HomeMy WebLinkAbout2010-10-11 - Finance-Accounting Committee Meeting Agenda Packet
Yorba Linda
Water District
AGENDA
YORBA LINDA WATER DISTRICT
FINANCE-ACCOUNTING COMMITTEE MEETING
Monday, October 11, 2010, 4:00 PM
1717 E Miraloma Ave, Placentia CA 92870
COMMITTEE STAFF
Director John W. Summerfield, Chair Ken Vecchiarelli, General Manager
Director Ric Collett Stephen Parker, Finance Director
1. PUBLIC COMMENTS
Any individual wishing to address the committee is requested to identify themselves and state the matter on
which they wish to comment. If the matter is on this agenda, the committee Chair will recognize the individual for
their comment when the item is considered. No action will be taken on matters not listed on this agenda.
Comments are limited to matters of public interest and matters within the jurisdiction of the Water District.
Comments are limited to five minutes.
2. ACTION CALENDAR
This portion of the agenda is for items where staff presentations and committee discussions are needed prior to
formal committee action.
2.1. August 2010 Budget to Actual Results
Recommendation: That the Committee review, receive and file the August 2010
Budget to Actual Results.
2.2. August 2010 Monthly Investment Report
Recommendation: That the Committee receive and file the August 2010 Monthly
Investment Report.
2.3. Submission of Audit Reports
Recommendation: That the Committee recommend the Board of Directors receive
and file the FY 09110 Comprehensive Annual Financial Report, the Report on
Internal Control and the Communication To Those In Governance Letter.
3. DISCUSSION ITEMS
This portion of the agenda is for matters such as technical presentations, drafts of proposed policies, or similar
items for which staff is seeking the advice and counsel of the Committee members. This portion of the agenda
may also include items for information only.
3.1. Future Agenda Items and Staff Tasks
4. ADJOURNMENT
4.1. The next regular meeting of the Finance-Accounting Committee will be held on
November 8, 2010 at 4:00 p.m.
Items Distributed to the Committee Less Than 72 Hours Prior to the Meeting
Pursuant to Government Code section 54957.5, non-exempt public records that relate to open session agenda items
and are distributed to a majority of the Committee less than seventy-two (72) hours prior to the meeting will be available
for public inspection in the lobby of the District's business office located at 1717 E. Miraloma Avenue, Placentia, CA
92870, during regular business hours. When practical, these public records will also be made available on the District's
internet website accessible at http://www.ylwd.com/.
Accommodations for the Disabled
Any person may make a request for a disability-related modification or accommodation needed for that person to be
able to participate in the public meeting by telephoning the Executive Secretary at 714-701-3020, or writing to Yorba
Linda Water District, P.O. Box 309, Yorba Linda, CA 92885-0309. Requests must specify the nature of the disability and
the type of accommodation requested. A telephone number or other contact information should be included so the
District staff may discuss appropriate arrangements. Persons requesting a disability-related accommodation should
make the request with adequate time before the meeting for the District to provide the requested accommodation.
ITEM NO. 2.1
AGENDA REPORT
Meeting Date: October 11, 2010
To: Finance-Accounting Committee
From: Ken Vecchiarelli, General
Manager
Presented By: Stephen Parker, Finance Dept: Finance
Director
Prepared By: Delia Lugo, Senior Accountant
Subject: August 2010 Budget to Actual Results
STAFF RECOMMENDATION:
That the Committee review, receive and file the August 2010 Budget to Actual Results.
DISCUSSION:
Attached are the budget to actual summary results for the District broken out between the Water
Fund, Sewer Fund and combined. Overall, District revenue is trending below expectations due to
lower water consumption from cooler summer temperatures and higher conservation levels. This
negative trend is partially offset by lower than expected water purchases and by other operating
expenses trending slightly below budget.
. Water operating revenue is only 16.6% of annual budget, which is lower than normal for the
summer months, mostly due to the cooler than normal temperatures and higher water
conservation rates from our customers. The budget was based on 15% conservation and
through August customers are conserving over 21%, which is a 40% increase.
. Variable water costs as a percentage of the yearly budget are higher than operating revenues.
This is primarily the result of the District's operational strategy to purchase a higher
percentage of import water in the first six months of the fiscal year, to take advantage of the
current import water rates prior to Metropolitan Water District of Southern California's 7.5%
rate increase, which takes effect on January 1, 2011.
. The other expenses and revenues are generally on target with budgeted projections.
PRIOR RELEVANT BOARD ACTION(S):
On September 13, 2010 the Committee reviewed, received and filed the July 31, 2010 Budget to
Actual Results.
ATTACHMENTS:
Name: Des-- iption: Type:
Water Sewer August 2010.xls Water Sewer Consolidated Results Backup Material
Water August 2010.xls Water August 2010 Backup Material
Sewer _August _2010.xls Sewer August 2010 Backup Material
Yorba Linda Water District
Summary Financial Report
Water & Sewer Funds
For Two Months Ending August 31, 2010
Annual Actual YTD
Budget YTD through Under/(Over) % of
FY 10/11 Augsut 31, 2010 Budget Annual Budget
Revenue (Operating):
Water Revenue (Consumption & Flat Charge) $25,672,831 $4,266,755 $21,406,076 16.62%
Sewer Revenue 1,235,402 203,177 $1,032,225 16.45%
Other 714,221 137,982 $576,239 19.32%
Total Operating Revenue: 27,622,454 4,607,914 23,014,540 16.68%
Expenses (Operating):
Variable Water Costs (G.W., Import & Power) 12,667,236 2,893,425 9,773,811 22.84%
Salary Related Expenses 7,624,683 744,617 6,880,066 10.72%
Supplies & Services 3,996,585 678,895 3,317,690 16.99%
Depreciation &Amortization 5,017,876 865,887 4,151,989 17.26%
Total Operating Expenses: 29,306,380 5,182,824 24,123,556 17.68%
Operating Income (Loss) (1,683,926) (574,910) (1,109,016) 34.14%
Revenue (Non-Operating):
Interest and Investments 156,000 46,235 109,765 29.64%
Property Taxes 1,206,000 6,701 1,199,299 0.56%
Other 126,133 189,744 (63,611) 150.43%
Total Non-Operating Revenue: 1,488,133 242,680 1,245,453 16.31%
Expenses (Non-Operating):
Interest on Long Term Debt (1,940,954) (323,224) (1,617,730) 16.65%
Other Expense (103,193) (5,893) (97,300) 5.71%
Total Non-Operating Expenses: (2,044,147) (329,117) (1,715,030) 16.10%
Non-Operating Income (Loss) (556,014) (86,437) (469,577)
Net Income (Loss) ($2,239,940) ($661,347) ($1,578,593) 29.53%
Contributed Capital 145,860 649 145,211 0.44%
Capital - Direct Labor - (72,745) 72,745
Yorba Linda Water District
Water Fund
For Two Months Ending August 31, 2010
FY 2011 YTD % of
Annual August Actual Under/(Over) Annual
Budget 2010 YTD Budget Budget
Revenue (Operating):
Water Revenue (Residential) $ 17,248,481 $ 1,399,983 $ 2,653,301 $ 14,595,180 15.38%
Water Revenue (Commercial & Fire Det.) 1,522,341 181,542 339,337 1,183,004 22.29%
Water Revenue (Landscape/Irrigation) 3,588,335 447,507 840,619 2,747,716 23.43%
Water Revenue (Service Charge) 3,313,674 191,143 433,498 2,880,176 13.08%
Other Operating Revenue 701,089 14,600 136,421 564,668 19.46%
Total Operating Revenue: 26,373,920 2,234,775 4,403,176 21,970,744 16.70%
Expenses (Operating):
Variable Water Costs (G.W., Import & Power) 12,667,236 1,388,728 2,893,304 9,773,932 22.84%
Salary Related Expenses 6,809,598 479,968 655,930 6,153,668 10.70%
Supplies & Services:
Communications 376,576 14,041 36,047 340,529 9.57%
Contractual Services 707,007 47,249 143,994 563,013 20.37%
Data Processing 109,596 159 2,170 107,426 1.98%
Dues & Memberships 30,778 680 703 30,075 2.28%
Fees & Permits 44,020 2,426 3,394 40,626 7.71%
Board Election 72,800 - - 72,800 0.00%
Insurance 314,314 161,853 161,853 152,461 51.49%
Materials 337,766 42,119 71,129 266,637 21.06%
District Activities, Emp Recognition 11,648 620 620 11,028 5.32%
Maintenance 325,227 11,592 14,717 310,510 4.53%
Non-Capital Equipment 92,611 3,142 7,954 84,657 8.59%
Office Expense 39,221 1,220 2,744 36,477 7.00%
Professional Services 638,224 40,800 95,902 542,322 15.03%
Training 45,735 1,705 3,361 42,374 7.35%
Travel & Conferences 40,602 666 1,072 39,530 2.64%
Uncollectible Accounts 45,955 5,612 5,612 40,343 12.21%
Utilities 111,930 9,687 25,115 86,815 22.44%
Vehicle Equipment 285,877 12,759 32,748 253,129 11.46%
Supplies & Services Sub-Total 3,629,887 356,330 609,135 3,020,752 16.78%
Depreciation & Amortization 4,403,257 382,958 766,357 3,636,900 17.40%
Total Operating Expenses 27,509,978 2,607,984 4,924,726 22,585,252 17.90%
Operating Income (Loss) (1,136,058) (373,209) (521,550) (614,508) 45.91%
Revenue (Non-Operating):
Interest 142,000 21,651 42,191 99,809 29.71%
Property Taxes 1,206,000 6,407 6,407 1,199,593 0.53%
Other Non-Operating Revenue 100,687 87,153 182,281, (81,594) 181.04%
Total Non-Operating Revenue: 1,448,687 115,211 230,879 1,217,808 15.94%
Expenses (Non-Operating):
Interest on Long Term Debt (1,940,954) (161,612) (323,224) (1,617,730) 16.65%
Other Expense (102,193) (2,947) (5,893) (96,300) 5.77%
Total Non-Operating Expenses: (2,043,147) (164,559) (329,11
:77)(l 714,030) 16.11°k
Non-Operating Income (Loss) (594,460) (49,348) (98,238) (496,222) 16.53%
Total Income (Loss) $ (197309518) $ (4229557) $ (6199788) (1,110,730) 35.82%
Contributed Capital $ 92,807 $ 649 $ 649 $ 92,158 0.70%
,Capital - Direct Labor $ 29,370 $ 72,505 $ 72,505
Yorba Linda Water District
Sewer Fund
For Two Months Ending August 31, 2010
FY 2011 YTD % of
Annual August Actual Underi(Over) Annual
Budget FY 2010 YTD Budget Budget
Revenue (Operating):
Sewer Charge Revenue $ 1,132,574 $ 85,577 $ 203,177 $ 929,397 17.94%
Locke Ranch Assessments 102,828 - - 102,828 0.00%
Other Operating Revenue 13,132 1,050 1,561 11,571 11.89%
Total Operating Revenue: 1,248,534 86,627 204,738 1,043,796 16.40%
Expenses (Operating):
Variable Costs (Power) 700 121 121 579 17.29%
Salary Related Expenses 815,085 62,171 88,687 726,398 10.91%
Supplies & Services:
Communications 39,284 1,383 3,559 35,725 9.06%
Contractual Services 61,478 3,681 12,013 49,465 19.54%
Data Processing 10,839 16 215 10,624 1.98%
Dues & Memberships 3,340 67 69 3,271 2.07%
Fees & Permits 6,382 196 892 5,490 13.98%
Board Election 7,200 - 0 7,200 0.00%
Insurance 31,086 16,007 16,007 15,079 51.49%
Materials 18,849 421 6,059 12,790 32.14%
District Activities 1,152 61 61 1,091 5.30%
Maintenance 41,973 4,529 4,739 37,234 11.29%
Non-Capital Equipment 20,509 251 663 19,846 3.23%
Office Expense 3,879 121 257 3,622 6.63%
Professional Services 67,176 4,715 10,590 56,586 15.76%
Training 5,314 74 623 4,691 11.72%
Travel & Conferences 4,348 62 98 4,250 2.25%
Uncollectible Accounts 4,545 555 555 3,990 12.21%
Utilities 11,070 958 2,484 8,586 22.44%
Vehicle Equipment 28,273 7,701 10,876 17,397 38.47%
Supplies & Services Sub-Total 366,697 40,798 69,760 296,937 19.02%
Depreciation & Amortization 614,619 49,765 99,530 515,089 16.19%
Total Operating Expenses 1,797,101 152,855 258,098 1,539,003 14.36%
Operating Income (Loss) (548,567) (66,228) (53,360) (495,207) 9.73%
Revenue (Non-Operating):
Interest 14,000 1,965 4,044 9,956 28.89%
Property Taxes - 294 294 (294) 0.00%
Other Non-Operating Revenue 25,446 1,528 7,463 17,983 29.33%
Total Non-Operating Revenue: 39,446 3,787 11,801 27,645 29.92%
Expenses (Non-Operating):
Other Expense 1,000 - - 1,000 0.00%
Total Non-Operating Expenses: 1,000 - - 1,000 0.00%
Non-Operating Income (Loss) 40,446 3,787 11,801 28,645 29.18%
Total Income (Loss) $ (508,121) $ (62,441) $ (41,559) $ (466,562) 8.18%
Contributed Capital $53,053 - $53,053 0.00%
Capital - Direct Labor - (240) (240) $240 0.00%
ITEM NO. 2.2
AGENDA REPORT
Meeting Date: October 11, 2010
To: Finance-Accounting Committee
From: Ken Vecchiarelli, General Manager
Presented By: Stephen Parker, Finance Director Dept: Finance
Prepared By: Delia Lugo, Senior Accountant
Subject: August 2010 Monthly Investment Report
SUMMARY:
Government Code Section 53607, et, seq., requires the person delegated to invest funds to make a quarterly
report of the investments to the legislative body.
STAFF RECOMMENDATION:
That the Committee receive and file the August 2010 Monthly Investment Report.
DISCUSSION:
Staff is submitting the August 2010 Monthly Investment Report for your review and approval. The Investment
Portfolio Report presents the market value and percent yield for all the District investments by institution. The
Investment Report Summary includes budget and actual interest and average term portfolio information, as
well as market value broken out by reserve categories.
The Investment Report reflects the transfer of funds from the Money Market to the Medium Term accounts for
all active accounts at CaITRUST. This transfer between account types will have a direct impact on Interest
Income due to the significant difference in the account type yields. The result of these transfers will initially be
reflected in the statements ending September 30, 2010. Staff would like to point out that transfers have been
made to redistribute reserve funds as recommended to the Board in conjunction with the Board's adoption of
Resolution 10-12 which created a financial reserves policy. The changes that were made transferred money
from Sewer Operating Fund to Sewer Emergency Fund to allow the maximum target of $1,000,000 to be
made. The remaining portion of funds being transferred out of the Sewer Operating Fund went to the Sewer
Capital Project Fund. As a result of the redistribution, Sewer revenues that are currently being transferred
monthly to the Sewer Emergency Fund will now be distributed to the Sewer Capital Project Fund.
PRIOR RELEVANT BOARD ACTION(S):
Monthly Investment Reports are presented to the Finance-Accounting Committee on a regular basis.
Quarterly Investment Reports are presented to the Board of Directors. The Investment Report for the month
ended July 31, 2010 was received and filed by the Finance-Accounting Committee on September 13, 2010.
The Investment Report for the quarter ended June 30, 2010 was received and filed by the Board of Directors
on August 26, 2010.
ATTACHMENTS:
Name: Description: Type:
Invst_Rpt 8-10.xlsx Portfolio Report Backup Material
Agenda 10-11_backup-August_2010.docx Agenda Backup Backup Material
Yorba Linda Water District
Investment Portfolio Report
August 31, 2010
Market % Percent
Value Cost of Total Institution Yield
Cash & Checking Accounts:
$ 855,411 $ 855,411 Wells Fargo Bank
$ 855,411 $ 855,411 2.56% Total 0.00%
Money Market Accounts:
$ 905,884 $ 905,884 Wells Fargo Money Market 0.30%
$ 905,884 $ 905,884 2.71% Total 0.30%
$ 1,761,294 $ 1,761,294 5.26% Sub-total 0.30%
Money Market Account:
$ 9,715,171 $ 9,715,171 US Bank 2008 Revenue Bond 0.20%
$ 9,715,171 $ 9,715,171 29.04% 0.20%
CaITRUST
$ 281 $ 281 Heritage Money Market Fund 0.24%
$ 4,398,517 $ 4,385,337 Ca1TRUST Short Term 0.56%
$ 17,583,828 $ 17,410,335 Ca1TRUST Medium Term 1.30%
$21,982,625 $21,795,953 65.71% 1.15%
$ 33,459,090 $ 33,272,418 100.00% Sub Total Investments 0.84%
$ 33,459,090 $ 33,272,418 100% Total Investments 0.84%
Per Government Code requirements, the Investment Report is in compliance with the Yorba
Linda Water District's Investment Policy, and there are adequate funds available to meet
budgeted and actual expenditures for the next six months.
Delia Lugo, Senior Accountant
8/31/10
Investment Report Summary
Below is a chart summarizing the yields as well as terms and maturities for the month of August
2010:
Avg. Portfolio Avg. Portfolio # of Avg. Term
Month Yield Without Yield With Days to of Portfolio
of 2010 CaITRUST CaITRUST Maturity in Days
August 0.21% 0.84% 368 245
Below is a chart comparing operating fund interest for current and prior fiscal years.
Actual Interest 8/31/09 8/31/10
Monthly - August $21,811 $23,616
Year-to-Date $38,029 $46,233
Budget 2009/2010 2010/2011
Interest Budget, August YTD $21,317 $25,700
Interest Budget, Annual $127,900 $154,200
Interest earned on investments is recorded in the Fund that owns the investment.
Investment Summary Comparison
The distribution of investments in the portfolio both in dollars and as a percentage of the total
portfolio by funds is as follows:
Fund Description Balance 8/31/10
Water Operating $ 94,409 0.28%
Water Emergency Reserve 2,065,935 6.13%
Water Capital Project Reserve 18,289,141 54.23%
Water Reserve for Debt Service 1,630,001 4.83%
COP Revenue Bond 2008 - Reserve 2,147,096 6.37%
COP Revenue Bond 2008 7,568,074 22.44%
Sewer Operating 347,042 1.04%
Sewer Emergency Reserve 1,002,423 2.97%
Sewer Capital Project Reserve 577,913 1.71%
$33,722,034 100.00%
Wells Fargo Bank Checking
Water Operating (248,482)
Sewer Operating 1( 4,462)
26( 2,944)
Total 33.459.090
ITEM NO. 2.3
AGENDA REPORT
Meeting Date: October 11, 2010 Budgeted: N/A
To: Finance-Accounting Committee
Funding Source: N/A
From: Ken Vecchiarelli, General
Manager
Presented By: Stephen Parker, Finance Dept: Finance
Director
Reviewed by Legal: N/A
Prepared By: Stephen Parker, Finance CEQA Compliance: N/A
Director
Subject: Submission of Audit Reports
STAFF RECOMMENDATION:
That the Committee recommend the Board of Directors receive and file the FY 09/10
Comprehensive Annual Financial Report, the Report on Internal Control and the Communication To
Those In Governance Letter.
DISCUSSION:
Staff is pleased to present the Finance-Accounting Committee with Yorba Linda Water District's first
Comprehensive Annual Financial Report, which will be submitted for recognition and consideration
of an award from the Government Finance Officers Association.
Diehl Evans & Company, LLP, the District's external auditors, have completed their audit of the
Yorba Linda Water District for the fiscal year ending June 30, 2010, and have rendered an
unqualified (clean) opinion in the attached Comprehensive Annual Financial Report. They also
identified no internal control findings that rose to the level of a significant deficiency as documented
in the attached Report on Internal Control. Lastly, they have reported required disclosures to the
Finance-Accounting Committee in the Communication To Those In Governance.
ATTACHMENTS:
Name: Description: 1 ype:
6.30.10 CAFR.pdf FY 09/10 Comprehensive Annual Financial Report Backup Material
6.30.10 Report on Internal Control.pdf FY 09/10 Report on Internal Control Backup Material
6.30.10 Communication To Those In Governance.pdf FY 09/10 Communication to Those In Governance Backup Material
YORBA LINDA WATER DISTRICT
of Yorba Linda, California
Comprehensive Annual Financial Report
.
WITH REPORT ON AUDIT BY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
FOR THE YEAR ENDED JUNE 30, 2010
Prepared by:
The Yorba Linda Water District Finance Department
Stephen Parker, CPA - Finance Director
Delia Lugo, Senior Accountant
JoAnn Gitmed, Accounting Assistant II
and
Cindy Botts, Management Analyst
YORBA LINDA WATER DISTRICT
TABLE OF CONTENTS
For the year ended June 30, 2010
Page
Number
INTRODUCTORY SECTION:
Letter of Transmittal i
Board of Directors and Executive Staff xiii
Organization Chart xiv
District Boundaries xv
FINANCIAL SECTION:
Independent Auditors' Report 1
Management's Discussion and Analysis
(Required Supplementary Information) 3
Basic Financial Statements: 11
Combined Statements of Net Assets 12
Combined Statements of Revenues, Expenses
and Changes in Net Assets 14
Combined Statements of Cash Flows 15
Notes to Basic Financial Statements 17
Required Supplementary Information: 43
Other Post-Employment Benefit Plan - Schedule
of Funding Progress 44
Supplementary Information: 45
Combining Schedule of Net Assets 46
Combining Schedule of Revenues, Expenses and
Changes in Net Assets 48
Combining Schedule of Cash Flows 49
Schedule of Operating Expenses by Cost Center and
Nature of Expenses for Water and Sewer 51
Schedule of Capital Assets 52
YORBA LINDA WATER DISTRICT
TABLE OF CONTENTS
(CONTINUED)
For the year ended June 30, 2010
Page
Number
STATISTICAL SECTION: 53
Description of Statistical Section 55
Financial Trends:
Changes in Net Assets 56
Revenue Capacity:
Number of Connections 58
Ten Largest Customers 59
Debt Capacity:
Ratio of Outstanding Debt 60
Debt Coverage 61
Demographic and Economic Information:
Demographics 62
Ten Largest Employers 63
Operating Information:
Number of Employees 64
Operating and Capacity Indicators 65
INTRODUCTORY SECTION
Yorba Linda
Water District
September 15, 2010
Members of the Board of Directors
Yorba Linda Water District
Introduction
It is our pleasure to submit Yorba Linda Water District's Comprehensive Annual Financial
Report (CAFR) for the fiscal year ending June 30, 2010. This report was prepared pursuant to the
guidelines set forth by the Governmental Accounting Standards Board (GASB).
District staff prepared this financial report in conjunction with an unqualified "clean" opinion
issued by Diehl, Evans & Company, LLP. The independent auditor's report is located at the front
of the financial section of this report. Management's discussion and analysis (MD&A)
immediately follows the independent auditor's report and provides a narrative introduction,
overview and analysis of the basic financial statements. MD&A complements this letter of
transmittal and should be read in conjunction with it.
This report consists of management's representations concerning the finances of Yorba Linda
Water District. Consequently, management assumes full responsibility for the completeness and
reliability of the information presented in this report. To provide a reasonable basis for malting
these representations, management of the District has established a comprehensive internal
control framework that is designed both to protect the District's assets from loss, theft or misuse,
and to compile sufficient reliable information for the preparation of the District's financial
statements in conformity with generally accepted accounting principles (GAAP). Because the
cost of internal control should not outweigh their benefits, the District comprehensive framework
of internal controls has been designed to provide reasonable rather than absolute assurance that
the financial statements will be free from material misstatement. As management, we assert that,
to the best of our knowledge and belief this financial report is complete and reliable in all
material aspects.
This report is organized into three sections: (1) Introductory (2) Financial and (3) Statistical. The
Introductory section offers general information about the District's organization and current
District activities along with reports on a summary of significant financial results. The Financial
section includes the Independent Auditors' Report, Management's Discussion and Analysis of
the District's basic financial statements, and the District's audited basic financial statements with
accompanying Notes. The Statistical section includes a ten-year history of financial trends,
revenue and debt capacity, demographic and other operating information in table and graphical
format.
i
District Structure and Leadership
The Yorba Linda Water District is an independent special district, which operates under the
authority of Division 12 of the California Water Code. The Yorba Linda Water District has been
providing water and sewer services to the residents of the City of Yorba Linda, portions of
Placentia, Brea, Anaheim, and nearby unincorporated areas since 1959, the year it was formed to
take over the assets and water service responsibilities of the Yorba Linda Water Company, a
mutual formed in 1909. The District is governed by a five-member Board of Directors, elected at
large from within the District's service area. The General Manager administers the day-to-day
operations of the District in accordance with policies and procedures established by the Board of
Directors. The Yorba Linda Water District employs a full-time staff of 76 employees. The
District's Board of Directors meets on the second and fourth Thursday of each month. Meetings
are publicly noticed and citizens are encouraged to attend.
The District provides water, sewer or a combination of both services to residents and businesses
within its service area, which includes approximately 14,475 acres of land comprising 22.6
square miles. The District serves a population of approximately 75,000 and currently provides
water service through approximately 23,850 residential, commercial, and light industrial
connections.
District Services
Residential customers make up approximately 92% of the District's customer base and consume
approximately 72% of the water provided annually by the District. The District obtains about
half of its water supply from the Metropolitan Water District (MWD) through the Municipal
Water District of Orange County (MWDOC) and the other half from groundwater wells within
the area. In 2009 and 2010, the District provided 23,417 acre-feet and 20,162 acre-feet of water
to customers, respectively.
The District's service area is known for having larger than average residential lots and more than
30 horse trails of more than 100 miles of aggregate length. In 2005, CNN ranked the City of
Yorba Linda as 21" among the best places in the United States to live. Similarly, in an article by
CNN Money, the City of Yorba Linda was listed as one of the most affluent cities in the United
States, as well as the highest median income in Orange County, as reported by 2000 Census data,
based on towns between 65,000 and 250,000 in population.
Economic Condition and Outlook
The District's administrative offices are located in the City of Placentia in Orange County. The
economic outlook for the area is one of very slow growth, which is projected to continue through
2011 because of the ongoing financial crisis and the somewhat distressed housing market.
ii
California's water supply continues to be a concern due to projected population increases and
drought conditions. This concern has increased focus on the need for conservation as well as
more efficient irrigation methods and systems. Within the District's boundaries, population
growth is expected to increase only minimally in the next 5-10 years, as more than 50% of the
current households have children under the age of 18 who are not expected to add to this growth
via newborns. Additionally, the District's area is primarily "built out", and an influx of residents
from outside the area is expected to remain fairly low. The State of California, however, is
expected to grow by 20 million people over the next 40 years.
In June 2008, the Governor responded to severe cuts in water allocation by declaring a statewide
drought, which directed his state agencies and departments, including the California Department
of Water Resources, to take immediate action to address the serious drought conditions and
water delivery reductions that exist in California. Additionally, as part of this declaration, he
instituted the "20 by 2020" initiation, which requires agencies to reduce their usage by twenty
percent by the year 2020.
Simultaneously with the rising cost of import water, the District is also limited with the amount
of water it is able to provide to customers without paying significant penalties. In essence, a
water allocation has been placed on the District by MWDOC, which amounts to a reduction of
water usage of 10% below the District's average water use for calendar years 2004-2006.
Failure to remain within this allocation results in substantial penalties. While allocations were
anticipated, the District implemented a conservation ordinance effective July 1, 2009 placing
restrictions and curtailing excessive water use.
As of the end of the fiscal year 2009/10, the ordinance has proven to be successful with District
customers reducing water usage by an overwhelming 18%. With this trend, the District is
optimistic water usage will remain within allocation, penalties will be avoided and the District's
will reach the State's "20 by 2020" mandate.
Table 1- Historical Water Use
0--1110r is
Fiscal
Cons % Change
Consumed
Year (Acre -ft) (from prev. yr)
2004/05 21,611.5
2005/06 23,032.9 6%
2006/07 25,656.5 100/0
2007/08 19,843.3 -29%
2008/09 23,416.8 150/0
iii
Water Conservation Programs
The District has implemented conservation management practices since the late 1980's. District
staff participates in community events and distributes informational materials to encourage water
conservation. Through a partnership program with MWDOC, the District offers the following
conservation programs offering rebates for purchase and installation of:
Weather-based Irrigation Landscape Controllers
Rotating Irrigation Nozzles
High Efficiency Clothes Washers
In addition to these programs, the District also implemented a Water Conservation Ordinance on
July 1, 2009. The ordinance focuses on water use efficiency through the prohibition of wasteful
practices and the establishment of water conservation stages. During fiscal year 2009/10, the
District remained at a Stage 2: Moderate Water Shortage Condition, in sync with MWD's water
shortage stage.
Water Conservation Stages
Stage 1 Minimum Water Shortage
Reduce usage by 10%
ModerateWater Shortage
II Stage 2 Reduce usage by 10% - 20%
Stage 3 Severe Water Shortage
Reduce usage by 20-35%
Mission/Vision Statement and Maior Initiatives
The activities of the Board and staff of the District are driven by its Mission Statement: "To
provide reliable, high quality water and sewer services in an environmentally responsible manner
at the most economical cost to our customers", and its Vision Statement: "Yorba Linda Water
District will become the premier self-sufficient source for reliable water, sewer and related
services in the communities it serves." The Mission and Vision Statements dictate the following
six major initiatives of the District.
1. To supply clean, wholesome water to the community and provide water for the future.
2. To plan, construct, operate, maintain and upgrade the water system facilities to reliably
serve customer needs.
3. To Utilize the District's financial resources in an effective and prudent manner.
4. To provide high quality customer service for District customers.
5. To inform, educate, and communicate with the community on District and water issues
including conservation awareness.
6. To review and maintain a plan to be proactive in preventative maintenance of the
District's water and sewer systems.
iv
Major Accomplishments during FY 2009/10
In FY 2009/10, the Board of Directors approved a Five-Year Capital Improvement Program for
2009 to 2014 with a combined total of S44AM. Of that amount, an estimated S18.2M was
budgeted for FY 2009/10 for projects in planning, design and construction. Those projects
included the following:
Highland Reservoir
The new 511.2M Highland Reservoir, in use as of July 2010, provides six million gallons of
potable water storage and is expected to be fully completed by September 2010. The buried,
reinforced concrete reservoir serves the most southerly part of the District and is designed with
provisions for expansion to nine million gallons. The new reservoir, considered to be the hub of
water storage for the District's groundwater transmission facilities, replaced the Highland
Reservoir, originally constructed in 1911.
t
(Highland Reservoir in construction)
Zone Reconfiguration Project
Approximately 800 homes located within the District's Pressure Zone 3A were observed to have
low water pressures during certain times of the year. The condition occurred in periods of high
water demands within three locations of the service area. This SLIM pipeline project separated
and created a new zone for those homes with higher water pressure throughout the year. The
project included the installation of approximately 8,500 feet of new pipeline and various valves.
This project was completed in November 2009.
San Antonio Pressure Regulating Station Upgrade Project
Located on San Antonio Road, this 5250,000 upgrade project consisted of replacing outdated
pressure regulating valves, piping and controls. This underground facility will regulate pressure
and flow to the new service subarea created by the Zone Reconfiguration Project. The vault has
also been improved with better access, lighting, ventilation, remote controls and telemetry. This
project was completed in October 2009.
v
Hidden Hills Reservoir Project
Located at the top of Hidden Hills Road, this S7M project will provide more efficient operation
in the District's highest pressure zones within the Hidden Hills area. The project includes
construction of a two million gallon buried concrete reservoir and improvements to the Santiago
Booster Pump Station. It is currently in use and will be fully completed by September 2010.
y
(Lakeview Reservoir in Construction)
Lakeview Sewer Lift Station Replacement
The District's only sewer lift station is located within the County of Orange Flood Control area
known as the Yorba Linda Lakebed and "lifts" the wastewater collected up to an area where it
can be incorporated along with other District wastewater flows and ultimately drain, via gravity
flow, into the Orange County Sanitation District (OCSD) sewer pipelines. The sewer lift station
was fully retrofitted at a cost of S200,000 with new larger pumps, a new control system and an
upgraded electrical supply. Construction was completed in November 2009.
Highland Booster Pump Station Replacement
The Highland Booster Pump Station Replacement project allows the District to reliably pump up
to 18,000 gallons per minute of water from the adjacent 6 million gallon Highland Reservoir to
customers in the largest pressure zone served by the District and up to the Lakeview Reservoir.
A feasibility study was completed in early 2009 and the project design plans were completed in
June 2010. Construction of the S7M project is scheduled to start in October 2010 with
completion in late 2011.
vi
Solar Panel Pilot Program
The District installed a photovoltaic solar panel system on the roof of its administration building
in April 2010. This system will convert DC electric current from the solar panels to AC electrical
power and ultimately reduce the building's electricity bills by approximately twenty percent,
reduce atmospheric emissions and serve as a test site for future renewable energy solutions at
other District facilities. The solar panels will generate approximately 31,500 watts of power
annually, which equates to about 20% of the District's usage at the new headquarters.
District Well Projects
The District's water demand is approximately 22,000 to 24,000 acre-feet per year. Of that total,
approximately half is pumped from the groundwater basin and the remainder is imported water
purchased through MWDOC. The cost of groundwater, including the cost of pumping, is about
half the cost of imported water. As such, the District is working to ensure it can pump its full
allotment of groundwater. To do so, it must fully utilize its existing wells, optimize their
capacity, and construct new wells when necessary. In this regard, the CIP includes various well
projects, including the following:
• Wells 1, 5 and 12 Upgrade Project
The District refurbished Wells 1, 5 and 12 located close to District headquarters. These
wells have a combined capacity of approximately 5,000 gallons per minute. These wells
were originally drilled between 1934 and 1950 and were refurbished to increase capacity
and service life. Refurbishment results in continued groundwater production, enabling the
District to reduce the use of more expensive imported water.
• Well 20 Project
This project includes construction of a new groundwater production well near existing
Well 11, located at the southerly end of Richfield Road. Well 11 was drilled in 1934 and
was relined in the 1990's, but has recently become less productive due to age and wear.
Well 20, at a cost of approximately S2M, will provide an estimated 2,000 gallons per
minute of groundwater production. It will improve the District's capability to produce its
full allotment of groundwater in place of the more expensive imported water.
Construction should be completed by September 2011.
• West Wellfield Project
Initial work has commenced on potential locations and feasibility of a proposed West
Wellfield Project. The project concept consists of three to four groundwater wells located
westerly of the District's service area in Anaheim, CA. Information available from
Orange County Water District indicates that the groundwater basin and aquifer is deeper
and more productive further west than the District's current well locations. Consultants
have been retained to evaluate water quality and quantity in the area, and to identify
potential well sites, south of Mira Loma Avenue and west of Tustin Avenue. The
combined capacity of these new wells may yield 6,000 to 8,000 gallons per minute. This
new groundwater production will enable the District to reduce dependence on some of its
older wells and to improve its overall groundwater production in place of more expensive
imported water. This project may take three or four years to implement at a cost of
approximately S9M.
vii
Additional major accomplishments in FY 2009/10 include:
Asset Management Master Plan
The District completed an Asset Management Plan (AMP) in May 2010. The plan identifies all
of the District's capital assets, the current condition of each, the risk profiles, and the long-term
rehabilitation and replacement (R&R) funding requirements. A proposed funding policy to
maintain the District's assets on an ongoing basis, based on the AMP recommendation was
approved by the District Board of Directors in July 2010.
Technological Advancements
From FY 2008/09 to the present, the District has continued to implement a series of
technological improvements including hardware and software system integrations. By ensuring
that the District remains current with technology improvements, efficiency gains have been
achieved, which include centralizing key information, reducing or eliminating inefficient,
redundant manual processes, and updating software to industry standards.
One of the largest advancements is the implementation of a new financial software package,
which will allow for a streamlined, computerized and centralized approach to the general ledger,
accounts payable, inventory, purchase orders, payroll, project accounting, bank reconciliation
and budgeting processes. A new and advanced Utility Billing software system has also been
implemented, with access to customer history and consumption information, which also offers
improved integration with online bill pay, backflow device maintenance and tracking, and
integration with the District's Geographical Information System (GIS).
Reserve Policy
Adoption of a financial reserves policy is a critical component of responsible public governance.
The District's reserve policy establishes written goals and objectives and provides guidelines for
managing funding and use of the District's financial reserves. Together with the recent Asset
Management Plan (AMP), the preparation of a cost of service and alternative rate structure study,
and the development of a five year financial plan; the reserves policy is an important pillar in the
overall financial planning process. A formal reserve policy also demonstrates to the public and
the District's stakeholders that the District continues to manage its current and future financial
obligations in a prudent and fiscally responsible manner.
Risk Management
The District is a member of the Association of California Water Agencies Joint Power Insurance
Authority (JPIA). The purpose of the JPIA is to arrange and administer programs of insurance
for the pooling of self-insured losses and to purchase excess insurance coverage. Additionally,
the District has assigned responsible charge of risk management activities within the Human
Resources Department and has reactivated a Safety Committee of employees from different
departments to better focus on internal safety measures, reinforce safety training and to decrease
risk both within and outside the District.
viii
Future Years
Amidst the national economic turmoil and the California state budget crisis, our region continues
to face water supply issues due to extended drought seasons, as well as judicial, environmental
and regulatory restriction. First and foremost, we continue to monitor the State's budget shortfall
and potential shift of our property tax revenues. Secondly, with water conservation and reduced
water sales, our ability to maintain a high level of services while holding costs down, has been
seriously challenged. The slump in the real estate market in our region has also caused lower
connection fee revenues and slower increases in the projected future water demands. As a result
we have adjusted our ten year capital improvement plan to reflect the anticipated slower growth
in future years.
Water Rate & Increases
In FY 2009/2010, YLWD charged a uniform commodity rate of S2.52 per unit and a monthly
fixed charge of 510.20 for all sizes of meters. One unit of water equals 748 gallons, equating one
gallon of water to approximately 50.0034 (one third of a cent). At an average of 30 units of water
per month (approximately 22,500 gallons), a typical YLWD customer would pay about S87 on
the average for their monthly water bill. YLWD also provides wastewater service to
approximately two-thirds of the District's customer base, at an additional charge of S5.50 per
month.
In FY 2010/11, Yorba Linda Water District faces many challenges related to water supply and
demand. The District's water supply is currently derived by both groundwater and import water,
approximately 50% from each source. As drought conditions have worsened, the cost of import
water has significantly increased by unprecedented amounts. With limited water available to
recharge the groundwater basin, pumping restrictions have also increased which has lowered the
amount of the cheaper groundwater we can utilize in our supply portfolio.
Both import and groundwater prices have dramatically increased over the past two fiscal years.
In January 2009, import water prices increased by 14.1% and another 19.7% in September 2009.
Effective January 1, 2011, import water costs will increase again by 7.5% and arc scheduled to
increase by an additional 7.5% in January 2012. These most recent increases alone have
translated to over S2M in additional costs in FY 2009/10. As a result, the District implemented a
41% water rate increase, beginning September 14, 2009. An additional pass-through rate
adjustment resulting from the January 2011 and 2012 import water rate increases, has prompted
the District Board to approve a monthly service charge increase to 511.73, beginning
August 1, 2010.
With the intent to develop a rate structure to support conservation and cquitability among
customers, the District developed a Request for Proposals to conduct a Cost of Service Analysis
and Alternative Water Rate Feasibility Study in November 2009. This study will address the
impacts of implementing a tiered water conservation rate structure and/or a budget-based water
rate structure for customers of the District. It is the District's goal for the study to be completed
and approved by the Board of Directors in December 2010, with potential for implementation
beginning July 1, 2011.
ix
Annexation Initiative
While 75% of the District's service boundary is within the territory of the Orange County Water
District (OCWD), the agency responsible for managing the groundwater basin, District Staff and
the Board will pursue annexation of the remaining 25%. The advantage of 100% annexation is a
substantial cost savings in the water the District produces from the groundwater basin. Currently,
the OCWD groundwater basin has a pumping limitation of 62% of each agency's annual
demands, which is applicable to all Orange County water agencies that arc completely annexed
within OCWD. Since only 75% the District's boundaries are within OCWD, this equates to a
47% pumping limitation. The remaining water is supplied through the more costly import water.
It is estimated that the District would reduce its water costs by over S1.OM per year if the entire
area is annexed into OCWD.
Enhanced Outreach & Communications
The District continues to enhance its communications with and presence within the community.
Within the FY 2009/10 Budget, the District has funded a newly formed position of a Public
Information Officer. This position develops additional public information and water conservation
programs with the overall goal of developing a more transparent image of the District to the
community. Additionally, it is the District's intent to develop a short-term and long-term public
information master plan.
In February 2009, the District formed a Citizens Advisory Committee to serve as ambassadors to
the community. On a monthly basis, the committee meets with District staff to discuss and
provide recommendations on various pending District issues. The committee has been actively
involved with issues such as the water rate increase, the water conservation ordinance,
continuing conservation outreach, public information, and various other matters as they arise.
The committee continues to meet and make recommendations to staff and to the Board of
Directors.
Sewer Master Plan
In FY 2009/10 the District budgeted for a Sewer Master Plan to supplement the current plan
completed in 1978. The revised plan is currently in progress and will identify existing sewer
facilities, develop and calibrate a hydraulic computer model, provide flow monitoring, identify
any existing system deficiencies, forecast deficiencies that may develop with future build out,
and provide recommendations for future improvements, repairs and replacements.
Future Technological Advancements
Future technological advancements include the incorporation of a Computerized Maintenance &
Management System (CMMS), which will automate and track all field work orders and provide
actual costs to perform work order related functions. An Automated Purchase Requisitioning
System, which would provide better workflow and approvals for purchasing items, as well has
have direct integration with the new financial software.
x
Internal Control Structure
District management is responsible for the establishment and maintenance of the internal control
structure that ensures the assets of the District are protected from loss, theft or misuse. The
internal control structure also ensures adequate accounting data is compiled to allow for the
preparation of financial statements in conformity with generally accepted accounting principles.
The District's internal control structure is designed to provide reasonable assurance that these
objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control
should not exceed the benefits likely to be derived, and (2) the valuation of costs and benefits
requires estimates and judgments by management.
Budgetary Control
The District Board of Directors adopts an operating and capital budget every year. The budget
authorizes and provides the basis for reporting and control of financial operations and
accountability for the District's enterprise operations and capital projects. The budget and
reporting treatment applied to the District is consistent with the accrual basis of accounting and
the financial statement basis.
Cash and Investment Management
In order of priority, the District's objectives when investing, reinvesting, purchasing, acquiring,
selling and managing public funds are as follows:
1. Safety: Safety of principal is the foremost objective of the investment program.
Investments made by the District are undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To attain this objective, diversification is
required to prevent any potential loss on any individual security or depository from
exceeding the income generated from the remainder of the portfolio.
2. Liquidity: The investment portfolio will remain sufficiently liquid to enable the District to
meet all operating requirements that might be reasonably anticipated.
3. Return on Investments: The investment portfolio shall be designed with the objective of
attaining a market rate of return throughout budgetary and economic cycles, taking into
account the investment risk constraints and the cash flow characteristics of the portfolio.
Audit and Financial Reporting
State Law and Bond covenants require the District to obtain an annual audit of its financial
statements by an independent certified public accountant. The accounting firm of Diehl, Evans
& Company, LLP has conducted the audit of the District's financial statements. Their
unqualified (clean) Independent Auditor's Report appears in the Financial Section.
xi
Other References
More information is contained in the Management's Discussion and Analysis and the Notes to
the Basic Financial Statements found in the Financial Section of the report.
Acknowledgements
Preparation of this report was accomplished by the combined efforts of District staff. We
appreciate the dedicated efforts and professionalism that these staff members contribute to the
District. We would also like to thank the members of the Board of Directors and especially the
Finance-Accounting Committee members for their continued support in planning and
implementation of the Yorba Linda Water District's fiscal policies.
Respectfully submitted,
Kenneth R. Vecchiarelli Stephen Parker
General Manager Finance Director
X11
Yorba Linda Water District
Board of Directors and Executive Staff
William R. Mills, President Michael J. Beverage, Vice-President
f
.Sy
x r
Z
John W. Summerfield Phil Hawkins Ric Collet
Director Director Director
Kenneth R. Vecchiarelli Pat Grady Stephen Parker
General Manager Asst. General Manager/ Finance Director
IT Director
S
Lee Cory Gina Knight Steven R. Conklin
Operations Manager Human Resources Engineering Manager
& Risk Manager
X111
Engineering
Manager
Sr. Project Engineering
Manager Secretary
Eng. Technician
Project If
Engineer
3 FTE
IIIIIIIII Sr. Accountant
' Accounting
Assistant I /II
2 FTE
■
YL
W
Finance
Director
Project
Engineer
Sr. Construction
Inspector
r
Construction
Inspector
RMCustomer Svc. Storekeeper
Supervisor
Customer Srv.
Rep. 1/11/111 Meter Services
Lead
4 FTE
Meter Reader
1 /11
4 FTE
Board of
Directors
General
Manager
Management
Analyst
HR & Risk
Assist. GM /IT
Director
Executive
Secretary
Operations Water Maint.
Chief Plant
G.I.S. Info. Systems S.C.A.D.A.
Water Quality
Technician Administrator Administrator
Engineer
Sr. Maintanance
.
Info. Systems
Dist. Operator Facilities
Technician 1 /11
WQ Technician
Maintenance
1 /11
2 PPE
I FTE
Management
Analyst
HR & Risk
Operations
Manager
Manager
HR Analyst Personnel Sr. Fleet
Operations Water Maint.
Chief Plant
Technician Mechanic
Assistant Superintendent
Operator
Mechanic
Sr. Maintanance
II /III
Dist. Operator Facilities
Sr. Plant
Maintenance
Operator
2 FTE
4 FTE
Maintanance Dist. Maintanance Dist. Maintanance
Plant Operator
Operator III Operator If Worker I
If
4 FTE 6 FTE Z FTE
3 FTE
i
r
1
A P&.
6fk
i
.9�I
$AWAMIX Rfv ER
DISTRICT BOUNDARIES
xv
qv
This page intentionally left blank
XVl
FINANCIAL SECTION
DIEHL, EVANS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
MW HALL R. LCDIN, CI'A
A I'AItI NLRSHII' INCLGDINCi ACCOI N 17\NCY C'ORPORAI IONS CI: V<j N'.'WRAKLR, CPA
NI I IN I'. PAI LL, CI'A
ROBLRH1 I. CALL1NAN, C'I'A
5 CORPORATE PARK, SUITE 100 'HIL11, HOLIKANIP.C1RA
'"fHOAI.1S .AA. I'LRLOlVS6, CCA
IRVINE, CALIFORNIA 92 606-5 1 65 H:v:VLY 1. SCHROLDLR,CPA
(949) 399-0600. FAX (949) 399-0610 KLNNLIH R. ANILS. CPA
W '
www.diehlcvlns.com ILMNI C. PEN I Z, C PA
September 15, 2010 ~ PROFFSSIONAL CORPORATION
INDEPENDENT AUDITORS' REPORT
Board of Directors
Yorba Linda Water District
Placentia, California
We have audited the basic financial statements of the Yorba Linda Water District (the District) as of
and for the year ended June 30, 2010 as listed in the table of contents. These basic financial statements
are the responsibility of the District's management. Our responsibility is to express an opinion on
these basic financial statements based on our audit. The prior year partial comparative information has
been derived from the financial statements of the District for the year ended June 30, 2009 and in our
report dated September 11, 2009, we expressed an unqualified opinion on these financial statements.
We conducted our audit 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, and the State Controller's Minimum
Audit Requirements for California Special Districts. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the District's internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the basic financial statements referred to above present fairly, in all material respects,
the financial position of Yorba Linda Water District as of June 30, 2010 and the results of its changes in
financial position and cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America, as well as the accounting systems prescribed by the
State Controller's Office and State regulations governing Special Districts.
-1-
OTIILR OFFICES AT 2965 ROOSLVLLT STRLLT 613 W. VALLLY PARKWAY- SUITL 330
CARLSBAD. CALIFORNIA 9200 ?389 LSC0NDID0_CALIFORNIA92025 ?598
(760) 729-2343 • FAX (760) 729-2234 (760) 741-3141 • FAX (760) 741-9890
In accordance with Government Auditing Standards, we have also issued our report dated
September 15, 2010 on our consideration of the District's internal control over financial reporting and
our tests of its compliance with certain provisions of laws, regulations, contracts, 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 and should be considered in assessing
the results of our audit.
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis and other post-employment benefit plan - schedule of funding
progress, as identified in the accompanying table of 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 the audit of the basic financial
statements. We do not express an opinion or provide any assurance on the information because the
limited procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance on them.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a
whole. The supplementary information listed in the table of contents is presented for purposes of
additional analysis and is not a required part of the basic financial statements of the District. 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. The information has
been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements of the District
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 information is fairly
stated in all material respects in relation to the basic financial statements taken as a whole.
Our audit was conducted for the purpose of forming an opinion on the District's basic financial
statements as a whole. The Introductory Section and Statistical Section are presented for purposes of
additional analysis and are not a required part of the basic financial statements. The Introductory
Section and Statistical Section have not been subjected to the auditing procedures applied in the audit
of the basic financial statements and, accordingly, we do not express an opinion or provide any
assurance on them.
-2-
YORBA LINDA WATER DISTRICT
MANA GEMENT'S DISCUSSION AND ANALYSIS
For the Year Ended June 30, 2010
The following Management's Discussion and Analysis ("MD&A") of activities and financial
performance of the Yorba Linda Water District ("District") provides an introduction to the financial
statements of the District for the fiscal year ended June 30, 2010. We encourage readers to consider the
information presented here in conjunction with the transmittal letter in the Introductory Section and
with the basic financial statements and related notes, which follow this section.
Financial Highlights
• The District's net assets increased by S5.1 million, or 3.45%.
• During the year the District's revenues were S25.9 million, up 8.75%, while expenses were
S27.4 million, up 0.34%.
• Capital contributions to the District amounted to S6.7 million.
Required Financial Statements
This annual report consists of a series of financial statements. The Statement of Net Assets, Statement
of Revenues, Expenses and Changes in Net Assets and Statement of Cash Flows provide information
about the activities and performance of the District using accounting methods similar to those used by
private sector companies.
The District's statements consist of two funds; the Water Fund and the Sewer Fund. The District's
records are maintained on an enterprise basis, as it is the intent of the Board of Directors that the costs
of providing water and sewer to the customer of the District are financed primarily through user
charges.
The Statement of Net Assets includes all of the District's investments in resources (assets) and the
obligations to creditors (liabilities). It also provides the basis for computing a rate of return, evaluating
the capital structure of the District and assessing the liquidity and financial flexibility of the District.
All of the current year's revenue and expenses are accounted for in the Statement of Revenues,
Expenses and Changes in Net Assets. This statement measures the success of the District's operations
over the past year and can be used to determine if the District has successfully recovered all of its costs
through its rates and other charges. This statement can also be used to evaluate profitability and credit
worthiness. The final required financial statement is the Statement of Cash Flows, which provides
infon-fiation about the District's cash receipts and cash payments during the reporting period. The
Statement of Cash Flows reports cash receipts, cash payments and net changes in cash resulting from
operations, investing, non-capital financing, and capital and related financing activities and provides
answers to such questions as where did cash come from, what was cash used for, and what was the
change in cash balance during the reporting period.
- 3 -
YORBA LINDA WATER DISTRICT
MANA GEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
For the Year Ended June 30, 2010
Financial Analysis of the District
One of the most important questions asked about the District's finances is, "Is the District better off or
worse off as a result of this year's activities?" The Statement of Net Assets and the Statement of
Revenues, Expenses and Changes in Net Assets report information about the District in a way that
helps answer this question. These statements include all assets and liabilities using the accrual basis of
accounting, which is similar to the accounting used by most private sector companies. All of the
current year's revenues and expenses are taken into account regardless of when the cash is received or
paid.
These two statements report the District's net assets and changes in them. You can think of the
District's net assets (the difference between assets and liabilities), as one way to measure the District's
financial health, or financial position. Over time, increases or decreases in the District's net assets are
one indicator of whether its financial health is improving or deteriorating. However, one will need to
consider other non-financial factors such as changes in economic conditions, population growth,
zoning and new or changed government legislation, such as changes in Federal and State water quality
standards.
Notes to the Basic Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in
the basic financial statements. The notes to the basic financial statements can be found on pages 18
through 42.
Statement of Net Assets
Condensed Statements of Net Assets
2010 2009 Change
Ass ets :
Current unrestricted assets S 13,259,954 S 15,461,086 S (2,201,132)
Current iestricted assets 26,908,949 36,076,326 (9,167,377)
Other assets 785,655 815,581 (29,926)
Capital assets, net 180322,149 164,911,787 15,410,362
Total Assets 221,276,707 217,264,780 4,011,927
Liabilities:
Liabilities payable from unrestrictedcurrent assets 7,038,086 7,208,558 (170,472)
Liabilities payable fromrestrictedas.sets 1,346,440 1,324,195 22,245
Non-cunentliabilities 58,324,858 59,312,717 (987,859)
Total Liabilities 66,709,384 67,845,470 (1,136,086)
Net Assets:
Invested in capital assets, net of related debt 146,877,122 141, 514,024 5,363,098
Restricted 15,797,432 14,063,802 1,733,630
Unrestricted (8,107,231) (6,158,513) (1,948,718)
Total Net Assets S 154,567,323 S 149,419,313 S 5,148,010
-4-
YORBA LINDA WATER DISTRICT
MANA GEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
For the Year Ended June 30, 2010
Statement of Net Assets (Continued)
As noted earlier, net assets may serve over time as a useful indicator of a government's financial
position. In the case of the District, assets of the District exceeded liabilities by S154.6 million and
S149.4 million as of June 30, 2010 and 2009, respectively.
By far the largest portion of the District's net assets (95% and 95% as of June 30, 2010 and 2009,
respectively) reflects the District's investment in capital assets (net of accumulated depreciation) less
any related debt used to acquire those assets that is still outstanding. The District uses these capital
assets to provide services to customers within the District's service area; consequently, these assets are
not available for future spending.
For the year ended June 30, 2010, the District showed a negative balance in its unrestricted net assets
of S8.1 million, which indicates that there aren't any reserves to be utilized in future years, as was the
same with the negative balance of S6.2 million for the year ended June 30, 2009.
-5-
YORBA LINDA WATER DISTRICT
MANA GEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
For the Year Ended June 30, 2010
Statement of Revenues, Expenses and Changes in Net Assets
2010 2009 Change
Revenues
Operating revenues:
Water sales S 22,141,731 S 19,626,738 S 2,514,993
Sewer revenue 1,275,979 1,259,723 16,256
Other operating revenue 571,903 439,302 132,601
Total operating revenues 23,989,613 21,325,763 2,663,850
Non-operating revenues:
Investment income 268,424 689,108 (420,684)
Property taxes 1,269,441 1,283,521 (14,080)
Other non-operating incorne 331,227 479,911 (148,684)
Total non-operating revenues 1,869,092 2,452,540 (583,448)
Total revenues 25,858,705 23,778,303 2,080,402
Expenses
Operating expenses:
Variable water costs 10,688,318 10,859,328 (171,010)
Personnel services 6,677,757 6,498,959 178,798
Supplies and services 3,576,147 4,151,058 (574911)
Depreciation 5,153,891 4,167,958 985,933
Total operating expenses 26,096,113 25,677,303 418,810
Non-operating expenses:
Interest expense 1,170,498 1,469,925 (299,427)
Other non-operating expense 151,300 177,553 (26,253)
Total non-operating expenses 1,321,798 1,647,478 (325,680)
Total expenses 27,417,911 27,324,781 93,130
Net income (loss) before capital
contributions (1,559,206) (3,546,478) 1,987,272
Capital contributions 6,707,398 4,363,527 2,343,871
Change in net assets 5,148,192 817,049 4,331,143
Net assets, beginning of year 149,419,313 148,602,264 817,049
Net assets, end of year S 154,567,505 S 149,419,313 S 5,148,192
The statement of revenues, expenses and changes of net assets shows how the District's net assets
changed during the fiscal years. In the case of the District, net assets increased by S5.1 million and
S800 thousand for the fiscal years ended June 30, 2010 and 2009, respectively.
-6-
YORBA LINDA WATER DISTRICT
MANA GEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
For the Year Ended June 30, 2010
Statement of Revenues, Expenses and Changes in Net Assets (Continued)
A closer examination of the sources of changes in net assets reveals that:
In 2010, the District's total revenues increased by S2.1 million, primarily due to an increase in
operating revenues of S2.7 million from increased water and sewer services as a result of a 41% rate
increase that went into effect in September 2009. Also, non-operating revenues decreased by 5600
thousand primarily due to lower interest rates and more use of cash on extensive capital projects. In
addition, total expenses increased by only S100 thousand despite a S LO million increase in
depreciation expense and an increase in imported water rates, primarily due to an 18% reduction in
water usage by conserving customers and cuts made by District staff in the supplies and services area.
In 2009, the District's total revenues decreased by 5400 thousand, primarily due to an increase in water
sales offset by a decrease in interest earnings. Total expenses increased by S2.2 million, due to
increases in imported water costs, groundwater replenishment, and departmental and operational
expenses.
Capital Assets
Changes in capital asset amounts for 2010 were as follows:
Balance Transfers/ Balance
2009 Additions Deletions 2010
Capital assets:
Capital assets, not being depreciated S 12,298,890 14,082,190 (2,366,246) 24,014,834
Capital assets, being depreciated 198,268,513 8,854,536 (134,889) 206,988,160
Less acCMILIlated depreciation (45,655,616) (5,153,891) 128,662 (50,680,845)
Total capital assets, net S 164,911,787 17,782,835 (2,372,473) 180,322,149
Changes in capital asset amounts for 2009 were as follows:
Balance Transfers/ Balance
2008 Additions Deletions 2009
Capital assets:
Capital assets, not being depreciated S 30,032,709 9,048,353 (26,782,172) 12,298,890
Capital assets, being depreciated 164,602,200 34,175,639 (509,326) 198,268,513
Less acciunulated depreciation (41,561,713) (4,415,966) 322,063 (45,655,616)
Total capital assets, net S 153,073,196 38,808,026 (26,969,435) 164,911,787
-7-
YORBA LINDA WATER DISTRICT
MANA GEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
For the Year Ended June 30, 2010
Capital Assets
At the end of fiscal year 2010 and 2009, the District's investment in capital assets amounted to
S 180.3 million and S 164.9 million, respectively (net of accumulated depreciation). This investment in
capital assets includes land, transmission and distribution systems, reservoirs, tanks, pumps, buildings
and structures, equipment, vehicles and construction-in-process, etc. Major capital assets additions
during the year included upgrades to the District's pumping plant and the transmission and distribution
system, most notably the complete replacement of Lakeview Reservoir.
Additional information regarding capital assets can be found in note 5 in Notes to Basic Financial
Statements.
-8-
YORBA LINDA WATER DISTRICT
MANA GEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
For the Year Ended June 30, 2010
Long-Term Liabilities
Changes in long-tennliabilities for the year ended June 30, 2010 were as follows:
Beginning Ending
Balance Additions Reductions Balance
2003 Revenue Certificates
of Particimtion S 9,645,000 S - $ (220,00) S 9,425,000
2008 Revenue Certificates
of Participation 34,640,00 - (605,(00) 34,035,000
Subtotal 44,285,00 - (825,00) 43,460,000
Add (Less):
Discount (131,283) - 5,432 (125,851)
Premitnn 757,375 - (26,420) 730,955
Total Certificates
of Participation 44,911,02 - (845,988) 44,065,104
Compensated absences 1,101,916 552,599 (603,627) 1,050,888
Other post-employment
liability 120,774 224,018 (108,30) 236,483
Total S 46,133,782 S 776,617 S (1,557,924) S 45,352,475
Changes in long-tennliabilities for the year ended June 30, 209 were as follows:
Beginning Ending
Balance Additions Reductions Balance
2003 Revenue Certificates
of Participation S 9,860,00 S - $ (215,00) S 9,645,000
2008 Revenue Certificates
of Participation 34,995,00 - (355,(00) 34,646,000
Subtotal 44,855,00 - (570,00) 44,285,000
Add (Less):
Discount (136,715) - 5,432 (131,283)
Premitnn 793,795 - (2(,420) 757,375
Total Certificates
of Participation 45,502,080 - (590,988) 44,911,092
Compensated absences 461,979 1,009,760 (369,823) 1,101,916
Other post-employment
liability - 217,979 (97,205) 120,774
Total S 45,964,059 S 1,227,739 S (1,058,016) S 46,133,782
Additional information regarding long-tern liabilities can be found in note 6 in Notes to Basic
Financial Statements.
-9-
YORBA LINDA WATER DISTRICT
MANA GEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
For the Year Ended June 30, 2010
Requests for Information
This financial report is designed to provide the District's finding sources, customers, stakeholders and
other interested parties with an overview of the District's financial operations and financial condition.
Should the reader have questions regarding the information included in this report or wish to request
additional financial information, please contact the District at 1717 E. Miraloma Avenue, Placentia,
California 92807 or the Finance Department at (714) 701-3040.
-10-
BASIC FINANCIAL STATEMENTS
- II -
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF NET ASSETS
Junc 30, 2010
(With prior year data for comparison only)
ASSETS 2010 2009
CURRENT ASSETS:
UNRESTRICTED ASSETS:
Cash and cash cquivalcnts $ 8,686,564 $ 2,959,002
Cash and investments - 9,248,752
Accounts rcccivablc - water and sewer services 3,923,554 2,564,759
Accounts rcccivablc - property taxes 120,976 29,183
Accrued intcrest rcccivablc 22,248 32,033
Prepaid expenses and deposits 273,024 344,661
Inventory 233,588 282,699
TOTAL UNRESTRICTED ASSETS 13,259,954 15,461,089
RESTRICTED ASSETS:
Cash and cash cquivalcnts 26,907,082 32,671,116
Cash and investments - 3,399,809
Accrued intcrest rcccivablc 1,867 5,401
TOTAL RESTRICTED ASSETS 26,908,949 36,076,326
TOTAL CURRENT ASSETS 40,168,903 51,537,415
NONCURRENT ASSETS:
Bond issuance costs 785,655 815,581
Capital assets (Note 5):
Non-depreciable 24,014,834 12,298,890
Dcprcciablc, net of accumulatcd depreciation 156,307,315 152,612,897
TOTAL NONCURRENT ASSETS 181,107,804 165,727,368
TOTAL ASSETS 221,276,707 217,264,783
Scc independent auditors' report and notes to basic financial statements. (Continued)
-12-
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF NET ASSETS
(CONTINUED)
Junc 30, 2010
(With prior year data for comparison only)
LIABILITIES 2010 2009
CURRENT LIABILITIES:
PAYABLE FROM UNRESTRICTED CURRENT ASSETS:
Accounts payable $ 5,536,848 $ 5,558,142
Accrued expenses 125,727 174,579
Compensated absences payable (Note 6) 262,722 275,479
Customer and construction deposits 632,187 610,420
Dcfcrrcd revenue 480,602 589,938
TOTAL PAYABLE FROM UNRESTRICTED CURRENT ASSETS 7,038,086 7,208,558
PAYABLE FROM RESTRICTED ASSETS:
Accrued interest payable 491,440 499,195
Certificates of Participation - current portion (Note 6) 855,000 825,000
TOTAL PAYABLE FROM RESTRICTED ASSETS 1,346,440 1,324,195
TOTAL CURRENT LIABILITIES 8,384,526 8,532,753
LONG-TERM LIABILITIES (LESS CURRENT PORTION):
Dcfcrrcd annexation revenue 14,090,105 14,279,414
Compensated absences (Note 6) 788,166 826,437
Othcr post-employment benefit (OPEB) liability (Notes 6 and 7) 236,483 120,774
Certificates of Participation (Note 6) 43,210,104 44,086,092
TOTAL LONG-TERM LIABILITIES (LESS CURRENT PORTION) 58,324,858 59,312,717
TOTAL LIABILITIES 66,709,384 67,845,470
NET ASSETS:
Invested in capital assets, nct of related debt (Note 9) 146,877,122 141,514,024
Restricted (Note 9) 15,797,432 14,063,802
Unrestricted (8,107,231) (6,158,513)
TOTAL NET ASSETS $ 154,567,323 $ 149,419,313
Scc independent auditors' report and notes to basic financial statements.
-13-
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS
For the year ended June 30, 2010
(With prior year data for comparison only)
2010 2009
OPERATING REVENUES:
Water sales $ 22,141,731 $ 19,626,738
Sewer revenues 1,275,979 1,259,723
Other operating revenues 571,903 439,302
TOTAL OPERATING REVENUES 23,989,613 21,325,763
OPERATING EXPENSES:
Variable water costs 10,688,318 10,859,328
Personnel services 6,677,757 6,498,959
Supplies and services 3,576,147 4,151,058
Depreciation 5,153,891 4,167,958
TOTAL OPERATING EXPENSES 26,096,113 25,677303
OPERATING LOSS (2,106,500) (4,351,540)
NONOPERATING REVENUES (EXPENSES):
Property taxes 1,269,441 1,283,521
Investment income 268,242 689,108
Interest expense (1,170,498) (1,469,925)
Other nonopcrating revenues 331,227 479,911
Other nonopcrating expenses (151,300) (177,553)
TOTAL NONOPERATING REVENUES (EXPENSES) 547,112 805,062
NET LOSS BEFORE CAPITAL CONTRIBUTIONS (1,559,388) (3,546,478)
CAPITAL CONTRIBUTIONS 6,707,398 4,363,527
CHANGES IN NET ASSETS 5,148,010 817,049
NET ASSETS - BEGINNING OF YEAR, AS RESTATED (NOTE 13) 149,419,313 148,602,264
NET ASSETS - END OF YEAR $ 154,567,323 $ 149,419,313
See independent auditors' report and notes to basic financial statements.
-14-
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF CASH FLOWS
For the year ended June 30, 2010
(With prior year data for comparison only)
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 22,589,206 $ 23,377,263
Cash payments to employees for salaries and wages (6,661,928) (6,257,272)
Cash payments to suppliers of goods and services (14,101,632) (14,673,677)
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,825,646 2,446,314
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Proceeds from property taxes and assessments 1,173,205 1,274,303
Other revenue 333,391 665,540
Other expenses (115,942) (142,195)
NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES 1,390,654 1,797,648
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:
Property taxes received for debt service 4,443 6,883
Proceeds from capital contributions 130,619 623,292
Acquisition and construction of capital assets (13,505,308) (12,286,690)
Proceeds from sales of capital assets 4,063 1,635
Principal paid on long-term liability (825,000) (570,000)
Interest paid on long-term liability (1,991,711) (2,157,836)
NET CASH USED BY CAPITAL AND
RELATED FINANCING ACTIVITIES (16,182,894) (14382,716)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale/purchase of investments, net 12,671,946 (5,364,774)
Interest and investment earnings 258,176 513,191
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 12,930,122 (4,851,583)
NET DECREASE IN CASH AND CASH EQUIVALENTS (36,472) (14,990,337)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 35,630,118 50,620,455
CASH AND CASH EQUIVALENTS - END OF YEAR $ 35,593,646 $ 35,630,118
See independent auditors' report and notes to basic financial statements. (Continued)
- 15 -
YORBA LINDA WATER DISTRICT
COMBINED STATEMENTS OF CASH FLOWS
(CONTINUED)
For the year ended June 30, 2010
(With prior year data for comparison only)
2010 2009
RECONCILIATION OF OPERATING LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Operating loss $ (2,106,500) $ (4,351,540)
Adjustments to reconcile operating loss to
net cash provided by operating activities:
Depreciation 5,153,891 4,167,958
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (1,358,795) 2,078,635
Inventory 49,111 115,286
Prepaid expenses and deposits 71,637 474,957
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (21,294) (347,076)
Accrued salaries and wages (48,852) 90,924
Accrued other post-employment benefits (OPEB) liability 115,709 120,774
Accrued compensated absences (51,028) 29,989
Customer and construction deposits 21,767 73,726
Prepaid connection fees - (7,319)
Total adjustments 3,932,146 6,797,854
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,825,646 $ 2,446,314
CASH AND CASH EQUIVALENTS -
FINANCIAL STATEMENT CLASSIFICATION:
Unrestricted $ 8,686,564 $ 2,959,002
Restricted 26,907,082 32,671,116
TOTAL CASH AND CASH EQUIVALENTS -
FINANCIAL STATEMENT CLASSIFICATION $ 35,593,646 $ 35,630,118
NONCASH INVESTING, CAPITAL AND
RELATED FINANCING ACTIVITIES:
Amortization related to long-term debt $ 20,988 $ 20,988
Capital contributions $ 6,278,134 $ 3,416,512
See independent auditors' report and notes to basic financial statements.
-16-
NOTES TO BASIC FINANCIAL STATEMENTS
-17-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2010
1. ORGANIZATION AND DESCRIPTION OF THE REPORTING ENTITY:
The Yorba Linda Water District (the District) is an independent special district established in 1959,
which operates under the authority of Division 12 of the California Water Code for the purpose of
providing water and sewer services to the properties within the District. The District is governed
by a five member board of Directors elected by the voters in the area to four-year terms. The
District provides two services which include Water and Sewer. Water is provided to the entire
service area. Sewer is provided to about two-thirds of the service area. The District's service area
includes Yorba Linda and portions of Placentia, Anaheim, Brea, and areas of unincorporated
Orange County. The District provides water and sewer service to approximately 81,893 residents.
The criteria used in determining the scope of the reporting entity are based on the provisions of
GASB Statement 14. The District is the primary government unit. Component units are those
entities which are financially accountable to the primary government, either because the District
appoints a voting majority or the component unit's board, or because the component unit will
provide a financial benefit or impose a financial burden on the District.
The District's reporting entity includes the Yorba Linda Water District Public Financing
Corporation, a California nonprofit public benefit corporation, formed in July 2003 for the purpose
of providing assistance to the District and other public agencies in the State of California of which
the District is a member, or is otherwise engaged with in the financing, refinancing, acquiring,
constructing and rehabilitating of facilities, land and equipment, in the sale or leasing of facilities,
land and equipment for the use, benefit and enjoyment of the public served by such agencies and
any other purpose incidental thereto). Although the District and the Public Facilities Corporation
are legally separate entities, the District's Board of Directors is financially responsible for the
Public Financing Corporation and, therefore, the accompanying financial statements include the
accounts and records of the Public Financing Corporation using the blending method as required
by accounting principles generally accepted in the United States of America. There are no separate
financial statements for the Public Financing Corporation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Basic Financial Statements:
The basic financial statements are comprised of the Combined Statements of Net Assets, the
Combined Statements of Revenues, Expenses and Changes in Net Assets, the Statements of
Cash Flows and the notes to the basic financial statements.
See independent auditors' report.
-18-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
b. Basis of Presentation:
The accounts of the District are an enterprise fund. An enterprise fund is a Proprietary type
fund used to account for operations (a) 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 be financed or recovered primarily through user charges; or (b) where the governing body
has decided that periodic determination of revenues earned, expenses incurred, and/or net
income is appropriate for capital maintenance, public policy, management control,
accountability or other purposes. The District has elected under Governmental Accounting
Standards Board (GASB) Statement 20, Accounting and Financial Reporting for Proprietary
Funds and Other Governmental Entities That Use Proprietary Fund Accounting, to apply all
GASB pronouncements as well as any applicable pronouncements of the Financial Accounting
Standards Board (FASB), the Accounting Principles Board (APB), or any Accounting Research
Bulletins (ARB) issued on or before November 30, 1989, unless they contradict or conflict
with GASB pronouncements.
c. Measurement Focus and Basis of Accounting:
Measurement focus is a term used to describe "which" transactions are recorded within the
various financial statements. Basis of accounting refers to "when" transactions are recorded
regardless of the measurement focus applied. The accompanying financial statements are
reported using the economic resources measurement focus, and the accrual basis of accounting.
Under the economic measurement focus all assets and liabilities (whether current or
noncurrent) associated with these activities are included on the Statement of Net Assets. The
Statement of Revenues, Expenses and Changes in Net Assets present increases (revenues) and
decreases (expenses) in total net assets. Under the accrual basis of accounting, revenues are
recorded when earned and expenses are recorded when a liability is incurred, regardless of the
timing of related cash flows.
See independent auditors' report.
-19-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
d. Net Assets:
In the Statement of Net Assets, net assets are classified in the following categories:
• Invested in capital assets, net of related debt - This amount consists of capital assets net of
accumulated depreciation and reduced by outstanding debt that is attributed to the
acquisition, construction, or improvement of the assets.
• Restricted net assets - This amount is restricted by external creditors, grantors, contributors,
or laws or regulations of other governments.
• Unrestricted net assets - This amount is all net assets that do not meet the definition of
"invested in capital assets, net of related debt" or "restricted net assets".
When both restricted and unrestricted resources are available for use, the District may use
restricted resources or unrestricted resources based on the Board's discretion.
e. Operating Revenues and Expenses:
Operating revenues, such as charges for services (water sales and sewer service charges) result
from exchange transactions associated with the principal activity of the District. Nonoperating
revenues, such as property taxes and assessments, and investment income, result from
nonexchange transactions or ancillary activities in which the District receives value without
directly giving equal value in exchange.
Operating expenses include the cost of sales and services, administrative expenses and
depreciation on capital assets. All expenses not meeting this definition are reported as
nonoperating expenses.
f. Cash and Cash Equivalents:
The District considers all highly liquid investments with a maturity of three months or less at
the time of purchase to be cash equivalents.
See independent auditors' report.
-20-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
g. Investments and Investment Policy:
The District has adopted an investment policy directing the District's General Manager or
Finance Director to invest, reinvest, sell or exchange securities.
Investments are stated at fair value which represents the quoted or stated market value.
Changes in fair value that occur during a fiscal year are recognized as investment income
reported for that fiscal year. Investment income includes interest earnings, changes in fair
value, and any gains or losses realized upon the liquidation or sale of investments.
h. Accounts Receivable:
The District extends credit to customers in the normal course of operations. Management has
evaluated the accounts and believes they are all collectible. Management evaluates all
accounts receivable and if it is determined that they are uncollectible they are written off as a
bad debt expense. A charge of S41,612 and 527,135 were made to bad debt expense for the
fiscal years ended June 30, 2010 and 2009, respectively.
i. Property Taxes and Assessments:
The Orange County Assessor's Office assesses all real and personal property within the County
each year. The Orange County Tax Collector's Office bills and collects the District's share of
property taxes and assessments. The Orange County Treasurer's Office remits current and
delinquent property tax collections to the District throughout the year. Property taxes in
California are levied in accordance with Article XIIIA of the State Constitution at 1% of
countywide assessed valuations. This levy is allocated pursuant to state law to the appropriate
units of local governments.
Property taxes receivable at year-end are related to property taxes collected by the Orange
County Tax Collector which have not been credited to the District's cash balance as of June 30.
The property tax calendar is as follows:
Lien Date: January 1
Levy Date: July 1
Due Dates: First Installment - November 1
Second Installment - March 1
Collection Dates: First Installment - December 10
Second Installment - April 10
See independent auditors' report.
-21-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
J. Prepaid Expenses:
Certain payments to vendors reflects costs or deposits applicable to future accounting periods
and are recorded as prepaid items in the basic financial statements.
lc. Inventory:
Inventory consists primarily of materials and supplies used in the construction and
maintenance of the water and sewer systems and are stated at cost using the average-cost
method on a first in, first out basis.
1. Capital Assets:
Capital assets acquired and/or constructed are capitalized at historical cost. District policy has
set the capitalization threshold for reporting capital assets at 55,000. Contributed assets are
recorded at estimated fair market value at the date of contribution. Upon retirement or other
disposition of capital assets, the cost and related accumulated depreciation are removed from
the respective balances and any gains or losses are recognized.
Depreciation is recorded on the straight-line basis over the estimated useful lives of the assets
as follows:
Source of Supply 10 to 75 years
Pumping Plant 10 to 40 years
Water Treatment Plant 15 to 40 years
Transmission and Distribution Plant 5 to 100 years
General Plant 3 to 40 years
in. Bond Issuance Costs:
Bond issuance costs are amortized on a straight-line methodology based on the estimated term
of the related bond debt. Bond issuance costs were 5785,655 and 5815,581 net of accumulated
amortization of 5112,130 and 582,204 at June 30, 2010 and 2009, respectively.
n. Interest Expense:
The District incurs interest charges on the Certificates of Participation. Interest expense of
5787,038 and 5580,963 has been capitalized as an addition to the cost of construction for the
years ended June 30, 2010 and 2009, respectively.
See independent auditors' report.
-22-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
o. Compensated Absences:
The District's policy is to permit employees to accumulate earned vacation and sick leave. The
liability for vested vacation and sick leave is recorded as an expense when earned. Employees
may carry forward up to one and one-half years of earned vacation days and an unlimited
number of sick leave days.
Upon termination or retirement, permanent employees are entitled to receive compensation at
their current base salary for all unused vacation leave except for those employees that have not
completed the probationary period.
Permanent employees that retire in accordance with the Public Employee's Retirement System
qualifications are entitled to receive cash compensation at their current base salary for
three-eighths of all unused sick leave and the remaining five-eights of the unused sick leave is
contributed to the employee's PERS account. The District has accrued 100% of the unused
sick leave as a liability as it expects most employees to meet the PERS requirements when
retiring or leaving the District.
p. Deferred Credits:
Deferred credits represent customer refunds that have not been cashed.
q. Construction Advances and Deposits:
Construction deposits are collected by the District to cover the cost of construction projects
within the District. Funds in excess of project costs are refunded to the customer.
r. Construction Bonding Deposits:
The District's policy is to maintain certain bonding requirements for water and sewer
construction projects performed within District boundaries to ensure the proper completion of
the project. Deposited amounts are refunded upon final approval of the project.
s. Prepaid Connection Fees:
Connection fees are collected by the District to cover the cost of service connections within the
District. Funds in excess of connection costs are refunded to the customer.
See independent auditors' report.
-23-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
t. Deferred Annexation Revenue:
The District collects a fee from newly annexed developments for all residential and
commercial properties. This fee is in-lieu of the District's share of the 1% property tax revenue
which the District no longer received post-Proposition 13. The fee is a present worth value
required to generate a forty year revenue stream equivalent to the lost property tax revenue. It
is calculated based on the fair market value estimate of the improved property at the time the
fee is collected and based on the current rate of return on the District's investments. The
deposit balance accrues interest and provides a source of operational revenue for the District.
This deferred revenue source may be used for capital facilities in the future if approved by the
Board.
u. Water and Sewer Sales:
The District recognizes water and sewer service charges based on cycle billings rendered to the
customers each month.
v. Capital Contributions:
Capital contributions represent cash and capital asset additions contributed to the District by
property owners or real estate developers desiring services that require capital expenditures or
capacity commitment.
w. Budgetary Policies:
The District adopts annual nonappropriated budget for planning, control and evaluation
purposes. Budgetary control and evaluation are affected by comparisons of actual revenues
and expenses with planned revenues and expenses for the period. Encumbrance accounting is
not used to account for commitments related to unperformed contracts for construction and
services.
x. Use of Estimates:
The financial statements are prepared in conformity with accounting principles generally
accepted in the United States of America and, accordingly, include amounts that are based on
management's best estimates and judgments. Accordingly, actual results could differ from the
estimates.
See independent auditors' report.
-24-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
y. Prior Year Data:
Selected information regarding the prior year has been included in the accompanying financial
statements. This information has been included for comparison purposes only and does not
represent a complete presentation in accordance with generally accepted accounting principles.
Accordingly, such information should be read in conjunction with the District's prior year
financial statements, from which this selected financial data was derived.
3. CASH AND INVESTMENTS:
Cash and Investments:
Cash and investments as of June 30, 2010 are reported in the accompanying combining schedule of
net assets as follows:
Water Sewer Total
Unrestricted Current Assets:
Cash and cash equivalents S 6,850,711 S 1,835,853 S 8,686,564
Restricted Assets:
Cash and cash equivalents 26,907,082 - 26,907,082
Total Cash and Investments S 33,757,793 S 1,835,853 S 35,593,646
Cash and investments as of June 30, 2010 consisted of the following:
Water Sewer Total
Cash on hand S 1,200 S - S 1,200
Deposits with financial institutions 2,047,977 121,766 2,169,743
Escrow deposits 1,282,379 - 1,282,379
Investments 30,426,237 1,714,087 32,140,324
Total Cash and Investments S 33,757,793 S 1,835,853 S 35,593,646
See independent auditors' report.
- 25 -
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
3. CASH AND INVESTMENTS (CONTINUED):
Investments Authorized by the California Government Code and the District's Investment
Policy:
The table below identifies the investment types that are authorized for the District by the California
Government Code (or the District's investment policy, where more restrictive). The table also
identifies certain provisions of the California Government Code (or the District's investment
policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit
risk.
This table does not address investments of debt proceeds held by bond trustees that are governed
by the provisions of debt agreements of the District, rather than the general provisions of the
California Government Code or the District's investment policy.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of Portfolio * in One Issuer
Bank or Savings and Loans 5 years None None
Local Agency Investment Fund (LAIF) N/A None S 10 million
Orange County Commingled Investment Pool N/A None S 10 million
California Asset Management Program N/A None None
United States Treasury Bills, Notes
and Bonds 5 years None None
United States Government Sponsored
Enterprise Securities 5 years 50% None
Corporate Bonds 5 years 30% None
Bankers Acceptances 180 days 10% None
Commercial Paper 270 days 25% None
Ca1TRUST Investment Pool N/A N/A S10 million
Money Market Funds N/A 20% None
* Excluding amounts held by bond trustee that are not subject to California Government Code
restrictions.
N/A - Not Applicable
See independent auditors' report.
-26-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
3. CASH AND INVESTMENTS (CONTINUED):
Investments Authorized by Debt Agreements:
Investments of debt proceeds held by bond trustees are governed by provisions of the debt
agreements, rather than the general provisions of the California Government Code or the District's
investment policy. The table below identifies the investment types that are authorized for
investments held by bond trustees. The table also identifies certain provisions of these debt
agreements that address interest rate risk and concentration of risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity Allowed in One Issuer
Cash None None None
United States Treasury Bills, Notes
and Bonds None None None
United States Treasury Obligations None None None
Resolution Funding Corp. (REFCORP) None None None
Prefunded Municipal Bonds None None None
United States Government Sponsored
Enterprise Securities None None None
Commercial Paper None None None
Money Market Funds None None None
Certificates of Deposits None None None
Guaranteed Investment Contracts None None None
Bankers Acceptance 1 year None None
Repurchase Agreements 30 days None None
Local Agency Investment Fund None None None
Disclosures Relating to Interest Rate Risk:
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value
of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of
its fair value to changes in market interest rates. One of the ways that the District manages its
exposure to interest rate risk is by purchasing a combination of shorter term and longer term
investments and by timing cash flows from maturities so that a portion of the portfolio is maturing
or coming close to maturity as necessary to provide the cash flow and liquidity needed for
operations.
See independent auditors' report.
-27-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
3. CASH AND INVESTMENTS (CONTINUED):
Disclosures Relating to Interest Rate Risk (Continued):
Information about the sensitivity of the fair values of the District's investments (including
investments held by bond trustee) to market interest rate fluctuations is provided by the following
table that shows the distribution of the District's investments by maturity as of June 30, 2010.
Remaining
Maturity
(in Months)
12 Months
Investment Type or Less
Ca1TRUST Investment Pool S 21,520,247
Held by bond trustee:
Money market funds 10,620,077
S 32,140,324
Disclosures Relating to Credit Risk:
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. Presented in the following table are the minimum rating
required by (where applicable) the California Government Code, the District's investment policy,
or debt agreements, and the actual Standard and Poor's credit rating as of year end for each
investment type.
Minimum
Legal Not
Investment Type Rating Total Rated AAA AA
CalTRUST Investment Pool N/A S 21,520,247 S 17,186,223 S - S 4,334,024
Held by bond trustee:
Money market funds A 10,620,077 - 10,620,077 -
S 32.140.324 S 17,186,223 S 10.620.077 S 4,334,024
See independent auditors' report.
-28-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
3. CASH AND INVESTMENTS (CONTINUED):
Concentration of Credit Risk:
The investment policy of the District contains no limitations on the amount that can be invested in
any one issuer beyond that stipulated by the California Government Code.
Custodial Credit Risk:
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial
institution, the District will not be able to recover its deposits or will not be able to recover
collateral securities that are in the possession of an outside party. The custodial credit risk for
investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a
transaction, the District will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. With respect to investments, custodial credit
risk generally applies only to direct investments in marketable securities. Custodial credit risk does
not apply to a local government's indirect investment in securities through the use of mutual funds
or government investment pools (such as LAIF).
The California Government Code and the District's investment policy do not contain legal or
policy requirements that would limit the exposure to custodial credit risk for deposits or
investments, other than the following provision for deposits: The California Government Code
requires that a financial institution secure deposits made by state or local governmental units by
pledging securities in an undivided collateral pool held by a depository regulated under state law
(unless so waived by the governmental unit). The market value of the pledged securities in the
collateral pool must equal at least 110% of the total amount deposited by the public agencies.
California law also allows financial institutions to secure District deposits by pledging first trust
deed mortgage notes having a value of 150% of the secured public deposits. The District had
deposits with bank balances of 52,182,276 as of June 30, 2010. Of the bank balances, up to
5250,000 are federally insured and the remaining balance is collateralized in accordance with the
Code; however, the collateralized securities are not held in the District's name.
See independent auditors' report.
-29-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
3. CASH AND INVESTMENTS (CONTINUED):
Investment in Ca1TRUST Investment Pool:
Ca1TRUST is a Joint Powers Agency Authority created by local public agencies to provide a
convenient method for local public agencies to pool their assets for investment purposes.
Ca1TRUST is governed by a Board of Trustees made up of experienced local agency treasurers and
investment officers. The Board sets overall policies for the program and selects and supervises the
activities of the investment manager and other agents. CalTRUST maintains and administers four
pooled accounts within the program: Money Market, Short-Term, Medium-Term and Long-Tenn.
The Money Market account permits daily transactions, with same-day liquidity (provided
redemption requests are received by 1:00 p.m. Pacific time), with no limit on the amount of funds
that may be invested. The Short-Term account permits an unlimited number of transactions per
month (with prior day notice), with no limit on the amount of funds that may be invested. The
Medium- and Long-Term accounts permit investments, withdrawals and transfers once per month,
with five days advance notice. All CalTRUST accounts comply with the limits and restrictions
placed on local agency investments by the California Government Code. Ca1TRUST imposes a
S250,000 minimum investment; however, there is no maximum limit. The fair value of the
District's investment in this pool is reported in the accompanying financial statements at amounts
based upon the District's percentage interest of the fair value provided by CalTRUST for the
Ca1TRUST accounts (in relation to the amortized cost of that portfolio). The balance available for
withdrawal is based on the accounting records maintained by CalTRUST.
4. RESTRICTED ASSETS:
Restricted assets were provided by, and are to be used for the following as of June 30, 2010
and 2009:
Source Use 2010 2009
Custodial receipts Custodial costs S 1,282,379 S 1,074,800
Bond proceeds, taxes, Construction of capital
assessments and interest assets expansion 25,626,570 35,001,526
S 26,908,949 S 36,076,326
See independent auditors' report.
-30-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
5. CAPITAL ASSETS:
Changes in capital assets for the year ended June 30, 2010 is as follows:
Balance
July 1, 2009 Balance
(As Restated) Additions Deletions June 30, 2010
Capital assets, not being depreciated:
Land, mineral and water rights S 347,490 S - S - S 347,490
Construction in progress 11,951,400 14,082,190 (2,366,246) 23,667,344
Total capital assets, not
being depreciated 11298,890 14,082,190 (2,366,246) 24,014,834
Capital assets, being depreciated:
Source of supply 5,769,117 - (47,234) 5,721,883
Pumping plant 16,867,820 - - 16,867,820
Water treatment plant 2,556,613 67,268 - 2,623,881
Transmission and distribution plant 154,974,084 8,325,816 (8,655) 163,291,245
General plant 18,100,879 461,452 (79,000) 18,483,331
Total capital assets,
being depreciated 198,268,513 8,854,536 (134,889) 206,988,160
Less accumulated depreciation for:
Source of supply (1,374,629) (140,910) 44,352 (1,471,187)
Pumping plant (3,205,619) (609,150) - (3,814,769)
Water treatment plant (697,516) (104,933) - (802,449)
Transmission and distribution plant (35,807,133) (3,526,536) 5,310 (39,328,359)
General plant (4,570,719) (772,362) 79,000 (5,264,081)
Total accumulated depreciation (45,655,616) (5,153,891) 128,662 (50,680,845)
Total capital assets,
being depreciated, net 152,612,897 3,700,645 (6,227) 156,307315
Total capital assets, net S 164,911,787 517,782,835 &(2.372,473) S 180.322.149
Depreciation expense for the depreciable capital assets was 55,153,891 in 2010.
The District has been involved in various construction projects throughout the year. The balance of
construction in progress at June 30, 2010 is S23,667,344.
See independent auditors' report.
-31-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
6. LONG-TERM LIABILITIES:
Changes in long-term liabilities for the year ended June 30, 2010 were as follows:
Beginning
Balance Ending Due Within
(As Restated) Additions Reductions Balance One Year
Certificates of Participation:
2003 Revenue Certificates
of Participation S 9,645,000 S - S (220,000) S 9,425,000 S 225,000
2008 Revenue Certificates
of Participation 34,640,000 - (605,000) 34,035,000 630,000
Subtotal 44,285,000 - (825,000) 43,460,000 855,000
Add (Less):
Discount (131,283) - 5,432 (125,851) -
Premium 757,375 - (26,420) 730,955 -
Total Certificates
of Participation 44,911,092 - (845,988) 44,065,104 855,000
Compensated absences 1,101,916 552,599 (603,627) 1,050,888 262,722
Other post-employment
liability 120,774 224,018 (108,309) 236,483 -
Total S 46.133.782 S 776.617 S (1.557.924) S 45.352.475 S 1.117.722
2003 Revenue Certificates of Participation:
In August 2003, the Public Financing Corporation issued S 10,645,000 2003 Revenue Certificates
of Participation for the purpose of financing the Highland Reservoir Renovation and
Richfield-Phase 3 Renovation Project. The Certificates bear interest ranging from 2% to 5%,
payable semiannually on April 1 and October 1, commencing April 1, 2004. The Term Certificates
of 52,295,000 are due on October 1, 2028 and the Term Certificates of 52,930,000 are due on
October 1, 2033.
A surety bond for 5679,137 was issued by Financial Guaranty Insurance Company (FGIC). FGIC
is not rated by Moody's Investors' Service, Standard & Poor's or Fitch Investors' Service. At
June 30, 2010 the 2003 Certificates outstanding balance was 59,425,000.
The Certificates are obligations of the Corporation payable solely from payments received from
the District pursuant to the Installment Purchase Agreement, by and between the District and the
Corporation. The Installment Purchase Agreement requires the District to fix, prescribe and collect
rates and charges for the water service which will be at least sufficient to yield during each fiscal
year net revenues equal to 110% of the debt service for such fiscal year. For fiscal year 2010, the
net revenues equal to 222% of the debt service.
See independent auditors' report.
-32-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
6. LONG-TERM LIABILITIES (CONTINUED):
2003 Revenue Certificates of Participation (Continued):
The annual debt service requirements for the 2003 Revenue Certificates of Participation
outstanding at June 30, 2010 are as follows:
Year Ending Principal Interest Total
2011 S 225,000 S 445,726 S 670,726
2012 235,000 437,382 672,382
2013 245,000 428,076 673,076
2014 255,000 418,076 673,076
2015 265,000 407,411 672,411
2016 - 2020 1,500,000 1,848,890 3,348,890
2021 -2025 1,890,000 1,447,069 3,337,069
2026 - 2030 2,410,000 913,000 3,323,000
2031 -2034 2,400,000 247,500 2,647,500
Subtotal 9,425,000 6,593,130 16,018,130
Less: Discount (125,851) - (125,851)
Total S 9,299,149 S 6,593,130 S 15,892,279
2008 Revenue Certificates of Participation:
In February 2008, the District issued 534,995,000 2008 Revenue Certificates of Participation for
the purpose of financing the 2008 Capital Improvement Projects. The Certificates bear interest
ranging from 4% to 5%, payable semiannually on April 1 and October 1, commencing
October 1, 2008. The Term Certificates of S10,885,000 are due on October 1, 2038. The legal
reserve requirement of 52,147,096 was fully funded at June 30, 2010. At June 30, 2010 the 2008
Certificates outstanding balance was S34,035,000.
The Certificates are obligations of the Corporation payable solely from payments received from
the District pursuant to the Installment Purchase Agreement, by and between the District and the
Corporation. The Installment Purchase Agreement requires the District to fix, prescribe and collect
rates and charges for the water service which will be at least sufficient to yield during each fiscal
year net revenues equal to 110% of the debt service for such fiscal year. For fiscal year 2010, the
net revenues equal to 222% of the debt service.
See independent auditors' report.
-33-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
6. LONG-TERM LIABILITIES (CONTINUED):
2008 Revenue Certificates of Participation (Continued):
The annual debt service requirements for the 2008 Revenue Certificates of Participation
outstanding at June 30, 2010 are as follows:
Year Ending Principal Interest Total
2011 S 630,000 S 1,503,496 S 2,133,496
2012 655,000 1,477,796 2,132,796
2013 680,000 1,451,096 2,131,096
2014 705,000 1,423,396 2,128,396
2015 735,000 1,394,596 2,129,596
2016 - 2020 4,140,000 6,498,480 10,638,480
2021 -2025 5,040,000 5,582,601 10,622,601
2026 - 2030 6,170,000 4,413,004 10,583,004
2031 -2035 7,675,000 2,861,764 10,536,764
2036 - 2039 7,605,000 783,375 8,388,375
Subtotal 34,035,000 27,389,604 61,424,604
Add: Premium 730,955 - 730,955
Total S 34,765.955 S 27,389,604 S 62,155,559
Compensated Absences:
Compensated absences are comprised of unpaid vacation leave, sick leave and compensating time
off which are accrued as earned. (See Note 20).
7. OTHER POST EMPLOYMENT BENEFITS (OPEB):
a. Plan Description:
The District, through a single employer defined benefit plan, provides post-employment health
care benefits. Specifically, the District provides health insurance for its retired employees and
directors, their dependent spouses (if married and covered on the District's plan at time of
retirement), or survivors in accordance with Board resolutions. Medical coverage is provided
for retired employees who are age 50 or over and who have a minimum of 5 years service with
the District. The District pays 100% of the premium for the retiree and the dependent
coverage, for one year for every three years of service. Medical coverage is provided for the
surviving spouse of retired employees and the surviving spouse of active employees who upon
death had attained age 50 and who had a minimum of 5 years of service with the District, for
one year for every three years of service. The plan does not provide a publicly available
financial report.
See independent auditors' report.
-34-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
7. OTHER POST EMPLOYMENT BENEFITS (OPEB) (CONTINUED):
b. Funding Policy:
The contribution requirements of plan members and the District are established and may be
amended by the District, District's Board of Directors, and/or the employee associations.
Currently, contributions are not required from plan members. The District is currently funding
this OPEB obligation on a pay-as-you-go basis. For the year ended June 30, 2010, the District
paid S 108,309 in health care costs for its retirees and their covered dependents.
c. Annual OPEB Cost and Net OPEB Obligation:
The District's annual OPEB cost (expense) is calculated based on the annual required
contribution of the employer (ARC), an amount actuarially determined in accordance with
parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an
ongoing basis, is projected to cover normal cost each year and to amortize any unfunded
liabilities of the plan over a period not to exceed thirty years.
The following table shows the components of the District's annual OPEB cost for the year, the
amount actually contributed to the plan, and changes in the District's net OPEB obligation to
the Retiree Health Plan:
Annual required contribution S 217,979
Interest on net OPEB obligation 6,039
Adjustment to annual required contribution -
Annual OPEB cost (expense) 224,018
Actual contributions made 108,309
Increase in net OPEB obligation 115,709
Net OPEB Obligation - beginning of year 120,774
Net OPEB Obligation - end of year S 236,483
The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan,
and the net OPEB obligation for the years ended June 30, 2010 and 2009 (the first year in
which GASB Statement 45 is required to be implemented) were as follows:
Percentage
Fiscal Annual of Annual Net
Year OPEB OPEB Costs OPEB
Ended Cost Contributed Obligation
6/30/09 S 217,979 44.64% S 120,774
6/30/10 224,018 48.35% 236,483
See independent auditors' report.
-35-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
7. OTHER POST EMPLOYMENT BENEFITS (OPEB) (CONTINUED):
d. Funded Status and Funding Progress:
As of June 1, 2009, the most recent actuarial valuation date, the plan was zero percent funded.
The actuarial accrued liability for benefits was 51,740,127, and the actuarial value of assets was
zero, resulting in an unfunded accrued liability (UAL) of 51,740,127. The covered payroll
(annual payroll of active employees covered by the plan) was 54,983,653 and the ratio of the
UAL to the covered payroll was 34.9%.
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about rates of employee turnover, retirement, mortality, as well as economic
assumptions regarding claim costs per retiree, healthcare inflation and interest rates. Amounts
determined regarding the funded status of the plan and the annual required contributions of the
employer are subject to continual revision 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
multi-year trend information about whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liabilities for benefits.
e. 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 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 June 1, 2009 actuarial investment valuation, the entry
age normal cost method was used. The actuarial assumptions included an interest rate of 5%
per annum, a projected salary increase of 3.0% per annum and a health inflation rate of 4.0%
per annum.
See independent auditors' report.
-36-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
8. DEFINED BENEFIT PENSION PLAN:
a. Plan Description:
The District contributes to the California Employees Retirement System (CalPERS), an agent
multiple-employer public employee defined benefit pension plan. Ca1PERS provides retirement
and disability benefits, annual cost-of-living adjustments, and death benefits to plan members
and beneficiaries. Ca1PERS acts as a common investment and administrative agent for
participating public entities within the State of California. Benefit provisions and all other
requirements are established by State statute and District ordinance. Copies of CalPERS'
annual financial report may be obtained from their Executive Office located at, 400 P Street,
Sacramento, CA 95814.
b. Funding Policy:
The contribution rate for plan members in the CalPERS 2.0% at 55 Risk Pool Retirement Plan
is 7% of their annual covered salary. The District makes these contributions required of
District employees on their behalf and for their account. Also, the District is required to
contribute the actuarially determined remaining amounts necessary to fund the benefits for its
members. The required employer contribution rates for fiscal year 2010, 2009 and 2008 were
10.062%, 9.886% and 9.471%, respectively. The contribution requirements of the plan
members are established by State statute, and the employer contribution rate is established and
may be amended by CalPERS. For fiscal years 2010, 2009 and 2008 the District's annual
contribution were S857,291, S847,632 and S763,653, respectively, for Ca1PERS and was equal
to the District's required and actual contributions for each year.
9. NET ASSETS INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT AND
RESTRICTED NET ASSETS:
The balance of net investment in capital assets consisted of the following as of June 30, 2010
and 2009:
2010 2009
Capital assets, net of accumulated depreciation S 180,322,149 S 164,911,787
Certificates of participation - current (855,000) (825,000)
Certificates of participation - long-term (43,210,104) (44,086,092)
Unspent debt proceeds 10,620,077 21,513,329
Net assets invested in capital assets,
net of related debt S 146,877,122 S 141,514,024
See independent auditors' report.
-37-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
9. NET ASSETS INVESTED IN CAPITAL ASSETS, NET OF RELATED DEBT AND
RESTRICTED NET ASSETS (CONTINUED):
Restricted Net Assets:
Restricted net assets represents amounts restricted for debt service for constraints by the third party
holders of the Certificates of Participation.
10. RISK MANAGEMENT:
The District 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. In an effort to manage
its risk exposure, the District is a member of the Association of California Water Agencies Joint
Powers Insurance Authority (the Authority).
The Authority is a risk-pooling self-insurance authority, created under provisions of California
Government Code Sections 6500 et. seq. The purpose of the Authority is to arrange and administer
programs of insurance for the pooling of self-insured losses and to purchase excess insurance
coverage.
At June 30, 2010, as a member of the Authority, the District participated in the insurance programs
as follows:
• General and auto liability, public officials and employee's error and omissions: Total risk
financing self-insurance limits of S1,000,000, combined single limit at S1,000,000 per
occurrence. The District purchased additional excess coverage layers: S59 million for
general, auto and public officials liability, which increases the limits on the insurance
coverage noted above.
• Employee dishonesty coverage up to S100,000 per loss includes public employee
dishonesty, forgery or alteration and theft, disappearance and destruction coverages, subject
to a S 1,000 deductible per occurrence.
• Property loss is paid at the replacement cost for property on file, if replaced within two
years after the loss, otherwise paid on an actual cash value basis. ACWA JPIA is
self-insured for the first 550,000, and then purchased excess coverage up to S100 million,
subject to a 52,500 deductible, except for a S1,000 deductible on vehicles.
• Boiler and machinery coverage for the replacement cost up to S 100 million per occurrence,
subject to various deductibles depending on the type of equipment.
• Workers' compensation insurance up to California statutory limits for all work related
injuries/illnesses covered by California law.
See independent auditors' report.
-38-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
10. RISK MANAGEMENT (CONTINUED):
Settled claims have not exceeded any of the coverage amounts in any of the last three fiscal years
and there were no reductions in the District's insurance coverage during the years ended 2010,
2009 and 2008. Liabilities are recorded when it is probable that a loss has been incurred and the
amount of the loss can be reasonably estimated net of the respective insurance coverage.
Liabilities include an amount for claims that have been incurred but not reported (IBNR). There
were no IBNR clams payable as of June 30, 2010, 2009 and 2008.
11. COMMITMENTS AND CONTINGENCIES:
Construction Contracts:
The District has a variety of agreements with private parties relating to the installation,
improvement or modification of water facilities and distribution systems within its service area.
The financing of such construction contracts is being provided primarily from the District's
replacement reserves and advances for construction. The District has committed to approximately
S2,035,774 of open construction contracts as of June 30, 2010.
Construction contracts include:
Total Construction Balance
Approved Costs to
Project Name Contract to Date Complete
Design of Hidden Hills Reservoir (2MG) S 322,769 S 319,541 S 3,228
Hidden Hills Reservoir construction 5,012,458 4,525,453 487,005
Hidden Hills Reservoir construction management 348,520 346,383 2,137
Hidden Hills Reservoir geotechnical services 113,470 44,541 68,929
Hidden Hills Reservoir construction support services 277,465 263,592 13,873
CM for Highland Reservoir Replacement (6MG) 605,856 442,164 163,692
Geotechnical support services for Highland Reservoir
Replacement 86,200 79,699 6,501
Environmental support services for Highland Reservoir
Replacement 37,951 32,515 5,436
Construction of Highland Reservoir Replacement (6MG) 9,384,921 8,610,597 774,324
GIS parcel database 5-year purchase agreement 42,118 33,694 8,424
Lone reconfiguration project 215,751 207,365 8,386
Zone ReconfigUration Project construction materials testing 39,400 37,605 1,795
See independent auditors' report.
-39-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
11. COMMITMENTS AND CONTINGENCIES (CONTINUED):
Construction Contracts (Continued):
Total Construction Balance
Approved Costs to
Project Name Contract to Date Complete
Construction services for Well 20 S 349,037 S 292,770 S 56,267
Design, CM services for Well 20 79,820 19,644 60,176
Hydrogeological services Wells 1, 5 and 12 upgrade project 89,785 55,566 34,219
Parts and supplies for Wells 1, 5 and 12 upgrade project 222,528 171,064 51,464
Parts and supplies for Wells 1, 5 and 12 upgrade project 51,249 50,889 360
Parts and supplies for Wells 1, 5 and 12 upgrade project 27,880 - 27,880
Design services for Highland Booster Station replacement 561,533 490,000 71,533
Design services for Anaheim lntertie Project 26,100 20,000 6,100
Consultant serves for Sewer Master Plan 300,210 116,165 184,045
S 18,195.021 S 16.159.247 S 2,035.774
Litigation:
In November 2009, a series of wildfires, also known as the Yorba Linda-Corona Fire by the news
media, or Triangle Complex Fire, spread across the communities of Corona, Chino Hills, Yorba
Linda, Anaheim Hills, and Brea in Orange and Riverside County, California, and also spread to
Diamond Bar in Los Angeles County. The fire burned about 30,305 acres, destroyed about
200 structures, and forced the evacuations of about 7,000 homes. There are claims being asserted
against the District by homeowners and others damaged by the fires. As a member of ACWA JPIA
(see Note 10), these claims are currently handled by the JPIA's legal counsel. The District's
management believes the ultimate outcome of these claims will be not exceed the District's
insurance coverage amounts.
12. PROPOSITION IA BORROWINGS BY THE STATE OF CALIFORNIA:
Under the provisions of Proposition IA and as part of the 2009-2010 budget package passed by the
California state legislature on July 28, 2009, the State of California borrowed 8% of the amount of
property tax revenue, including those property taxes associated with the in-lieu motor vehicle
license fee, the triple flip in the lieu sales tax, and supplemental property tax, apportioned to cities,
counties and special districts (excluding redevelopment agencies). The state is required to repay
this borrowing plus interest by June 30, 2013. After repayment of this initial borrowing, the
California legislature may consider only one additional borrowing within a ten-year period. The
amount of this borrowing pertaining to the District was S 102,192.
See independent auditors' report.
-40-
YORBA LINDA WATER DISTRICT
NOTES TO BASIC FINANCIAL STATEMENTS
(CONTINUED)
June 30, 2010
12. PROPOSITION IA BORROWINGS BY THE STATE OF CALIFORNIA (CONTINUED):
The borrowing by the State of California was recognized as a receivable in the accompanying
financial statements. It is reported as part of accounts receivable - property taxes.
13. RESTATEMENT OF NET ASSETS:
Net assets at July 1, 2009 was restated as follows:
Net assets, July 1, 2009, as originally reported S 150,119,614
To adjust construction in progress for
unrecorded developers contributions 2,096,695
To adjust construction in progress to delete capitalized
overhead that should have been expensed (1,515,071)
To adjust construction in progress to delete capitalized
costs that should have been expensed (324,094)
To remove capital assets disposed in prior years (99,875)
To adjust accumulated depreciation on construction in progress
reclassified to utility plant (248,008)
To adjust compensated absences for additional accrual
for accumulated sick leave (609,948)
Net assets, July 1, 2009, as restated S 149.419.313
See independent auditors' report.
-41-
This page intentionally left blank
-42-
REQUIRED SUPPLEMENTARY INFORMATION
OTHER POST-EMPLOYMENT BENEFIT PLAN
SCHEDULE OF FUNDING PROGRESS
-43-
YORBA LINDA WATER DISTRICT
REQUIRED SUPPLEMENTARY INFORMATION
For the year ended June 30, 2010
OTHER POST-EMPLOYMENT BENEFIT PLAN
SCHEDULE OF FUNDING PROGRESS
Retiree Health Plan
Actuarial Value Unfunded Annual UL as a
Actuarial Accrued of Assets Liability Funded Covered Percentage
Valuation Liability (AVA) (UL) Ratio Payroll of Payroll
Date (a) (b) (a) - (b) (b)/(a) (c) [(a)-(b)]/(c)
06/01/09 S 1,740,127 S - S 1,740,127 0.00% S 4,983,653 34.92%
See independent auditors' report and notes to basic financial statements.
-44-
SUPPLEMENTARY INFORMATION
-45-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF NET ASSETS
Junc 30, 2010
ASSETS Water Sewer Totals
CURRENT ASSETS:
UNRESTRICTED ASSETS:
Cash and cash cquivalcnts $ 6,850,711 $ 1,835,853 $ 8,686,564
Accounts receivable - water and sewer services 3,742,266 181,288 3,923,554
Accounts rcccivablc - property taxes 120,976 - 120,976
Accrued intcrestrcccivablc 20,251 1,997 22,248
Prcpaid cxpcnscs and deposits 275,088 (2,064) 273,024
Inventory 233,588 233,588
TOTAL UNRESTRICTED ASSETS 11,242,880 2,017,074 13,259,954
RESTRICTED ASSETS:
Cash and cash cquivalcnts 26,907,082 - 26,907,082
Accrued intcrestrcccivablc 1,867 1,867
TOTAL RESTRICTED ASSETS 26,908,949 - 26,908,949
TOTAL CURRENT ASSETS 38,151,829 2,017,074 40,168,903
NONCURRENT ASSETS:
Bond issuance costs 785,655 - 785,655
Capital asscts (Note 5):
Non-depreciable 23,440,046 574,788 24,014,834
Depreciable, nct of accumulated depreciation 132,605,574 23,701,741 156,307,315
TOTAL NONCURRENT ASSETS 156,831,275 24,276,529 181,107,804
TOTAL ASSETS 194,983,104 26,293,603 221,276,707
Scc independent auditors' report.
-46-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF NET ASSETS
(CONTINUED)
June 30, 2010
LIABILITIES Water Sewer Totals
CURRENT LIABILITIES:
PAYABLE FROM UNRESTRICTED CURRENT ASSETS:
Accounts payable $ 5,547,859 $ (11,011) $ 5,536,848
Accrued expenses 125,727 - 125,727
Compensated absences 262,722 - 262,722
Customer and construction deposits 171,906 460,281 632,187
Deferred revenue 480,602 - 480,602
TOTAL PAYABLE FROM
UNRESTRICTED CURRENT ASSETS 6,588,816 449,270 7,038,086
PAYABLE FROM RESTRICTED ASSETS:
Accrued interest payable 491,440 - 491,440
Certificates of Participation - current portion 855,000 855,000
TOTAL PAYABLE FROM RESTRICTED ASSETS 1,346,440 - 1,346,440
TOTAL CURRENT LIABILITIES 7,935,256 449,270 8,384,526
LONG-TERM LIABILITIES (LESS CURRENT PORTION):
Deferred annexation revenue 14,090,105 - 14,090,105
Compensated absences 788,166 - 788,166
Other post-employment benefit (OPEB) liability 215,200 21,283 236,483
Certificates of Participation 43,210, t04 - 43,210,104
TOTAL LONG-TERM
LIABILITIES (LESS CURRENT PORTION) 58,303,575 21,283 58,324,858
TOTAL LIABILITIES 66,238,831 470,553 66,709,384
NET ASSETS:
Invested in capital assets, net of related debt 122,600,593 24,276,529 146,877,122
Restricted 15,797,432 - 15,797,432
Unrestricted (9,653,752) 1,546,521 (8,107,231)
TOTAL NET ASSETS $ 128,744,273 $ 25,823,050 $ 154,567,323
See independent auditors' report.
-47-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS
For the year ended Junc 30, 2010
Water Sewer Totals
OPERATING REVENUES:
Watcrsalcs $ 22,141,731 $ - $ 22,141,731
Scwcrrcvcnucs - 1,275,979 1,275,979
Othcr operating rcvcnucs 455,507 116,396 571,903
TOTAL OPERATING REVENUES 21597,238 1,392375 23,989,613
OPERATING EXPENSES:
Variable water costs 10,688,3 t8 - 10,688,318
Personnel serviccs 5,863,006 814,751 6,677,757
Supplies and services 3,228,241 347,906 3,576,147
Depreciation and amortization 4,561,701 592,190 5,153,891
TOTAL OPERATING EXPENSES 24,341,266 1,754,847 26,096,113
OPERATING LOSS (1,744,028) (362,472) (2,106,500)
NONOPERATING REVENUES (EXPENSES):
Property taxes - debt service 1,269,441 - 1,269,441
Invcst rent inconnc 248,882 19,360 268,242
Interest cxpcnsc (1,169,955) (543) (1,170,498)
Othcr nonopcrating rcvcnucs 301,888 29339 331,227
Other nonopcrating expenses (148,476) (2,824) (151,300)
TOTAL NONOPERATING REVENUES (EXPENSES) 501,780 45,332 547,112
NET LOSS BEFORE
CAPITAL CONTRIBUTIONS (1,242,248) (317,140) (1,559,388)
CAPITAL CONTRIBUTIONS 5,973,683 733,715 6,707,398
CHANGES IN NET ASSETS 4,731,435 416,575 5,148,010
NET ASSETS - BEGINNING OF YEAR, AS RESTATED 124,012,838 25,406,475 149,419,313
NET ASSETS - END OF YEAR $ 128,744,273 $ 25,823,050 $ 154,567,323
Scc independent auditors' report.
-48-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF CASH FLOWS
For the year ended June 30, 2010
Water Sewer Totals
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 21,219,512 $ 1,369,694 $ 22,589,206
Cash payments to employees for salaries and wages (5,849,493) (812,435) (6,661,928)
Cash payments to suppliers of goods and services (13,711,673) (389,959) (14,101,632)
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,658,346 167,300 1,825,646
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Proceeds from property taxes and assessments 1,171,251 1,954 1,173,205
Other revenue 301,170 32,221 333391
Other expenses (113,118) (2,824) (115,942)
NET CASH PROVIDED BY
NONCAPITAL FINANCING ACTIVITIES 1,359,303 31,351 1,390,654
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:
Property taxes received for debt service 4,443 - 4,443
Proceeds from capital contributions 123,415 7,204 130,619
Acquisition and construction of capital assets (13,107,653) (397,655) (13,505,308)
Proceeds from sales of capital assets 4,063 4,063
Principal paid on long-term liability (825,000) - (825,000)
Interest paid on long-term liability (1,991,168) (543) (1,991,711)
NET CASH USED BY CAPITAL AND
RELATED FINANCING ACTIVITIES (15,791,900) (390,994) (16,182,894)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale/purchase of investments, net 11,735,138 936,808 12,671,946
Interest and investment earnings 240,473 17,703 258,176
NET CASH PROVIDED
BY INVESTING ACTIVITIES 11,975,611 954,511 12,930,122
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (798,640) 762,168 (36,472)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 34,556,433 1,073,685 35,630,118
CASH AND CASH EQUIVALENTS - END OF YEAR $ 33,757,793 $ 1,835,853 $ 35,593,646
See independent auditors' report. (Continued)
-49-
YORBA LINDA WATER DISTRICT
COMBINING SCHEDULE OF CASH FLOWS
(CONTINUED)
For the year ended Junc 30, 2010
Watcr Scwcr Totals
RECONCILIATION OF OPERATING LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Operating loss $ (1,744,028) $ (362,472) $ (2,106,500)
Adjustments to reconcile operating loss to
nct cash provided by operating activities:
Depreciation 4,561,701 592,190 5,153,891
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts rcccivablc (1,342,774) (16,021) (1,358,795)
Inventory 49,111 - 49,111
Prepaid cxpcnscs and other deposits 66,684 4,953 71,637
Increase (decrease) in Iiabilitics:
Accounts payable and accrued cxpcnscs 54,190 (75,484) (21,294)
Accrued salaries and wages (39,938) (8,914) (48,852)
Accrued other post- cmploymcnt bcncfits (OPEB) liability 104,479 11,230 115,709
Accrued compensated absences (51,028) - (51,028)
Customer and other deposits (51) 21,818 21,767
Total adjustments 3,402,374 529,772 3,932,146
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,658,346 $ 167,300 $ 1,825,646
CASH AND CASH EQUIVALENTS -
FINANCIAL STATEMENT CLASSIFICATION:
Unrestricted $ 6,850,711 $ 1,835,853 $ 8,686,564
Restricted 26,907,082 - 26,907,082
TOTAL CASH AND CASH EQUIVALENTS -
FINANCIAL STATEMENT CLASSIFICATION $ 33,757,793 $ 1,835,853 $ 35,593,646
NONCASH INVESTING, CAPITAL AND
RELATED FINANCING ACTIVITIES:
Amortization related to long-term debt $ 20,988 $ $ 20,988
Capital contributions $ 5,551,623 $ 726,511 $ 6278,134
Scc independent auditors' report.
-50-
YORBA LINDA WATER DISTRICT
SCHEDULE OF OPERATING EXPENSES BY COST CENTER
AND NATURE OF EXPENSES FOR WATER AND SEWER
For the year ended Junc 30, 2010
Water Sewer Totals
OPERATING EXPENSES:
Variable Water Costs:
Imported water $ 6,727,831 $ $ 6,727,831
OCWD replenishment assessment 2,435,207 - 2,435,207
Fucl and power/pumping 1,052,148 - 1,052,148
MWD comncction charge 473,132 - 473,132
Total Variablc Watcr Costs 10,688,318 10,688,318
Pcrsonncl Services:
Unit salaries 2,673,364 421,197 3,094,561
Managcnlcnt, supervisor and confidential salaries 1,462,164 124,597 1,586,761
Fringc benefits 1,671,134 245,101 1,916,235
Director's fccs 45,797 3,907 49,704
Salaries - other 10,547 19,949 30,496
Total Pcrsonncl Scrviccs 5,863,006 814,751 6,677,757
Supplies and Scrviccs:
Maintenance 647,209 29,223 676,432
Contractual services 966,724 103,409 1,070,133
Insurance 204,884 18,229 223,113
Data processing 70,032 9,977 80,009
Communications 282,591 27,331 309,922
Vehicle cxpcnsc 243,904 38,585 282,489
Professional services 398,636 75,029 473,665
Utilities 105,003 10,385 115,388
Officc cxpcnsc 31,158 2,854 34,012
Training 35,696 4,185 39,881
Ducs and mcnlbcrships 29,740 3,009 32,749
Travel and conferences 13,971 1,305 15,276
Noncapital equipment 104,782 12,281 117,063
Bad debt cxpcnsc 34,952 6,660 41,612
Recreation committee 2,968 294 3,262
Othcr 55,991 5,150 61,141
Total Supplies and Scrviccs 3,228,241 347,906 3,576,147
TOTAL OPERATING EXPENSES $ 19,779,565 $ 1,162,657 $ 20,942,222
Scc independent auditors' report.
-51-
YORBA LINDA WATER DISTRICT
SCHEDULE OF CAPITAL ASSETS
For the year ended Junc 30, 2010
Watcr Scwcr Totals
Land, Mincral and Water Rights:
Land $ 138,629 $ $ 138,629
W atcr rights 86,300 86,300
Mincral rights 63,650 63,650
Land rights and cascincnts 385 58,526 58,911
Total Land, Mincral and Watcr Rights 288,964 58,526 347,490
Sourcc of Supply:
Wclls 5,211,307 - 5,211,307
MWD connection 517,275 (6,699) 510,576
Total Sourcc of Supply 5,728,582 (6,699) 5,721,883
Pumping Plant:
Structures and improvements 9,387,884 - 9,387,884
Equipment 7,450,696 29,240 7,479,936
Total Pumping Plant 16,838,580 29,240 16,867,820
Water Treatincnt Plant:
Structures and improvcmcnts 1,473,626 - 1,473,626
Equipment 1,150,255 - 1,150,255
Total Water Treatment Plant 2,623,881 2,623,881
Transmission and Distribution Plant:
Mains 66,380,759 28,061615 94,443,374
Rcscrvoirs and tanks 43,614,586 - 43,614,586
Scrvicc and meter installation 5,366,832 2,390,450 7,757,282
Firc hydrants 6,244,986 - 6,244,986
Mctcrs 8,669,133 8,669,133
Firc mains 717,746 717,746
Structures and improvcmcnts 1,844,138 - 1,844,138
Total Transmission and Distribution Plant 132,838,180 30,453,065 163,291,245
General Plant:
Structures and improvcmcnts 13,160,535 - 13,160,535
Transportation equipment 1,490,658 971,316 2,461,974
Powcr operated cquipmcnt 542,239 - 542,239
Communication equipment 565,557 - 565,557
Computer cquipmcnt 448,484 - 448,484
Oflicc furniture 1,188,942 - 1,188,942
Tools, shops and garage cquipmcnt 62,061 - 62,061
Other 4,650 - 4,650
Storc cquipmcnt 48,889 - 48,889
Total General Plant 17,512,015 971,316 18,483,331
Construction in Progress 23,151,082 516,262 23,667,344
Total Capital Asscts $ 198,981,284 $ 32,021,710 $ 231,002,994
Scc independent auditors' report.
-52-
STATISTICAL SECTION
- 53 -
This page intentionally left blank
-54-
YORBA LINDA WATER DISTRICT
DESCRIPTION OF STATISTICAL SECTION CONTENTS
June 30, 2010
This part of the District's comprehensive annual financial report presents detailed information as a
context for understanding what the information in the financial statements and the note disclosures say
about the government's overall financial health.
Contents: Pages
Financial Trends these schedules contain trend information to help the reader
understand how the District's financial performance and well-being have
changed over time. 56
Revenue Capacity these schedules contain information to help the reader
assess the District's most significant local revenue source, the property tax. 58
Debt Capacity these schedules present information to help the reader assess
the affordability of the District's current levels of outstanding debt and the
District's ability to issue additional debt in the future. 60
Demographic and Economic Information these schedules offer demographic
and economic indicators to help the reader understand the environment within
which the District's financial activities take place. 62
Operating Information these schedules contain service and infrastructure data
to help the reader understand how the information in the District's financial
report relates to the services the District provides and the activities it
performs. 64
- 55 -
Yorba Linda Water District
Changes in Net Assets
Last Ten Fiscal Years
Fiscal Year
Changes in Net Assets: 2010 2009 2008
Operating Rcvenucs
Watcr Sales $ 22,141,731 $ 19,626,738 $ 19,470,109
Scwcr Rcvenucs 1,275,979 1,259,723 1,247,907
Othcr Operating Rcvcnuc 571,903 439,302 380,175
Operating Expenses
Variable Watcr Costs 10,688,318 10,859,328 10,516,507
Personnel Services 6,677,757 6,498,959 5,751,384
Supplics and Sciviccs 3,576,147 4,151,058 4,361,512
Depreciation 5,153,891 4,167,958 3,572,726
Operating Loss (2,106,500) (4,351,540) (3,103,938)
Non operating Rcvcnuc (Expenses)
Property Taxes 1,269,441 1,283,521 1,263,656
Investmentlncome 268,242 689,108 1,508,193
IntcrestExpcnsc (1,170,498) (1,469,925) (824,387)
Othcr Non operating Rcvcnuc 331,227 479,911 270,429
Other Non operating Expcnsc (151,300) (177,553) (133,604)
Total Non-Operating Revenue (Expcnsc) 547,112 805,062 2,084,287
Nct Income (Loss) Bcforc Capital Contributions (1,559,388) (3,546,478) (1,019,651)
Capital Contributions 6,707,398 4,363,527 4,100,051
Changes in Net Assets $ 5,148,010 $ 817,049 $ 3,080,400
Net Assets by Component:
Invested in Capital Asscts, Net of Related Dcbt $ 146,877,122 $ 141,514,024 $ 139,677,663
Rcstrictcd 15,797,432 14,063,802 14,523,549
Unrestricted (8,107,231) (6,158,513) (4,898,647)
Total Net Assets $ 154,567,323 $ 149,419,313 $ 149,302,565
NOTE: GASB 34 implcmcntcd in 2002
SOURCE: YLWD Audited Financial Statements
-56-
Fiscal Year
2007 2006 2005 2004 2003 2002
$ 18,944,233 $ 17,017,275 $ 14,533,021 $ 14,138,952 $ 12,128,715 $ 12,080,445
806,897 778,275 750,771 763,528 545,119 525,188
393,285 382,917 427,430 385,241 177,966 174,572
10,703,037 8,930,535 7,920,218 8,405,858 7,510,409 7,018,095
5,276,878 4,635,464 4,294,020 3,903,396 3,304,878 2,874,817
3,395,303 2,877,288 2,699,842 2,345,991 2,111,993 1,762,580
3,445,868 2,923,288 2,578,420 2,498,265 2,305,286 2,073,348
(2,676,671) (1,188,108) (1,781,278) (1,865,789) (2,380,766) (948,635)
1,186,441 335,075 252,663 1,005,859 3,304,314 3,247,591
2,180,067 1,425,663 638,235 342,554 549,093 914,100
(468,087) (472,163) (565,581) (484,895) (214,842) (291,352)
455,067 534,385 416,778 642,358 155,814 277,198
(138,501) (336,649) (179,526) (296,528) (282,039) (311,231)
3,214,987 1,486,311 562,569 1,209,348 3,512,340 3,836,306
538,316 298,203 (1,218,709) (656,441) 1,131,574 2,887,671
6,913,095 26,026,524 6,701,629 2,184,681 11,419,097 1,884,633
$ 7,451,411 $ 26,324,727 $ 5,482,920 $ 1,528,240 $ 12,550,671 4,772,304
$ 121,317,296 $ 106,376,683 $ 84,000,773 $ 74,338,841 $ 80,268,884 $ 67,026,121
23,089,201 22,274,814 23,196,485 25,140,038 16,774,957 16,593,197
1,815,668 10,119,257 5,248,769 7,484,228 8,391,026 9,264,878
$ 146,222,165 $ 138,770,754 $ 112,446,027 $ 106,963,107 $ 105,434,867 $ 92,884,196
-57-
Yorba Linda Water District
Number of Connections
Current and Nine Years Ago
Single
Family Multi-Family Commercial/ Irrigation/ Direct Rate
Fiscal Year Residential Residential Industrial Other (Billing Unit)
2001 19,518 238 976 803 $ 1.03
2002 19,915 234 1,056 933 1.13
2003 20,383 225 1,050 865 1.33
2004 20,914 225 849 831 1.33
2005 20,773 217 842 828 1.48
2006 21,300 217 847 828 1.57
2007 21,451 228 792 915 1.57
2008 21,580 228 840 904 1.79
2009 21,672 228 831 909 2.52
2010 21,846 228 837 933 2.52
NOTE: x $1.48 was approved January 1, 2005
25,000
20,000
15,000 M Other
Industrial
10,000 Residential
M Residential
5,000
A-
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
SOURCE: YLWD Billing System
-58-
Yorba Linda Water District
Ten Largest Customers
Current and Nine Years Ago
FY 2008+
Customer Name Business Type Annual Revenues % of Total
1 City of Yorba Linda Government $ 1,162,249.51 5.51%
2 Placentia Yorba Linda USD Government 27,162.94 0.13%
3 Yorba Linda Villages Homeowner's Assoc. 18,409.96 0.09%
4 Rancho Dominquez Assoc. Hoincowncr's Assoc. 13,001.84 0.06%
5 Archstonc Apts Apartment Complcx 12,303.44 0.06%
6 Cal Watcr Manufacturer 9,493.13 0.04%
7 Tac Wcst Manufacturcr 9,381.26 0.04%
8 Placentia Linda Hospital Hospital 8,933.78 0.04%
9 Advanced Management Apartment Complcx 8,893.10 0.04%
10 St Francis of Assisi Privatc School 8,453.53 0.04%
1,278282.49 6.06%
FY 2002*
Customer Name Business Type Annual Revenues % of Total
1 City of Yorba Linda Govcrnmcnt $ 1,915,251.67 14.99%
2 Saba Pctrolcum Manufacturcr 175.921.20 1.38%
3 Tac Wcst Inc Manufacturer 98,367.66 0.77%
4 St Francis of Assissi Privatc School 97,005.47 0.76%
5 Shigcmi Muranaka Nursery Rctail 78,760.00 0.62%
7 Placentia Unificd School Govcrnmcnt 31,609.61 0.25%
6 Sunset Tropicals Nurscry Retail 30,968.79 0.24%
8 Costco Warehouse Rctail 30,308.28 0.24%
9 Exccll Circuits Manufacturcr 27,839.87 0.22%
10 YL Country Club Privatc Club 25,743.78 0.20%
$ 2,511,776.33 19.65%
Note: + Most recent available data
* Latcst available data
SOURCES: City of Yorba Linda CAFR
YLWD Billing Department
-59-
Yorba Linda Water District
Ratio of Outstanding Debt
Total
General Certificates As a Share of
Fiscal Obligation OCWD of Per Per Personal
Year Bonds Loan Participation Debt Connection Capita Income
2001 $ 7,360,216 $ 192,292 $ $ 7,552,508 $ 321 $ 87 0.13%
2002 5,742,169 171,048 5,913,217 252 68 0.09%
2003 3,671,446 149,061 3,820,507 163 44 0.05%
2004 1,590,000 - 10,384,239 11,974,239 510 138 0.16%
2005 - 10,000,078 10,000,078 426 115 0.13%
2006 - - 9,873,717 9,873,717 420 114 0.12%
2007 - - 10,540,139 10,540,139 449 121 0.12%
2008 - 45,502,080 45,502,080 1,936 523 0.50%
2009 - 44,911,092 44,911,092 1,911 517 0.44%
2010 - - 44,065,104 44,065,104 1,875 507 0.45%
Composition of Debt
$50,000,000
$40,000,000
$30,000,000
Participation
$20,000,000
■ Loan
$10,000,000 =MwMM i Bonds
®0M
r-I N m T Ln w r, oo m 0
0 0 0 0 0 0 0 0 0 r-I
0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N
Debt per Connection
$2,500
$2,000
$1,500
$1,000
$500 ,
$ ■ ■
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
SOURCE: YLWD Audited Financial Statements
-60-
Yorba Linda Water District
Debt Coverage
Last Ten Fiscal Years
Debt Service
Fiscal Operating & Net Coverage
Year Revenues Maint. Costs Revenues Principal Interest Total Ratio
2001 $ 15,617 $ 11,294 $ 4,323 $ 2,011 $ 376 $ 2,387 1.81
2002 16,568 11,759 4,809 1086 305 2,391 2.01
2003 16,215 12,873 3,342 2,172 229 2,401 1.39
2004 16,471 14,428 2,043 2,263 148 2,411 0.85
2005 16,178 14,230 1,948 1,760 299 2,059 0.95
2006 19,563 16,009 3,554 200 473 673 5.28
2007 23,036 18,703 4,333 205 469 674 6.43
2008 22,822 19,829 2,993 210 370 580 5.16
2009 22,514 20,604 1,910 570 1,577 1147 0.89
2010 24,417 19,928 4,489 825 1,194 2,019 2.22
NOTE: * Excludes dcprcciation and debt service payments
Includcs capitalized interest rcduction of $94, $581, and $787 (in thousands)
for the years 2008, 2009 and 2010; respectively.
SOURCE: YLWD Audited Financial Statements
-61-
Yorba Linda Water District
Demographics
Last Ten Fiscal Years
YLWD
Personal Income
Year Population City of YL Population Personal Income per Capita
2001 69,084 60,073 $ 4,761,071547 $ 68,917
2002 70,566 61,362 5,081,187,350 72,006
2003 72,080 62,678 6,025,361,496 83,593
2004 73,663 64,055 6,435,285,575 87,361
2005 75,189 65,382 6,699,301,248 89,099
2006 76,817 66,797 7,150,485,256 93,085
2007 78,090 67,904 7,623,582,080 97,626
2008 78,559 68,312 8,179,815,504 104,123
2009 80,209 69,747 9,465,109,914 118,006
2010 81,893 71,211 9,224,696,122 112,643
County of Orange
Year Population Unemployment Rate Personal Income Personal Income per
2001 N/A + 4.0% N/A N/A
2002 2,940,743 5.0% $ 111,750,294 $ 38,001
2003 2,983,731 5.0% 117,722,484 39,455
2004 3,019,889 4.8% 125,670,056 41,614
2005 3,047,054 4.3% 133,031,819 43,659
2006 3,072,336 3.2% 143,949,044 46,853
2007 3,098,121 3.9% 151,039,900 48,752
2008 3,121,251 5.2% 155,459,600 49,807
2009 3,139,017 9.0% 155,459,600 49,525
2010 3,158,479 9.8% * 151,510,926 47,970
NOTE: * As of July 2010
+ Information was not tracked by the County prior to
implementation of GASB No. 34 in FY 2001-2002
*x Based on City of Yorba Linda population, plus an additional 15%
of estimated population for customers outside of the City
SOURCES: City of Yorba Linda CAFR
County of Orange CAFR
Statc of California, Employment Development Department
State of California, Dcpartinent of Finance
YLWD Billing Systcm
-62-
Yorba Linda Water District
Ten Largest Employers
Current and Four Years Ago
2008- 2006+
% of Total % of Total
Employer ^ Employees Labor Force Employees Labor Force
Viasys Respiratory Care, Inc. 389 1.19 % 359 1.02 %
Nobel Biocare USA, Inc. 328 0.93 % 323 0.92 %
Costco Wholesale Corp. 276 0.78 % 204 0.58 %
City of Yorba Linda 194 0.55 % 180 0.51 %
Vons 165 0.47 % 167 0.48 %
Kohl's Inc. 158 0.45 % 145 0.41 %
Best Buy 129 0.37 % 135 0.38 %
Sunrise Retirement Homes 126 0.36 % 120 0.34 %
Office Solutions 92 0.26 % 98 0.28 %
Cobra Engineering 80 0.23 % 0 0.00 %
Total 1,937 5.6 % 1,731 4.9 %
NOTE: x Most current available data
+ Latest available data
The Placentia- Yorba Linda Unified School District has 2,500 employees and
serves the entire communities of Yorba Linda and Placentia, and also serves
parts of the cities of Brea, Anaheim and Fullerton. YLWD cannot provide the
number of employees working within the boundaries of Yorba Linda.
Source: City of Yorba Linda CAFR
-63-
Yorba Linda Water District
Number of Employees
Last Ten Fiscal Years
Full Time Equivalent Employees by Department
Department
Fiscal Human
Year Administration Engineering Finance Resources IT Operations Total
2001 2 10 10 1 1 27 51
2002 2 10 10 1 1 29 53
2003 2 11 10 1 2 29 55
2004 3 12 10 1 2 32 60
2005 3 13 11 1 3 31 62
2006 4 14 13 3 3 28 65
2007 4 13 15 3 3 32 70
2008 4 13 15 3 6 33 74
2009 4 13 16 3 6 33 75
2010 5 13 16 3 7 32 76
80
70
60
50 Operations
r IT
40 ■ Resources
Finance
30 ■ Engineering
■ Administration
20
10
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
NOTE: Number of employees in each department are authorized, funded and filled positions.
SOURCE: YLWD Human Resources Department
-64-
Yorba Linda Water District
Operating and Capacity Indicators
Last Ten Fiscal Years
Fiscal Miles of Water Yearly Water Average
Year Mains Installed* Production (MG) Production (MGD)
2001 2.40 6,996 19.2
2002 4.81 7,548 20.7
2003 0.78 7,796 21.4
2004 3.64 7,863 21.5
2005 3.64 7,042 19.3
2006 2.52 7,505 20.6
2007 9.72 8,360 22.9
2008 9.72 8,027 22.0
2009 9.72 7,590 20.8
2010 9.72 6,569 18.0
Fiscal Number of Number of Number of
Year Booster Pumps Reserviors Field Service Calls
2001 9 8 1,534
2002 9 9 1,535
2003 11 10 1,727
2004 11 10 1,833
2005 11 10 1,460
2006 11 10 1,484
2007 12 11 1,565
2008 12 11 1,943
2009 12 11 1,674
2010 12 13 1,640
MG - Millions of Gallons
MGD - Millions of Gallons per Day
NOTE: x Miles of Water Main estimatcd
SOURCES: YLWD Assct Managcmcnt Plan 2010
YLWD Operations Departmcnt
-65-
DIEHL, EVANS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
MW HALL R. LCDIN, CI'A
A I'AItI NLRSHII' INCLGDINCi ACCOI N 17\NCY C'ORPORAI IONS CI: V<j N'.'WR AKLR, CPA
NI I IN I'. PAI LL, CI'A
ROBLRH1 I. CALL1NAN, C'I'A
5 CORPORATE PARK, SUITE 100 'HIL11, HOLIKANIP.C1RA
'"fHOAI.1S .AA. I'LRLOlVS6, CCA
IRVINE, CALIFORNIA 92 606-5 1 65 H:v:VLY 1. SCHROLDLR,CPA
(949) 399-0600 . FAX (949) 399-0610 KLNNLI H R. AILS. CPA
W '
www.diehlcvlns.com ILMNI C. PEN I Z, C PA
PROFFSSIONAL(ORPORATION
September 15, 2010
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
The Board of Directors
Yorba Linda Water District
Placentia, California
We have audited the basic financial statements of the Yorba Linda Water District (the District) as of
and for the year ended Jame 30, 2010, and have issued our report thereon dated September 15, 2010.
We conducted our audit 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.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the District's internal control over financial
reporting as a basis for designing our auditing procedures 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
District's internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the District's internal control over financial reporting.
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 District's financial statements will not be prevented, or detected and corrected on a
timely basis.
Our consideration of the internal control over financial reporting 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 financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We
did not identify any deficiencies in internal control over financial reporting that we consider to be
material weaknesses, as defined above.
-1-
OTIILR OFFICES AT 2965 ROOSLVELT STRLLT 613 W. VALLLY PARKWAY- SUITL 330
CARLSBAD. CALIFORNIA 9200 ?389 LSC0NDID0_CALIFORNIA92025 ?598
(760) 729-2343 • FAX (760) 729-2234 (760) 741-3141 • FAX (760) 741-9890
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District's financial statements are free of
material misstatements, 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 audit 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.
This report is intended solely for the information and use of the Yorba Linda Water District Directors
and management of the Yorba Linda Water District and is not intended to be and should not be used by
anyone other than these specific parties.
LLP
-2-
DIEHL, EVANS & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
,\I[( HALL R. LCDIN, CI'A
A 1'AItI NLRSHII' INCLGDINCi ACCOI N 17\NCY C'ORPORAI IONS CI: V<j N'.'WR AKLR, CPA
NI I IN 1'. PAI LL, CI'A
ROBLRH1 I. CALL1NAN, C'I'A
5 CORPORATE PARK, SUITE 100 'HIL11, HOLIKANIP.C1RA
'"fH0AI.1S .AA. I'LRLOlVS6, CCA
IRVINE, CALIFORNIA 92606-5165 =HARVLY 1. SC HROLDLR, CPA
(949) 399-0600. FAX (949) 399-0610 KLNNLIH R. AILS. CPA
W '
www.diehlcvlns.com ILMNI C. PEN I Z, C PA
PROFFSSIONAL(ORPORATION
September 15, 2010
Board of Directors
Yorba Linda Water District
Placentia, California
We have audited the financial statements of the Yorba Linda Water District for the year ended
Jude 30, 2010, and have issued our report thereon dated September 15, 2010. Professional standards
require that we provide you with information about our responsibilities under generally accepted
auditing standards, as well as certain information related to the planned scope and timing of our audit.
We have communicated such information in our engagement letter dated March 27, 2008 and during
our planning meeting on August 9, 2010. Professional standards also require that we communicate to
you the following information related to our audit.
Significant Audit Findings:
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The
significant accounting policies used by the Yorba Linda Water District are described in Note 2 to the
financial statements. No new accounting policies were adopted and the application of existing
accounting policies was not changed during the year ended June 30, 2010. We noted no transactions
entered into by the Yorba Linda Water District during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in
the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management's knowledge and experience about past and current events and assumptions
about future events. Certain accounting estimates are particularly sensitive because of their
significance to the financial statements and because of the possibility that future events affecting them
may differ significantly from those expected.
-1-
OTIILR OFFICES AT 2965 ROOSLVLLT STRLLT 613 W. VALLLY PARKWAY- SUITL 330
CARLSBAD. CALIFORNIA 9200 ?389 LSCONDIDO_CALIFORNIA92025 ?598
(760) 729-2343 • FAX (760) 729-2234 (760) 741-3141 • FAX (760) 741-9890
Significant Audit Findings (Continued):
Qualitative Aspects of Accounting Practices (Continued):
The most sensitive estimates affecting the financial statements were:
a. Management's estimate of the fair market value of investments which is based on market
values by outside sources.
b. The estimated useful lives of capital assets for depreciation purposes which are based on
industry standards.
c. The annual required contribution for the District's Other Post-Employment Benefits was
prepared by an outside consultant.
We evaluated the key factors and assumptions used to develop these estimates in determining that they
were reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to
financial statement users. The most sensitive disclosure affecting the financial statements was reported
in Note 7 to the financial statements regarding the annual required contribution and the actuarial
liability for the District's Other Post-Employment Benefits.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing
our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during
the audit, other than those that are trivial, and communicate them to the appropriate level of
management. Management has corrected all such misstatements. In addition, none of the
misstatements detected as a result of audit procedures and corrected by management were material,
either individually or in the aggregate, to each opinion unit's financial statements taken as a whole
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a
financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that
could be significant to the financial statements or the auditors' report. We are pleased to report that no
such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated September 15, 2010.
-2-
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the Yorba Linda Water District's financial
statements or a determination of the type of auditor's opinion that may be expressed on those
statements, our professional standards require the consulting accountant to check with us to determine
that the consultant has all the relevant facts. To our knowledge, there were no such consultations with
other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the Yorba Linda Water District's
auditors. However, these discussions occurred in the normal course of our professional relationship
and our responses were not a condition to our retention.
This information is intended solely for the use of the Board of Directors and management of the Yorba
Linda Water District and is not intended to be and should not be used by anyone other than these
specified parties.
l~ J IL/~ , ~v c~,~ u.vti c~. C.d►M-rA+~t-+~ 0 LL Ili
-3-