(A CALIFORNIA NONPROFIT CORPORATION) FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT

Transcription

1 (A CALIFORNIA NONPROFIT CORPORATION) FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT FOR THE YEARS ENDED APRIL 30, 2018 AND 2017

2 CEDARPINES PARK MUTUAL WATER COMPANY (A CALIFORNIA NONPROFIT CORPORATION) FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT FOR THE YEARS ENDED APRIL 30, 2018 AND 2017 TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS Balance Sheet s 2 Statements of Revenue, Expenses, and Changes in Shareholder s Equity 3-4 Statements of Cash Flows 5 Notes to Financial Statements 6-10

3 Board of Directors Cedarpines Park Mutual Water Company Cedarpines Park, CA INDEPENDENT AUDITORS REPORT Report on the Financial Statements We have audited the accompanying financial statements of Cedarpines Park Mutual Water Company, which comprise the balance sheets as of April 30, 2018 and 2017, and the related statements of revenues, expenses and changes in shareholders equity and cash flows for the years then ended, and the related notes to the financial statements. 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. Auditors 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. 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 entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cedarpines Park Mutual Water Company as of April 30, 2018 and 2017, and the changes in stockholder s equity and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. July 6, 2018

4 FINANCIAL STATEMENTS

5 CEDARPINES PARK MUTUAL WATER COMPANY BALANCE SHEETS APRIL 30, 2018 AND 2017 Assets Current Assets Cash and cash equivalents $ 557,164 $ 471,691 Restricted cash 91,898 91,898 Total Cash 649, ,589 Accounts receivable (net) 118,305 94,574 Inventory 28,706 31,969 Prepaid expenses 8,213 8,213 Total Current Assets 155, ,756 Property and Equipment (net) 1,734,580 1,847,462 Total Assets $ 2,538,866 $ 2,545,807 Liabilities and Sharholder's Equity Current Liabilities Accounts payable $ 3,209 2,398 Accrued expenses 15,532 24,768 Accrued interest 30,201 30,405 Current portion long-term debt - grant 41,300 39,521 Current portion long - term debt - vehicles 5,430 13,606 Total Current Liabilities 95, ,698 Long-Term Debt Notes payable - long term portion - grant 1,077,466 1,118,766 Notes payable - long term portion - vehicles - 6,240 Total Liabilities 1,173,138 1,235,704 Shareholder's Equity Common stock, no par value Authorized: 5,000 shares Issued and outstanding: 4,135 shares and 4,137 shares 137, ,281 Memberships forfeited 352, ,974 Contributed capital 1,132,742 1,132,742 Total Capitalization 1,622,997 1,585,997 Retained earnings Unrestricted (670,836) (688,705) Unrestricted - designated 321, ,913 Restricted for debt service 91,898 91,898 Total Retained Earnings (257,269) (275,894) Total Shareholder's Equity 1,365,728 1,310,103 Total Liabilities and Shareholder's Equity $ 2,538,866 $ 2,545,807 See accompanying notes and accountants' report. 2

6 CEDARPINES PARK MUTUAL WATER COMPANY STATEMENTS OF REVENUE, EXPENSES AND CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED APRIL 30, 2018 AND Revenue Membership assessments $ 234,802 $ 212,447 Water consumption charges 247, ,865 Water meter charges 222, ,701 Connection charges 10,070 3,140 Membership transfer fees Penalty income 10,722 9,682 Miscellaneous income 16,483 39,397 Total Revenue 742, ,212 Operating Expenses Salaries and wages 218, ,358 Payroll taxes 18,862 24,531 Employees' benefits 23,385 15,275 Production power 25,423 21,802 Cost of water 51,985 77,774 Water analysis 7,646 9,131 Repairs and maintenance 50,207 44,141 Tools and shop expense 1,096 1,868 Truck and tractor expense 14,804 15,517 Materials and supplies Taxes - other 12,691 12,302 Insurance 22,897 31,559 Professional services 16,903 25,691 Office expense 13,257 11,092 Printing and postage 6,002 3,872 Telephone 6,371 8,188 Utilities 2,182 2,263 Permits 12,795 4,119 Computer maintenance 4,780 5,870 Miscellaneous expense 1,629 3,052 Directors' expense 2,200 2,250 Contract labor 2,684 2,921 Bad debt expense 6,338 1,094 Depreciation 126, ,356 Total Operating Expenses 648, ,400 Operating Income 93,844 22,812 Other Income and Expenses Interest income - 7 Interest expense (51,919) (53,061) Total Other Income and Expenses (51,919) (53,054) Net Income (Loss) Before Taxes 41,925 (30,242) Provision for State income taxes (800) (1,430) Net Income (Loss) $ 41,125 $ (31,672) See accompanying notes and accountants' report. 3

7 CEDARPINES PARK MUTUAL WATER COMPANY STATEMENTS OF CHANGES IN SHARHOLDER'S EQUITY FOR THE YEARS ENDED APRIL 30, 2018 AND Shareholder's equity - Beginning of year $ 1,310,103 $ 1,337,775 Plus: Shares sold 14,500 4,000 Net Income 41,125 - Less: Net loss - (31,672) Shareholder's equity - End of year $ 1,365,728 $ 1,310,103 See accompanying notes and accountants' report. 4

8 CEDARPINES PARK MUTUAL WATER COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 2018 AND Cash Flows from Operating Activities Cash received from members $ 712,731 $ 714,079 Interest received - 7 Cash paid to employees (270,302) (297,755) Cash paid to suppliers (251,478) (288,298) Interest paid (52,123) (54,655) Income tax paid (800) (1,430) Net Cash Provided by Operating Activities 138,028 71,948 Cash Flows from Investing Activities Cash payments for the construction of improvements (13,118) - Net Cash Used by Investing Activities (13,118) - Cash Flows from Financing Activities Cash received from sales of membership shares 14,500 4,000 Cash payments of principal on long-term debt (53,937) (56,645) Net Cash Used by Financing Activities (39,437) (52,645) Net Increase(Decrease) in Cash 85,473 19,303 Cash Balance at Beginning of Year 563, ,286 Cash Balance at End of Year $ 649,062 $ 563,589 Reconciliation of Net Income (Loss) to Net Cash Provided by Operating Activities Net Income (loss) $ 41,125 $ (31,672) Adjustments required to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 126, ,356 Changes in operating working capital: Accounts receivable (23,731) 5,961 Inventory 3,263 (4,491) Prepaid Expenses - 1,866 Accounts payable 811 (1,887) Other accrued expenses (9,236) (10,591) Accrued interest (204) (1,594) Net Cash Provided by Operating Activities $ 138,028 $ 71,948 See accompanying notes and accountants' report. 5

9 CEDARPINES PARK MUTUAL WATER COMPANY (A CALIFORNIA NONPROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED APRIL 30, 2018 AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Cedarpines Park Mutual Water Company (The Company) is a private, non-profit corporation, which sells water to landowners of Cedarpines Park, California, who are shareholders of the water company. Revenue Sources The Company receives its revenue primarily from shareholder assessments. The remaining revenue is derived from excess water charges and other fees. Accounting Records The financial statements presented use the accrual basis of accounting whereby revenues are recorded when earned and expenditures are recorded when the liability is incurred. Cash and cash equivalents For purposes of reporting cash flow information, the Company considers all highly liquid investment instruments with an original maturity of three months or less to be cash equivalents. Inventory The Company accounts for inventory at the lower of cost (on a first-in, first-out basis) or market. Inventory consisted of plumbing parts and supplies. Accounts Receivable Billed, but uncollected assessments, excess water charges, late charges, service charges, and stock transfer fees are considered accounts receivable from stockholders. Accounts receivable are stated net of an allowance for doubtful accounts. The Company estimates the allowance based on an analysis of the age of past due accounts. When a stockholder has assessments in arrears greater than 12 months the stockholder s share is forfeited and the associated receivable is written off as bad debt. As of April 30, 2018 and 2017 allowance for doubtful accounts is $8,032 and $7,307, respectively. Property, plant, and equipment The Company follows the practice of capitalizing all expenses for equipment in excess of $2,500. Property and equipment are carried at cost. Depreciation for financial reporting purposes is provided using the straight - line method over the estimated useful lives of the assets, which range from 5 to 30 years. The estimated useful lives of the assets are as follows: Years Building and paving Office equipment and furniture 5-10 Tanks, pumps and miscellaneous equipment 5-40 Pipelines Wells Meters and meter boxes Trucks and tractors 5 Fire hydrants 69 Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 6

10 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Income Taxes The Company is exempt from federal income taxes under section 501(c) (12) of the IRS Code. Accordingly, these financial statements do not include a provision for income taxes. In accordance with accounting standards, which provides accounting and disclosure guidance about uncertain tax positions taken by a Company, Management believes that all of the positions taken by the Company in its federal and state income tax returns are more likely than not to be sustained upon examination. The Company files returns in the U.S. Federal jurisdiction and the State of California. The Company s federal income tax returns for the prior three years remain subject to examination by the Internal Revenue Service. The Company s California income tax returns for the prior four years remain subject to examination by the Franchise Tax Board. Common Stock Transactions Shares with assessments unpaid can be forfeited back to the Company and are treated as transfers from stock and paid in capital accounts to retained earnings. Unpaid fees causing the forfeiture are written off in the current period. Reclassifications Certain reclassifications have been made to the prior years financial statements to conform to the current year presentation. 2. CONCENTRATION OF CREDIT RISKS Accounts Receivables Receivable balances are from shareholders in the service area of Cedarpines Park Mutual Water Company. In the event of a natural disaster resulting in the abandonment of properties by the shareholders, the receivable balance could be impaired. Cash and Cash Equivalents The Company has cash in financial institutions which is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 for all accounts. As of April 30, 2018 and 2017 the Company had uninsured cash balance of $145,770 and $65,406, respectively. 3. RESTRICTED CASH The Company maintains a mandatory minimum cash balance as required by the loan and grant agreement from the United States Department of Agriculture Rural Utilities Service. 4. ACCRUED EXPENSES Following the introductory period all regular full-time and part-time employees are eligible to receive paid vacation benefits based on their years of service. At April 30, 2018 and 2017, accrued vacation totaled $6,676 and $14,041, respectively This section intentionally left blank 7

11 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. PROPERTY AND EQUIPMENT As of April 30, 2018 and 2017 property and equipment were composed of the following: Balance Balance 4/30/17 Additions Retirements 04/30/18 Land $ 63,749 $ - $ - $ 63,749 Buildings and paving 188, ,138 Office furniture and equipment 69, ,867 Tanks, pumps and miscellaneous equipment 1,547, ,547,447 Pipelines 2,737, ,737,511 Wells 44, ,834 Meters and meter boxes 74, ,430 Trucks and tractors 204, ,424 Fire hydrants 70, ,317 Total Property and Equipment 5,000, ,000,717 Accumulated Depreciation (3,232,321) (126,000) - (3,358,321) Construction in Progress 92, ,184 Net Property and Equipment $ 1,860,580 $ (126,000) $ - $ 1,734,580 Depreciation expense amounted to: $ 126,000 Balance Balance 4/30/16 Additions Retirements 04/30/17 Land $ 63,749 $ - $ - $ 63,749 Buildings and paving 188, ,138 Office furniture and equipment 69, ,867 Tanks, pumps and miscellaneous equipment 1,547, ,547,447 Pipelines 2,737, ,737,511 Wells 44, ,834 Meters and meter boxes 74, ,430 Trucks and tractors 204, ,424 Fire hydrants 70, ,317 Total Property and Equipment 5,000, ,000,717 Accumulated Depreciation (3,117,965) (114,356) - (3,232,321) Construction in Progress 79, ,066 Net Property and Equipment $ 1,961,818 $ (114,356) $ - $ 1,847,462 Depreciation expense amounted to: $ 114,356 8

12 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. LOAN PAYABLE AND GRANT The Company received a loan and grant agreement from the United States Department of Agriculture Rural Utilities Service for the upgrade of the Company s water system. The original loan amount was $1,670,500 at 4.50% per annum. The maximum grant amount was $1,085,000. Per loan agreement the Company is required to reserve year s worth of principal and interest payments of $91,644 each year, which are due yearly on September 25 until the year Accrued interest due on the loan as of April 30, 2018 and 2017 were $30,201 and $30,405, respectively. Interest expense incurred for the years ended April 30, 2018 and 2017 was $51,919and $53,061, respectively. The following is a summary of changes in long-term debt for the years ended April 30, 2018 and 2017: Principal April 30, 2017 Additions Payments April 30, 2018 Rural Utilities Service Loan $ 1,158,287 - (39,521) $ 1,118,766 Principal April 30, 2016 Additions Payments April 30, 2017 Rural Utilities Service Loan $ 1,196,106 - (37,819) $ 1,158,287 Future maturities of Rural Utilities Service Loan Year Ending April 30, Interest Principal 2019 $ 50,344 $ 41, ,486 43, ,544 45, ,514 47, ,394 49, , , , , , ,393 Total $ 540,489 $ 1,118, NOTE PAYABLE VEHICLES The Company financed the purchase of three service vehicles for 5 years, with notes bearing interest between the amounts of 0% and 6.3%. The Company made principal payments. The remaining principal balance due on these notes as of April 30, 2018 are as follows: Future maturities of vehicle loans are as follows: 2019 $ 5,430 Total $ 5,430 9

13 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 8. RETAINED EARNINGS Cedarpines Park Mutual Water Company s Board of Directors designated a portion of the Company s accumulated unrestricted retained earnings as a long-term reserve for debt payments and operating funds to be used in the event of a significant shortfall in revenues. Retained earnings as of and for the year ended April 30, 2018 and 2017 are as follows: Unrestricted Available for operations $ (670,836) $ (688,705) Designated for debt payment 72,534 71,778 Designated contingency for operations 249, ,135 Total unrestricted designated 321, ,913 Temporarily restricted Debt Service reserve 91,898 91,898 Total Retained Earnings $ (257,269) $ (275,894) 9. SUBSEQUENT EVENTS Accounting standards require that Cedarpines Park Mutual Water Company assess and disclose the date and the basis for that date through which potential subsequent events have been evaluated. The date represents the date the financial statements were issued or were available to be issued. The Company evaluated all potential subsequent events as of July 6, 2018 when the financial statements were authorized and available to be issued. No subsequent events or transactions were identified after the balance sheet date or as of July 6, 2018 that require disclosure in the financial statements. * * * * 10