01081973 Regular Meeting - Laserfiche WebLink

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I I I City of San Marcos -3- December 27, 1972 Because of reorganization and assignment of personnel now in process, the City has the opportunity to hire personnel who can handle such matters and to maintain tha City records properly. This problem will become more critical as the City converts to the computer. If input throughout the year is not accurate, even more time will be nec- essary for the auditors to restate the accounting records to reflect proper balances. Requirements of Bond Ordinances Ordinances adopted by the City Council authorizing issuances of general obligation bonds and waterworks and sewer system revenue bonds contain very specific provisions for segregating tax and utility revenues into special funds for retirement of bonds and payment of related interest. Revenue bond ordinances require that utility revenues be applied first to operate and maintain the waterworks and sewer system, then to accounts for retirement of semiannual interest and annual principal as well as creation of certain "reserve" funds which have specific minil11Um balances. During our examination we noted that monthly payments to interest and sinking funds are not being made systematically and that raserve require- ments are not being met. Requirements as disclosed in Note A of the Utility Fund financial statements should be met. During 1972 the City Council increased utility rates in an effort to provide the funds necessary to fully comply with provisions of bond ordi- nances and to provide adequate working capital for an enterprise with assets totaling nearly $5,000,000. The rate increases were not adequate to solve the fiscal problems of the Utility Fund before the year ended September 30, 1972. Review of the results of the rate increases shows that some improve- ment in financial position has resulted; however, serious deficiencies still existed in working capital and in special funds required by the bond ordinances. Working capital of the Utility Fund has the same definition as for any business enterprise; it is the excess of "current assets" over "current liabilities" as shown in the enterprise's balance sheet. The 1972 audited financial statements include a statement of changes in financial position for the Utility Fund wherein sources of working capital and applications of working capital are shown. This statement (page 15 of the annual audit report) reveals that working capital increased only $41,542 in 1972 even though net income was $82,423. Changes in the components of working capital are detailed in the audited financial statements for 1972; totals for the last two years are as follows: September 30, 1972 September 30, 1971 $101,330 186,335 ($85,005) Total current assets Total current liabilities Working capital (deficit) $156,925 200,388 ($43,463)