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City of Elk River
<br />March 15, 2001
<br />Page Ten
<br />The following are areas that came to our attention during the audit that we feel should be reviewed:
<br />The results of the Electric and Water Enterprise Funds are as follows:
<br />Electric Fund
<br />The following table tracks cash balance, unreserved retained earnings and fixed asset additions for the previous five years in the
<br />Electric Fund.
<br />Percent
<br />Cash Outlays
<br />Percent
<br />of
<br />Operating
<br />of
<br />Electric Fund
<br />2000
<br />Charges
<br />1999
<br />Charges
<br />Fixed Asset
<br />Charges for services and other revenue
<br />$ 9,389,846
<br />100.0%
<br />$ 8,902,004
<br />100.0%
<br />Operating expenses excluding depreciation
<br />7,456,665
<br />79.4
<br />6,741,394
<br />75.7
<br />Operating income before depreciation
<br />1,933,181
<br />20.6
<br />2,160,610
<br />24.3
<br />Depreciation expense
<br />812,124
<br />8.7
<br />739,411
<br />8.3
<br />1998
<br />Operating income
<br />1.121.057
<br />11 9%
<br />8,502,983
<br />16.0%
<br />1997
<br />513,064
<br />Electric Fund
<br />2000
<br />7,914,485
<br />1999
<br />1996
<br />132,085
<br />Operating cash and investments
<br />$ 1,407,906
<br />7,581,164
<br />$ 1,315,004
<br />Restricted cash and investments
<br />781,025
<br />629,690
<br />Total
<br />2,188.931
<br />1.944.694
<br />Electric Fund
<br />The following table tracks cash balance, unreserved retained earnings and fixed asset additions for the previous five years in the
<br />Electric Fund.
<br />The effect of new customers was reflected in a 5.9% increase in charges for services. The operating expenses increased at a
<br />higher rate than revenue due to higher purchased power costs, increased repair and maintenance and higher depreciation. The
<br />cash position of the electric fund did remain strong relative to these expense increases and still is at a high enough level to meet
<br />working capital needs. Management has monitored rates and adjusted them to maintain this cash balance.
<br />Cash Outlays
<br />Operating
<br />Operating
<br />Cash as
<br />Cash
<br />Expenses and
<br />Fixed Asset
<br />a Percent
<br />Balances
<br />Debt Service
<br />Additions
<br />Total
<br />of Outlays
<br />2000
<br />$ 1,407,906
<br />$ 8,337,900
<br />$ 1,780,097
<br />$ 10,117,997
<br />13.9%
<br />1999
<br />1,315,004
<br />7,190,828
<br />1,653,043
<br />8,843,871
<br />14.9
<br />1998
<br />800,828
<br />6,903,054
<br />1,599,929
<br />8,502,983
<br />9.4
<br />1997
<br />513,064
<br />6,262,400
<br />1,652,085
<br />7,914,485
<br />6.5
<br />1996
<br />132,085
<br />6,135,178
<br />1,445,986
<br />7,581,164
<br />1.7
<br />The effect of new customers was reflected in a 5.9% increase in charges for services. The operating expenses increased at a
<br />higher rate than revenue due to higher purchased power costs, increased repair and maintenance and higher depreciation. The
<br />cash position of the electric fund did remain strong relative to these expense increases and still is at a high enough level to meet
<br />working capital needs. Management has monitored rates and adjusted them to maintain this cash balance.
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