CENTRAL LINCOLN PEOPLE'S UTILITY DISTRICT

Transcription

1 AUDIT REPORT Years Ended June 30, 2014, and 2013 KENNETH KUHNS & CO. Certified Public Accountants 570 Liberty Street S.E., Suite 210 Salem, Oregon Telephone: (503)

2 TABLE OF CONTENTS Board of Directors, Administrative Staff and Administrative Office 1 Page Independent Auditor's Report 2 to 4 Management s Discussion and Analysis 5 to 6 Financial Statements: Statement of Net Position 7 Statement of Revenues, Expenses and Changes in Net Position 8 Statement of Cash Flows 9 Notes to Financial Statements 10 to 23 Required Supplementary Information: Schedule of Funding Progress for Retirement Plan 24 Schedule of Funding Progress for Retiree Health Plan 25 Other Supplementary Information: Schedule of Electric Plant in Service 26 Independent Auditor's Comments Required by Oregon State Regulations 27 to 28 Disclosures in Accordance With Government Auditing Standards and OMB Circular A-133: Independent Auditor s Report on the Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance With Government Auditing Standards 29 to 30 Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by OMB Circular A to 32 Schedule of Expenditures of Federal Awards 33 Schedule of Findings and Questioned Costs 34

3 Board of Directors Judy Matheny th Street President Florence, Oregon Larkin Kaliher P.O. Box 188 Vice-President Toledo, Oregon Thomas Tymchuk 820 View Street Treasurer Reedsport, Oregon Ron Benfield 714 S.E. Marine Court Secretary Newport, Oregon Curt Abbott 760 Range Drive Director Waldport, Oregon Administrative Staff Debra Smith Brian Barth, CPA Bruce Lovelin, PE Chris Chandler Doug Dawson Dennis Hinton Randy Grove Sunnetta Capovilla Sue Tyler Brandon Hignite Gail Malcolm General Manager and Registered Agent Accounting & Finance Manager Chief Engineer/Systems Engineering Manager Communication, Community & Economic Development Manager Communications & Information Technology Manager Customer & Energy Services Manager Distribution Engineering & Operations Manager Executive Assistant Human Resources Manager Power Analyst Project Manager Administrative Office Location: 2129 N. Coast Highway Mailing Address: P.O. Box 1126 Newport, Oregon Newport, Oregon Web Site: Telephone: (541)

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7 MANAGEMENT S DISCUSSION AND ANALYSIS

8 MANAGEMENT S DISCUSSION AND ANALYSIS This discussion and analysis is designed to provide an overview of the financial activities of Central Lincoln People's Utility District (District) with registered office in Newport, Oregon for the year ended June 30, This supplementary information is to be read with the District's financial statements. Administration The District is a municipal corporation duly authorized by Section 12, Article XI of the Constitution of the State of Oregon and organized under Chapter 261, Oregon Revised Statutes. The District was formed in 1940 and took over operations of West Coast Power Company in The District is governed by a five member elected Board of Directors serving staggered four year terms. Service Area The District's service area is located along the Oregon coast and extends through Lincoln, Lane, Douglas and Coos counties providing service to 38,406 customers. The area has a total length of 112 miles, varies in width from one to 25 miles. The District purchases all required energy from the Bonneville Power Administration (BPA). The BPA delivers power at nine points of delivery: Toledo, Florence, Mapleton, Berrydale, Gardiner, Reedsport, Lakeside, Hauser and Glasgow. Financial Summary and Analysis Rate Summary The District's largest customer operated through September 30, 2013 under the rate schedule adopted September 21, Beginning October 1, 2013 the customer operated under the rate schedule adopted September 11, The District s remaining customers operated through June 30, 2014 under the rate schedule adopted September 22, 2010, that went into effect October 1, Selected Financial Data Year Ended Operating revenues $ 77,613,622 $ 76,650,992 $ 75,517,207 Operating expenses (79,072,220) (74,873,304) (73,525,010) Nonoperating revenues-(expenses) (93,198) (206,415) (43,352) Net income-(loss) $ (1,551,796) $ 1,571,273 $ 1,948,845 Revenues were up in 2014 and 2013 primarily because of increased sales to a large industrial customer. The increase in operating expenses is primarily the corresponding increase in power costs. There was a BPA rate increase in October 2013 of 8.3% -5-

9 Assets: Net electric plant $ 106,324,164 $ 105,044,793 $ 104,221,355 Current assets 36,445,845 38,679,157 * 28,499,848 Other assets 615, , ,365 Deferred charges 701, , ,258 Total assets 144,087, ,132, ,223,826 Deferred outflows of resources: Unamortized loss on refunding ,397 Liabilities: Long-term debt 8,907,950 9,472,580 * 985,000 Current liabilities 8,731,108 7,968,665 * 7,558,865 Deferred credits 2,718,258 2,409,432 2,010,654 Total liabilities 20,357,316 19,850,677 10,554,519 Net Position: Net investment in capital assets 97,864,197 96,030, ,822,752 Restricted for bond debt service 1,069,775 1,022, ,417 Unrestricted 24,796,209 28,229,506 20,622,535 Total net position $ 123,730,181 $ 125,281,977 $ 123,710,704 In FY14 and FY13 the District received Smart Grid grant money of approximately $2.1 and $1.3 million dollars respectively, from the U.S. Department of Energy, some of which reimbursed the District for digital meter installations, distribution automation, control voltage regulation, a meter data management system and fiber build out. *On January 30, 2013 the District sold $9,185,000 worth of bonds to be paid off over 15 years at a true interest cost of 2.066%. Proceeds of the Series 2013 Revenue Bonds are being used to provide funds for capital improvements, to fund a reserve account and to pay costs of issuance. In order to better position itself in the future in terms of long term debt flexibility, it was determined that in December 2012 the District would re-fund all remaining Series 2001 Electric System Revenue Refunding Bonds of $985,000 before issuing new bonds. Power Supply The District is a statutory preference customer of the Bonneville Power Administration (BPA) and historically purchased all of its power from the BPA. In November 2008, the District executed a Power Sales Agreement with the Bonneville Power Administration for the period October 1, 2011 through September 30, Wholesale power rates under this agreement will be adjusted every two years and are currently fixed through September 30,

10 FINANCIAL STATEMENTS

11 Statement of Net Position June 30, Assets Electric plant: (Notes 1 and 2) In service - at cost $ 207,801,193 $ 205,385,806 Construction in progress 12,209,436 6,500,235 Total electric plant 220,010, ,886,041 Less: Accumulated provision for depreciation (113,686,465) (106,841,248) Net electric plant 106,324, ,044,793 Current assets: Cash and investments (Notes 1 and 3): Current cash 26,879,587 28,401,016 Restricted for capital improvements 957, ,983 Restricted for bond debt service 1,091,779 1,045,113 Customer accounts receivable (net of allowance for doubtful accounts of $150,190 in 2014 and $149,855 in 2013) 3,469,650 3,822,763 Other receivables 253, ,795 Materials and supplies (Note 1) 3,326,758 3,338,073 Prepayments 402, ,005 Other 63,233 59,409 Total current assets 36,445,845 38,679,157 Other assets: Net pension obligation (Note 7) 615, ,288 Unamortized transmission agreement expense (Note 4) 701, ,416 Total other assets 1,317,488 1,408,704 Total assets $ 144,087,497 $ 145,132,654 The accompanying notes are an integral part of this statement. -7-

12 Statement of Net Position June 30, Net Position and Liabilities Net position: Net investment in capital assets $ 97,864,197 $ 96,030,196 Restricted for bond debt service 1,069,775 1,022,275 Unrestricted 24,796,209 28,229,506 Total net position 123,730, ,281,977 Long-term debt: Bonds payable, less current maturities (Note 5) 8,175,000 8,685,000 Unamortized bond premium (Note 5) 732, ,580 Total long-term debt 8,907,950 9,472,580 Current liabilities: Current maturities of long-term debt (Note 5) 510, ,000 Accounts payable 5,207,363 4,545,787 Accrued compensated absences (Note 1) 2,080,112 2,009,742 Customer deposits 902, ,178 Accrued interest - long term debt 22,004 22,838 Accrued interest - customer deposits 9,404 10,120 Total current liabilities 8,731,108 7,968,665 Other liabilities: Post-employment health care benefits (Note 8) 2,241,501 1,861,879 Liability reserves (Note 6) 231, ,879 Other 245, ,674 Total other liabilities 2,718,258 2,409,432 Total net position and liabilities $ 144,087,497 $ 145,132,654-7-

13 Statement of Revenues, Expenses and Changes in Net Position Operating revenues: Sales of electricity: -8- Year Ended June 30, Residential $ 32,799,119 $ 33,230,188 Commercial 13,265,420 13,430,406 Industrial 29,008,829 27,507,946 Other 1,069,692 1,061,940 Other operating revenues: Rent from electric plant 722, ,443 Transmission of electricity of others 387, ,623 Miscellaneous service revenue 360, ,446 Total operating revenues 77,613,622 76,650,992 Operating expenses: Cost of power 48,164,611 45,387,581 Transmission and distribution expense - operations 3,389,900 3,228,794 Transmission and distribution expense - maintenance 3,294,634 3,119,437 Customer accounts expense 1,971,688 2,488,079 Customer service and informational expense 430,150 44,973 Administrative and general expense 9,684,728 9,115,961 Depreciation 8,921,657 8,274,248 Taxes and franchise fees 3,214,852 3,214,231 Total operating expenses 79,072,220 74,873,304 Net operating revenues-(loss) (1,458,598) 1,777,688 Nonoperating revenues-(expenses): Interest on investments 123, ,169 Interest expense - long term debt (268,216) (146,006) Interest expense - other (2,127) (2,207) Amortization of bond premium 54,630 22,762 Amortization of loss on refunding - (41,397) Bond issuance costs - (145,736) Other (980) - Total nonoperating revenues-(expenses) (93,198) (206,415) Net income-(loss) (1,551,796) 1,571,273 Net position - beginning of year 125,281, ,710,704 Net position - end of year $ 123,730,181 $ 125,281,977 The accompanying notes are an integral part of this statement.

14 Statement of Cash Flows -9- Year Ended June 30, Cash flows from operating activities: Cash received from customers $ 78,216,573 $ 76,696,538 Cash payments for purchased power (47,604,830) (45,636,651) Cash payments to suppliers for goods and services (9,980,612) (9,660,610) Cash payments to employees for services (11,223,791) (10,395,926) Net cash provided by operating activities 9,407,340 11,003,351 Cash flows from capital and related financing activities: Construction and acquisition of plant (13,436,461) (10,548,630) Capital grant contributions 2,303,670 1,548,325 Other contributions in aid of construction 867, ,500 Proceeds from sale of equipment 31,123 9,868 Proceeds from issuance of revenue bonds - 9,185,000 Premium on issuance of revenue bonds - 810,342 Bond issuance costs - (145,736) Principal payments on bonds payable (500,000) (1,440,000) Interest payments on bonds payable (269,050) (128,692) Other interest payments (2,843) (2,733) Net cash used in capital and related financing activities (11,005,598) (549,756) Cash flows from investing activities: Interest on investments 123, ,169 Net increase-(decrease) in cash and cash equivalents (1,474,763) 10,559,764 Cash and cash equivalents - beginning of year 30,404,112 19,844,348 Cash and cash equivalents - end of year $ 28,929,349 $ 30,404,112 Reconciliation of net operating revenues-(loss) to net cash provided by operating activities: Net operating revenues-(loss) $ (1,458,598) $ 1,777,688 Adjustments to reconcile net operating revenues-(loss) to net cash provided by operating activities: Depreciation 8,921,657 8,274,248 Other nonoperating expenses (980) - Decrease-(increase) in: Customer accounts receivable 353,113 (204,710) Other receivables 246, ,886 Materials and supplies 11, ,054 Prepayments (11,880) (29,023) Other current assets (3,824) (7,957) Net pension obligation 34,374 37,077 Unamortized transmission agreement expense 56,842 56,842 Increase-(decrease) in: Accounts payable 858,057 79,198 Accrued compensated absences 70, ,620 Customer deposits 22,047 3,650 Post-employment health care benefits 379, ,503 Liability reserves (56,390) 100,598 Other deferred credits (14,406) 4,677 Total adjustments 10,865,938 9,225,663 Net cash provided by operating activities $ 9,407,340 $ 11,003,351 Noncash capital and related financing activities: Deferred outflows - unamortized loss on refunding $ - $ 41,397 Amortization of loss on refunding - (41,397) Unamortized bond premium (54,630) (22,762) Amortization of bond premium 54,630 22,762 Total noncash capital and related financing activities $ - $ - The accompanying notes are an integral part of this statement.

15 Notes to Financial Statements June 30, 2014, and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: General Central Lincoln People's Utility District is a municipal corporation organized under Oregon Revised Statutes (ORS) Chapter 261. The District has provided electric services to residential, commercial and industrial customers along a one hundred twelve mile section of the central Oregon coast since The District is governed by a five member elected Board of Directors serving staggered four-year terms. The Board has the authority to set rates and charges for commodities and services furnished. Substantially all revenues are derived from the sale of electric power to residential, industrial and commercial customers. The District is empowered and required by law to establish, maintain and collect rates and charges for electric power which are fair and nondiscriminatory. It has received from the Oregon Public Utilities Commission the exclusive rights to approximately 95% of its voterauthorized territory. This represents approximately 99% of the District's load excluding the District's largest customer, Georgia-Pacific Corporation. Georgia-Pacific Corporation is in a nonexclusive portion of the District's service area. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Additionally, although the District is not subject to the regulations of the Federal Energy Regulatory Commission (FERC), its accounting policies generally conform to the accounting requirements of the FERC. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of 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. Significant policies are described below. Description of Reporting Entity The financial statements of the District include all accounts of the District, and the Board of Directors is not financially accountable for any other governmental entity. Financial accountability is determined in accordance with criteria set forth in generally accepted accounting principles, primarily on the basis of authority to appoint voting majority of an organization s governing board, ability to impose its will on that organization, the potential for that organization to provide specific financial benefits or impose specific financial burdens and that organization's fiscal dependency. -10-

16 Notes to Financial Statements June 30, 2014, and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Contd) Basis of Accounting The District uses the accrual basis of accounting for financial reporting purposes. Revenues are recognized when earned and expenses are recognized when incurred. Revenues related to the District s principal operations are considered to be operating revenues. All other revenues are considered to be nonoperating. Electric Plant Electric plant is stated substantially at cost. Cost includes materials, labor, payments to contractors and indirect costs, such as transportation and construction equipment use and employee benefits. Other than general plant assets, the costs of additions, renewals and betterments with a useful life exceeding one year are capitalized regardless of dollar amount. General plant additions of approximately $1,000 or more with a useful life exceeding one year are capitalized. Repairs and minor replacements are charged to operating expenses. The cost of property retired, together with removal cost less salvage, is charged to accumulated depreciation when property is removed. Contributions in Aid of Construction (CIAC) Payments are received from customers and grantors for construction costs primarily relating to the expansion of the electric system. FERC guidelines are followed in recording CIAC, which direct the reduction of utility plant assets by the amount of contributions received toward the construction of utility plant. CIAC of $3,171,633 for the year ended June 30, 2014, and $1,710,825 for the year ended June 30, 2013, was recorded as a reduction of utility plant assets. Depreciation Provision for depreciation of electric plant is computed using composite rates over the following estimated useful lives: Structures and improvements Station equipment, line transformers, meters and street lighting equipment Overhead conductor and devices Underground conductor and devices Poles, towers and fixtures Office furniture and equipment Transportation equipment 40 years various 30 years 30 years 30 years 6 years 12 years -11-

17 Notes to Financial Statements June 30, 2014, and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Contd) Investments Investments included in cash and investments are reported at fair value. Cash and Cash Equivalents For purposes of the cash flows statement, the District considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Materials and Supplies Materials and supplies are carried at average cost. Unamortized Bond Premium and Unamortized Loss on Refunding The unamortized premium on the Series 2013 bonds is being amortized over the life of the Series 2013 bond issue using the straight-line method. The unamortized loss on refunding on the Series 2001 bonds was amortized over the life of the Series 2001 bond issue using the straight-line method. Compensated Absences Accumulated unpaid vested personal leave is accrued as earned by employees. Operating Revenues Georgia-Pacific Corporation currently accounts for 46.1% of the District's total kilowatt-hour sales. The next largest customer of the District accounted for less than 1.5% of the District's total kilowatt-hour sales and less than 1.2% of the District's revenues from the sale of electricity in the current year. Restricted net position Restricted net position reported in the balance sheet represent amounts for which constraints were imposed by creditors, grantors, contributors or laws or regulations. The District s policy is to first use restricted resources when an expense is incurred for which both restricted and unrestricted net position is available. -12-

18 Notes to Financial Statements June 30, 2014, and ELECTRIC PLANT: Electric plant activity for the year ended June 30, 2014 was as follows: July 1, 2013 Increases Decreases June 30, 2014 Electric plant not being depreciated: Intangible $ 147,817 $ - $ - $ 147,817 Land 4,574, ,180-4,712,111 Construction in progress 6,500,235 9,250,890 3,541,689 12,209,436 Total electric plant not being depreciated 11,222,983 9,388,070 3,541,689 17,069,364 Electric plant being depreciated: Transmission 16,597, ,597,369 Distribution 137,497,142 3,275,622 1,378, ,394,740 General 46,568,547 1,201, ,302 46,949,156 Total electric plant being depreciated 200,663,058 4,477,533 2,199, ,941,265 Accumulated depreciation: Transmission 7,468, ,564-8,136,357 Distribution 60,856,751 5,449,960 1,286,260 65,020,451 General 38,515,704 2,804, ,180 40,529,657 Total accumulated depreciation 106,841,248 8,921,657 2,076, ,686,465 Total electric plant being depreciated, net 93,821,810 (4,444,124) 122,886 89,254,800 Electric plant, net $ 105,044,793 $ 4,943,946 $ 3,664,575 $ 106,324,164 Electric plant activity for the year ended June 30, 2013 was as follows: July 1, 2012 Increases Decreases June 30, 2013 Electric plant not being depreciated: Intangible $ 147,817 $ - $ - $ 147,817 Land 4,574, ,574,931 Construction in progress 9,650,872 9,267,726 12,418,363 6,500,235 Total electric plant not being depreciated 14,373,620 9,267,726 12,418,363 11,222,983 Electric plant being depreciated: Transmission 15,869, , ,032 16,597,369 Distribution 131,587,870 8,041,100 2,131, ,497,142 General 44,936,187 2,008, ,319 46,568,547 Total electric plant being depreciated 192,393,238 10,990,999 2,721, ,663,058 Accumulated depreciation: Transmission 7,195, , ,799 7,468,793 Distribution 58,891,166 5,249,405 3,283,820 60,856,751 General 36,458,810 2,377, ,884 38,515,704 Total accumulated depreciation 102,545,503 8,274,248 3,978, ,841,248 Total electric plant being depreciated, net 89,847,735 2,716,751 (1,257,324) 93,821,810 Electric plant, net $ 104,221,355 $ 11,984,477 $ 11,161,039 $ 105,044,

19 Notes to Financial Statements June 30, 2014, and CASH AND INVESTMENTS: Cash and investments are comprised of the following as of June 30, 2014, and 2013: Working funds $ 5,050 $ 5,400 Deposits with financial institutions 1,103,671 1,229,903 Investments 27,820,628 29,168,809 Total cash and investments $ 28,929,349 $ 30,404,112 Deposits Deposits with financial institutions include bank demand deposits. The total bank balance, as shown on the banks' records, was $1,290,864 at June 30, 2014, and $1,780,493 at June 30, Of these deposits, the total covered by federal depository insurance was $596,204 at June 30, 2014, and $588,100 at June 30, The Oregon State Treasurer is responsible for monitoring public funds held by bank depositories in excess of FDIC insured amounts, and for assuring that public funds on deposit are collateralized to the extent required by Oregon Revised Statutes (ORS) Chapter 295. ORS Chapter 295 requires depository banks to place and maintain on deposit with a thirdparty custodian bank securities having a value of 10%, 25% or 110% of public funds on deposit depending primarily on the capitalization level of the depository bank. Custodial credit risk for deposits is the risk that in the event of a bank failure, the District s deposits may not be returned to it. The District follows State law with respect to custodial credit risk and has not adopted a separate policy. Of the District s bank balance, $694,660 was exposed to custodial credit risk as of June 30, 2014, and $1,192,393 was exposed to custodial credit risk as of June 30, 2013, because deposits in excess of FDIC insurance were uncollateralized and/or were collateralized but not held by the third-party custodian bank in the District s name. Investments State statutes authorize the District to invest in general obligations of the U.S. Government and its agencies, certain bonded obligations of Oregon municipalities, bank repurchase agreements, bankers' acceptances, and the Oregon Local Government Investment Pool, among others. The District has no investment policy that would further limit its investment choices. -14-

20 Notes to Financial Statements June 30, 2014, and CASH AND INVESTMENTS: (Contd) Investments (Contd) At June 30, 2014, and 2013, the District's investments consisted of: Investment in Oregon Local Government Investment Pool $ 27,820,628 $ 29,168,809 The Oregon Local Government Investment Pool is an open-ended, no-load diversified portfolio pool. The fair value of the District s position in the pool is substantially the same as the value of the District s participant balance. The District s investment in the Oregon Local Government Investment Pool is 100% of total investments. The Oregon Local Government Investment Pool is an external investment pool which is part of the Oregon Short-Term Fund. Investment policies are governed by the Oregon Revised Statues and the Oregon Investment Council (Council). The State Treasurer is the investment officer for the Council. Investments are further governed by portfolio guidelines issued by the Oregon Short-Term Fund Board. The Oregon Short-Term Fund does not receive credit quality ratings from nationally recognized statistical rating organizations. Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The Oregon Short-Term Fund manages this risk by limiting the maturity of the investments held by the fund. Weighted average maturities of investments in the Oregon Short-Term Fund at June 30, 2014 were: 61% mature within 93 days, 13% mature from 94 days to one year, and 26% mature from one to three years. Weighted average maturities of investments in the Oregon Short-Term Fund at June 30, 2013 were: 71% mature within 93 days, 9% mature from 94 days to one year, and 20% mature from one to three years. The District has restricted cash and investments for bond debt service totaling $1,091,779 at June 30, 2014, and $1,045,113 at June 30, The District has restricted cash and investments for capital improvements totaling $957,983 at June 30, 2014, and UNAMORTIZED TRANSMISSION AGREEMENT EXPENSE: The District entered into a transmission agreement with Consumers Power, Inc. for the use of transmission facilities for emergency and backup service for District transmission facilities south of the Yaquina River. Under the agreement the District paid Consumers Power, Inc. $1,640,035 during The District is amortizing this cost over the thirty year term of the agreement. -15-

21 Notes to Financial Statements June 30, 2014, and LONG-TERM DEBT: During January 2013, the District issued Series 2013 Electric System Revenue Bonds totaling $9,185,000. Proceeds of the Series 2013 Revenue Bonds are being used to provide funds for capital improvements, to fund a reserve account and to pay costs of issuance. Series 2013 Revenue Bonds are special limited obligations of the District payable solely from and secured by a pledge of the net revenues of the electric system and amounts on deposit in the debt service account and bond reserve account. During December 2012, the District made scheduled principal and interest payments and currently refunded all remaining Series 2001 Electric System Revenue Refunding Bonds. At June 30, 2014, and 2013, bonds payable consist of the following: Series 2013 Revenue Bonds, principal payable annually on December 1 beginning in Interest at 2% to 4% per annum payable semi-annually on June 1 and December 1 each year. $8,685,000 $9,185,000 Less current maturities 510, ,000 Long-term debt $8,175,000 $8,685,000 Bond principal and interest transactions for are as follows: Interest Balance Balance Due Within Matured July 1, 2013 Issued Retired June 30, 2014 One Year and Paid Series 2013 $ 9,185,000 $ - $ 500,000 $ 8,685,000 $ 510,000 $ 269,050 Bond principal and interest transactions for are as follows: Interest Balance Balance Due Within Matured July 1, 2012 Issued Retired June 30, 2013 One Year and Paid Series 2013 $ - $ 9,185,000 $ - $ 9,185,000 $ 500,000 $ 92,111 Series ,440,000-1,440, ,581 $ 1,440,000 $ 9,185,000 $ 1,440,000 $ 9,185,000 $ 500,000 $ 128,

22 Notes to Financial Statements June 30, 2014, and LONG-TERM DEBT: (Contd) As of June 30, 2014, scheduled annual maturities of Series 2013 bond principal and interest are as follows: Year Ending June 30 Principal Interest Total 2015 $ 510,000 $ 258,950 $ 768, , , , , , , , , , , , , ,125, ,875 3,852, ,905, ,525 3,082,525 Total $ 8,685,000 $ 2,092,325 $ 10,777,325 The unamortized premium on the Series 2013 bonds is being amortized over the life of the Series 2013 bond issue using the straight-line method. 6 - LIABILITY RESERVES: Liability reserves consist of the following at June 30, 2014, and 2013: 7 - RETIREMENT PLAN: Plan Description Unemployment claims $ 5,248 $ 5,248 Medical, dental and optical 217, ,200 Unclaimed checks 8,441 8,431 Total $ 231,489 $ 287,879 Central Lincoln People's Utility District Employees' Pension Trust is a singleemployer defined benefit pension plan. Assets are held separately and may be used only for the payment of benefits to its members. Actuarial valuations are performed annually. The Pension Trust covers the District's union and non-union employees. The plan provides retirement, disability and death benefits to plan participants and their beneficiaries. The District's Board of Directors has the power to alter, amend or terminate the Trust. As of July 1, 2014, the plan has the following number of participants: -17-

23 Notes to Financial Statements June 30, 2014, and RETIREMENT PLAN: (Contd) Plan Description (Contd) Terminated plan members vested 8 Active plan members 99 Total 107 In June 2010, the Board of Directors amended the plan such that no employees hired on or after July 1, 2010 will be eligible to participate in the plan. Employees hired on or after July 1, 2010 will be able to participate in a 401(k) plan. The Pension Trust issues a separate financial report which is available from the Pension Trustees. Funding Policy Active plan participants are required to make monthly contributions of one percent of annual compensation divided by twelve. Active participants may also make voluntary contributions to the plan. The District makes monthly supplemental contributions on behalf of each active participant of two percent of annual compensation divided by twelve. The District is also required to make annual contributions. These contributions are actuarially determined such that they, together with investment proceeds of Trust funds and the required and supplemental member contributions received and expected to be received, will be sufficient to fund member benefits other than those coming from voluntary contributions. Contribution requirements can be changed by plan amendment authorized by the District's Board of Directors. Plan administration costs are paid by the District. Annual Pension Cost and Net Pension Obligation The District's annual pension cost and net pension obligation for the July 1, 2013 to June 30, 2014 fiscal year were as follows: Annual required contribution $ 2,809,677 Interest on net pension obligation (45,520) Adjustment to annual required contribution 82,334 Annual pension cost 2,846,491 Contributions made 2,812,117 Increase in net pension obligation 34,374 Net pension obligation - beginning of year (650,288) Net pension obligation - end of year $ (615,914) -18-

24 Notes to Financial Statements June 30, 2014, and RETIREMENT PLAN: (Contd) Annual Pension Cost and Net Pension Obligation (Contd) The annual required contribution for the year was determined as part of the July 1, 2013 actuarial valuation using the aggregate actuarial cost method. The actuarial assumptions included (a) 7.0% investment rate of return and (b) projected salary increases of 5.0%. An explicit inflation component was not identified but was assumed consistent for both (a) and (b). The actuarial value of assets equaled the market value of assets. Because the valuation was based on the aggregate actuarial cost method, unfunded actuarial liabilities were not separately amortized. Three-Year Trend Information Annual Percentage Net Year Pension of APC Pension Ended Cost (APC) Contributed Obligation $ 2,846,491 99% $ (615,914) ,726,525 99% (650,288) ,552,607 99% (687,365) Funded Status and Funding Progress The July 1, 2014 actuarial valuation uses the aggregate actuarial cost method. The actuarial assumptions included (a) 7.0% investment rate of return, (b) projected salary increases of 5.0% and (c) inflation at an annual rate of 3.0% compounded annually. The actuarial value of assets equaled the market value of assets. Because the valuation was based on the aggregate actuarial cost method, unfunded actuarial liabilities were not separately amortized. The plan was amended to automatically update a member s compensation to include the most recent three years at each plan year end for members active in June. Information about funded status and funding progress has been prepared using the entry age actuarial cost method for that purpose and the information presented is intended to serve as a surrogate for the funded status and funding progress of the plan. As of July 1, 2014, the most recent actuarial valuation date, the plan was 21 percent funded. The actuarial accrued liability for benefits was $31,044,949, and the actuarial value of assets was $6,587,899, resulting in an unfunded actuarial accrued liability (UAAL) of $24,457,050. The anticipated covered payroll (annual payroll of active employees covered by the plan) was $8,526,282, and the ratio of the UAAL to the anticipated covered payroll was 287 percent. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. -19-

25 Notes to Financial Statements June 30, 2014, and POST-EMPLOYMENT HEALTH CARE BENEFITS: Plan Description The District administers a single-employer defined benefit health care plan. The plan provides post-employment health care benefits for eligible retirees (until age 65) and their spouses through the District's health care plan, which covers both active and retired participants. Benefit provisions are established through District policy. The criteria to determine eligibility includes employee age, years of service and date of hire. No employees hired on or after July 1, 2010 will be eligible for the plan benefits. The District s post employment health care plan does not issue a publicly available financial report. Funding Policy Contribution requirements are established through District policy. In general, retirees are required to contribute 16% of the standard COBRA premium. Funding is on a pay-asyou-go basis. During , the District contributed $363,167 and participants receiving benefits contributed $65,654 to the plan. During , the District contributed $411,842 and participants receiving benefits contributed $60,563 to the plan. Annual OPEB Cost and Net OPEB Obligation The District's annual other post-employment benefit (OPEB) cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a year period. The following table shows the components of the District s annual OPEB cost for the year, amounts actually contributed to the plan, and changes in the District s net OPEB obligation: Annual required contribution $ 835,774 Interest on net OPEB obligation 74,475 Adjustment to annual required contribution (167,460) Annual OPEB cost 742,789 Contributions made (363,167) Increase in net OPEB obligation 379,622 Net OPEB obligation - beginning of year 1,861,879 Net OPEB obligation - end of year $ 2,241,501 The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for , and were as follows: -20-

26 Notes to Financial Statements June 30, 2014, and POST-EMPLOYMENT HEALTH CARE BENEFITS: (Contd) Annual OPEB Cost and Net OPEB Obligation (Contd) Year Annual Percentage of Annual Net OPEB Ended OPEB Cost OPEB Cost Contributed Obligation 6/30/2014 $ 742,789 49% $ 2,241,501 6/30/ ,345 58% 1,861,879 6/30/ ,204 95% 1,568,376 Funded Status and Funding Progress As of June 30, 2012, the most recent actuarial valuation date, the plan was 0% funded. The actuarial accrued liability for benefits was $4,984,974 and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $4,984,974. The anticipated covered payroll (annual payroll of active employees covered by the plan) was $9,448,814, and the ratio of the UAAL to the anticipated covered payroll was 53%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events into the future. Examples include assumptions about future employment, mortality and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and the plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the actuarial valuation conducted as of June 30, 2012, the projected unit credit actuarial cost method was used. The unfunded actuarial accrued liability is being amortized using the level-dollar method over various open and closed periods ranging from years. Actuarial assumptions included a discount rate of 4% and an annual healthcare cost trend rate of 5% initially, reduced gradually to an ultimate rate of 3.75% in 2042 and thereafter. -21-

27 Notes to Financial Statements June 30, 2014, and RISK MANAGEMENT: Health and Unemployment The District administers risk management programs for employee health and unemployment on a cost-reimbursement basis. Significant losses are covered by commercial insurance. For insured programs, there have been no significant reductions in insurance coverage. Settlement amounts have not exceeded insurance coverage in any of the past three years. Claims liability for health insurance is adjusted monthly based on actual claims submitted weekly to the District. All known liabilities have been disclosed. Liability Claims Claims Estimates Liability July 1 Paid and Adjustments June Health insurance $ 274,200 $ (2,199,452) $ 2,143,052 $ 217,800 Unemployment 5, ,248 Total $ 279,448 $ (2,199,452) $ 2,143,052 $ 223, Health insurance $ 175,000 $ (2,184,550) $ 2,283,750 $ 274,200 Unemployment 5, ,248 Total $ 180,248 $ (2,184,550) $ 2,283,750 $ 279, Health insurance $ 226,956 $ (2,017,857) $ 1,965,901 $ 175,000 Unemployment 5, ,248 Total $ 232,204 $ (2,017,857) $ 1,965,901 $ 180, Health insurance $ 295,320 $ (2,033,034) $ 1,964,670 $ 226,956 Unemployment 5, ,248 Total $ 300,568 $ (2,033,034) $ 1,964,670 $ 232, Health insurance $ 320,492 $ (1,807,803) $ 1,782,631 $ 295,320 Unemployment 5, ,248 Total $ 325,740 $ (1,807,803) $ 1,782,631 $ 300,568 Liability The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The District is a member of Special Districts Insurance Services (SDIS) and pays an annual premium to SDIS for risks of loss including general liability, automobile liability, public official liability, property coverage and workers compensation coverage. Under the membership agreement with SDIS, SDIS is to be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of certain limits. The District also carries commercial insurance for other risks of loss including boiler and machinery coverage. Settled claims resulting from these risks have not exceeded insurance coverage in any of the past three years. -22-

28 Notes to Financial Statements June 30, 2014, and INCOME TAX STATUS: The District is a people's utility district organized under Oregon Revised Statutes Chapter 261. As a political subdivision of the State of Oregon, the District is exempt from taxation under the provisions of Section 115 of the Internal Revenue Code POWER PURCHASE AGREEMENTS: The District is a statutory preference customer of the Bonneville Power Administration (Bonneville) and historically purchased all of its power from Bonneville. Starting October 1, 2011, the District began purchasing power from Bonneville under a longterm power supply agreement which will last through September 30, Under this agreement, the District may purchase a certain portion of the output of the Federal System (the District s High Water Mark HWM ) at cost-based or Tier 1 rates. Bonneville will set its rates as well as each of its customer s HWM every two years through a rate case process in which the District participates along with several trade groups of which the District is a member. If the District s load is forecast to exceed its HWM, it may purchase Tier 2 power from Bonneville or procure the power through a market purchase or its own generating resource. Currently, the District has committed to supply its above HWM load through a market purchase with Northwest Energy Management Services through This includes a 1 amw purchase which began October 1, 2012 and continued through September 30, Aside from this first year, the District forecasts no above HWM load for at least the following 8 years. The District will make a decision about above HWM load service post-2019 in September 2016 or later COMMITMENTS: In April 2010, the District was awarded a $9,936,950 U.S. Department of Energy Smart Grid Grant (with an equal match to be provided by the District) which is being used to purchase and install Smart Grid technology throughout the District s service territory. As of June 30, 2014, the District has expended $19,172,264 on the project and has claimed $9,586,132 for reimbursement from the U.S. Department of Energy. -23-

29 REQUIRED SUPPLEMENTARY INFORMATION

30 Schedule of Funding Progress for Retirement Plan Unfunded Actuarial Accrued Actuarial Unfunded Liability as a Actuarial Actuarial Accrued Actuarial Anticipated Percentage Valuation Value of Liability Accrued Funded Covered of Anticipated Date Assets (Entry Age)(a) Liability Ratio Payroll Covered Payroll 7/1/2014(b) $ 6,587,899 $ 31,044,949 $ 24,457,050 21% $ 8,526, % 7/1/2013 8,939,420 24,916,752 15,977,332 36% 9,092, % 7/1/2012 9,824,681 23,980,260 14,155,579 41% 9,273, % (a) The annual required contribution is calculated using the aggregate actuarial cost method. Information in this schedule is calculated using the entry age actuarial cost method as a surrogate for the funding progress of the plan. (b) The plan was amended to automatically update a member's compensation to include the most recent three years at each plan year end for members active in June. -24-

31 Schedule of Funding Progress for Retiree Health Plan Actuarial Valuation Date 6/30/2012 6/30/2009 Actuarial value of assets (a) $ - $ - Actuarial accrued liability (b) 4,984,974 6,288,849 Unfunded actuarial accrued liability (b-a) $ 4,984,974 $ 6,288,849 Funded ratio (a/b) 0% 0% Covered payroll (c) $ 9,448,814 $ 9,380,438 Unfunded actuarial accrued liability as a percentage of covered payroll ((b-a)/c) 53% 67% Notes: In the actuarial valuation conducted as of June 30, 2012, several actuarial assumptions were changed from those used in the actuarial valuation conducted as of June 30, The changes include reducing the healthcare cost trend rate used each year by 1%, reducing the percentage of active employees who are assumed to be married from 75% to 65%, and modifying the retirement decrement rates. -25-

32 OTHER SUPPLEMENTARY INFORMATION

33 Schedule of Electric Plant in Service -26- June 30, Intangible plant: Organization $ 14,743 $ 14,743 Franchises and consents 1,387 1,387 Miscellaneous 131, ,687 Total intangible plant 147, ,817 Transmission plant: Land and land rights 2,239,585 2,239,585 Station equipment 50,344 50,344 Poles, towers and fixtures 10,314,092 10,314,092 Overhead conductors and devices 5,880,796 5,880,796 Underground conduit 54,999 54,999 Underground conductors and devices 297, ,138 Total transmission plant 18,836,954 18,836,954 Distribution plant: Land and land rights 1,991,827 1,854,647 Structures and improvements 4,149,888 4,149,888 Station equipment 38,784,528 36,988,605 Poles, towers and fixtures 17,003,107 16,979,552 Overhead conductors and devices 15,215,843 15,256,308 Underground conduit 13,000,098 12,997,202 Underground conductors and devices 13,426,295 13,419,216 Line transformers 22,442,788 22,839,939 Services 6,185,939 6,181,446 Meters and devices 6,418,542 5,917,274 Installations on customers' premises 664, ,455 Street lighting equipment 2,103,257 2,103,257 Total distribution plant 141,386, ,351,789 General plant: Land and land rights 480, ,699 Structures and improvements 11,054,139 11,063,948 Office furniture and equipment 14,419,236 14,122,287 Transportation equipment 6,510,731 6,560,015 Stores equipment 8,529 8,529 Tools and shop equipment 1,251,569 1,193,092 Laboratory equipment 549, ,602 Communications equipment 13,093,511 13,043,853 Miscellaneous equipment 61,755 79,221 Total general plant 47,429,855 47,049,246 Total electric plant in service $ 207,801,193 $ 205,385,806

34 INDEPENDENT AUDITOR'S COMMENTS REQUIRED BY OREGON STATE REGULATIONS

35

36

37 DISCLOSURES IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS AND OMB CIRCULAR A-133

38

39

40

41

42 Schedule of Expenditures of Federal Awards For the year ended June 30, 2014 Federal Accrued Accrued CFDA Revenues Revenues Number Receipts Expenditures U.S. Department of Energy: ARRA-Electricity Delivery and Energy Reliability, Research, Development and Analysis $ 170,336 $ 2,303,670 $ 2,139,866 $ 6,532 U.S. Department of Homeland Security: Passed through Oregon Military Department, Office of Emergency Management: Public Assistance Grants , ,069 - Total federal awards $ 170,336 $ 2,429,739 $ 2,265,935 $ 6,532 Note to Schedule of Expenditures of Federal Awards: Basis of Accounting The schedule of expenditures of federal awards presents receipts on the cash basis of accounting and presents expenditures on the accrual basis of accounting. Differences between receipts and expenditures are reflected as accrued revenues. -33-

43 CENTRAL LINCOLN PEOPLE S UTILITY DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2014 A - SUMMARY OF AUDIT RESULTS: 1. The independent auditor's report expresses an unmodified opinion on the financial statements of Central Lincoln People s Utility District. 2. There were no significant deficiencies in internal control over financial reporting reported during the audit of the financial statements of Central Lincoln People s Utility District. 3. No instances of noncompliance material to the financial statements of Central Lincoln People s Utility District were disclosed during the audit. 4. There were no significant deficiencies in internal control over compliance reported during the audit of the major federal award program of Central Lincoln People s Utility District. 5. The independent auditor's report on compliance for the major federal award program of Central Lincoln People s Utility District expresses an unmodified opinion. 6. No audit findings relative to the major federal award program of Central Lincoln People s Utility District are reported in this schedule. 7. The program tested as a major program is as follows: Program Name CFDA Number ARRA-Electricity Delivery and Energy Reliability, Research, Development and Analysis The threshold for distinguishing Type A programs from Type B programs was $300, Central Lincoln People s Utility District was determined to be a low-risk auditee. B - FINDINGS, FINANCIAL STATEMENTS AUDIT: None. C - FINDINGS AND QUESTIONED COSTS, MAJOR FEDERAL AWARD PROGRAMS AUDIT: None. -34-