HomeMy WebLinkAboutFY 17/18 Audited Financials Statements CLAY COUNTY UTILITY AUTHORITY
FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
CLAY COUNTY UTILITY AUTHORITY
FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
TABLE OF CONTENTS
Page
Number(s)
Independent Auditors' Report 1 —2
Management's Discussion and Analysis 3 —7
Basic Financial Statements
Statements of Net Position 8
Statements of Revenues,Expenses, and Changes in Net Position 9
Statements of Cash Flows 10
Notes to Financial Statements 11 — 18
Schedule of Expenditures of State Financial Assistance 19
Schedule of Findings and Questioned Costs 20—21
Independent Auditors' Report on Compliance for Each Major State Project and
Report on Internal Control Over Compliance in Accordance with Chapter
10.550,Rules of the Auditor General 22—23
Independent Auditors' 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 24—25
Independent Auditors' Management Letter Required by Chapter 10.550,Rules of
the State of Florida Office of the Auditor General 26—27
Independent Accountants' Examination Report 28
Management's Response to Findings 29
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J11 .James Moore
Certified Public Accountants and Consultants
INDEPENDENT AUDITORS' REPORT
To the Board of Supervisors,
Clay County Utility Authority:
Report on the Financial Statements
We have audited the accompanying financial statements of the Clay County Utility Authority (the
Authority), as of and for the years ended September 30, 2018 and 2017, and the related notes to the
financial statements, which collectively comprise the Authority's basic financial statements as listed in
the table of contents.
Management's Responsibility for the Financial Statements
The Authority's management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of America;
this includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors'Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audits 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 auditors' 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 Authority'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.
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121 Executive Circle 133 East Indiana Avenue 5931 NW 1st Place 2477 Tim Gamble Place,Suite 200
Daytona Beach,FL 32114-1180 DeLand,FL 32724-4329 Gainesville,FL 32607-2063 Tallahassee,FL 32308-4386
Telephone:386-257-4100 Telephone:386-738-3300 Telephone:352-378-1331 Telephone:850-386-6184
Website:www.jmco.com I Email: info@jmco.com I Member of AGN International with offices in principal cities worldwide
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the Authority as of September 30, 2018 and 2017, and the respective 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.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that management's
discussion and analysis, as listed in the table contents, 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 audits 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.
Other Information
Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole.
The accompanying schedule of expenditures of state financial assistance is presented for purposes of
additional analysis as required by Section 215.97, Florida Statutes,Florida Single Audit Act, and is not a
required part of the financial statements. Such information is the responsibility of management and was
derived from and relates directly to the underlying accounting and other records used to prepare the
financial statements. Such information has been subjected to the auditing procedures applied in the audits
of the financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and other additional procedures in accordance with
auditing standards generally accepted in the United States of America. In our opinion, the schedule of
expenditures of state financial assistance is fairly stated in all material respects in relation to the financial
statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 21,
2018, on our consideration of the Authority's internal control over financial reporting and on our tests of
its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is to describe the scope of our testing of internal control over financial
reporting and compliance and the results of that testing, and not to provide an opinion on the internal
control over financial reporting or on compliance. That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the Authority's internal control over
financial reporting and compliance.
V"1 'T l.(O L.
Daytona Beach, Florida
December 21, 2018
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Management's Discussion and Analysis
Managerial Philosophy and Strategic Objectives
The senior management staff of the Clay County Utility Authority(Authority)is pleased to offer interested
parties additional insight, a strategic perspective and further analysis of key operational factors that may
help the reader gain a deeper understanding of the financial statements for the year ended September 30,
2018.
The Authority is an Independent Special District in the State of Florida.The Florida Legislature created the
Authority on October 1, 1994 by special act(F.S. 94-491)to manage the water,wastewater and reclaimed
water systems in the unincorporated areas of Clay County, Florida. The Authority also serves adjacent
jurisdictions per specific inter-local governmental agreements. The Authority serves customers in Clay,
Duval, and Bradford Counties and uses proprietary fund accounting to report the Authority's financial
position.
One of the core managerial philosophies of the Authority is the commitment to operate, to the extent
possible,the publicly owned utility using the sound business practices of private enterprise.We are charged
with the responsibility of providing our customers with the best long-term value at the lowest possible cost.
A second core principle is the desire to lead the way in improving the quality of life for the members of our
community. We recognize our responsibility to be good stewards of our limited water resources and our
environment. Furthermore, we clearly understand that the continued economic vitality of our community
relies on an abundant, safe and economical supply of drinking water. We have voluntarily invested in the
technology and infrastructure needed to accomplish these important objectives.
To date, we are one of the few utilities in Northeast Florida voluntarily using advanced wastewater
treatment techniques. In addition, we continue to expand our reclaimed water initiative. Our reclaimed
water distribution system includes seven storage and pumping plants. Our reclaimed water customers
irrigated their lawns with an average of 3.95 million gallons per day during the fiscal year ending September
30,2018,this equates to conserving approximately 1.44 billion gallons of drinking water per year.We also
augmented our reclaimed water supply by partnering with the Town of Orange Park and the St.Johns River
Water Management District. Since 2012, the Town now discharges to our reclaimed water distribution
system during high demand periods rather than the St. Johns River. This collaborative approach has
significant water conservation and very positive environmental impacts.
By virtue of a very cost effective public-private partnership,we have taken a leadership role in constructing
the first operational deployment of an exciting new bio-solid residual treatment and disposal technology.
The new treatment technology produces an environmentally superior product while using approximately
half the energy of existing treatment methods.
Our accomplishments have been acknowledged by the receipt of thirty-nine awards, varying from
"Excellence of Operations" for both our water and wastewater system, "Municipal Water Use Efficiency"
award for the most innovative and effective reclamation and reuse program for the Southeastern United
States,Region Four,presented by the Environmental Protection Agency, "Best in Construction"presented
by Florida Transportation Builders Association for utility coordination and damage prevention during
construction on the most heavily traveled urban corridor in Northeast Florida and our most recent receipt
of the"Biosolids Program Excellence Award for BCR Neutralizer Installations"presented by Florida Water
Environmental Association.
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Financial Overview
The Authority is continuing its facility expansions to support the population growth of its service area and
to expand its water reuse capacity. Service rates remained unchanged from fiscal year 2010 to 2014
however, in 2015, service rates were increased 5.4% to address the cost of renewal and replacement of
existing infrastructure and in 2016, an increase of$1.00 per water bill was implemented for alternative
water supply(AWS), a sustainable water source that does not originate from the Floridan Aquifer. Service
rates remained unchanged for fiscal year 2017. In fiscal year 2018 service rates were increased by .93%
Management estimated a 15.0% reduction in water demand from our base year 2009 to our current fiscal
year, 2017/2018. Customers have aggregately decreased water use 7.63%, even though our customer base
has grown by 5,916 accounts during this time.
The Authority's cash reserves, borrowing capacity and scheduled fiscal year 2017/2018 service rates are
adequate to support currently planned maintenance and expansion projects. Contributions in aid of
construction continue to be a major source of capital.
Condensed Statement of Net Position ($000)
For the Year Ended September 30,2018
2018 2017 Change 2016 Change
Capital assets-net 265,873 246,675 7.6 239,538 3.0
Current assets 36,945 45,405 (18.6) 40,508 12.1
Investments, current 5,980 5,906 1.3 5,843 1.1
Other non-current assets 5,823 1,674 247.9 5,694 (70.6)
Investments,non-current 5,378 5,316 1.2 5,253 1.2
Deferred Outflow of Resources 2,636 2,871 (8.2) 3,110 (7.7)
Totals 322,636 307,847 4.8 299,946 2.6
Liabilities and fund equity
Net position 238,675 229,123 4.2 220.447 3.9
Long-term liabilities,net 71,511 66,620 7.3 70,797 (5.9)
Current liabilities, including restricted 12,450 12,104 2.9 8,702 39.1
Totals 322,636 307,847 4.8 299,946 2.6
Capital Assets-Net
Net Capital assets increased$19,199,000 during the fiscal year 2017/2018.The increase is mainly attributed
to $29,829,000 of various utility expansions and dispositions, offset by $10,630,000 of depreciation
expense. Developers contributed$5,196,000 of those assets.
For the year 2017, capital assets increased$7,137,000. The increase is mainly attributed to $16,539,000 of
various utility expansions and dispositions, offset by $9,402,000 of depreciation expense. Developers
contributed$4,037,000 of those assets.
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Current Assets
The change in current assets is due to the decrease in cash. Cash in excess of operations was used to fund
capital projects.
Net Position
The net position can serve as a useful indicator of our financial position,with an increase of$9,553.000 the
net investment in capital assets, the largest portion of the Authority's net position, 80%, reflects the net
investment in capital assets (e.g., land, buildings, equipment, infrastructure and intangible assets), these
assets are used to provide services to customers; consequently, these assets are not available for future
spending. The restricted portion of the net position, 2%, is capacity charges that are subject to capital
improvements which decreased significantly from prior year due capital outlay exceeding the capacity fee
revenue and debt service for future payments. Developer and other contributions of $7,468,000 were
received in fiscal year 2018, approximately $2,272,000 of which was cash. The unrestricted portion, 20%,
remained unchanged.Net income is an unrestricted reserve used for future capital funding.
Long-Term Debt-Net
In fiscal year 2018,the Net long-term debt increased$4,891,000. This increase is due to additional monies
borrowed on the Mid-Clay Waste Water Treatment Facility expansion project of$9,400,000 and scheduled
debt payments throughout the year.
Current Liabilities
Current liabilities increased$346,000 due largely to accounts and retainage payable, as well as the current
portion of the long-term debt.
Condensed Statement of Revenues,Expenses, and Changes in Net Position ($000)
For the Year Ended September 30,2018
2018 2017 Change 2016 Change
Operating revenues 42,317 42,379 (0.1) 41,499 2.1
Operating expenses (38,786) (38,308) 1.2 (35,302) 8.5
Operating income 3,532 4,071 (13.2) 6,197 (34.3)
Non-operating(expenses),net (1,619) (1,750) (7.5) (1,942) (9.9)
Contributions and grants 7,640 6,356 20.2 6,084 4.5
Increase in Net Position 9,553 8,677 10.1 10,338 (16.1)
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Operating Revenues
Operating revenue was within 3% of management projections. Operating revenue is 53% fixed through
base charges and 47%is variable through usage charges. Consequently,climatic conditions such as rainfall
and temperature will cause revenue fluctuations.A large majority(92.7%)of residential customers continue
to use no more water than the second tier allowance in fiscal 2018.
In the prior year,operating revenue was within 1.0%of management projections.A large majority(90.6%)
of residential customers continue to use no more water than the second tier allowance in fiscal 2017.
Operating Expenses
The increase of$477,000 in operating expenses in 2018, is largely due to $344,000 increase in wages and
related benefits resulting from additional staffing, and a 2.0% cost of living allowance and merit, and
$461,000 increase in supplies largely due to improvements and repairs to the plant and$426,000 decrease
in depreciation.
The increase of$3,006,000 in operating expenses in 2017,is largely due to$974,000 increase in wages and
related benefits resulting from additional staffing, hurricane pay and a 2.0% cost of living allowance and
merit, and $1,311,000 increase in subcontractors largely due to the reclaim supervisory control and data
acquisition system and$1,073,000 increase in depreciation.
Non-Operating Revenue and Expenses
The decrease of$131,000 in non-operating revenue and expenses is due to an increase of$35,000 in interest
income, a reduction of$125,000 in interest expense and a decrease of$30,000 on sale of assets.
During fiscal 2017, the decrease of$192,000 in non-operating revenue and expenses is due to an increase
of$79,000 in interest income,a reduction of$57,000 in interest expense and an increase of$56,000 on sale
of assets.
Contributions in Aid of Construction
Developers and others are required to contribute property(water,wastewater and reclaimed water lines)in
their developments and cash for their proportional share of existing water,wastewater,and reclaimed water
plant capacity in order to connect to the Authority's systems.Contributed property was$5,196,000 in 2018,
compared to $4,036,000 in 2017. Cash contributions totaled $2,444,000 in 2018, of which $172,000 was
grant money compared to cash contributions of$2,319,000, of which$11,000 was grant money in 2017.
Utility Service Demand Trend
An Equivalent Residential Connection (ERC) is the equivalent flow that can be anticipated from one
residential connection.
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The following table provides historical information on average annual usage per ERC, expressed in
thousands of gallons. The calculation of ERCs is derived by Annual Base Revenue divided by the Annual
Residential Base Rate and the Usage per ERC is a calculation of the gallons divided by the ERCs.
Water Sewer Reuse
Fiscal Yr
Ending ERCs Use/ERC ERCs Use/ERC ERCs Use/ERC
9/30/2006 44,083 107.9 38,636 79.5 6,437 254.4
9/30/2007 45,188 110.8 40,230 79.9 6,923 266.7
9/30/2008 46,453 99.8 41,717 76.6 7,230 252.3
9/30/2009 46,267 90.7 41,643 71.0 7,392 203.7
9/30/2010 47,069 88.4 42,490 69.6 7,736 202.3
9/30/2011 46,423 94.6 41,750 75.2 6,769 215.5
9/30/2012 47,982 79.5 43,463 68.1 8,325 121.9
9/30/2013 48,364 74.2 43,729 65.7 8,706 107.4
9/30/2014 49,382 71.3 44,614 64.0 9,279 94.7
9/30/2015 49,810 73.5 45,017 64.8 9,640 103.2
9/30/2016 51,735 75.6 46,845 66.0 10,342 120.3
9/30/2017 52,419 76.0 47,613 66.2 10,860 131.6
9/30/2018 53,392 77.1 48,401 50.9 11,379 118.8
Economic Factors and Next Year's Rate
The Authority's financial condition is generally affected less by the local economy than by climatic
conditions and water use restrictions.Water,wastewater and reclaimed water service is a public necessity;
thus revenue typically remains stable as long as the number of customers, and customer usage does not
decline.Conservation will moderate future water revenue,however Authority's rates are designed to absorb
a 20%decrease in water demand and still generate sufficient revenue to operate the business.
The Authority has adopted an Alternative Water Supply (AWS) surcharge of$1.03 per water bill and an
AWS capacity charge of$325 to support the development of AWS. An AWS is simply any sustainable
water source with its supporting infrastructure for processing and delivery that does not originate from the
upper Florida Aquifer. The AWS surcharge and capacity charge are necessary to address AWS
requirements from the St.Johns River Water Management District(SJRWMD),the Suwannee River Water
Management District (SRWMD), and the Florida Department of Environmental Protection (FDEP)
associated with Minimum Flows and Levels (MFL) and North Florida Regional Water Supply Planning.
The AWS surcharge and capacity charge are also necessary in order to put the Authority in the best position
possible to develop the infrastructure to provide all of the rate payers of the Authority with a sustainable
water supply. The first project that will be funded by the AWS surcharge and capacity charge will be the
Florida Department of Transportation (FDOT) Storm Water Harvesting Pilot Project. For additional
information,please visit: https://www.clayutility.org/aws/default.aspx .
Request for Information
This financial report is designed to provide a general overview of the Authority's finances. Questions
concerning any of the information provided in this report or requests for additional financial information
should be addressed to Jeffrey Wesselman, Chief Financial Officer, 3176 Old Jennings Road,Middleburg,
Florida, 32068.
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CLAY COUNTY UTILITY AUTHORITY
STATEMENTS OF NET POSITION
SEPTEMBER 30,2018 AND 2017
2018 2017
ASSETS
Current assets
Cash and cash equivalents $ 31,839,800 $ 38,306,325
Restricted cash and cash equivalents 2,046,628 3,555,871
Investments 5,980,723 5,906,360
Accounts receivable,net 2,463,525 2,947,320
Prepaid items and inventory 595,013 595,616
Total current assets 42,925,689 51,311,492
Non-current assets
Restricted cash and cash equivalents 5,461,082 1,311,369
Investments 5,377,869 5,315,633
Notes receivable 362,805 362,272
Utility plants 370,321,798 357,343,194
Construction in process 32,843,566 16,113,351
Accumulated depreciation (137,292,318) (126,782,037)
Total non-current assets 277,074,802 253,663,782
Total Assets $320,000,491 $304,975,274
DEFERRED OUTFLOWS OF RESOURCES
Deferred loss on bond refunding $ 2,635,869 $ 2,871,275
LIABILITIES
Current liabilities
Accounts and retainage payable $ 1,061,590 $ 1,457,099
Accrued expenses 1,142,232 1,090,229
Unearned revenues 279,171 313,457
Customer deposits 3,393,428 3,354,534
Liabilities payable from current restricted assets:
Accounts and retainage payable 1,273,500 2,760,343
Interest payable 773,128 795,528
Current portion of long-term debt 4,527,159 2,332,857
Total current liabilities 12,450,208 12,104,047
Non-current liabilities
Non-current portion of long-term debt 71,510,853 66,619,770
Total non-current liabilities 71,510,853 66,619,770
Total Liabilities $ 83,961,061 $ 78,723,817
NET POSITION
Net investment in capital assets $192,470,903 $180,593,156
Restricted for:
Capital projects 2,256,642 1,746,384
Debt service 3,204,440 1,490,932
Unrestricted 40,743,314 45,292,260
Total Net Position $238,675,299 $229,122,732
The accompanying notes to financial statements are an integral part of these statements.
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CLAY COUNTY UTILITY AUTHORITY
STATEMENTS OF REVENUES,EXPENSES,AND CHANGES IN NET POSITION
FOR THE YEARS ENDED SEPTEMBER 30,2018 AND 2017
2018 2017
Operating revenues
Charges for services $ 41,118,511 $ 41,307,273
Miscellaneous revenues 1,198,676 1,071,613
Total operating revenues 42,317,187 42,378,886
Operating expenses
Wages and related benefits 13,221,714 12,878,008
Operating expenses 9,419,398 8,367,505
Subcontractors 3,668,707 4,147,857
In lieu of taxes 1,845,421 1,858,994
Depreciation expense 10,630,303 11,056,001
Total operating expenses 38,785,543 38,308,365
Operating income 3,531,644 4,070,521
Nonoperating revenues(expenses)
Interest income 416,888 381,619
Interest expense (2,073,771) (2,199,430)
Gain(loss)on sale of assets 37,918 67,444
Total nonoperating revenues(expenses) (1,618,965) (1,750,367)
Income(loss)before capital contributions 1,912,679 2,320,154
Capital contributions
Developer and other contributions 7,467,983 6,344,562
Grants 171,905 11,332
Total capital contributions 7,639,888 6,355,894
Change in net position 9,552,567 8,676,048
Net position,beginning of year 229,122,732 220,446,684
Net position,end of year $ 238,675,299 $ 229,122,732
The accompanying notes to financial statements are an integral part of these statements.
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CLAY COUNTY UTILITY AUTHORITY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30,2018 AND 2017
2018 2017
Cash flows from operating activities
Receipts from customers $ 42,805,057 $ 42,192,384
Payments to suppliers (13,483,011) (11,748,459)
Payment in lieu of taxes (1,845,421) (1,858,994)
Payments to employees (13,169,711) (12,876,176)
Net cash provided by operating activities 14,306,914 15,708,755
Cash flows from capital and related financing activities
Proceeds from issuance of bonds and loans 9,407,325 -
Principal paid on long-term debt (2,321,940) (3,519,275)
Interest paid on long-term debt (1,860,765) (2,030,523)
Payments to acquire and construct plant property (26,081,420) (11,683,625)
Capital contributions 2,271,637 2,307,826
Grants 171,905 11,332
Net cash used in capital and related financing activities (18,413,258) (14,914,265)
Cash flows from investing activities
Purchases of investments (5,950,655) (5,860,423)
Sales of investments 5,814,056 5,734,332
Interest income 416,888 381,619
Net cash provided by investing activities 280,289 255,528
Net increase(decrease)in cash and cash equivalents (3,826,055) 1,050,018
Cash and cash equivalents,beginning of year 43,173,565 42,123,547
Cash and cash equivalents,end of year $ 39,347,510 $ 43,173,565
Cash and cash equivalents classified as:
Unrestricted $ 31,839,800 $ 38,306,325
Restricted 2,046,628 3,555,871
Restricted-noncurrent 5,461,082 1,311,369
Total cash and cash equivalents $ 39,347,510 $ 43,173,565
Reconciliation of operating income to net cash provided by operating activities
Cash flows from operating activities
Operating income $ 3,531,644 $ 4,070,521
Adjustments to reconcile operating income to net
cash provided by operating activities:
Depreciation expense 10,630,303 11,056,001
Changes in assets and liabilities
Decrease(Increase)in accounts and notes receivable 483,262 (355,986)
Decrease(Increase)in prepaid items and inventory 603 529,374
Increase(Decrease)in accounts and retainage payable (395,509) 237,529
Increase(Decrease)in accrued expenses 52,003 1,832
Increase(Decrease)in unearned revenue (34,286) (5,399)
Increase(Decrease)in customer deposits 38,894 174,883
Total adjustments 10,775,270 11,638,234
Net cash provided by operating activities $ 14,306,914 $ 15,708,755
Supplemental schedule of noncash investing,capital,and financing activities
Deferred loss on refunding amortization $ 235,406 $ 238,778
Utility plant property contributed by developers 5,196,346 4,036,736
The accompanying notes to financial statements are an integral part of these statements.
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CLAY COUNTY UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
(1) Summary of Significant Accounting Policies:
The accounting policies of the Clay County Utility Authority (the Authority) conform to generally
accepted accounting principles applicable to governmental units. The following is a summary of
significant policies.
(a) Reporting entity—The Authority is an independent special district established on October 1,
1994, pursuant to Chapter 94-491, Laws of Florida (1994), to provide Clay County, Florida and
other territorial limits near the County with certain publicly owned water, wastewater and reclaimed
water facilities. The governing body of the Authority consists of seven members acting as the Board
of Supervisors. The Authority has adopted Governmental Accounting Standards Board (GASB)
Codification and has determined that there are no component units that meet the criteria for
inclusion in the Authority's financial statements.
(b) Measurement focus, basis of accounting, and financial statement presentation—The
accounts of the Authority are organized and reported as a proprietary fund type Enterprise Fund.
The operations of this fund are accounted for with a set of self-balancing accounts that comprise its
assets, liabilities, net assets, revenues and expenses. Enterprise Funds are used to account for
operations that are financed and operated in a manner similar to private business enterprises where
the intent of the governing body is that the costs (expenses, including depreciation) of providing
goods or services to the general public on a continuing basis are financed or recovered primarily
through user charges.
The principal operating revenues of the Authority are charges for water, wastewater, and reclaimed
water services, and operating expenses include the cost of sales 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.
Basis of accounting refers to when revenues and expenses are recognized in the accounts and
reported in the financial statements. Basis of accounting relates to the timing of the measurements
made, regardless of the measurement focus applied. The Authority uses the accrual basis of
accounting in accordance with the GASB Codification. Revenues are recognized when earned and
measurable, and expenses are recognized when incurred.
(c) Cash and cash equivalents Cash and cash equivalents consists of cash on hand and on
deposit in banks and money market accounts.
(d) Investments—Investments solely consist of certificates of deposit and are valued at cost plus
accrued interest,which approximates fair value.
(e) Accounts receivable—The Authority's accounts receivable consists of amounts due from
consumers. The Authority performs account evaluations on their consumers and requires collateral
deposits.
(0 Inventories and prepaid items—The cost of inventory is accounted for on the consumption
basis wherein inventories are charged as expenditures when used, rather than when purchased. All
inventories are valued at cost. Certain payments to vendors reflect costs applicable to future
accounting periods and are recorded as prepaid items.
(g) Restricted assets and net position—Certain assets are required to be segregated from other
assets due to various bond indenture agreements and restricted revenue streams. These assets are
legally restricted for specific purposes such as debt service, construction, and renewals and
replacements. The remaining excess of restricted assets over liabilities is reflected as restricted net
position.
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CLAY COUNTY UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
(1) Summary of Significant Accounting Policies: (Continued)
(h) Due from other governments—Due from other governments consists of amounts due from
grantor agencies for capital grants and/or proceeds on state revolving fund loans.
(i) Property and plant—Property and plant are recorded at cost less accumulated depreciation,
except contributed assets which are recorded at acquisition value on the date of contribution.
Expenditures of $1,000 or more are capitalized. Construction period interest cost, net of interest
earned on the unexpended proceeds of tax-exempt borrowings, is capitalized as part of the asset
cost. Depreciation, on a straight-line basis, is charged over estimated useful lives as follows:
Buildings and Building Improvements 25 years
Water,Wastewater, and Reclaimed Water Lines 40 years
Equipment 7, 15,25 years
(j) Bond discounts, premiums, and deferred amounts—Bond discounts, premiums, and
deferred amounts, consisting of deferred outflows from loss on refunding of long-term debt, are
deferred and amortized over the term of the bonds using the effective interest method.
(k) Deferred outflows/inflows of resources—In addition to assets, the statements of net position
will sometimes report a separate section for deferred outflows of resources. This separate financial
statement element 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/expenditure) until then. The Authority
has only one item, deferred loss on bond refunding, which qualifies for reporting in this category. 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 or refunding debt.
In addition to liabilities, the statement of financial position will sometimes report a separate section
for deferred inflows of resources. This separate financial statement element represents an acquisition
of net position that applies to a future period and will not be recognized as an inflow of resources
(revenue)until that time. The Authority had no deferred inflows at September 30,2018 and 2017.
(1) Net position flow assumption—Sometimes the Authority will fund outlays for a particular
purpose from both restricted and unrestricted resources. In order to determine amounts reported as
restricted and unrestricted net position, it is the Authority's policy to consider restricted net position
to have been used before unrestricted net position is applied.
(m) Revenue recognition—Operating revenue consists primarily of charges for services, which
are billed to customers for water, wastewater, and reclaimed water service. Billings are included in
revenue as meters are read each month. Unbilled revenues are accrued based on estimated
consumption of the most recent billing.
(n) Capital contributions Capital contributions represent contributions of certain water
distribution and wastewater collection systems. Such contributions are recognized as increases in net
position in the period they are received.
(o) 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 amount of assets, liabilities, and changes therein,
and disclosure of contingent assets and liabilities.Actual results could differ from those estimates.
- 12 -
CLAY COUNTY UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
(2) Deposits and Investments:
(a) Deposits and Investments—In addition to insurance provided by the Federal Depository
Insurance Corporation, deposits are held in banking institutions approved by the State Treasurer of
the State of Florida to hold public funds. Under Florida Statutes Chapter 280, Florida Security for
Public Deposits Act, the State Treasurer requires all Florida qualified public depositories to deposit
with the Treasurer or another banking institution eligible collateral. In the event of failure of a
qualified public depository,the remaining public depositories would be responsible for covering any
resulting losses. The Authority's deposits at year end are considered insured for custodial credit risk
purposes.
At September 30,2018,the Authority's cash and investments consisted of the following:
Average Credit
Types of Cash and Investments Maturity Quality Amount
Investments and restricted investments
Certificates of deposit 0.36 years N/A $ 11,358,592
Cash on deposit 39,347,510
Total cash and investments (unrestricted and restricted) $ 50,706,102
At September 30,2017,the Authority's cash and investments consisted of the following:
Average Credit
Types of Cash and Investments Maturity Quality Amount
Investments and restricted investments
Certificates of deposit 0.97 years N/A $ 11,221,993
Cash on deposit 43,173,565
Total cash and investments(unrestricted and restricted) $ 54,395,558
(b) Custodial credit risk—For an investment, custodial credit is the risk that, in the event of the
failure of the counterparty, the Authority will not be able to recover the value of its investments or
collateral securities that are in the possession of an outside party. In order to manage the custodial
credit risk, the Authority's investment policy specifies certain requirements to pre-qualify financial
institutions and brokers/dealers and an annual review of the institutions used.
(c) Credit risk—Credit risk is the risk that an issuer or other counter party to an investment will
not fulfill its obligations. The Authority does have a formal investment policy that limits its
investments to high quality investments to control credit risk, which requires diversification of
investments, limited investments in securities with higher credit risks, investing in securities with
varying maturities, and continuously investing a portion of the portfolio in readily available funds
such as local government investment pools or money market funds.
(d) Interest rate risk—Interest rate risk is the risk that changes in interest rates will adversely
affect the fair value of an investment. The Authority has no formal policy relating to a specific
investment-related risk. In accordance with the provisions of the state statutes governing allowable
investments, the Authority manages its exposure to declines in fair values by limiting the maturity
of specific investments to provide sufficient liquidity to pay obligations as they come due.
- 13 -
CLAY COUNTY UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
(3) Accounts and Notes Receivable:
Unbilled receivables represent amounts earned which have not yet been billed, along with other amounts
which can be invoiced upon completion or attainment of contract objectives. Allowance for doubtful
accounts is estimated by analysis of accounts receivable balance over 60 days, and historical collection
trends. Accounts receivable at September 30,2018 and 2017,consist of the following:
2018 2017
Billed customer receivables $ 1,085,063 $ 1,552,963
Unbilled customer receivables 1,400,733 1,360,294
Notes receivable—current portion 37,029 48,597
Other receivables 299,798 314,012
Gross accounts receivable 2,822,623 3,275,866
Less:Allowance for uncollectables (359,098) (328,546)
Net total receivables $ 2,463,525 $ 2,947,320
As part of the notes receivable included above, many such agreements have a long-term portion based on
extended payment schedules. The long-term balance of the notes receivables totaled $362,805 and
$362,272 at September 30, 2018 and 2017, respectively. Based on an assessment of interest rates and
repayment schedules, management does not believe any calculated discount to the gross receivable
amount would be material, and no such provision has been made.
(4) Capital Assets:
Changes in the Authority's capital assets for the years ended September 30, 2018 and 2017, were as
follows:
Balance Balance
October 1, September 30,
2017 Increases Decreases 2018
Capital assets not being depreciated:
Land $ 5,209,184 $ 59,540 $ - $ 5,268,724
Construction in progress 16,113,351 23,912,587 (7,182,372) 32,843,566
Total capital assets not being
depreciated 21,322,535 23,972,127 (7,182,372) 38,112,290
Capital assets being depreciated:
Machinery and equipment 347,556,433 12,926,431 (224,407) 360,258,457
Buildings 4,577,577 217,040 - 4,794,617
Accumulated depreciation (126,782,037) (10,734,688) 224,407 (137,292,318)
Total capital assets being depreciated,net 225,351,973 2,408,783 - 227,760,756
Capital Assets,net $246,674,508 $ 26,380,910 $ (7,182,372) $265,873,046
- 14 -
CLAY COUNTY UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
(4) Capital Assets: (Continued)
Balance Balance
October 1, September 30,
2016 Increases Decreases 2017
Capital assets not being depreciated:
Land $ 5,064,827 $ 650,149 $ (505,792) $ 5,209,184
Construction in progress 6,650,356 12,957,526 (3,494,531) 16,113,351
Total capital assets not being
depreciated 11,715,183 13,607,675 (4,000,323) 21,322,535
Capital assets being depreciated:
Machinery and equipment 335,896,703 13,424,601 (1,764,871) 347,556,433
Buildings 9,305,417 45,376 (4,773,216) 4,577,577
Accumulated depreciation (117,379,592) (11,160,036) 1,757,591 (126,782,037)
Total capital assets being depreciated,net 227,822,528 2,309,941 (4,780,496) 225,351,973
Capital Assets,net $239,537,711 $ 15,917,616 $ (8,780,819) $246,674,508
Depreciation expense for 2018 and 2017 was $10,630,303 and $11,056,001, respectively. Additional
depreciation amounts of $104,385 and $104,035 in 2018 and 2017, respectively, related to equipment
used for construction in progress and was capitalized as part of the cost of construction in progress.
Total interest expense incurred by the Authority during the years ended September 30, 2018 and 2017
was $2,130,027 and $2,223,640, respectively. Of these amounts, $56,256 and $24,210 was capitalized in
2018 and 2017,respectively, and included as part of the cost of construction in progress.
Commitments on outstanding construction contracts for improvements and maintenance of the utility
systems totaled$2,939,327 at September 30,2018.
(5) Compensated Absences:
Vacation leave is earned on a bi-weekly basis (regular 80 hours worked) at established rates based upon
years of service. Employees with one full year of service or more are required to take no less than forty
consecutive hours of vacation each calendar year.
In December of each year, employees are paid for any hours in excess of forty hours (eighty at
employee's request) in their vacation accrual account. Employees with less than six (6) months of service
are not eligible for payment of unused vacation.
Sick leave is earned for each regularly scheduled compensated hour with sick pay not to exceed 10 days
per year. In December of each year, employees are paid for any hours in excess of forty hours (eighty at
employee's request) in their sick pay accrual account. Employees with less than six (6)months of service
are not eligible for payment of unused sick hours.
Because annual leave time accrued exceeds limitations on compensated absence balances at calendar
year-end, all balances are considered to be current, and no long-term portion has been calculated. As such,
these amounts have not been included in the long-term debt rollforward in Note 6.
Outstanding compensated absences, included in accrued expenses on the statements of net position,
totaled$595,183 and$574,348 at September 30, 2018 and 2017,respectively.
- 15 -
CLAY COUNTY UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
(6) Bonds and Notes Payable:
Long-term debt at September 30,2018 and 2017, is comprised of the following:
2018 2017
$42,210,677 Utility System Revenue and Refunding Note, Series 2015;
with variable payment amounts due semi-annually and principal
payments due from 2016 through 2031. Interest is fixed at 2.82%. $41,910,667 $42,010,667
$10,000,000 Clay County Utility Authority Utilities System Revenue
Note, Series 2009; due in semi-annual installments commencing on May
1, 2009 through 2029, with interest at 4.24%. Interest rate amended to
2.97%in August 2013. 6,103,341 6,584,324
$10,236,041 Utility System Revenue and Refunding Bonds, Series 2012;
due in annual installments varying from $237,103 to $1,901,056 plus
interest payable semi-annually at 1.86%through 2024. 8,502,981 9,505,178
$9,407,325 Clean Water State Revolving Fund loan with maximum
$14,179,180 available balance; due in semi-annual installments of
$399,298 including interest at 0.94% until the payment amount is
adjusted by amendment. Repayment to begin after completion of project;
expected to begin August 15,2019. 9,407,325 -
$4,066,297 Clean Water State Revolving Funds; due in semi-annual
installments commencing on November 15, 2010, through 2030 with
interest at 2.92%. 2,707,258 2,891,375
$10,300,628 Clean Water State Revolving Fund; due in semi-annual
installments commencing on May 15, 2010, through 2030 with interest
ranging from 2.85%to 3.24%. 6,158,422 6,558,388
$461,195 The School Board of Clay County, Florida,present value annual
services of capital lease in which ownership will be transferred at the
end of the term in 2021. 121,991 162,551
$1,735,142 Clean Water State Revolving Fund; due in semi-annual
installments of$54,020 including interest ranging from 1.29%to 3.10%,
beginning on January 15, 2017,through 2032. 1,126,027 1,240,144
Bonds and notes payable 76,038,012 68,952,627
Less: Current portion of bonds and notes payable (4,527,159) (2,332,857)
Long-term bonds and notes payable,net $ 71,510,853 $ 66,619,770
Activity in bonds and notes payable for the years ended September 30, 2018 and 2017, is as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
2018 $ 68,952,627 $ 9,407,325 $ (2,321,940) $ 76,038,012 $ 4,527,159
2017 $ 72,471,902 $ - $ (3,519,275) $ 68,952,627 $ 2,332,857
- 16 -
CLAY COUNTY UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
(6) Bonds and Notes Payable: (Continued)
Debt service requirements to maturity are as follows at September 30,2018:
Total Debt
September 30 Principal Interest Service
2019 $ 4,527,159 $ 1,950,442 $ 6,477,601
2020 4,969,986 1,837,516 6,807,502
2021 5,077,803 1,718,385 6,796,188
2022 5,162,698 1,588,863 6,751,561
2023 5,286,370 1,464,066 6,750,436
2024—2028 27,973,388 5,258,945 33,232,333
2029—2033 23,040,608 1,487,112 24,527,720
Totals $ 76,038,012 $ 15,305,329 $ 91,343,341
Net revenues of the water,wastewater, and reclaimed water utility system are pledged as collateral for the
revenue bonds and the Clean Water State Revolving Funds.
(7) Retirement Benefits:
The Authority provides retirement benefits for all of its full-time employees through the Clay County
Utility Authority Employees Plan (the Plan), which is a defined contribution plan administered by a
financial institution. The Authority has the right to amend the Plan at any time, provided that no
amendment or modification shall reduce the account balances of any participant. The Plan's benefits
depend solely on amounts contributed plus investment income. The covered payroll for employees
covered by this plan for the years ended September 30, 2018 and 2017, was $9,360,846 and $9,131,267,
respectively, and the total payroll was $9,507,076 and $9,313,709 for the same years, respectively.
Participants are fully vested after 5 years of service; rollovers from other qualified plans are 100%vested.
No employee contributions are allowed by the Plan. The Authority contributes an amount equal to 10%of
the participant's compensation for the year to the Plan. The Authority contributed $936,085 and$913,127
for the years ended September 30,2018 and 2017,respectively.
(8) Deferred Compensation Plan:
The Authority offers its employees a deferred compensation plan created in accordance with Internal
Revenue Code Section 457 and administered by a financial institution. Participation is on a voluntary
basis and contributions are made via payroll deduction. The plan permits deferral of compensation until
future years. According to the plan, the deferred compensation is not available until termination,
retirement, death, or an unforeseeable emergency. All plan assets are held in trust by the financial
institution, and as such, no provision for plan assets or liabilities has been recorded on the Authority's
financial statements.
(9) Risk Management:
The Authority is exposed to various risks of loss related to torts; theft of, damage to, and destruction of
assets; errors and omissions; injuries to employees; and natural disasters for which the Authority
purchases commercial insurance. During the year ended September 30, 2018,the Authority did not reduce
insurance coverage levels in place as of September 30, 2017. The Authority has no settled claims
resulting from these risks that exceeded its commercial coverage in any of the past three fiscal years.
- 17 -
CLAY COUNTY UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,2018 AND 2017
(10) Other Post-Employment Benefits(OPEB):
Retirees and their dependents are permitted to remain covered under the Authority's respective health
care plans as long as they pay a full premium applicable to the coverage elected. This conforms to the
minimum required of Florida governmental employers per Chapter 112.08 of Florida Statutes. According
to the Authority's employee handbook,retirees are defined as"Any full time employee age sixty-five(65)
or older with at least five(5)years of continuous eligible service at the time of his/her retirement."
In 2015, the Authority engaged an actuary to calculate the outstanding liability for certain post-
employment healthcare benefits provided by the Authority. Based on the Authority's policies, the OPEB
liability was actuarially determined to be zero. There have been no changes to the Authority's policies or
state statutes since that time which management believes would impact this determination as of
September 30,2018.As such,no OPEB liability has been recorded.
(11) Commitments and Contingencies:
In accordance with the Master Utility Services Agreement between the Authority and a developer, the
Authority has granted connection fee credits which can be used by the developer or its assignee toward
future connections in the specified development.
As part of this agreement, the developer contributed land valued at $2,091,708 during the year ended
September 30, 2016. In return,the developer received connection fee credits for future connections within
the development equal to the agreed-upon value of the contributed land; however, should the developer
cease plans to develop the land, no amounts will be due to the developer from the Authority, nor will the
contributed property revert back to the developer.
At September 30, 2018, no connections have been made in this development and total future connection
fee credits available to the developer totaled$2,091,708.
(12) New Accounting Pronouncements:
The Governmental Accounting Standards Board ("GASB") has issued several pronouncements that have
effective dates that may impact future financial statements. Listed below are pronouncements with
required implementation dates effective for subsequent fiscal years that have not yet been implemented.
Management has not currently determined what, if any, impact implementation of the following will have
on the City's financial statements:
(a) GASB issued Statement No. 87, Leases, in June 2017. GASB 87 increases the usefulness of
governments' financial statements by requiring recognition of certain lease assets and
liabilities for leases that previously were classified as operating leases and recognized as
inflows of resources or outflows of resources based on the payment provisions of the contract.
It establishes a single model for lease accounting based on the foundational principle that
leases are financings of the right to use an underlying asset. The provisions in GASB 87 are
effective for periods beginning after December 15,2019.
(b) GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a
Construction Period, in June 2018. GASB 89 requires that interest cost incurred before the
end of a construction period be recognized as an expense in the period in which the cost is
incurred for financial statements prepared using the economic resources measurement focus.
As a result, interest cost incurred before the end of a construction period will not be included
in the historical cost of a capital asset reported in a business-type activity or enterprise fund.
The provisions in GASB 89 are effective for periods beginning after December 15,2019.
- 18 -
CLAY COUNTY UTILITY AUTHORITY
SCHEDULE OF EXPENDITURES OF STATE FINANCIAL ASSISTANCE
FOR THE YEAR ENDED SEPTEMBER 30,2018
State Grantor/Pass- CSFA Contract/
Through Grantor/Program Title Number Grant Number Expenditures
State of Florida Depaitciient of Environmental Protection
Direct Programs:
Wastewater Treatment Facility Construction 37.077 WW10020 $ 9,407,325
Total Expenditures of State Financial Assistance $ 9,407,325
Notes:
1) Basis of Presentation:
The accompanying Schedule of State Financial Assistance includes state financial assistance activity of Clay
County Utility Authority and is presented on the accrual basis of accounting. The information in this
schedule is presented in accordance with the requirements of Chapter 10.550, Rules of the Florida Auditor
General.
2) Subrecipients:
The Authority provided no state awards to subrecipients during the year ended September 30, 2018.
- 19-
CLAY COUNTY UTILITY AUTHORITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
SEPTEMBER 30,2018
A. Summary of Auditors' Results:
Financial Statements:
Type of audit report issued on the financial statements: Unmodified
Internal control over financial reporting:
Material weakness(es) identified? X yes no
Significant deficiency(ies) identified? X yes none reported
Noncompliance material to financial statements noted? yes X no
State Financial Assistance:
Internal control over major state projects:
Material weakness(es) identified? yes X no
Significant deficiency(ies)identified? yes X none reported
Type of auditor's report issued on compliance for major
state projects: Unmodified
Any audit findings disclosed that are required to be
reported for state financial assistance projects in
accordance with Chapter 10.550? yes X none reported
Dollar threshold used to distinguish between type A and
type B programs: $300,000
Identification of major state projects:
CSFA Number Project Name
37.077 Wastewater Treatment Facility Construction
B. Financial Statement Findings:
2018-001 Timeliness Completion of Bank Reconciliations:
Criteria: As an integral part of any organization's internal control over cash, bank reconciliations
should be performed on no less than a monthly basis. Such reconciliations should be both prepared
and reviewed on a timely basis.
Condition: The Authority's operating bank account reconciliations for fiscal year 2018 were not
completed and reviewed in a timely manner. While a significant portion of the year-end
reconciliation was performed after year-end when the matter was brought up during the audit, there
remained a year-end difference of approximately$8,000 left to be reconciled in fiscal year 2019.
-20 -
CLAY COUNTY UTILITY AUTHORITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
SEPTEMBER 30,2018
Cause: Various cash activity monitoring procedures were in place during the year, but these did not
include individual reconciliations of the operating bank account being performed on a monthly
basis.
Effect: Significant errors in the operating bank reconciliations could have resulted in a material
misstatement of the Authority's financial statements, and should any improper transactions have
occurred,they would not have been identified timely.
Recommendation: While compensating controls are in place related to overall cash management and
general ledger recording, we recommend all of the Authority's bank statements be reconciled on a
monthly basis, with all reconciliations to be prepared and reviewed no less than one month
following the end of the applicable month being reconciled.
2018-002 Accounts Receivable and Capital Asset Adjustments
Criteria: All significant account balances should be reconciled on no less than an annual basis, with
increased frequency necessary for balances related to the Authority's key transaction cycles, such as
revenue/accounts receivable.
Condition: Certain receivable and capital asset activity did not agree to the general ledger. This
resulted in adjustments to certain receivable accounts and correcting entries to capital asset balances.
Additionally, an accounts receivable clearing account remained with an approximately $18,000
negative balance left to be reconciled in fiscal year 2019.
Cause: A year-end proof of the subsidiary ledger/detail activity and the recording of the applicable
adjustments to the relevant general ledger accounts were not completed over customer accounts
receivable account, accounts receivable clearing account, and various capital asset accounts.
Effect: Significant errors or discrepancies in the accounts receivable activity could have resulted in a
material misstatement of the Authority's financial statements, and should any improper transactions
have occurred, they may not have been identified timely. Capital asset balances could have also
been misstated,resulting in the timing of the recognition of the related expense being inaccurate.
Recommendation: We recommend the accounts receivable ledger be reconciled to the general ledger
on no less than a monthly basis. We also recommend all capital asset expenditures be reconciled to
capital asset additions when preparing year-end capital asset and depreciation schedules.
C. State Financial Assistance Findings and Questioned Costs:None
D. Summary Schedule of Prior Audit Findings:Not applicable—no prior year findings.
E. Corrective Action Plan: See management's response to findings as listed in the table of contents.
-21 -
Al ,James Moore
Certified Public Accountants and Consultants
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR STATE
PROJECT AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE
IN ACCORDANCE WITH CHAPTER 10.550,RULES OF THE AUDITOR GENERAL
To the Board of Supervisors,
Clay County Utility Authority:
Report on Compliance for Each Major State Project
We have audited Clay County Utility Authority's (the Authority) compliance with the types of
compliance requirements described in the Department of Financial Services' State Projects Compliance
Supplement that could have a direct and material effect on each of the Authority's major state projects for
the year ended September 30, 2018. The Authority's major state projects are identified in the summary of
auditors' results section of the accompanying schedule of findings and questioned costs.
Management's Responsibility
Management is responsible for compliance with State statutes, regulations, and the terms and conditions
applicable to its state projects.
Auditors'Responsibility
Our responsibility is to express an opinion on compliance for each of the Authority's major state projects
based on our audit of the types of compliance requirements referred to above. We conducted our audit of
compliance in accordance with auditing standards generally accepted in the United States of America; the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; and Chapter 10.550, Rules of the Auditor General. Those
standards and Chapter 10.550, Rules of the Auditor General,require that we plan and perform the audit to
obtain reasonable assurance about whether noncompliance with the types of compliance requirements
referred to above that could have a direct and material effect on a major state project occurred. An audit
includes examining, on a test basis, evidence about the Authority's compliance with those requirements
and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major state
project. However, our audit does not provide a legal determination of the Authority's compliance.
Opinion on Each Major State Project
In our opinion, the Authority complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major state
projects for the year ended September 30,2018.
-22 -
121 Executive Circle 133 East Indiana Avenue 5931 NW 1st Place 2477 Tim Gamble Place,Suite 200
Daytona Beach,FL 32114-1180 DeLand,FL 32724-4329 Gainesville,FL 32607-2063 Tallahassee,FL 32308-4386
Telephone:386-257-4100 Telephone:386-738-3300 Telephone:352-378-1331 Telephone:850-386-6184
Website:www.jmco.com I Email:info@jmco.com I Member of AGN International with offices in principal cities worldwide
Report on Internal Control over Compliance
Management of the Authority is responsible for establishing and maintaining effective internal control
over compliance with the types of compliance requirements referred to above. In planning and performing
our audit, we considered the Authority's internal control over compliance with the types of requirements
that could have a direct and material effect on each major state project as a basis for designing auditing
procedures that are appropriate in the circumstances for the purpose of expressing an opinion on
compliance for each major state project and to test and report on internal control over compliance in
accordance with Chapter 10.550, Rules of the Auditor General, but not for the purpose of expressing an
opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an
opinion on the effectiveness of the Authority's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a
state project on a timely basis. A material weakness in internal control over compliance is a deficiency,
or combination of deficiencies, in internal control over compliance, such that there is a reasonable
possibility that material noncompliance with a type of compliance requirement of a state project will not
be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control
over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance
with a type of compliance requirement of a state project that is less severe than a material weakness in
internal control over compliance, yet important enough to merit attention by those charged with
governance.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be material weaknesses or significant deficiencies. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses. However,
material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our
testing of internal control over compliance and the results of that testing based on the requirements of
Chapter 10.550, Rules of the Auditor General. Accordingly, this report is not suitable for any other
purpose. Al•W 'it l
al,,,z.
Daytona Beach, Florida
December 21, 2018
-23 -
AA James Moore
Certified Public Accountants and Consultants
INDEPENDENT AUDITORS' 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
To the Board of Supervisors,
Clay County Utility Authority:
We have audited, in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in the Government Auditing Standards
issued by the Comptroller General of the United States of America, the financial statements of the Clay
County Utility Authority(the Authority) as of and for the year ended September 30, 2018, and the related
notes to the financial statements, which collectively comprise the Authority's basic financial statements,
and have issued our report thereon dated December 21, 2018.
Internal Control over Financial Reporting
In planning and performing our audits of the financial statements, we considered the Authority's internal
control over financial reporting (internal control) to determine audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinion on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the Authority's internal control. Accordingly,we
do not express an opinion on the effectiveness of the Authority's internal control.
Our consideration of internal control over financial reporting was for the limited purpose described in the
preceding paragraph and was not designed to identify all deficiencies in internal control over financial
reporting that might be material weaknesses or significant deficiencies and therefore,material weaknesses
or significant deficiencies may exist that were not identified. However, as described below, we identified
certain deficiencies in internal control that we consider to be material weaknesses and significant
deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees in the normal course of performing their assigned functions, to prevent, or
detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination
of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement
of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We
consider the deficiency described in the accompanying schedule of findings and questioned costs at item
2018-001 to be a material weakness.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less
severe than a material weakness, yet important enough to merit attention by those charged with
governance. We consider the deficiency described in the accompanying schedule of findings and
questioned costs as items 2018-002 to be a significant deficiency.
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121 Executive Circle 133 East Indiana Avenue 5931 NW 1st Place 2477 Tim Gamble Place,Suite 200
Daytona Beach,FL 32114-1180 DeLand,FL 32724-4329 Gainesville,FL 32607-2063 Tallahassee,FL 32308-4386
Telephone:386-257-4100 Telephone:386-738-3300 Telephone:352-378-1331 Telephone:850-386-6184
Website:www.jmco.com I Email:info@jmco.com I Member of AG International with offices in principal cities worldwide
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority's financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements,noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audits and, accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
Clay County Utility Authority's Response to Findings
The Authority's response to the findings identified in our audit are described in the attached response to
findings as listed in the table of contents. The Authority's response was not subjected to the auditing
procedures applied in the audit of the financial statements and, accordingly,we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the entity's internal control and compliance. Accordingly,
this communication is not suitable for any other purpose.
la144ted MOW % ( . , ?.i.
Daytona Beach,Florida
December 21, 2018
-25 -
J1A James Moore
Certified Public Accountants and Consultants
INDEPENDENT AUDITORS' MANAGEMENT LETTER REQUIRED
BY CHAPTER 10.550,RULES OF THE STATE OF FLORIDA
OFFICE OF THE AUDITOR GENERAL
To the Board of Supervisors,
Clay County Utility Authority:
Report on the Financial Statements
We have audited the basic financial statements of the Clay County Utility Authority (the Authority), as of
and for the fiscal year ended September 30, 2018, and have issued our report thereon dated December 21,
2018.
Auditors' Responsibility
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America; the standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States; and Chapter 10.550, Rules of the Auditor General.
Other Reporting Requirements
We have issued our Independent Auditors' Report on Internal Control over Financial Reporting and
Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance
with Government Auditing Standards; Independent Auditors' Report on Compliance for Each Major State
Project and Report on Internal Control over Compliance in Accordance with Chapter 10.550,Rules of the
Auditor General; Schedule of Findings and Questioned Costs; and Independent Accountants' Report on
an examination conducted in accordance with AICPA Professional Standards, AT-C Section 315,
regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor General.
Disclosures in those reports and schedule, which are dated December 21, 2018, should be considered in
conjunction with this management letter.
Prior Audit Findings
Section 10.554(1)(i)1., Rules of the Auditor General,requires that we determine whether or not corrective
actions have been taken to address findings and recommendations made in the preceding annual financial
audit report.No such findings or recommendations were identified in the preceding annual financial audit
report.
Official Title and Legal Authority
Section 10.554(1)(i)4., Rules of the Auditor General, requires that the name or official title and legal
authority for the primary government and each component unit of the reporting entity be disclosed in this
management letter, unless disclosed in the notes to the financial statements. The Clay County Utility
Authority was established by special act by the Florida Legislature. There are no component units related
to the Authority.
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121 Executive Circle 133 East Indiana Avenue 5931 NW 1st Place 2477 Tim Gamble Place,Suite 200
Daytona Beach,FL 32114-1180 DeLand,FL 32724-4329 Gainesville,FL 32607-2063 Tallahassee,FL 32308-4386
Telephone:386-257-4100 Telephone:386-738-3300 Telephone:352-378-1331 Telephone:850-386-6184
Website:www.jmco.com I Email: info@jmco.com I Member of AGN International with offices in principal cities worldwide
Financial Condition and Management
Sections 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, require us to apply appropriate
procedures and report the results of our determination as to whether or not the Authority has met one or
more of the conditions described in Section 218.503(1), Florida Statutes, and to identify the specific
condition(s)met. In connection with our audits, we determined that the Authority did not meet any of the
conditions described in Section 218.503(1),Florida Statutes.
Pursuant to Sections 10.554(1)(i)5.c. and 10.556(8), Rules of the Auditor General, we applied financial
condition assessment procedures for the Authority. It is management's responsibility to monitor the
Authority's financial condition, and our financial condition assessment was based in part on
representations made by management and the review of financial information provided by same.
Section 10.554(1)(i)2.,Rules of the Auditor General,requires that we communicate any recommendations
to improve financial management. In connection with our audit,we had the following recommendation:
2018-003 Recording of Retainage Payable
During our audit, we noted the Authority did not record retainage payable on construction contracts
until the retainage amounts become due. For proper balance sheet presentation in the Authority's
financial statements in accordance with generally accepted accounting principles, we recommend
the Authority record all retainage payable and the related construction in progress on future
contracts as such amounts are incurred,regardless of when payments are expected to become due.
Additional Matters
Section 10.554(1)(i)3., Rules of the Auditor General, requires us to communicate noncompliance with
provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred,
that have an effect on the financial statements that is less than material but which warrants the attention of
those charged with governance. In connection with our audit,we did not note any such findings.
Clay County Utility Authority's Response to Findings
The Authority's response to the findings identified in our audit are described in the attached response to
findings as listed in the table of contents. The Authority's response was not subjected to the auditing
procedures applied in the audit of the financial statements and, accordingly,we express no opinion on it.
Purpose of this Letter
Our management letter is intended solely for the information and use of the Legislative Auditing
Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor
General, Federal and other granting agencies, and applicable management and the Board of Supervisors,
and is not intended to be and should not be used by anyone other than these specified parties.
))94"4# 1A4 WV ‘,1 6). i_ ,
C
Daytona Beach,Florida
December 21, 2018
-27 -
J11James Moore
Certified Public Accountants and Consultants
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Supervisors,
Clay County Utility Authority:
We have examined the Clay County Utility Authority's (the Authority) compliance with Section 218.415,
Florida Statutes, Local Government Investment Policies, for the year ended September 30, 2018. The
Authority's management is responsible for the Authority's compliance with those requirements. Our
responsibility is to express an opinion on the Authority's compliance based on our examination.
Our examination was conducted in accordance with attestation standards established by the American
Institute of Certified Public Accountants. Those standards require that we plan and perform the
examination to obtain reasonable assurance about whether the Authority complied with Section 218.415,
Florida Statutes, Local Government Investment Policies, for the year ended September 30, 2018, in all
material respects. An examination involves performing procedures to obtain evidence about the
Authority's compliance with those requirements. The nature,timing, and extent of the procedures selected
depend on our judgment, including an assessment of risks of material noncompliance with those
requirements, whether due to fraud or error. We believe that the evidence we obtained is sufficient and
appropriate to provide a reasonable basis for our opinion.
In our opinion, the Clay County Utility Authority complied, in all material respects, with the
aforementioned requirements for the year ended September 30,2018.
sal4s4, Ow f (0. , ?.L.
Daytona Beach,Florida
December 21, 2018
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121 Executive Circle 133 East Indiana Avenue 5931 NW 1st Place 2477 Tim Gamble Place,Suite 200
Daytona Beach,FL 32114-1180 DeLand,FL 32724-4329 Gainesville,FL 32607-2063 Tallahassee,FL 32308-4386
Telephone:386-257-4100 Telephone:386-738-3300 Telephone:352-378-1331 Telephone:850-386-6184
Website:www.jmco.com I Email: info@jmco.com I Member of AGN International with offices in principal cities worldwide
0. c UNT Clay County Utility Authority$
G 3176 old Jennings Road Working together to
protect public health,
Middleburg,Florida 32068-3907 conserve our natural
G Telephone(904)213-2428 resources,and create
It 00 Facsimile(904)213-2429 long-term value for
IrY AUTO our ratepayers.
MEMO TO:
The Board of Supervisors,
Clay County Utility Authority
The State Auditor General
THROUGH: Tom Morris,Executive Director
FROM: Jeffrey S. Wesselman, Chief Financial Officer
DATE: December 21,2018
SUBJECT:Reply to the Independent Auditors' Report on Internal Control and Management Letter
Comments for Fiscal Year Ended September 30,2018
FINANCIAL STATEMENT FINDINGS
2018-001 Cash: Reconciling Statements Regularly
Management concurs with this comment and recommendation that the operating bank account be reconciled
monthly to the general ledger in a similar manner to the other bank accounts and that all suspicious
reconciling items be promptly investigated and adjusted with adequate explanations.
2018-002 Recording of Retainage Payable
Management concurs with this comment and recommendation to record all retainage payable on future
contracts as such amounts are incurred,regardless of when expected to become due.
2018-003 Accounts Receivable and Revenue
Management concurs with this comment and recommendation that the accounts receivable subsidiary system
be improved to ensure that accounts receivable balances are reconciled between the general ledger and the
subsidiary on a consistent and timely basis and differences investigated and resolved as soon as possible.
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