HomeMy WebLinkAbout1988-05-23 Min - Board SPECIAL 14EETING
May 23, 1988
The special meeting of the Board. of Directors of the Truckee Donner Public
Utility District was called to order by President Corbett at 7:10 P.M. in
the TDPUD Board roam.
ROLL CALL: Directors Aguera, Sutton, White and Corbett were present.
Director Maass had a prior engagement and was utiable to attend.
EMPLOYEES PRESENT: Paul Colburn and Peter Holzmeister.
CONSULTANTS PRESENT: John Phelps.
OTHERS PRESENT: Among those present in the audience were Auditors Bill
Fowler and Chic Dohoney from Touche Ross and Company.
AUDIT WORKSHOP
Mr. Fowler provided an outline of the workshop to the Board. After the
introduction, Mr. Fowler said he was impressed with the cooperation on the
part of District staff. He reported on the status of the audit, in which
electric and water operations were combined for the first time in five
years. Several confirmation letters from debt holders have yet to be
received; resolution on certain accounting policies must occur, and a few
minor administrative matters must be handled before the audit can be
finalized, Mr. Fowler stated. He discussed Touche Ross' report and noted
it is an unqualified report; there are no exceptions to the financial
statements. There is a consistency exception, which means that during 1987
the District elected to make some changes to its accounting system; this is
strictly a disclosure item. Mr. Fowler also discussed the technicalities
of preparing a combined audit and answered questions posed by the Board.
It was noted that the audit also shows the electric and water operations
separately.
The procedure for presenting the management letter was discussed. Mr.
Fowler noted it is normally 'first presented to the Manager and Finance
Supervisor to verify the facts included therein; judgmental areas of the
letter may not be changed by anyone other than the auditors. The procedure
for presentation is established by the governing body, Mr. Fowler noted.
Mr. Dohoney explained the divisional combining balance sheet and
comparative statements of earnings for the electric and water operations.
Regarding the previously mentioned changes in accounting principles ,
Director Sutton stated she feels auditors should come in and audit what has
been done by accounting principles during the year, not play with the
accounting system. Manager Holzmeister noted the auditors came to him and
the Finance Supervisor and reported that the treatment in certain areas of
accounting were resulting in inaccurate statements. The auditors said this
should be resolved before completing the audit, and Mr. Holzmeister brought
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the issues before the Board (on May 2); changes were approved at that time.
Unbilled revenues, purchased power, earnings before cumulative effect of
changes in accounting principles were explained by Mr. Dohoney and
discussed. Regarding changes in accounting practices, Director Sutton
stated she does not feel accounting policy should be determined by the
auditor. Mr. Dohoney agreed, saying he feels it is the responsibility of
the auditor to advise the Board and Manager as to the appropriateness of
the accounting policy. Director Sutton stated she thinks the auditors
should have given this advice in writing in their report rather than basing
their report on things that had not taken place. The auditors explained
the retroactive requirement for changing accounting principles.
On the statements of earnings and retained earnings, there was discussion
regarding the operating revenues and other income. Director Sutton asked
why the statement wasn't more detailed and why there was such a "mishmash"
of revenues and earnings. Mr. Dohoney said the statements can be made as
detailed as the Board wishes.
The balance sheets, collectibility of accounts receivable, bad debts,
construction advances, facilities fees, Dart Industries' settlement ,
interest on advances, and the reserve for future meters were among the
topics discussed.
" With respect to funds provided by Dart industries, Mr. Dohoney explained he
recommended the District reevaluate their policy. Counsel Phelps reviewed
the matter and determined there is no legal obligation for the District to
use these funds for any particular purpose. In accounting terms, Mr.
Dohoney said, it should not be reflected as a liability, but in equity.
This has been done and has been run through the income statement as a
change in accounting principle. Nothing has been done with the restriction
of the funds. Director Sutton said that she believes Counsel Phelps' gave
a reserved opinion, and she indicated her surprise that the Finance
Supervisor asked Counsel for an opinion on these things prior to the Board
meeting. Director White noted that this is something Director Maass
requested two Board meetings ago.
Discussion ensued regarding the fact that the financial statements already
incorporate suggestions made by the Finance Committee.
For the record , Director Sutton said she is not an accountant ,, CPA,
engineer, attorney, or professional piano player, but anyone who sits on a
board in this state has to judge professionals who make presentations to
them; therefore, she said, she will not hesitate to ask questions that the
auditors may feel are insulting because the questions have to be asked, and
its the PUD Board that has that responsibility.
The combined balance sheet, general and restricted funds were discussed.
The Board asked that the following changes in the audit format be made:
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1. The Dart fends are to be identified.
2. Anything listed in the "other" category that's over $50,000 should be
identified.
3. There will be two interest income lines; other operating revenue will
show any revenue on special fees, facilities fees, standby fees; the other
will accumulate the smaller items.
4. There will be separate line items for storm damage- ;preliminary
survey costs*
5. A note having to do with the insurance settlement for Soma Sierra Tank
will be included.
6. The Dart industry funds will be separated.
7 . Notes to the financial statements are to be referenced in the
supplemental information section.
The auditor noted that clarification regarding reserve funds for future
water meters is needed; Counsel Phelps agreed.
Director Sutton stated she thinks the auditors should direct the Board's
attention to whatever issues they believe are unclear, but doesn't think
everything for last year should be changed. The auditor said he can ('o
this , but he would have to report that the financial statements for last
year are incorrect.
Mr. Dohoney answered questions posed by Director Sutton relating to
reclassifications to the 1986 financial statements, deferred standby fees,
the District's budgeting system, and the non-profit corporation that is the
financing organization for the PUD building.
Mr. Fowler advised that if the Board instructs the auditors to prepare a
statement that is not in conformance with General Accounting Principles he
will have to issue a qualified opinion. The majority of the Board was not
in favor of a qualified audit report. Director Sutton stated she has a
philosophical difference with the Board, and probably the management and
the auditors on the responsibi.l.lty o` an audit and how to resolve these
kinds of questions. She said she doesn't think the auditors should be
"palsy-walsy with us;" they should come in, do their work, analyze what the
District's done, report deficiencies without consulting the Finance
Supervisor, Manager or anyone. The object of a workshop , she said, is to
clarify what has progressed in the audit, not for the Board to give the
auditors direction on what the report says. She said she does not agree
with the auditors' approach and stated she is concerned that the changes
reflected in the audit will make the District ineligible for certain
state/federal funding and grants.
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Mr. Fowler noted that he appreciates and respects Director Sutton' s
approach. He said he hopes she will take note of the f act that he is here
as an independent CPA to share with the District his observations about the
fairness of the financial statements. The audit workshop, he said, is to
acquaint the Directors with all the problems or all the good things that
came of the audit. He said the staff is very cooperative; however, there
are a number of things the Board has missed in prior years. The auditors
were hired by the Board, he said, and their obligation is to the Board and
to themselves.
The opinion prepared by Counsel relating to the reserve for future metering
and Resolution No. 7920 were discussed. By consensus, the Manager was
asked to research the minutes for discussion relating to passage of the
resolution and the Board's intent in doing so.
Mr. Holzmeister noted that unless a special meeting is held, this will
cause the auditors' to exceed their June 1 deadline. The Board agreed to
extending the deadline.
Director White mentioned the unbilled revenues; it was agreed that it be
left in the balance sheet.
There being no further business before the Board , Director Aguera moved
that the meeting be adjourned at approximately 10:30 P.M. ; seconded by
Director White, All Directors, aye, by voice vote. SO MOVED.
CKI DO R PUAIC I ITY DISTRICT
In L. Corbett, P sident
Prepared by
AO-
Susan No Cr g, Deputy District Clerk
smc/5d.12
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