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4.0 POLICY & COMPLIANCE <br />4.1 2022 Financial Audit <br />Mr. Berg presented the 2022 Financial Audit. He stated that the auditors issued an <br />unmodified opinion on the financials, including legal compliance, for a completely clean <br />audit. <br />Mr. Berg noted overall total cash and investment balances for both electric and water <br />show consistency over time with a decrease from 2021 to 2022 due to the spending of the <br />bonds proceeds that were issued in 2021 for the new field services building project. <br />Commissioner Stewart asked if there would be any challenges with the Governmental <br />Accounting Standards Board (GASB) or imputed interest if ERMU were to utilize an <br />interdepartmental loan from water to electric for capital projects to avoid taking on <br />additional bonds. Mr. Berg replied there would not be a problem with this approach and <br />imputed interest would not be necessary. <br />Chair Dietz asked for clarification as to how ERMU had an increase in its net position while <br />profits were down. Mr. Berg stated the water department largely impacted the net <br />position with its significant increase in connection fees in 2022. <br />Chair Dietz asked if the transfers to other city funds of $1.5 million was the payment in <br />lieu of taxes (PILOT) ERMU pays to the City and if it is tied to the maintenance of vehicles. <br />Ms. Karpinski replied the $1.5 million is the PILOT, however, the maintenance of vehicles <br />is listed elsewhere as an expense. <br />Chair Dietz asked if this was the largest amount we have ever paid the City for PILOT. Mr. <br />Berg replied that it was. Ms. Karpinski added it was due in part to paying PILOT on the <br />power cost adjustment (PCA). <br />Commissioner Stewart asked for clarification on the inclusion of the PCA with the PILOT as <br />she thought the PCA was considered a pass through and not revenue. Ms. Karpinski <br />reported that per policy PCA is considered revenue and therefore included in the PILOT. <br />Chair Dietz asked for the rate of interest on cash deposit investments and if ERMU would <br />move its investments due to low interest rates. Ms. Karpinski said the interest rate varies <br />and that ERMU usually waits for the investment to mature before reinvesting, also noting <br />staff has built a ladder system with ERMU investments. She further explained UBS <br />Financial Services helps determine when and where to invest. <br />Chair Dietz commented on the beneficial lease income from permitting the attachment of <br />communications infrastructure to water towers. Ms. Karpinski stated this is a new GASB <br />standard so going forward you will see this income in the audit. <br />Elk River Municipal Utilities Commission Meeting Minutes <br />April 11, 2023 <br />Page 3 <br />W <br />