AUGUSTA, GEORGIA UTILITIES AUGUSTA, GEORGIA FINANCIAL REPORT FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

Transcription

1 FINANCIAL REPORT FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

2 FINANCIAL REPORT FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 TABLE OF CONTENTS Page INDEPENDENT AUDITOR S REPORT FINANCIAL STATEMENTS Statements of Net Position... 4 and 5 Statements of Revenues, Expenses and Changes in Net Position... 6 Statements of Cash Flows... 7 and 8 Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedules of Funding Progress Defined Benefit Retirement Plans Schedule of Funding Progress Other Post-employment Benefit Plan STATISTICAL SECTION (UNAUDITED) Statistical Section 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 and 45

3 INDEPENDENT AUDITOR S REPORT To the Utilities Department, Augusta-Richmond County Commission Augusta, Georgia Report on the Financial Statements We have audited the accompanying basic financial statements of Augusta, Georgia Utilities (the Utilities ), an enterprise fund of Augusta, Georgia, as of and for the years ended December 31, 2013 and 2012, and the related notes to the financial statements, as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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. 300 MULBERRY STREET, SUITE 300 POST OFFICE BOX 1877 MACON, GEORGIA FAX MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Augusta, Georgia Utilities, an enterprise fund of Augusta, Georgia, as of December 31, 2013 and 2012, and the changes in financial position and, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1, the financial statements present only the Utilities enterprise fund of Augusta, Georgia and do not purport to, and do not, present fairly the financial position of Augusta, Georgia as of December 31, 2013 and 2012, the changes in its financial position or its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. 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 Schedules of Funding Progress on pages 36 and 37 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. Management has omitted the management s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information. 2

5 Other Information Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Augusta, Georgia Utilities. The statistical section listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. The statistical section has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Macon, Georgia June 30,

6 STATEMENTS OF NET POSITION DECEMBER 31, 2013 AND 2012 ASSETS CURRENT ASSETS Cash and cash equivalents $ 29,229,000 $ 13,323,339 Investments 2,005,939 1,998,557 Customer accounts receivable 16,548,459 20,649,953 Interest receivable 2,853 2,376 Prepaid expenses 249,935 - Inventory 2,176,438 2,087,594 Total current assets 50,212,624 38,061,819 RESTRICTED CASH AND CASH EQUIVALENTS Sinking fund - all funds 19,655,402 7,054,815 Construction fund - all funds 74,754,158 68,347,447 Total restricted assets 94,409,560 75,402,262 CAPITAL ASSETS Capital assets not being depreciated 22,997,128 20,338,685 Capital assets, net of accumulated depreciation 568,799, ,334,014 Total capital assets 591,796, ,672,699 OTHER ASSETS Prepaid bond interest 11,635,854 12,325,431 Prepaid bond insurance 1,725,418 1,804,845 Total other assets 13,361,272 14,130,276 Total assets 749,779, ,267,056 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 4,997,298 5,544,035 Total deferred outflows of resources 4,997,298 5,544,035 LIABILITIES CURRENT LIABILITIES, PAYABLE FROM CURRENT ASSETS Accounts and other payables 2,120,873 2,772,204 Accrued interest 5,776,204 5,401,530 Due to other funds of the Government 21,984,820 4,716,566 Accrued salaries 392, ,490 Compensated absences 674, ,146 Notes payable - current 3,391,714 3,193,632 Capital leases payable - current 912, ,502 Total current liabilities payable from current assets 35,253,044 17,938,070 CURRENT LIABILITIES PAYABLE FROM RESTRICTED ASSETS Revenue bonds payable - current 9,185,000 7,920,000 Total current liabilities payable from restricted assets 9,185,000 7,920,000 (Continued) 4

7 STATEMENTS OF NET POSITION DECEMBER 31, 2013 AND LONG-TERM LIABILITIES Advance from other funds of the Government $ 350,901 $ 106,762 Revenue bonds payable 491,263, ,515,289 Notes payable 24,612,564 28,004,278 Capital leases payable 3,114,061 3,516,540 Total long-term liabilities 519,341, ,142,869 Total liabilities 563,779, ,000,939 NET POSITION Net investment in capital assets 104,395, ,224,161 Restricted for capital outlay 25,020,053 10,284,449 Restricted for debt service 29,308,790 25,065,145 Unrestricted net position 32,273,811 38,236,397 Total net position $ 190,997,881 $ 195,810,152 See Notes to Financial Statements. 5

8 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED DECEMBER 31, 2013 AND Operating revenues Water and sewerage sales $ 68,801,255 $ 70,343,327 Industrial sewer charges 2,868,332 2,814,461 Water and sewerage service fees 3,777,923 3,754,784 Department of the Army revenue 11,866,227 25,231,577 Other 327, ,763 Total operating revenue 87,640, ,495,912 Operating expenses Personnel services 14,405,875 13,458,826 Depreciation 27,950,200 27,091,020 Other operating expenses 4,190,605 3,940,964 Materials and supplies 8,848,680 9,244,716 Professional services 6,662,165 5,476,542 General allocation 1,383,690 1,383,690 Risk management 557, ,117 Vehicle cost allocation 769, ,083 Payment in lieu of taxes 1,079,010 1,103,800 Payment in lieu of franchise fees 2,656,320 2,659,010 Total operating expenses 68,503,688 65,630,768 Net operating income 19,137,138 36,865,144 Non-operating revenues (expenses) Interest revenue 134, ,669 Interest and fiscal charges (22,945,071) (23,727,104) Bond issuance costs (1,178,002) (1,267,330) Gain on sale of capital assets 39,511 50,853 Net non-operating revenues (expenses) (23,949,409) (24,726,912) Transfers Transfers out to other funds of the Government - (40,620) Total transfers - (40,620) Change in net position (4,812,271) 12,097,612 Total net position, beginning of year 195,810, ,712,540 Total net position, end of year $ 190,997,881 $ 195,810,152 See Notes to Financial Statements. 6

9 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2013 AND CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers and users $ 106,798,733 $ 96,720,550 Payments to suppliers (27,137,723) (24,728,657) Payments to employees (14,297,224) (13,284,646) Net cash provided by operating activities 65,363,786 58,707,247 CASH FLOWS FROM NON-CAPITAL AND RELATED FINANCING ACTIVITIES Transfers out - (40,620) Net cash used in non-capital and related financing activities - (40,620) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from sale of capital assets 39,511 50,853 Acquisition and construction of capital assets (20,073,693) (31,052,433) Principal payments on bonds (7,920,000) (103,330,000) Principal payments on notes and lease payable (2,275,700) (1,839,660) Proceeds from issuance of notes payable - 309,011 Proceeds from issuance of bonds 22,150, ,225,211 Proceeds from issuance of capital leases 619,846 - Payments of bond issuance costs (1,098,575) (1,693,922) Interest paid (22,018,925) (23,266,445) Net cash used in capital and related financing activities (30,577,121) (12,597,385) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (7,382) (9,364) Interest received 133, ,617 Net cash provided by investing activities 126, ,253 Increase in cash and cash equivalents 34,912,959 46,277,495 Cash and cash equivalents, beginning of year 88,725,601 42,448,106 Cash and cash equivalents, end of year $ 123,638,560 $ 88,725,601 Classified as: Cash and cash equivalents $ 29,229,000 $ 13,323,339 Restricted assets: Cash and cash equivalents 94,409,560 75,402,262 (Continued) $ 123,638,560 $ 88,725,601 7

10 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2013 AND CASH FLOWS FROM OPERATING ACTIVITIES Net operating income $ 19,137,138 $ 36,865,144 Adjustments to reconcile net operating income to net cash provided by operating activities: Depreciation 27,950,200 27,091,020 Department of Defense payment used to reduce note payable (2,455,980) (2,455,980) Changes in assets and liabilities: (Increase) decrease in accounts receivable and other receivables 4,101,494 (1,500,510) (Increase) decrease in inventories (88,844) 930,333 (Increase) decrease in prepaids (249,935) 22,577 Decrease in accounts payable (651,331) (600,645) Increase in accrued expenses 77,011 72,035 Increase (decrease) in due to other funds 17,512,393 (1,818,872) Increase in compensated absences 31, ,145 Net cash provided by operating activities $ 65,363,786 $ 58,707,247 NONCASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on notes payable $ 1,923,613 $ 1,827,948 Interest paid 532, ,032 $ 2,455,980 $ 2,455,980 See Notes to Financial Statements. 8

11 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Augusta, Georgia Utilities (the Utilities ) is a provider of water and sewer services located in Augusta, Georgia. The Utilities grants credit to residential, business, and industrial customers, substantially all of whom are located in the Central Savannah River Area. The Utilities accounts for its financial position and results of operations in accordance with accounting principles generally accepted in the United States of America (U.S.GAAP) applicable to governmental units. The following is a summary of the significant accounting policies: A. Reporting Entity The Utilities is an enterprise fund of Augusta, Georgia (the Government ). These financial statements present only an enterprise fund and are not intended to present fairly the financial position and results of operations of Augusta, Georgia in conformity with accounting principles generally accepted in the United States of America. The Utilities is an integral part of the Government s financial reporting entity, and its results are included in the financial report of the Government, which should be read in conjunction with these financial statements. B. Measurement Focus, Basis of Accounting and Basis of Presentation The accounting and reporting policies of the Utilities conform to accounting principles generally accepted in the United States of America. The financial statements are prepared on the accrual basis of accounting, whereby revenues are recognized as earned and expenses are recognized as incurred. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the Utilities are charges for goods and services provided. Operating expenses of the Utilities include the cost of these goods and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the Utilities policy to use restricted resources first, then unrestricted resources as they are needed. C. Cash and Cash Equivalents Cash and cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments with original maturities of three months or less meet this definition. 9

12 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Investments Investments are reported at fair value. Fair value is determined as follows: short-term investments are reported at cost, which approximates fair value; securities traded on national exchanges are valued at current prices or current prices of similar securities; securities for which an established market does not exist are reported at estimated fair value using selling prices for similar investments for which there is an active market. E. Accounts Receivable Accounts receivable include billed but uncollected amounts and unbilled receivables based upon a prorated amount of subsequent monthly billings. Allowances for doubtful accounts are maintained based on historical trends. F. Inventories Inventories are stated at lower of cost (first in, first out) or market, and are accounted for using the consumption method. G. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. Prepaid items are accounted for using the consumption method. H. Restricted Assets Certain assets are classified as restricted assets on the statements of net position because their use is limited by applicable debt covenants. I. Capital Assets Capital assets are recorded at cost when purchased. Depreciation is provided using the straightline method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to expense as incurred and major renewals and betterments are capitalized. Minimum capitalization costs are $5,000 for all categories of capital assets. When items of capital assets are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is recognized. 10

13 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I. Capital Assets (Continued) The estimated lives used in determining depreciation are as follows: Years Water and sewer systems Buildings and other improvements Vehicles 3-5 Machinery and equipment 5-10 Office furniture and fixtures 5-10 Capital leases 3 Other capital items 3-12 The value of water and sewerage systems installed by various subdivision developers and deeded to Utilities at no cost prior to 1970 was recorded based on an appraisal by an engineering firm. Such donated assets are recorded at estimated fair market values effective at the date of said appraisals. J. Long-Term Obligations Long-term debt and other long-term obligations are reported as liabilities in the applicable statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed in the period incurred. K. Compensated Absences The vacation policy of the Utilities provides for the accumulation of up to 30 days earned vacation leave with such leave being fully vested when earned. An expense and a liability for compensated absences and the salary-related payments are recorded as leave is earned. The Utilities has assumed a first-in, first-out method of using accumulated compensated time. The portion of that time that is estimated to be used in the next fiscal year has been designated as a current liability in the financial statements. No accrual has been established for accumulated sick leave of employees since it is the Utilities policy to record the cost of sick leave only when it is used. 11

14 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) L. Deferred Outflows / Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. The utilities had one item that qualified for reporting in this category, which is the deferred charge on refunding. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded debt or the refunding debt. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of fund balance that applies to future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Utilities did not have any items that qualified for reporting in this category. M. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2. DEPOSITS AND INVESTMENTS Total deposits as of December 31, 2013 and December 31, 2012, are summarized as follows: As reported in the Statement of Net Position: December 31, 2013 December 31, 2012 Cash and cash equivalents $ 29,229,000 $ 13,323,339 Investments 2,005,939 1,998,557 Restricted cash and cash equivalents 94,409,560 75,402,262 $ 125,644,499 $ 90,724,158 Cash deposited with financial institutions $ 123,638,560 $ 88,725,601 Certificate of Deposit 2,005,939 1,998,557 $ 125,644,499 $ 90,724,158 12

15 NOTE 2. DEPOSITS AND INVESTMENTS (CONTINUED) As of December 31, 2013, the Utilities held the following investments: Investments Maturities Fair Value Certificate of Deposit 2 months $ 2,005,939 As of December 31, 2012, the Utilities held the following investments: Investments Maturities Fair Value Certificate of Deposit 2 months $ 1,998,557 Credit Risk. State statutes authorize the Utilities to invest in obligations of the State of Georgia or other states; obligations issued by the U.S. government; obligations fully insured or guaranteed by the U.S. government or by a government agency of the United States; obligations of any corporation of the U.S. government; prime bankers acceptances; the local government investment pool established by state law; repurchase agreements; and obligations of other political subdivisions of the State of Georgia. Interest Rate Risk. The Utilities investment policy states that the Utilities will structure its portfolio to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities prior to their maturity. The policy also emphasizes the purchase of shorter term or more liquid investments. The policy does not place formal limits on investment maturities. Custodial Credit Risk Deposits. The Utilities does not have a formal custodial credit risk policy. Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. State statutes require all deposits and investments (other than federal or state government instruments) to be collateralized by depository insurance, obligations of the U.S. government, or bonds of public authorities, counties, or municipalities. As of December 31, 2013 and 2012, the Utilities did not have any balances exposed to custodial credit risk as uninsured and uncollateralized as defined by GASB pronouncements. Custodial Credit Risk Investments. Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty, the Utilities will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. State statutes require all investments (other than federal or state government instruments) to be collateralized by depository insurance, obligations of the U.S. government, or bonds of public authorities, counties, or municipalities. 13

16 NOTE 3. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2013 is as follows: Beginning Balance Additions Transfers Disposals Ending Balance Capital assets, not being depreciated: Land $ 11,031,787 $ 300,301 $ - $ - $ 11,332,088 Construction in progress 9,306,898 6,373,843 (4,015,701) - 11,665,040 Total 20,338,685 6,674,144 (4,015,701) - 22,997,128 Capital assets, being depreciated: Buildings 44,268,108 49, ,393-44,506,624 Vehicles 7,076, ,103 - (281,358) 7,090,160 Machinery and equipment 15,814, , ,623,858 Furniture and fixtures 561, ,282 Other capital 6,551,578 95, ,647,402 Water and sewerage systems 769,370,486 12,150,300 3,826, ,347,094 Contributed water and sewerage systems 10,563, ,563,423 Total 854,205,951 13,399,549 4,015,701 (281,358) 871,339,843 Less accumulated depreciation for: Buildings (31,846,789) (1,428,121) - - (33,274,910) Vehicles (6,306,170) (346,147) - 281,358 (6,370,959) Machinery and equipment (10,609,317) (1,113,301) - - (11,722,618) Furniture and fixtures (557,505) (3,028) - - (560,533) Other capital (6,416,690) (89,073) - - (6,505,763) Water and sewerage systems (210,795,613) (24,649,619) - - (235,445,232) Contributed water and sewerage systems (8,339,853) (320,911) - - (8,660,764) Total (274,871,937) (27,950,200) - 281,358 (302,540,779) Total capital assets, being depreciated, net 579,334,014 (14,550,651) 4,015, ,799,064 Total capital assets, net $ 599,672,699 $ (7,876,507) $ - $ - $ 591,796,192 14

17 NOTE 3. CAPITAL ASSETS (CONTINUED) Capital asset activity for the year ended December 31, 2012 is as follows: Beginning Balance Additions Transfers Disposals Ending Balance Capital assets, not being depreciated: Land $ 10,361,099 $ 670,688 $ - $ - $ 11,031,787 Construction in progress 25,833,521 7,771,517 (24,298,140) - 9,306,898 Total 36,194,620 8,442,205 (24,298,140) - 20,338,685 Capital assets, being depreciated: Buildings 40,638,702 2,572,884 1,056,522-44,268,108 Vehicles 6,818, ,525 - (175,117) 7,076,415 Machinery and equipment 15,690, ,828 - (115,421) 15,814,659 Furniture and fixtures 561, ,282 Other capital 6,449, , ,551,578 Water and sewerage systems 726,866,688 19,262,180 23,241, ,370,486 Contributed water and sewerage systems 10,563, ,563,423 Total 807,588,121 22,610,228 24,298,140 (290,538) 854,205,951 Less accumulated depreciation for: Buildings (30,453,595) (1,393,194) - - (31,846,789) Vehicles (6,044,726) (436,561) - 175,117 (6,306,170) Machinery and equipment (9,659,108) (1,065,630) - 115,421 (10,609,317) Furniture and fixtures (531,625) (25,880) - - (557,505) Other capital (6,205,889) (210,801) - - (6,416,690) Water and sewerage systems (187,034,442) (23,761,171) - - (210,795,613) Contributed water and sewerage systems (8,142,070) (197,783) - - (8,339,853) Total (248,071,455) (27,091,020) - 290,538 (274,871,937) Total capital assets, being depreciated, net 559,516,666 (4,480,792) 24,298, ,334,014 Total capital assets, net $ 595,711,286 $ 3,961,413 $ - $ - $ 599,672,699 15

18 NOTE 4. LONG-TERM DEBT The following is a summary of long-term debt activity for the year ended December 31, 2013: Beginning Ending Due Within Balance Additions Reductions Balance One Year Business-type activities: Revenue bonds $ 466,349,999 $ 22,070,000 $ (7,920,000) $ 480,499,999 $ 9,185,000 Add deferred amounts Unamortized discounts (895,956) - 45,326 (850,630) - Unamortized premiums 21,981,246 80,415 (1,262,535) 20,799,126 - Total bonds payable 487,435,289 22,150,415 (9,137,209) 500,448,495 9,185,000 Notes payable 31,197,910 - (3,193,632) 28,004,278 3,391,714 Capital leases 4,412, ,846 (1,005,681) 4,026, ,146 Compensated absences 643, ,855 (591,215) 674, ,786 Business-type activities: long-term liabilities $ 523,688,387 $ 23,393,116 $ (13,927,737) $ 533,153,766 $ 14,163,646 The following is a summary of long-term debt activity for the year ended December 31, 2012: Beginning Ending Due Within Balance Additions Reductions Balance One Year Business-type activities: Revenue bonds $ 430,849,999 $ 138,830,000 $ (103,330,000) $ 466,349,999 $ 7,920,000 Add deferred amounts Unamortized discounts (613,447) (936,627) 654,118 (895,956) - Unamortized premiums 12,881,709 10,331,838 (1,232,301) 21,981,246 - Total bonds payable 443,118, ,225,211 (103,908,183) 487,435,289 7,920,000 Notes payable 33,696, ,011 (2,807,119) 31,197,910 3,193,632 Capital leases 5,272,531 - (860,489) 4,412, ,502 Compensated absences 541, ,171 (615,026) 643, ,146 Business-type activities: long-term liabilities $ 482,627,811 $ 149,251,393 $ (108,190,817) $ 523,688,387 $ 12,652,280 16

19 NOTE 4. LONG-TERM DEBT (CONTINUED) Revenue Bonds The Government issues bonds to provide funds for various projects. The revenue bonds outstanding are as follows: Balance at Balance at Interest December 31, December 31, Rate Water and Sewer, Series % $ 160,000,000 $ 160,000,000 Water and Sewer, Series % to 5.00% 159,599, ,519,999 Water and Sewer, Series % to 5.00% 138,830, ,830,000 Water and Sewer, Series % to 4.85% 22,070, ,499, ,349,999 Less: Unamortized discounts (850,630) (895,956) Add: Unamortized premium 20,799,126 21,981,246 $ 500,448,495 $ 487,435,289 During the year ended December 31, 2004, the Government issued $160,000,000 in Series 2004 Water and Sewerage Revenue Bonds. Proceeds of the bonds were used to pay the costs of making additions, extensions and improvements to the water and sewer system. The bonds are limited obligations of the Government and payable solely from the net revenues of the Water and Sewer System. The Series 2004 Bonds are due in annual installment of interest only of $8,400,000 through October Principal is due in annual installments beginning October 2033 through October 2039 from $19,500,000 to $26,510,000, plus interest of 5.25%. 17

20 NOTE 4. LONG-TERM DEBT (CONTINUED) Revenue Bonds (Continued) During the year ended December 31, 2007, the Government issued $177,010,000 in Series 2007 Water and Sewerage Revenue Bonds. A portion of the proceeds from the sale of these bonds was used to refund all of the former Series 1996 and 1997 Water and Sewerage Revenue Bonds in the amount of $56,875,000. The remaining portion of the bond proceeds of $120,135,000 was used to advance refund a portion of the Series 2000 and 2002 Water and Sewerage Revenue Bonds. The current refunding resulted in a difference between the reacquisition price and the net carrying amount of the 1996 and 1997 Bonds of approximately $4,300,000. This difference, reported in the accompanying financial statements as a deferred inflow of resources, is being charged to operations through the year 2030 using the effective-interest method. The refunding decreased the total debt service payments over the next 21 years by approximately $5,600,000 and produced an economic gain of approximately $3,700,000. The advance refunding of the 2000 and 2002 Bonds resulted in a difference between the reacquisition price and the net carrying amount of the old debt of approximately $3,200,000. This difference, reported in the accompanying financial statements as a deferred outflow of resources, is being charged to interest expense through the year 2030 using the effective-interest method. The refunding decreased the total debt service payments over the next 23 years by approximately $7,200,000 and produced an economic gain of approximately $4,600,000. Proceeds of approximately $126,793,000 from the defeased issues were used to purchase U.S. Government Securities. Those securities were deposited in an irrevocable trust fund with an escrow agency to provide for all future debt service payments on the above mentioned bonds. The bonds are due in annual installments of $2,060,000 to $12,260,000 plus interest at 4.0% to 5.0% through October During the year ended December 31, 2012, the Government issued $138,830,000 in Series 2012 Water and Sewerage Revenue Refunding and Improvement Bonds for the purposes of (1) refunding all of the Series 2002 Water and Sewerage Revenue Bonds, (2) financing the costs of making additions, extensions, and improvements to the water and sewer system, (3) funding a debt service reserve account for the 2012 Series Bonds, and (4) financing the costs of issuing the 2012 Series Bonds. The advance refunding of the 2002 series resulted in a difference between the reacquisition price and the net carrying amount of the old debt of approximately $600,000. The difference, reported in the accompanying financial statements as a deferred outflow of resources, is being charged to increase expenses through the year 2033 using the effective-interest method. The refunding decreased the total debt service payments over the next 11 years by approximately $78 million and produced an economic gain of approximately $40 million. The bonds are due in annual installments of $4,155,000 to $20,095,000 plus interest at 3.0% to 5.0% through October

21 NOTE 4. LONG-TERM DEBT (CONTINUED) Revenue Bonds (Continued) During the year ended December 31, 2013, the Government issued $22,070,000 in Series 2013 Water and Sewerage Revenue Bonds for the purposes of (1) funding, in part, the debt service reserve account for the Prior Lien Bonds, (2) funding a debt service reserve for the Series 2013 Bonds and (3) paying the costs of issuance of the Series 2013 Bonds. Principal payments are due in annual installments commencing on October 1, 2014 through Interest payments are due in semi-annual installments on each April 1 and October 1 at varying rates between 0.7% and 4.85%. Annual debt service requirements to maturity for the revenue bonds as of December 31, 2013 are as follows: Principal Interest Total Year ending December 31, 2014 $ 9,185,000 $ 22,604,513 $ 31,789, ,610,000 22,182,673 31,792, ,055,000 21,737,173 31,792, ,530,000 21,260,973 31,790, ,030,000 20,761,623 31,791, ,690,000 95,267, ,957, ,900,000 78,055, ,955, ,784,999 57,776, ,561, ,990,000 33,261, ,251, ,725,000 6,094,375 76,819,375 $ 480,499,999 $ 379,002,806 $ 859,502,805 Notes Payable The Utilities has incurred debt to the U.S. Army Fort Gordon Garrison Command for the purchase of the water and sewer system and to the Georgia Environmental Finance Authority for improvements to the water and sewer system. These notes are as follows: Original Interest Due December 31, December 31, Purpose Amount Rate Date Fort Gordon asset purchase $ 19,196, % 2018 $ 9,364,047 $ 11,287,659 Water and sewer improvements 5,143, % ,628 1,231,033 Water and sewer improvements 6,553, % ,442,263 2,812,830 Water and sewer improvements 8,040, % ,304,689 7,615,574 Water and sewer improvements 8,250, % ,996,651 8,250,814 28,004,278 31,197,910 Less current maturities (3,391,714) (3,193,632) $ 24,612,564 $ 28,004,278 19

22 NOTE 4. LONG-TERM DEBT (CONTINUED) Notes payable debt service requirements to maturity are as follows as of December 31, 2013: Principal Interest Total Year ending December 31, 2014 $ 3,391,714 $ 1,004,711 $ 4,396, ,546, ,705 4,396, ,518, ,306 4,207, ,486, ,760 4,017, ,775, ,718 2,179, ,263,342 1,515,857 5,779, ,544, ,532 5,421, ,476, ,544 3,670,280 $ 28,004,278 $ 6,063,133 $ 34,067,411 Capital Leases The Government has entered into lease agreements as lessee for financing the acquisition of various equipment. The lease agreements qualify as capital leases for accounting purposes (titles transfer at the end of the lease terms) and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inceptions. The following is an analysis of leased assets under capital leases: December 31, December 31, Equipment $ 8,708,678 $ 8,088,832 Less: Accumulated depreciation (4,547,257) (3,707,381) $ 4,161,421 $ 4,381,451 20

23 NOTE 4. LONG-TERM DEBT (CONTINUED) Capital Leases (Continued) The following is a schedule of future minimum lease payments together with the present value of net minimum lease payments as of December 31, 2013: Fiscal year ending December 31, 2014 $ 1,052, , , ,048, ,637 Total minimum lease payments 4,388,416 Less amount representing interest (362,209) Present value of future minimum lease payments $ 4,026,207 NOTE 5. PENSION PLANS 1945 Plan Plan Description The 1945 Plan (the 1945 Plan ), a single-employer defined benefit pension plan, was available to all former Richmond County employees hired prior to October 1, 1975 that met the Plan s age and length of service requirements. Participants in the Plan who retired at or after age 60 are entitled to a monthly benefit equal to 2% of average earnings multiplied by years of service. The Plan provides death and disability benefits. These benefit provisions and all other requirements including amendments are established by Government ordinance. The Plan also provides for reduced benefits if the participant elects to retire after attaining age 50 and completing 15 years of service. This is a closed retirement plan (new employees may not participate in the Plan). The 1945 Plan does not issue a stand-alone financial statement report. Participant Data At January 1, 2014, the date of the most recent actuarial valuation, there were 27 participants as follows: Active participants 2 Retirees and beneficiaries

24 NOTE 5. PENSION PLANS (CONTINUED) 1945 Plan (Continued) As of the most recent valuation date, January 1, 2014, the funded status of the 1945 Plan was as follows: Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) (b-a)/c) 12/31/2013 $ 6,423,808 $ 8,756,203 $ 2,332, % $ 132,346 1,762.3 % The required schedule of funding progress immediately following the notes to the financial statements presents multiyear trend information about whether the actuarial value of the 1945 Plan net position is increasing or decreasing over time relative to the actuarial accrued liability. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and actuarially determined amounts are subject to continual revision as results are compared to past expectations and new estimates are made about the future. Actuarial calculations reflect long-term perspective. Calculations are based on the substantive plan in effect as of January 1, Funding Policy Employees are required to make contributions to the 1945 Plan equal to 5% of earnings. The Government is required to contribute the remaining amounts necessary to fund the 1945 Plan. If a participant terminates employment prior to completion of 10 years of credited service, the participant receives a lump-sum amount equal to his total contributions to the 1945 Plan, with 5% interest computed from January 1, After completion of at least 10 years of credited service, the participant receives a monthly benefit deferred to his normal retirement date, equal to the benefit computed as for normal retirement multiplied by the percentage based on completed years of credited service, as follows: 50% after 10 years, increasing 10% each year to 100% after 15 years of credited service. 22

25 NOTE 5. PENSION PLANS (CONTINUED) 1945 Plan (Continued) Annual Pension Cost and Net Pension Obligation The Government s annual pension cost and net pension obligation for the 1945 Plan for the current year is as follows: 2013 Derivation of Annual Pension Cost Annual Required Contribution $ 336,358 Interest on Net Pension Obligation (8,631) Amortization of Net Pension Obligation 9,107 Annual Pension Cost $ 336,834 Derivation of Net Pension Asset Annual Pension Cost $ 336,834 Actual Contributions to Plan 299,605 Decrease in Net Pension Asset 37,229 Net Pension Asset as of December 31, 2012 (107,889) Net Pension Asset as of December 31, 2013 $ (70,660) Basis of Valuation Current valuation date January 1, 2014 Annual return on invested Plan assets 8.00% Projected annual salary increases 5.5% Expected annual inflation 3.00% Actuarial value of assets Market Value Actuarial cost method Projected Unit Credit Amortization method Level Percent of Pay (Closed) Remaining amortization period Various periods to comply with state law Trend Information for The Plan Net Pension Fiscal Annual Actual Percentage Obligation Year Pension Government of APC (Asset) - Beginning Cost (APC) Contribution Contributed End of Year 1/1/2013 $ 336,834 $ 299, % $ (70,660) 1/1/ , , (107,889) 1/1/ , , (74,185) 23

26 NOTE 5. PENSION PLANS (CONTINUED) General Retirement Plan Description Former City of Augusta employees hired after March 1, 1949 and before March 1, 1987, whose age did not exceed 35 years at the time of their employment and are not participants of the 1977 Plan are covered under the General Retirement Plan, a single-employer defined benefit pension plan. Pension benefits vest after an employee is 45 years of age and has 15 years of full-time employment. An employee may retire at age 60 with 25 years of service and receive annual pension benefits equal to 2% of the employee s average salary earned during the last three years of employment, multiplied by the number of full-time years of employment. The Plan provides death and disability benefits. These benefit provisions and all other requirements including amendments are established by Government ordinance. All full-time employees hired before July 1, 1980 must contribute 8% of gross earnings and employees hired after July 1, 1980 must contribute 5% of gross earnings to the Plan, with the Government contributing remaining amounts sufficient to provide future pensions. This is a closed retirement plan (new employees may not participate in the Plan). The General Retirement Plan does not issue a stand-alone financial statement report. Participant Data At January 1, 2014, the date of the most recent actuarial valuation, there were 263 participants as follows: Active participants 71 Retirees and beneficiaries 182 Vested terminated As of the most recent valuation date, January 1, 2014, the funded status of the General Retirement Plan was as follows: Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (AAL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (a) (b) (b-a) (a/b) (c) (b-a)/c) 12/31/2013 $ 64,261,414 $ 82,674,584 $ 18,413, % $ 2,906, % 24

27 NOTE 5. PENSION PLANS (CONTINUED) General Retirement (Continued) The required schedule of funding progress immediately following the notes to the financial statements presents multiyear trend information about whether the actuarial value of the General Retirement Plan position is increasing or decreasing over time relative to the actuarial accrued liability. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and actuarially determined amounts are subject to continual revision as results are compared to past expectations and new estimates are made about the future. Actuarial calculations reflect long-term perspective. Calculations are based on the substantive plan in effect as of January 1, Funding Policy Employer contributions for 2013 are determined as part of the January 1, 2014 actuarial valuation using the frozen entry age cost method. The unfunded accrued liability is composed of pieces that are amortized over various periods to comply with Georgia law as a level percentage of payroll. When the actuarial value of assets exceeds 150% of the present value of accrued benefits, the Official Code of Georgia Annotated states that there is no minimum required contribution. The significant actuarial assumptions used to compute pension contribution requirements are the same as those used to determine the standard measure of the pension obligation. 25

28 NOTE 5. PENSION PLANS (CONTINUED) General Retirement (Continued) Annual Pension Cost and Net Pension Obligation The Government s annual pension cost and net pension obligation for the General Retirement Plan for the current year is as follows: December 31, 2013 Derivation of Annual Pension Cost Annual Required Contribution $ 2,481,116 Interest on Net Pension Obligation (33,595) Adjustment on annual required contribution 35,438 Annual Pension Cost $ 2,482,959 Derivation of Net Pension Obligation Annual Pension Cost $ 2,482,959 Actual Contributions to Plan 1,924,332 Decrease in Net Pension Asset 558,627 Net Pension Asset as of December 31, 2012 (419,937) Net Pension Obligation as of December 31, 2013 $ 138,690 Basis of Valuation Current valuation date January 1, 2014 Annual return on invested Plan assets 8.00% Projected annual salary increases 5.5% Expected annual inflation 3.00% Actuarial value of assets Market Value Actuarial cost method Projected Unit Credit Amortization method Level Percent of Pay (Closed) Remaining amortization period Various periods to comply with state law Trend Information for The Plan Fiscal Annual Actual Percentage Net Pension Year Pension Government of APC Obligation - Beginning Cost (APC) Contribution Contributed End of Year 1/1/2013 $ 2,482,959 $ 1,924, % $ 138,690 1/1/2012 2,310,827 2,826, (419,937) 1/1/2011 1,542,646 1,543, ,027 26

29 NOTE 5. PENSION PLANS (CONTINUED) Georgia Municipal Employees Benefit System Plan Description Employees from the City of Augusta hired after March 1, 1987 and before consolidation on December 31, 1996, and who were not participants in any other employer-sponsored retirement plan, and Augusta Canal Authority employees are covered under the Georgia Municipal Employees Benefit System (GMEBS), a multiple-employer defined benefit pension plan. The GMEBS Plan provides pension benefits, deferred allowances, and death and disability benefits. In 2008, this plan was reopened to participants of the 1998 Defined Contribution Plan who opted to convert to the GMEBS Plan. Participation in this plan is mandatory for all new employees. These benefit provisions and all other requirements including amendments are established by Government ordinance. A participant may retire after reaching the age of 65 if the participant is not classified as public safety personnel; participating public safety personnel may retire at age 65 or age 55 with 25 years of total credited service, whichever is earlier. Early retirement may be taken at age 55 with 10 years of credited service. Benefits vest after 10 years of service. Employees who retire at or after age 55 with 10 or more years of service are entitled to pension payments for the remainder of their lives equal to 1 ¼% of their final five-year average salary times the number of years of which they were employed as a participant in the GMEBS. The final five-year average salary is the average salary of the employee during the final five years of full-time employment. Pension provisions include deferred allowances, whereby an employee may terminate his or her employment with the Government after accumulating 10 years of service but before reaching the age of 55. If the employee does not withdraw his or her accumulated contributions, the employee is entitled to all pension benefits upon reaching the age of 55. Employees must contribute 3.5% of their gross earnings to the Plan. In addition, the Government must provide annual contributions sufficient to satisfy the actuarially determined contribution requirements as amended by GMEBS. The GMEBS Retirement Fund issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Georgia Municipal Employees Benefit System, 201 Pryor Street, SW, Atlanta, Georgia Participant Data At July 1, 2013, the date of the most recent actuarial valuation, there were 2,536 participants as follows: Active participants 2,047 Retirees and beneficiaries 393 Vested terminated 96 2,536 27

30 NOTE 5. PENSION PLANS (CONTINUED) Georgia Municipal Employees Benefit System (Continued) Funding Policy The employer contributions for 2013 are determined as part of a July 1, 2012 actuarial valuation using the projected unit credit actuarial cost method. The actuarial value of plan assets are computed with a smoothing method that uses a roll forward of prior year s actuarial value with contributions, disbursements, and expended return of investments, plus 10% of investment gains (losses) during 10 prior years. Normal cost is funded on a current basis. The Plan is subject to the minimum funding standards of the Public Retirement Systems Standards Law. Since the Government s policy is to contribute the pension expense in each year, the funding strategy should provide sufficient resources to pay employee pension benefits on a timely basis. The significant actuarial assumptions used to compute pension contribution requirements are the same as those used to determine the standardized measure of the pension obligation. The plan s unfunded actuarial accrued liability is being amortized over 30 years as a level dollar. Annual Pension Cost The Government s annual pension cost and net pension obligation for the GMEBS Plan for the current year is as follows: Trend Information for The Plan Fiscal Annual Actual Percentage Net Pension Year Pension Government of APC Obligation - Beginning Cost (APC) Contribution Contributed Beginng of Year 1/1/2013 $ 5,170,685 $ 5,170, % $ - 1/1/2012 5,082,322 5,082, /1/2011 4,893,018 4,893,