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<br />FINANCIAL HIGHLIGHTS - CONT'D. <br /> <br />WATER AND SEWER FUND <br /> <br />The City's Water and Sewer Fund prov ides ut i 1 i ty serv ice to <br />San Marcos residents and the Fund ended the fiscal year with net <br />operating income of $262,429, compared to a loss of $906 in the pre- <br />vious year. The increase in net operating income was due to a rate <br />increase established during 1979-80. This resulted in a bond <br />coverage ratio of 4.20 compared to 1.37 in 1979. The City's Bond <br />Indenture agreements acquire a 1.50 bond coverage ratio and therefore <br />a 4.20 ratio would be very beneficial to the City in its bond <br />program. <br /> <br />FINANCIAL REPORTING <br /> <br />The Ci ty' s financial reporting continues to meet the <br />requirements and standards set by the American Institute of Certified <br />Public Accountants, as well as, the Municipal Finance Officer's <br />Association of the United States and Canada (MFOA). <br /> <br />The MFOA awarded a Certificate of Conformance in Financial <br />Reporting to the City of San Marcos for the Annual Financial Report <br />for the fiscal year ended September 30, 1979. <br /> <br />In order to be awarded a Certif icate of Conformance, a gov- <br />ernmental unit must publish an easily readable and efficiently <br />organized comprehensive Annual Financial Report, whose contents con- <br />form to industry standards. Such reports must satisfy both generally <br />accepted accounting principles and applicable legal requirements. <br /> <br />The current report continues to conform to Certificates of <br />Conformance program requirements, and is being submitted to MFOA for <br />the required Annual Review. <br /> <br />As reported in the Journal of Accountancy (January, 1981), a <br />recent Standard & Poor's Corporation poll of 200 market makers and <br />institutions in the tax-exempt sector revealed that where financial <br />reporting is substandard, interest rates may increase from 1/8 to 1/4 <br />percentage points. For a city selling $10 million of general <br />obligation bonds with a 10-year average life, that equals $125,000 to <br />$250,000 in additional interest paid over the life of the bonds. <br /> <br />- 5 - <br /> <br />Harold V. Simpson & Company, Certified Public Accountants, Austin, Texas <br />