated depreciation). The Port s investment in capital assets includes land, buildings, improvements (other than buildings), machinery and equipment, and construction in progress. The total increase in the Port s investment in capital assets for the current year was $ or 6.4%. Major capital asset events during 2013 included the following: Components of the multi-year West Vancouver Freight Access project continue through engineering and construction. Completion of the Terminal 2 Berth 2 Deck Repair in the amount of $1.6 million, completion of the Maritime Domain Awareness Phase II project in the amount of $2.1 million, and the completion of the Grain Unit Train Phase B project in the amount of $3.4 million. 14

18 Additional information on the Port s capital assets activity may be found in Note 4 in the notes to the financial statements. Long-term Debt At December 31, 2013, long-term debt outstanding totaled $ million. Of this amount, $ million comprises general obligation debt and $25 million represents special revenue bonds secured by a letter of credit. The port is liable for a note payable in the amount of $4.087 million for right-of-way acquisition for the West Vancouver Freight Access Project. Additional information on the Port s long-term debt can be found in Note 10 in the notes to the financial statements. Economic Factors and 2014 Budget Economic Factors Port revenue continues to follow a ten-year upward trend, remaining relatively steady as the national and global economy recovers. The port continues to benefit from customers interested in connecting the Midcontinent to international and domestic markets. Rail improvements have helped attract $500 million in private sector investment and are expected to create up to 1,000 new, permanent jobs and 4,000 construction jobs. Overall, marine and industrial businesses at the port employ an estimated 2,300 people and generate approximately $1.6 billion in economic benefit to the region annually. The West Vancouver Freight Access Project, in addition to investments in a 43-foot Columbia River shipping channel, docks, cranes and other infrastructure and equipment, has set the foundation for growth. In ten years, the port has improved its net assets of transportation infrastructure, land, buildings and equipment by more than 260 percent an investment that will continue to pay benefits and provide economic vitality to Clark County well into the future. Total cargo tonnage for 2013 remained stable with a modest 1.6 percent decrease as domestic and international markets continue to recover. Export cargoes fluctuated depending on the customer, country and commodity. Mineral bulks, including bentonite clay (used in a variety of industrial and consumer products) and copper concentrate (used to create copper wiring and products), saw the effects of a lower demand in Asian markets, while other exports including wheat, corn and soy continue to rise with global demand and facility investments to increase capacity at the port. The decrease in imported wind energy components due to uncertainties related to tax incentive programs for alternative energy significantly impacted the port s overall revenue. Fortunately, Subaru imports continue to increase as the U.S. market demand grows. The port s capacity to handle a growing variety of cargoes is increasing significantly as new rail infrastructure comes on line. Potash exports (a component of fertilizer) continues to advance as the port and its prospective tenant BHP Billiton finalize a long-term lease agreement in Additionally, a potential crude oil transfer facility is currently undergoing a robust environmental permitting process to transfer North American crude oil from rail to vessels. Vancouver Energy Distribution Terminal, operated by Savage Companies and Tesoro, plan to transport the oil to West Coast refineries. Wheat, soy and corn exports, the largest commodity at the Port of Vancouver by tonnage, saw an increase in 2013, helping to stabilize fluctuations in other exports at the port that are still affected by inconsistent global economic growth and tariff changes that influence international supply of construction products, with more sanctions expected on steel products in Scrap metal exports declined due to depressed global pricing. The port welcomed several new businesses to its roster in 2013, including Pangea Motors and ProBuild-ST, and the expansion of existing tenants Brewcraft USA, Puget Sound Pipe and Supply and Vancouver Warehouse. These additions held the port s occupancy rate up to more than 99 percent. To address the need for additional space, the port completed development of the first 58 acres of its new Centennial Industrial Park thanks to a $5.7 million grant from Washington State s Department of Commerce Jobs Now Act. 15

19 For the third year in a row, the port continued its commitment to renewable energy through the purchase Renewable Energy Credits (RECs) equal to 100% of its purchased electricity. The port also continued its efforts at innovation in stormwater management, integrating successful biofiltration technology that enabled the port to meet its regulatory requirements to control zinc, oil and other runoff contaminants. The port also installed a new facility to separate solid from liquid contaminants swept up from the docks, thanks to a grant from the Washington State Department of Ecology. The port s innovative stormwater management also included the installation of a closed-loop equipment steam cleaning system that will reduce water use and wastewater discharges associated with keeping the port s fleet of vehicles and industrial equipment properly maintained. The port continues its installation of bike and pedestrian trails with the completion of a pedestrian and bike path on Lower River Road. A grant awarded in 2013 will construct a new section that will link the administration building to C-Tran bus service, and will additionally design another section that will make all the trail pieces contiguous to Gateway Avenue. The grant funded projects are part of the port s overall plan to construct approximately 3.7 miles of safe passage for bicyclists and pedestrians along Lower River Road. When complete, it will connect downtown Vancouver to the Flushing Channel at Vancouver Lake. Future segments of the path will be funded as the port s western properties such as Columbia Gateway are developed, or as additional grant funds are acquired. Lastly, the port, together with Clark County Wetland Mitigation Partners, LLC, celebrated major construction milestones on the 154-acre Columbia River Wetland Mitigation Bank, with final planting occurring in early The wetland provides valuable habitat while ensuring responsible development Budget The Port s 2014 operating revenues are forecast at $ million, which is an increase over the $ million 2013 actual operating revenues. This increase is attributed to retaining strong imports of heavy lift cargos, continued industrial development, customers interested in connecting the Midcontinent to international and domestic markets, and bulk exports operating expenses are forecast at $ million, an increase over the actual 2013 operating expenses of $ million. The $ million 2014 capital budget represents various facility and terminal improvements. However, the continued engineering and construction of the West Vancouver Freight Access project remains a priority to improve the passenger and freight network operating on the Pacific Northwest Rail Corridor. Requests for Information This financial report is designed and intended to provide a general overview of the Port of Vancouver s financial position. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Port of Vancouver, Auditor, 3103 NW Lower River Road, Vancouver, WA or 16

20 PORT OF VANCOUVER USA STATEMENT OF NET POSITION For the Year Ended December 31, 2013 ASSETS Current Assets Cash and cash equivalents (Note 1) $ 17,879,426 Restricted cash and cash equivalents (Note 1) 2,294,701 Total Cash and Investments 20,174,127 Other Current Assets Accounts receivable - trade (net) 2,532,377 Prepaid insurance 447,876 Grants receivable 3,652,747 Receivable - earned and unbilled 897 Taxes receivable 296,129 Note receivable (current portion) 54,600 Inventory 1,164,237 Prepaid expense 77,883 Total Other Current Assets 8,226,746 Total Current Assets 28,400,873 Noncurrent Assets Capital Assets Not Being Depreciated (Note 4) Land and land rights 89,335,685 Construction in progress 106,881,240 Total Capital Assets Not Being Depreciated 196,216,925 Capital Assets Being Depreciated (Note 4) Buildings and structures 38,540,808 Machinery and equipment 20,958,805 Improvements 189,660,791 Total Capital Assets Being Depreciated 249,160,404 Accumulated Depreciation (114,306,825) Total Net Capital Assets 331,070,504 Other Noncurrent Assets Minimum lease payments-revenue bonds (Note 9) 25,000,000 Intangible asset (Note 14) 15,654 Note receivable 17,548 Total Other Noncurrent Assets 25,033,202 TOTAL ASSETS $ 384,504,579 DEFERRED OUTFLOWS OF RESOURCES Deferred Charge on Refunding (Note 9) 2,677,719 TOTAL DEFERRED OUTFLOWS OF RESOURCES $ 2,677,719 See Accompanying Notes to the Financial Statements 17

21 PORT OF VANCOUVER USA STATEMENT OF NET POSITION For the Year Ended December 31, 2013 LIABILITIES Current Liabilities Accounts payable $ 4,887,248 Payroll payable 473,258 Taxes payable 297,465 Retainage 637,449 Payable from restricted assets (customer deposits) 1,015,510 Current portion of GO Bonds (Note 9) 3,645,000 Current portion of other long-term obligations (Note 9) 4,197,043 Bond interest payable 169,844 Total Current Liabilities 15,322,817 Noncurrent Liabilities Employee leave benefits 942,907 General obligation bonds - net (Note 9) 55,544,681 Revenue bond 25,000,000 Note payable 4,169,684 Environmental remediation (Note 12) 11,002,148 Unearned Revenue 234,386 Total Noncurrent Liabilities 96,893,806 TOTAL LIABILITIES $ 112,216,623 NET POSITION Total net investment in capital assets 266,191,815 Restricted (Note 11) 776,640 Unrestricted 7,997,220 TOTAL NET POSITION $ 274,965,675 See Accompanying Notes to the Financial Statements 18

22 PORT OF VANCOUVER USA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION For the Year Ended December 31, 2013 OPERATING REVENUES Marine terminal/operations $ 18,016,133 Property lease/rental operations 8,019,769 Facilities sales and service 3,458,075 Security sales and service 307,510 General and administrative 75,374 Total Operating Revenues 29,876,861 OPERATING EXPENSES Marine terminal/operations 7,201,200 Facilities 5,516,404 Security 1,585,155 General and administrative 6,817,606 Total before depreciation 21,120,365 Depreciation 8,636,650 Total Operating Expenses 29,757,015 Operating Income $ 119,846 NONOPERATING REVENUES (EXPENSES) Ad valorem tax revenues $ 10,014,288 Interest income 229,545 Federal and state grants 13,093,003 Other revenues 348,698 Miscellaneous taxes 6,000 Sale of equipment and scrap 20,960 Environmental remediation 706,870 Columbia River Channel Improvement expense (15,075) Interest expense (2,352,292) Other expense (95,308) Total Nonoperating Revenues (Expenses) 21,956,689 Income(Loss) before other revenues, expenses, gains, loses, and transfers 22,076,535 Capital contribution 267,826 Increase (decrease) in net position 22,344,361 Net Position as of January 1 253,192,319 Change in Accounting Principle (Note 16) (571,005) Net Position as of December 31 $ 274,965,675 See Accompanying Notes to the Financial Statements 19

23 PORT OF VANCOUVER USA STATEMENT OF CASH FLOWS For the Year Ended December 31, 2013 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 29,672,927 Payments to suppliers (15,537,636) Payments to employees (8,476,753) Other receipts (payments) 244,770 Net cash provided (used) by operating activities 5,903,308 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Payments for environmental remediation (811,223) Net cash provided by noncapital financing activities (811,223) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from restricted property taxes 5,152,993 Proceeds from unrestricted property taxes 4,906,828 Grants received 10,671,481 Acquisition and construction of capital assets (28,514,850) Principal paid on bonds (2,985,000) Interest paid on bonds (2,141,658) Proceeds from principal paid on notes (4,268,140) Interest paid on notes (712) Proceeds from contributed capital 267,826 Proceeds from bond administration 6,000 Net cash used for capital and related financing activities (16,905,232) CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends 42,263 Net cash provided by investing activities 42,263 Net increase (decrease) in cash and cash equivalents (11,770,884) Cash and cash equivalents and January 1 31,945,011 Cash and cash equivalents at December 31 $ 20,174,127 Reconcile operating income to net cash provided by operating activities Net operating income (loss) $ 119,846 Adjustments: Depreciation 8,636,650 Change in assets and liabilities: Accounts receivable 2,785 Inventory (67,914) Unearned revenues (223,689) Other operating receivables 16,818 Accounts payable (3,043,863) Prepaid expenses 40,475 Taxes payable (111,779) Accrued liabilities 289,210 Nonoperating revenues (expenses) 244,769 Total adjustments (2,853,188) Net cash provided by operating activities $ 5,903,308 See Accompanying Notes to the Financial Statements 20

24 PORT OF VANCOUVER NOTES TO THE FINANCIAL STATEMENTS December 31, 2013 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Port of Vancouver (port) was incorporated in 1912 and operates under the laws of the state of Washington applicable to a public port district as a municipal corporation under the provisions of Chapter 53 of the Revised Code of Washington (RCW). The financial statements of the port have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governments. A. Reporting Entity The port is in Clark County, Washington, and comprises territory less than the entire county, which is divided into three port districts. The port is governed by a three-member Board of Commissioners (commission) elected by port voters. The commission possesses final decision-making authority and is held primarily accountable for decisions. The commission appoints management, who is responsible for the day-to-day operations of the port. Management is held accountable to the commission. The commission and appointed management possess the ability to significantly influence operations, including authority to review and approve budgets, sign contracts as the contracting authority, approve the hiring and retention of key managerial personnel, exercise control over facilities and properties and determine the outcome or disposition of matters affecting the port's customers. The port is independent from Clark County, which levies and collects taxes on behalf of the district. The port is a primary government and does not have any component units. The RCW authorizes the port to provide and charge rentals, tariffs and other fees for docks, wharves and similar harbor facilities, including associated storage and traffic handling facilities for waterborne commerce. The port may also provide freight and passenger terminals and transfer and storage facilities for other modes of transportation, including air, rail and motor vehicles. The port may acquire and improve land for sale or lease for industrial or commercial purposes and may create industrial development districts. The powers of eminent domain and ad valorem taxation upon the real and personal property within the district are also within the scope of port districts. B. Basis of Accounting and Reporting The accounting records of the port are maintained in accordance with methods prescribed by the State Auditor under the authority of Chapter RCW. The port uses the Budgeting, Accounting and Reporting System for GAAP Port Districts in the State of Washington. Funds are accounted for on a cost of services or economic resources measurement focus. This means that all assets and all liabilities (whether current or noncurrent) associated with their activity are included on their statements of net position (or balance sheets). Their reported fund position is segregated into net investment in capital assets, restricted and unrestricted components of net position. Operating statements present increases (revenues and gains) and decreases (expenses and losses) in net position. The port discloses changes in cash flows by a separate statement that presents their operating, noncapital financing, capital and related financing and investing activities. The port uses the full-accrual basis of accounting where revenues are recognized when earned, and expenses are recognized when incurred. Capital asset purchases are capitalized and long-term liabilities are accounted for in the appropriate fund. The port distinguishes between operating revenues and expenses from nonoperating ones. Operating revenues and expenses result from providing services and producing and delivering goods in connection with the port s principal ongoing operations. Terminal services and property rental revenues are charges for use of the port s facilities and are reported as operating revenue. Operating expenses for the Port include the costs of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as 21

25 nonoperating revenues and expenses. Ad valorem tax levy revenues, interest income, grant reimbursements and other revenues generated from non-operating sources are classified as nonoperating revenue. C. Use of Estimates The preparation of the port s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. D. Assets, Liabilities and Net Position 1. Cash and Cash Equivalents It is the Port s policy to invest all temporary cash surpluses. At December 31, 2013, the treasurer was holding $20,174,127 in short-term residual investments of surplus cash. This amount is classified on the statement of net position as cash and cash equivalents. The amounts reported as cash and cash equivalents also include compensating balances maintained with certain banks in lieu of payments for services rendered. The average compensating balance maintained during 2013 was approximately $2,800,000. For purposes of the statement of cash flows, the Port considers all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. 2. Receivables Taxes receivable consist of property taxes and related interest and penalties (See Note 3). Accrued interest receivable consists of amounts earned on investments, notes and contracts at the end of the year. Customer accounts receivable consist of amounts owed from private individuals or organizations for goods and services including amounts owed for which billings have not been prepared. Notes and contracts receivable consist of amounts owed on open account from private individuals or organizations for goods and services rendered. Receivables have been recorded net of estimated uncollectible amounts. Because property taxes and special assessments are considered liens on property, no estimated uncollectible amounts are established. Estimated uncollectible amounts for trade receivables are $152,618. Allowance for Uncollectable consists of the estimated amounts of customer accounts, notes and contracts that will never be collected. 3. Amounts Due To and From Other Governments These accounts include amounts due to or from other governments for grants, entitlements and temporary loans, taxes and charges for services. 4. Inventories Reported inventory is rail material purchased for the West Vancouver Freight Access Project and general rail system maintenance and environmental mitigation bank credits. Rail material inventory is valued at cost and will be used for rail system maintenance and phased rail construction based on engineering design and part specification over the next several years. Environmental mitigation bank credits will be used in future land developments. The Port maintains a small inventory of office supplies and maintenance parts. Parts and supplies are expensed as purchased and no inventory of these items is maintained. 22

26 5. Restricted Assets and Liabilities These accounts contain resources for construction, debt service and in accordance with certain agreements or policies. The current portion of related liabilities is shows as Payables from Current Restricted Assets. The restricted assets are composed of the following: Parcel 3 Account $ 750,000 Deferred Compensation 457(f) Plans 26,640 Customer Deposits 1,015,510 Escrow 500,000 FSA $ 2,551 2,294,701 Only customer deposits are shown with a related liability. 6. Employee Leave Benefits In accordance with GASB Statement No. 16, Accounting for Compensated Absences, the Port accrues a liability for compensated absences. As of January 1, 2008, the Port implemented a paid time off (PTO) policy for eligible administrative and union employees. The PTO policy takes the place of accounting for sick and vacation leave separately. PTO is accrued monthly based on years of service. PTO can be accrued to a maximum of 600 hours. Employees will receive remuneration upon resignation, separation or retirement for all PTO hours accumulated at their current rate of pay. 7. Unearned Revenues This account includes amounts recognized as receivables (assets) but not revenues because the revenue recognition criteria have not been met. 8. Deferred Compensation Plans The Port offers a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all Port employees, permits them to defer a portion of their salary until future years. The Plan is fully funded and held in an outside trust. The Port has established a plan for non-represented employees in accordance with Internal Revenue Code Section 401(a). The Port contributes to each eligible employee s 401(a) account based on tenure. A minimum contribution of $500 up to a maximum of $1,100 will be made annually. In addition, the Port matches employee 457 plan deferrals dollar for dollar to a fixed maximum of $2,200 based on length of service. A 457(f) Nonqualified Executive Retirement Plan and a 401(a) Supplemental Employer Contribution Savings Plan is provided to key employees. The Board of Commissioners has discretionary authority to make determinations as to eligibility and benefits under the plan. The participants accrued benefits shall be fully vested providing they remain in continuous service for the term of the agreement or until they leave under a qualifying event. If participants terminate under a non-qualifying event they forfeit all accrued benefits. 9. Capital Assets and Depreciation (See Note 4) 10. Long-term Debt (See Note 9) 11. Deferred Inflows and Outflows of Resources The Port reports a separate section for deferred outflows of resources. This represents a consumption of net position that applies to a future period(s) and so will not be recognized as an 23