OUA Audit Report 9-30-2017
OKEECHOBEE UTILITY AUTHORITY
FINANCIAL STATEMENTS WITH INDEPENDENT
AUDITOR’S REPORT THEREON
SEPTEMBER 30, 2017
OKEECHOBEE UTILITY AUTHORITY
SEPTEMBER 30, 2017
TABLE OF CONTENTS
Pages
Independent Auditor's Report 1 - 3
Management’s Discussion and Analysis (required supplementary information) 4 - 9
Basic Financial Statements:
Statement of Net Position 10- 11
Statement of Revenues, Expenses, and Changes in Net Position 12
Statement of Cash Flows 13-14
Statement of Fiduciary Net Position 15
Statement of Changes in Fiduciary Net Position 16
Notes to Financial Statements 17-45
REQUIRED SUPPLEMENTAL INFORMATION
Schedule of Funding Progress - Other Postemployment Benefits 46
Schedule of Changes in Net Pension Liability and Related Ratios 47
Schedule of Employer Contributions and Investment Returns 48
Notes to the Schedule of Contributions 49
OTHER REPORTS
Independent Auditor's Report on Internal Control Over Financial Reporting and on
Compliance and on Other Matters Based on an Audit of Financial Statements
Performed in Accordance with government Auditing Standards 50-51
Management Letter in Accordance with the Rules of the Auditor General
of the State of Florida 52-54
Independent Accountant’s Report on Compliance with
Section 218.415, Florida Statutes 55
1
INDEPENDENT AUDITOR’S REPORT
The Honorable Chairman and Members of the
Okeechobee Utility Authority Board
Okeechobee, Florida
Report on the Financial Statements
We have audited the accompanying financial statements of the proprietary fund of the
Okeechobee Utility Authority as of and for the year ended September 30, 2017, and the related
notes to the financial statements, which together with the aggregate remaining fund information,
collectively comprise the Okeechobee Utility Authority’s basic financial statements as listed in
the table of contents. We did not audit the financial statements of the Okeechobee Utility
Authority Employees’ Retirement System, which comprises 100% of the aggregate remaining
fund information of the Okeechobee Utility Authority.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did
not audit the financial statements of the Okeechobee Utility Authority Employees’ Retirement
System, which comprises 100% of the aggregate remaining fund information of the Okeechobee
Utility Authority. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included for the Okeechobee
Utility Authority Employees’ Retirement System, is based solely on the report of other auditors.
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. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
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An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinions
In our opinion, based on our audit and the report of other auditors, the financial statements
referred to above present fairly, in all material respects, the financial position of the proprietary
fund and the aggregate remaining fund information of the Okeechobee Utility Authority as of
September 30, 2017, and the changes in its financial position, and, where applicable, cash flows
thereof for the year then ended in accordance with accounting principles generally accepted in
the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis on pages 4 through 9, the schedule of funding progress on
page 46, and the pension schedules on pages 47 through 49 be presented to supplement the basic
financial statements. Such information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board, who considers it to be an essential
part of financial reporting for placing the basic financial statements in an appropriate operational,
economic, or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the
United States of America, which consisted of inquiries of management about the methods of
preparing the information and comparing the information for consistency with management’s
responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our 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.
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Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
June 20, 2018, on our consideration of the Okeechobee Utility Authority’s internal control over
financial reporting and on 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 in considering the Okeechobee Utility Authority’s internal control over
financial reporting and compliance.
West Palm Beach, Florida
June 20, 2018
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Okeechobee Utility Authority
Management’s Discussion and Analysis
For the Fiscal Year Ended September 30, 2017
Management’s discussion and analysis is intended to provide an objective analysis of the Okeechobee
Utility Authority (the “Authority”) financial activities for fiscal year ended September 30, 2017. The
analysis provides summary financial information for the Authority and should be read in conjunction
with the financial statements.
FINANCIAL HIGHLIGHTS
§ The Authority’s assets exceeded its liabilities at September 30, 2017, by $46 million (net
position). Of this amount, approximately $8.7 million is its unrestricted net position (Table 1).
§ The Authority’s total assets decreased by approximately $0.5 million or 0.7% from FY2016.
§ The Authority’s operating revenues increased by approximately $0.1 million or 1.07% and
operating expenses decreased by approximately $0.15 million or 1.64% from FY2016 (Table 2).
§ Operating expenses were $8.8M, which was 6.4% less than budget.
§ The Authority refunded the balance of $19.975 million of Capital Improvement Revenue Notes
with a savings in interest expense of $1.062 million over 14 years.
§ The Authority received $650,000 in capital grants from the Florida Department of Environmental
Protection that helped fund part of the cost of approximately $1.5 million for the Pine Ridge Park
water and wastewater projects.
§ The Authority’s utility plant, before accumulated depreciation, increased by approximately $2.4
million from FY2016 (Table 3).
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the Authority’s basic financial
statements. Since the Authority is a special district involved solely in the provision of water and
wastewater services within the service area of the utility system, its operations are accounted for in a
Proprietary Fund, specifically an Enterprise Fund. Enterprise Funds are used to report business-type
functions, which recover all or a significant portion of their costs through user fees and charges.
Over time, significant changes in the Authority’s net position serve as a useful indicator of whether
its financial health is improving or deteriorating. To fully assess the financial health of any entity, the
reader must also consider other non-financial factors such as changes in economic conditions,
customer growth, and legislative mandates
The Okeechobee Utility Authority Employees’ Retirement System is a component unit of the
Authority as it is fiscally dependent on and imposes a specific financial burden. It is reported in the
Authority’s financial statements as a Fiduciary Fund, the General Employee’s Pension Trust Fund.
Fiduciary Funds are not included in the government-wide financial statements because the Authority
cannot use these assets to finance its operations. Therefore, there are no government-wide financial
statements, as they would be redundant to the fund financial statements.
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REQUIRED FINANCIAL STATEMENTS
The financial statements report information about the Authority using accounting methods similar to
those used by private business enterprises; mainly, costs of providing goods or services are financed
or recovered primarily through user charges. The full accrual basis of accounting is used whereby
revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless
of the timing of related cash flows.
The Statement of Net Position includes the Authority’s assets, deferred outflows of resources,
liabilities, and deferred inflows of resources and provides information about the nature and amounts
of investments in resources (assets) and the obligations to Authority creditors (liabilities). It also
provides the basis for evaluating the capital structure of the Authority and assessing the liquidity and
financial flexibility of the Authority. The current year’s revenues and expenses are accounted for in
the Statement of Revenues, Expenses, and Changes in Net Position. This statement measures the
results of the Authority’s operations over the past year and may be used to determine whether the
Authority is efficiently recovering all its costs through its user fees and other charges. This statement
helps the reader understand the Authority’s profitability and credit worthiness.
The other required financial statement is the Statement of Cash Flows. The primary purpose of this
statement is to provide information about the Authority’s cash receipts and cash payments during the
reporting period. This statement reports cash receipts, cash payments, and net changes in cash
resulting from operating, investing, and financing activities. Answers to questions regarding source
of cash, use of cash, and changes in cash balances during the reporting period may be found in this
report. The Notes to the Financial Statements provide additional information that is essential to a full
understanding of the financial statements.
FINANCIAL ANALYSIS OF THE AUTHORITY AS A WHOLE
The Statement of Net Position and the Statement of Revenues, Expenses, and Changes in Net Position
report information about the Authority’s activities in a way that reflects whether the Authority is
improving or deteriorating as a result of the year’s activities. These two statements report the net
position of the Authority and changes in the net position. Viewing the Authority’s net position helps
one to evaluate the financial health or financial position of the Authority. Net position is the
difference between assets and deferred outflows of resources (what is owned) and liabilities and
deferred inflows of resources (what is owed).
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The Authority’s total net position increased $1,358,103. The condensed analysis below focuses on
the Authority’s net position (Table 1) and changes in net position (Table 2) during the year.
Table 1
Net Positions
FY2017 FY2016 Net Change
Net Capital Assets $ 61,224,975 $ 61,523,966 $ (298,991) (0.49%)
Restricted Assets 5,081,695 6,833,605 (1,751,910) (25.64%)
Current and Other Assets 9,977,377 8,442,757 1,534,620 18.18%
Total assets $ 76,284,047 $ 76,800,328 $ (516,281) (0.67%)
Total deferred outflows $ 1,640,765 $ 2,144,160 $ (503,395) (23.48%)
Noncurrent Liabilities $ 27,841,018 $ 30,842,797 $ (3,001,779) (9.73%)
Liabilities Payable from Restricted Assets 541,424 577,641 (36,217) (6.27%)
Current Liabilities 2,982,828 2,361,316 621,512 26.32%
Total liabilities $ 31,365,270 $ 33,781,754 $ (2,416,484) (7.15%)
Total deferred inflows $ 210,263 $ 171,558 $ 38,705 22.56%
Net Investment in Capital Assets $ 33,077,487 $ 31,595,225 $ 1,482,262 4.69%
Restricted for Capital Projects 2,382,408 3,535,535 (1,153,127) (32.62%)
Restricted for Debt Service 204,570 338,549 (133,979) (39.57%)
Restricted for Rate Stabilization 1,953,293 2,381,591 (428,298) (17.98%)
Unrestricted Net Position 8,731,521 7,140,276 1,591,245 22.29%
Total Net Position $ 46,349,279 $ 44,991,176 $ 1,358,103 3.02%
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A comparison of the Authority’s income (loss) is as follows (Table 2):
Table 2
Income
FY2017 FY2016 Net Change
Revenue
Charges for Services $ 9,890,272 $ 9,785,526 $ 104,746 1.07%
Miscellaneous Revenue 158,210 86,995 71,215 81.86%
Non-Operating Revenue 301,115 416,661 (115,546) (27.73%)
Total Revenue $ 10,349,597 $ 10,289,182 $ 60,415 0.59%
Expenses
Operating Expenses $ 8,766,758 $ 8,913,147 $ (146,389) (1.64%)
Non-Operating Expenses 890,173 1,030,282 (140,109) (13.60%)
Total Expenses $ 9,656,931 $ 9,943,429 $ (286,498) (2.88%)
Excess Revenue over Expenses
Before Capital Contributions $ 692,666 $ 345,753 $ 346,913 100.3%
Capital Contributions 665,437 18,253 647,184 3545.6%
Total change in net position $ 1,358,103 $ 364,006 $ 994,097 273.1%
Beginning Net Position $ 44,991,176 $ 44,627,170 $ 364,006 0.82%
Ending Net Position $ 46,349,279 $ 44,991,176 $ 1,358,103 3.02%
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At the end of fiscal year 2017, the Authority had $61,224,975 after accumulated depreciation
invested in a broad range of utility capital assets including land, ground water plant, surface water
plant, water main system, wastewater plant, lift stations, sanitary sewer system, force mains and
equipment.
The Authority’s total capital assets decreased after accumulated depreciation from last year by
approximately $0.3 million as reflected in the following table (Table 3):
Table 3
Changes in Capital Assets
FY2017 FY2016 Net Change
Land and Easements $ 2,897,455 $ 2,897,455 $
Buildings 985,404 948,904 36,500
Equipment 3,875,023 3,647,756 227,267
Distribution & Collection System 91,167,277 89,000,640 2,166,637
$ 98,925,159 $ 96,494,755 $ 2,430,404
Less: Accumulated Depreciation (38,855,213) (36,182,765) (2,672,448)
$ 60,069,946 $ 60,311,990 $ (242,044)
Construction in Progress 1,155,029 1,211,976 (56,947)
$ 61,224,975 $ 61,523,966 $ (298,991)
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The Authority plans each year for capital improvement projects; some projects may be completed
within the fiscal year and some projects that extend over a longer period. The SWTP Storage Water
Tank Project listed below is the construction of a 3 million-gallon water tank at a cost of
approximately $5 million.
Table 4 below reflects the major additions and costs incurred as of September 30, 2017.
Table 4
Capital Improvement Projects Ongoing
(Dollars in Thousands)
PRP Wastewater Improvement $ 945,298
Whispering Pines Water System 62,279
NW 20th Lane WM 15,905
SWTP Storage Water Tank Project 131,547
Total Ongoing CIP Projects $ 1,155,029
Damage from Hurricane Irma is estimated at $550,000; a substantial portion of this cost is expected
to be recovered from FEMA and insurance proceeds. See Notes to the Financial Statements (Note 7)
for additional information related to capital assets.
Debt Administration
On September 30, 2017, the Authority had State Revolving Loans and notes payable outstanding in
the amount of $29,159,310. During fiscal year 2017, refunded the Series 2010 Notes with the Series
2017 Notes. Debt service payments excluding the refunding totaled $2,620,619. See Notes to the
Financial Statements (Note 8) for additional information related to State Revolving Loans and notes
payable.
CURRENT ECONOMIC FACTORS AND ASSESSMENT OF GROWTH
The Authority began operations in 1995. Since 1995, the net increase in new customer accounts had
been averaging approximately 1.5% per year. In the most recent fiscal year ended September 30,
2017, capital connection charge revenue for 57 water and 18 wastewater equivalent residential
connections (ERC’s) was received. Given the current economic environment, a modest growth in the
number of connections is expected to be realized from general infill in the existing developed
sections of the Authority’s service area rather than through previously planned new developments.
During the most recent real estate expansion period that affected both Atlantic and Gulf coastal
Florida areas, rural central areas did not experience the same rate of growth. Additionally, since those
coastal areas are approaching their maximum build out levels, future growth, when the housing
market stabilizes, is anticipated to have a higher impact on more central underdeveloped rural areas
such as Okeechobee.
The City of Okeechobee is approximately one hour from the Atlantic coast. The main east / west
access highways are State Road 70 and State Road 710. As such, the Okeechobee Utility Authority’s
service area is within a commutable range of the Atlantic coast and all that is offered there. Many
developers who, historically had focused their activities in the Atlantic coastal areas of Palm Beach
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and Saint Lucie Counties, have purchased property within the Authority’s service area with the
intention of creating future developments similar to or more modest than those which they have
developed on the east coast. Developments that were originally planned continue to be on hold until a
more favorable economic environment emerges.
The Authority’s current water treatment plants with a total treatment capacity of six million gallons
per day (6mgd) can accommodate approximately twenty-four thousand (24,000) residential water
connections, well over the existing customer base of approximately nine thousand two hundred thirty
(9,230) residential connections. The Authority’s expanded wastewater treatment plant with three
million gallons per day (3mgd) of total treatment capacity can accommodate approximately twelve
thousand (12,000) additional wastewater customers, well over the existing customer base of
approximately four thousand two hundred sixteen (4,216). In the near-term projection of five years,
this available capacity is more than adequate to accommodate the projected level of customer growth.
This financial report is designed to provide a general overview of the Okeechobee Utility Authority’s
finances for those interested in the Authority’s finances. Questions concerning any of the information
provided in this report or requests for additional information should be addressed to
Finance Director, 100 SW 5th Avenue, Okeechobee, Florida, 34974-4221. Complete financial
statements for the Authority may be obtained at the Main Office of the Authority.
OKEECHOBEE UTILITY AUTHORITY
Statement of Net Position - Proprietary Fund
September 30, 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents 6,324,932$
Investments 1,025,330
Interest receivable 8,506
Receivables:
Accounts receivable, less allowance for
uncollectible accounts of $240,421 1,206,051
Inventories 457,051
Prepaid expenses 55,387
Total current assets 9,077,257
NONCURRENT ASSETS
Restricted assets:
Cash and cash equivalents 5,081,695
Capital assets:
Land 2,897,455
Utility plants 96,027,704
98,925,159
Less accumulated depreciation (38,855,213)
60,069,946
Construction in progress 1,155,029
Total capital assets 61,224,975
Other noncurrent assets:
Non-operating land 727,257
Unamortized organizational costs, net 172,863
Total noncurrent assets 67,206,790
TOTAL ASSETS 76,284,047
DEFERRED OUTFLOWS OF RESOURCES
Pension related items 628,943
Deferred loss on bond refunding, net 1,011,822
TOTAL DEFERRED OUTFLOWS OF RESOURCES 1,640,765
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LIABILITIES
CURRENT LIABILITIES
Accounts payable 256,572$
Accrued expenses 56,776
Due to other governments 29,516
Bonds payable (current)2,045,840
Accrued compensated absences (current)52,700
Payable from restricted assets:
Accrued interest 8,526
Customer deposits 532,898
Total current liabilities 2,982,828
NONCURRENT LIABILITIES
Long-term portion of bonds payable 27,113,470
Long-term portion of compensated absences 160,924
Net pension liability 529,825
Accrued OPEB payable 63,085
Unearned revenues:
Connection fees 64,028
Land lease 31,520
Developer fees 419,590
Total noncurrent liabilities 28,382,442
TOTAL LIABILITIES 31,365,270
DEFERRED INFLOWS OF RESOURCES
Pension related items 210,263
NET POSITION
Net investment in capital assets 33,077,487
Restricted for capital projects 2,382,408
Restricted for debt service 204,570
Restricted for rate stabilization 1,953,293
Unrestricted 8,731,521
TOTAL NET POSITION 46,349,279$
See notes to the financial statements.
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OKEECHOBEE UTILITY AUTHORITY
Statement of Revenues, Expenses, and Changes in Net Position -
Proprietary Fund
For the Fiscal Year Ended September 30, 2017
OPERATING REVENUE
Charges for services 9,890,272$
Miscellaneous 158,210
Total operating revenues 10,048,482
OPERATING EXPENSES
Water services 1,362,977
Sewer services 855,684
Maintenance 1,719,487
Meter reader 223,510
Administrative and general 1,923,052
Depreciation and amortization 2,682,048
Total operating expenses 8,766,758
OPERATING INCOME 1,281,724
NONOPERATING REVENUES (EXPENSES)
Interest revenue 79,378
Interest expense (890,173)
Total nonoperating revenues (expenses)(810,795)
INCOME BEFORE CAPITAL CONTRIBUTIONS 470,929
CAPITAL CONTRIBUTIONS
Capital grants 650,000
Capital connection fees 221,737
Developer contributions for capital projects 15,437
Total capital contributions 887,174
INCREASE IN NET POSITION 1,358,103
NET POSITION, BEGINNING OF PERIOD 44,991,176
NET POSITION, END OF PERIOD 46,349,279$
See notes to the financial statements.
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OKEECHOBEE UTILITY AUTHORITY
Statement of Cash Flows - Proprietary Fund
For the Fiscal Year Ended September 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 10,101,073$
Payments to suppliers (2,575,744)
Payments to employees (2,389,066)
Payments for employee benefits (820,548)
Net cash provided (used) by operating activities 4,315,715
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition and construction of capital assets (2,326,705)
Loan fees (99,775)
Bond and loan principal payments (21,250,099)
Bond refunding proceeds 19,425,000
Bond and loan interest paid (795,534)
Capital connection fees received 238,494
Captial grants 650,000
Net cash (used) by capital and related financing activities (4,158,619)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments 1,782,608
Interest on investments 80,914
Net cash provided by investing activities 1,863,522
Net increase (decrease) in cash and cash equivalents 2,020,618
Cash and cash equivalents at beginning of year 9,386,009
Cash and cash equivalents at end of year 11,406,627$
See notes to the financial statements.
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OKEECHOBEE UTILITY AUTHORITY
Statement of Cash Flows (continued)
For the Fiscal Year Ended September 30, 2017
CASH AND CASH EQUIVALENTS CLASSIFIED AS:
Current assets 6,324,932$
Restricted assets 5,081,695
Total 11,406,627$
ADJUSTMENTS TO RECONCILE OPERATING INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating Income 1,281,724$
Adjustments to reconcile operating income to
net cash provided by operating activities:
Change in net pension liability and related deferred amounts 6,758
Depreciation and amortization 2,682,048
Change in assets and liabilities:
(Increase) decrease in accounts receivable 86,683
(Increase) decrease in inventory (50,618)
(Increase) decrease in prepaid expenses 408,099
Increase (decrease) in accounts payable (8,944)
Increase (decrease) in accrued liabilities (7,172)
Increase (decrease) in compensated absences (19,083)
Increase (decrease) in OPEB (30,151)
Increase (decrease) in deposits (33,987)
Increase (decrease) in unearned fees (105)
Increase (decrease) in due to other governments 463
Total adjustments 3,033,991
Net cash provided (used) by operating activities 4,315,715$
See notes to the financial statements.
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ASSETS
Contributions receivable
Employee 9,681$
Employer 6,648
Accured interest and dividends 67
Prepaid expenes 2,065
Investments: (at fair value)
Cash equivalents 109,458
Investment funds- fixed income 2,890,886
Investment funds - equity 4,795,131
Total investments 7,795,475
TOTAL ASSETS 7,813,936
LIABILITIES
Accounts payable 7,111
FIDUCIARY NET POSITION - RESTRICTED FOR PENSION BENEFITS 7,806,825$
See notes to the financial statements.
OKEECHOBEE UTILITY AUTHORITY
Statement of Fiduciary Net Position
Pension Trust Fund
September 30, 2017
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ADDITIONS
Contributions
Employer 287,362$
Plan members 130,765
Total contributions 418,127
Investment income
Net appreciation in fair value of investments 695,171
Interest and dividends 156,566
851,737
Less: investment expenses (20,250)
Net investment income 831,487
TOTAL ADDITIONS 1,249,614
DEDUCTIONS
Benefits paid to participants 201,221
Refunds due on terminations 17,426
DROP payment 3,445
Administrative expenses 52,153
TOTAL DEDUCTIONS 274,245
NET INCREASE 975,369
FIDUCIARY NET POSITION - RESTRICTED FOR PENSION BENEFITS
Beginning of year -
Transfers 6,831,456
End of year 7,806,825$
OKEECHOBEE UTILITY AUTHORITY
Statement of Changes in Fiduciary Net Position
Pension Trust Fund
For the Fiscal Year Ended September 30, 2017
See notes to the financial statements.
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OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Okeechobee Utility Authority (the “Authority”) have been
prepared in conformity with U.S. generally accepted accounting principles (GAAP) as applied to
governmental units. The Governmental Accounting Standards Board (GASB) is the accepted
standard setting body for establishing governmental accounting and financial reporting
principles. The Authority’s significant accounting policies are described below.
Reporting Entity
The Okeechobee Utility Authority is an independent special district created pursuant to an
Interlocal Agreement (the “Agreement”), dated November 10, 1994, between the City of
Okeechobee (the “City”) and the County of Okeechobee (the “County”) in accordance with the
provisions of Chapters 163 and 189, Florida Statutes.
As required by generally accepted accounting principles, these financial statements include the
Authority (the primary government) and its component units. Component units are legally
separate entities for which the Authority is financially accountable. The Authority is financially
accountable if:
a) the Authority appoints a voting majority of the organization’s governing board and
(1) the Authority is able to impose its will on the organization or (2) there is a potential
for the organization to provide specific financial benefits to or impose specific financial
burdens on the Authority, or
b) the organization is fiscally dependent on the Authority and (1) there is a potential for the
organization to provide specific financial benefits to the Authority or (2) impose specific
financial burdens on the Authority.
Organizations for which the Authority is not financially accountable are also included when
doing so is necessary in order to prevent the Authority’s financial statements from being
misleading.
Based upon application of the above criteria, the Authority has determined that there is one
legally separate entity to consider as a potential component unit. The Okeechobee Utility
Authority Employees’ Retirement System is a component unit as it is fiscally dependent on and
imposes a specific financial burden on the Authority. It is reported in the Authority’s financial
statements as a Fiduciary Fund, the General Employee’s Pension Trust Fund.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reporting Entity (Continued)
The Authority was created in order to regionalize the water and wastewater services being
provided to the residents and customers within the service area of the utility system and to assist
in addressing environmental issues concerning the quality and supply of water for Lake
Okeechobee and South Florida. The Authority has broad powers with respect to the operation
and maintenance of the utility system.
The Authority services both residential and commercial customers and its service area includes
the City and County of Okeechobee and extends into part of the unincorporated section of
Glades County.
The Authority began operations on September 28, 1995 and is governed by a Board of Directors
comprised of five (5) members and three (3) alternates. The Board of Directors has financial
accountability and control over all activities relating to the operations of the Authority.
Basis of Presentation
The Authority is accounted for as a proprietary type enterprise fund. Enterprise funds are used to
account for activities that are financed and operated in a manner similar to private business
enterprises. Enterprise funds are used in the following situations: 1) the activity is financed with
debt that is secured solely by a pledge of the net revenues from fees and charges of the activity;
2) laws or regulations require that all costs of providing services, including capital costs, be
recovered from fees and charges; or 3) fees and charges are designed to recover the costs of the
activity, including capital costs.
Basis of Accounting
These financial statements are prepared on the accrual basis of accounting in accordance with
U.S. generally accepted accounting principles. Under the accrual basis of accounting, revenues
are recognized when earned; expenses are recognized when incurred. The assets, deferred
outflows, liabilities, deferred inflows, and net position of the Authority are reported in a self-
balancing set of accounts, which include restricted and unrestricted resources, representing funds
available for support of the Authority’s operations.
Pension trust funds also use the accrual basis of accounting and the economic resources
measurement focus.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
19
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Operating Revenues and Expenses
Proprietary funds distinguish operating revenues and expenses from non-operating items. The
Authority’s operating revenues and expenses consist of revenues earned and expenses incurred
relating to the operation and maintenance of its system, including administrative expenses and
depreciation of capital assets. All other revenues and expenses not meeting the definition above
are reported as non-operating revenues and expenses.
When both restricted and unrestricted resources are available for use, it is the Authority’s policy
to use restricted resources first, then unrestricted resources as they are needed.
Budget Process
Pursuant to the interlocal agreement, the Authority is required to adopt a budget and provide a
copy to the City of Okeechobee and the Okeechobee County Board of County Commissioners.
The Authority adopted its final budget relating to the fiscal year ended September 30, 2017 on
September 13, 2016.
Deposits and Investments
Cash and cash equivalents include amounts on deposit in demand accounts and money market
accounts. For the purposes of the statement of cash flows, the Authority considers all highly
liquid investments and certificates of deposit with an original maturity of three months or less
when purchased to be cash equivalents.
Investments are reported at fair value as required by generally accepted accounting principles.
The fair value of an investment is the amount that the Authority could reasonably expect to
receive for it in a current sale between a willing buyer and a willing seller, other than in a forced
or liquidation sale. The Authority categorizes its investments according to the fair value
hierarchy established by GASB Statement No. 72. The hierarchy is based on observable and
unobservable inputs used in establishing the fair value of a financial asset or liability. Purchases
and sales of investments are recorded on a trade date basis.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
20
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable
Accounts receivable consist of both billed and unbilled receivables. Unbilled receivables
represent the estimated amount of accounts receivable for services that have not been billed as of
the statement of financial position date. The amounts are a result of a timing difference between
the Authority’s fiscal year end and the date the various utility cycles are subsequently billed.
Inventories
Inventories are recorded at cost using the first-in, first-out method.
Utility Plant
Property, plant, and equipment are stated at cost for items constructed or purchased. Donated
capital assets, donated works of art and similar items, and capital assets received in a service
concession arrangement are recorded at acquisition value.
Depreciation of exhaustible utility fixed assets, including those acquired through
intergovernmental grants externally restricted to capital acquisition, is charged as an expense
against operations. Depreciation of the various assets is computed over the assets’ estimated
useful lives using the straight-line method. The estimated useful lives range as follows:
Distribution and collection plants 10-60 years
Buildings 20-25 years
Equipment 5-25 years
Capitalized Interest
Interest costs are capitalized and included in the cost of capital assets when debt proceeds are
used to finance the construction of assets.
Unearned Revenues
Unearned revenues primarily represent water and wastewater capital connection and inspection
fees and service payments that are paid in advance by customers. These fees will be recognized
as income in subsequent years as the services are performed.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
21
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Outflow of Resources
In addition to assets, the Statement of Net Position will sometimes report a separate section for
Deferred Outflows of Resources. Deferred Outflows of Resources represent the usage of net
position applicable to future periods and will not be recognized as an expense until the future
period to which it applies. The Authority has two items that qualify for reporting in this category.
The first is the deferred amount on bond refunding. The deferred loss on current and advance
refunding of bonds is being charged to operations through the year 2030 based on the effective
interest method. The second is deferred pension items in connection with its pension plan. These
deferred pension charges are either (a) recognized in the subsequent period as a reduction of the
net pension liability or (b) amortized in a systematic and rational method as pension expense in
future periods.
Deferred Inflows of Resources
In addition to liabilities, the Statement of Net Position will sometimes report a separate section
for Deferred Inflows of Resources. Deferred Inflows of Resources represent the acquisition of
net position applicable to future periods and will not be recognized as revenue until the future
period to which it applies. The Authority currently reports deferred pension items in connection
with its pension plan. These deferred pension charges are either (a) recognized in the subsequent
period as a reduction of the net pension liability or (b) amortized in a systematic and rational
method as pension expense in future periods.
Compensated Absences
The Authority’s policy is to allow each employee eligible for vacation leave to accumulate up to
thirty (30) days. Employees are paid unused vacation leave at current hourly rates upon
retirement or at termination. Employees of the Authority, with ten (10) years or more of
continuous service, receive payment for unused sick leave at a rate of fifty percent (50%) of
current hourly rates upon retirement or at termination. This also applies to employees at normal
retirement, regardless of length of service.
Accrued liabilities, based on hourly salary rates at September 30, 2017, are reflected in the
accounts of the Authority for vested (not contingent on an employee’s future services) vacation
and sick leave benefits.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
22
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Amortization Expense
Organizational costs related to the start-up of operations are amortized over forty (40) years.
Organizational costs are recorded as other assets.
Net Position
Net position is the result of assets and deferred outflows of resources less liabilities and deferred
inflows of resources. Net position is classified in three components:
Net investment in capital assets
This category consists of the Authority’s capital assets net of accumulated depreciation and
reduced by the outstanding balances of any bonds or notes that are attributable to the acquisition,
construction, or improvements of those assets.
Restricted
This category of net position consists of constraints placed on net asset use through external
constraints imposed by creditors (such as through debt covenants), grantors, contributors or laws
or regulations of other governments or constraints imposed by law through constitutional
provisions or enabling legislation.
Unrestricted
This category represents all other Authority net position that do not meet the definition of net
investment in capital assets, restricted for capital projects, or restricted for debt service as defined
earlier.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions. This will affect the reported
amounts of assets, deferred inflows and outflows, and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these estimates.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
23
NOTE 2 – DEPOSITS AND INVESTMENTS
Authority Deposits
As of September 30, 2017, the carrying amount of the Authority’s book balance for deposits in
“Qualified Public Depositories” was $12,430,007 and the bank balance was $12,484,210.
Included in deposits are $1,025,330 of certificates of deposits with an original maturity greater
than three months that are reported as an investment on the financial statements, the Authority
also had $1,950 in petty cash for a total carrying amount of $12,431,957.
In addition to insurance provided by the Federal Depository Insurance Corporation, deposits are
held in banking institutions approved by the State Treasurer of the State of Florida to hold public
funds. Under Florida Statutes Chapter 280, Florida Security for Public Deposits Act, the State
Treasurer requires all Florida qualified public depositories to deposit with the Treasurer or
banking institution eligible collateral. In the event of failure of a qualified public depository, the
remaining public depositories would be responsible for covering any resulting losses. The
Authority’s deposits at year end are considered insured for custodial credit risk purposes.
Authority Investments
The Authority’s investment policy authorizes investments in savings accounts, certificates of
deposits, money market funds, bonds, notes or other obligations of the U.S. Government,
repurchase agreements, securities issued or guaranteed by certain federal agencies and
instrumentalities, Local Government Surplus Trust Fund or any intergovernmental investment
fund authorized pursuant to the Florida Interlocal Cooperation Act, commercial paper, securities
issued by the Authority, any guaranteed investment contract within the limitations established by
Florida Statutes, tax certificates issued by Okeechobee County, Florida on lands on which the
Authority has placed a Special Assessment thereon in accordance with the terms described in the
Standard Developer’s Agreement, and any other investment vehicle authorized by Florida law
and determined by the investment officer and the Board of Directors to be a prudent investment.
The Authority had the following investments as of September 30, 2017:
Weighted Average
Maturity (Days) Fair Value
Certificates of deposit 347 $ 1,025,330
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
24
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
Authority Investments (Continued)
Credit Risk
Credit risk is the risk that an issuer or other counter party to an investment will not fulfill its
obligations. The Authority’s investment policies limit its investments to high quality investments
to control credit risk.
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an
investment. The Authority does not have a formal investment policy that limits investment
maturities as a means of managing exposure to fair value losses arising from increasing interest
rates.
Cash and cash equivalents and investments were comprised of the following as of September 30,
2017:
Cash on hand $ 1,950
Deposits held by public depositories 12,430,007
Total cash and cash equivalents and investments $ 12,431,957
Cash and cash equivalents and investments are presented in the balance sheet as of September
30, 2017, as follows:
Current cash and cash equivalents $ 6,324,932
Investments 1,025,330
Restricted cash and cash equivalents 5,081,695
Total cash and cash equivalents and investments $ 12,431,957
General Employee’s Pension Trust Fund
Salem Trust Company periodically holds uninvested cash in its capacity as custodian for the
Plan. These funds exist temporarily as cash in the process of collection from the sale of securities
and for the payments of benefits and expenses. The pension plan’s policy for the allocation of
invested assets is established by the Plan’s Board of Trustees which pursues an investment
strategy that reduces risk through a prudent diversification of the portfolio across a selection of
distinct asset classes. The policy discourages the use of cash equivalents, except for liquidity
purposes and refrains from shifting asset class allocations over short time spans.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
25
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
General Employee’s Pension Trust Fund (Continued)
Investment management fees are calculated quarterly as a percentage of the fair market value of
the Plan’s assets managed, where applicable. The plan uses mutual funds as the investment
vehicle for fixed income, international equity and additional domestic equity investments for
further diversification. These investments are recommended and monitored by the investment
monitor.
The plan follows the investment guidelines as established within the ordinance and Florida
Statute 112.661. The Pension Trust Fund is authorized to invest in the local government surplus
funds trust fund, obligations of the U.S. Government or agencies thereof, banking institution
within the state and other such institutions within the guidelines of the state statutes which are
insured by the Federal Deposit Insurance Corporation, investment agreements, direct and general
long-term obligations of any state with proper credit rating and full faith and credit pledge,
municipal obligations with proper credit rating, annuity and life insurance contracts, bonds
issued by the State of Israel, foreign stocks or bonds, and stocks, bonds, and commingled funds
administered by National or State banks or evidences that the corporation is listed on a nationally
recognized exchange and holds proper credit ratings as set forth by a major credit rating service.
These equity investments are not to exceed 60% of the assets of the fund on a cost basis or 70%
of the market value of plan assets. Foreign investments are not to exceed 25% of the market
value of the assets. Temporary investment funds held by the custodian in a money market fund
are classified as cash equivalents within the investment account.
The Plan carried no particular security investment that individually represented 5% or more of
the Plan’s net assets available for benefits as of September 30, 2017.
Investments not evidenced by securities that exist in physical or book-entry form include
investments in mutual funds, domestic investment funds or a commingled pooled trust fund.
The Plan’s independently managed investments are segregated into a separate account. The
investment manager is monitored by the Board of Trustees and an investment performance
monitor, when applicable.
The Plans investments are uninsured and unregistered and are held in the custodian’s accounts in
the Plan’s name as described above.
The Plan has no instrument that, in whole or in part, is accounted for as a derivative instrument
under GASB statement No. 53, Accounting and Financial Reporting for Derivative Instruments
during the current year.
The Plan invests in mortgage-backed securities representing interests in pools of mortgage loans
as part of its interest rate risk management strategy. The mortgage-backed securities are not used
to leverage investments in fixed income portfolios.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
26
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
General Employee’s Pension Trust Fund (Continued)
The mortgage-backed securities held by the Plan are guaranteed by federally sponsored agencies
such as the Government National Mortgage Association. These investments are inside of the
fixed income open-end mutual fund that the plan holds.
All of the Plan’s financial investments are carried at fair value on the Statement of Fiduciary Net
Position included in investments. The gain or loss on financial instruments is recognized and
recorded on the Statement of Changes in Fiduciary Net Position as part of investment income.
The Plan invests in a variety of investment vehicles. Investments in general are exposed to
various risks, such as interest rate, credit, and overall volatility risk. Due to the level of risk
associated with certain investments, it is reasonably possible that changes in the values of
investments will occur in the near term and such changes could materially affect the amounts
reported in the statement of fiduciary net position.
For a more detailed and comprehensive list of available investments, the Investment Policy
Statement, as approved by the Board of Trustees, should be referenced. All of the Plan’s
financial investments are carried at fair value on the statement of fiduciary net position. The gain
or loss on financial instruments is recognized in the changes in net position as part of investment
income.
The following is a list of the Plan’s investments by categories of risk as of September 30, 2017:
2017
Historical Fair
Cost Value
Cash Equivalents $ 109,525 $ 109,458
Investment Funds - Equity 4,033,931 4,795,131
Investment Funds - Fixed Income 2,899,093 2,890,886
$ 7,042,549 $ 7,795,475
Investment Measurement at Fair Value
The accounting standards break down the fair value hierarchy into three levels based on how
observable inputs are valued. The most observable inputs are classified as Level 1 where as the
most unobservable inputs are classified as Level 3.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
27
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
General Employee’s Pension Trust Fund (Continued)
Investment Measurement at Fair Value (Continued)
Level 1 inputs to the valuation methodology are unadjusted quoted prices for identical assets or
liabilities in active markets that the Plan has the ability to access. As a general rule, any asset that
has a daily closing price and is actively traded will be classified as a Level 1 input.
Level 2 inputs are inputs (other than quoted prices included within Level 1) that are observable for
the asset or liability, either directly or indirectly. Inputs to the valuation methodology include: (1)
quoted market prices for similar assets or liabilities in active markets, (2) quoted prices for identical
or similar assets or liabilities in active markets, (3) inputs other than quoted prices that are
observable for the asset or liability, and (4) inputs that are derived principally from or corroborated
by observable market data by correlation or other means. If the asset or liability has a specified
(contractual) term, the Level 2 input must be observable for substantially the full term of the asset
or liability.
As a general rule, if an asset or liability does not fall into the requirements of a Level 1 or Level 3
input, it would default to Level 2. With Level 2 inputs, there is usually data that can be easily
obtained to support the valuation, even though it is not as easily obtained as a Level 1 input would
be.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
As a general rule, Level 3 inputs are those that are difficult to obtain on a regular basis and require
verification from an outside party, such as an auditor or an appraisal, to validate the valuation.
Net asset value (NAV) is a common measurement of fair value for Level 1, Level 2, and Level 3
investments. A fund’s NAV is simply its assets less its liabilities and is often reported as a per
share amount for fair value measurement purposes. The Plan would multiply the NAV per share
owned to arrive at fair value. Level 1 investment in funds such as mutual funds report at a daily
NAV per share and are actively traded. NAV is also used to value Level 2 and 3 investments. As a
matter of convenience (or referred to in accounting literature as a “practical expedient”), a Plan can
use the NAV per share for investments in a nongovernmental entity that does not have a readily
determined fair value, such as an alternative investment. Investments measured at NAV as a
practical expedient would be excluded from the fair value hierarchy because the valuation is not
based on actual market inputs but rather is quantified using the fund’s reported NAV as a matter
of convenience.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
28
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
General Employee’s Pension Trust Fund (Continued)
Investment Measurement at Fair Value (Continued)
The Plan categorizes its fair value measurement within the fair value hierarchy established by
generally accepted accounting principles. The Plan has the following total recurring fair value
measurements as of September 30, 2017:
• Debt securities - Debt securities classified in Level 1or Level 2 of the fair value hierarchy are
valued using prices quoted in active markets for those securities. Debt securities classified in
Level 2 of the fair value hierarchy are valued using a matrix pricing technique.
• Investment mutual funds - The rationale for inclusion in Level 1 or Level 2 points to the
unobservable inputs involved in mutual fund pricing. Mutual funds do not trade using bid
and ask, as with ETF’s or common stock. Instead, the prices are determined by the net asset
value of the underlying investments at the close of business for the next day’s open. The
underlying assets themselves may include a variety of Level 1 and Level 2 securities and
some may be valued using matrix pricing which interpolates the price of a security based on
the price of similar securities.
• Fixed income funds - Valued using pricing models maximizing the use of observable input
for similar securities. This includes basing value on yield currently available on comparable
securities of issues with similar credit ratings.
• Equity funds - Valued at market prices for similar assets in active markets.
• Common stock - Valued at quoted market prices for identical assets in active markets
The Plan categorizes its fair value measurements within the fair value hierarchy established by
general accepted accounting principles. The hierarchy is based on the valuation inputs used to
measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical
assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant
unobservable inputs. The Plan has the following recurring fair value measurement as of September
30, 2017:
Fair Value Measurement
Balance Level 1 Level 2 Level 3
Investments by fair value level
Cash equivalents -temporary investments $ 109,458 $ 109,458 $ $
Domestic investment fund - equity 4,795,131 4,795,131
Domestic investment fund - fixed income 2,890,886 2,890,886
Investments by fair value level $ 7,795,475 $ 4,904,589 $ 2,890,886 $
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
29
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
General Employee’s Pension Trust Fund (Continued)
Risk Level
Fixed income securities have inherent financial risks, including credit risk and interest rate risk.
Credit risk for fixed income securities is the risk that the issuer will not fulfill its obligations.
Nationally recognized statistical rating organizations (“NSROs”), such as Moody’s, Fitch or
Standard and Poor’s, assign credit ratings to security issuers and issues that indicate a measure of
potential credit risk to investors. Fixed income securities considered investment grade are those
rated at least Baa by Moody’s and BBB by Standard and Poor’s. A minimum rating of investment
grade or higher is required for at least 85% of the fixed income investments. Interest rate risk is the
risk that changes in interest rates will adversely affect the fair market value of fixed income
securities. Effective duration, a commonly used measure of interest rate risk, incorporates a
security’s yield, coupon, final maturity, call features and other imbedded options into one number
expressed in years that indicates how price-sensitive a security or portfolio of securities is to
changes in interest rates. The effective duration of a security or portfolio indicates the approximate
percentage change in fair value expected for a one percent change in interest rates. The longer the
duration, the more sensitive the security or portfolio is to changes in interest rates.
Concentration of credit risk is an increased risk of loss which occurs as more investments are
acquired from one issuer (i.e. lack of diversification). Custodial credit risk for deposits exists when,
in the event of the failure of a depository financial institution, an entity may be unable to recover
deposits, or collateral securities, that are in the possession of an outside party.
At September 30, 2017, the fixed income fund was invested in a mutual fund primarily in high
quality bonds and other fixed income securities including U.S. Government obligations, mortgage
and asset-backed securities, corporate and municipal bonds, collateralized mortgage obligations,
short-term instruments, and the other investments A rated by Standard & Poor’s, Moody’s Investor
Services or Fitch. To a lesser extent the fund may also invest in fixed income securities rated Baa
or lower. This fund had an effective duration of 4.2 years and effective maturity of 7.5 years as of
September 30, 2017.
NOTE 3 – INVENTORY
Inventory was comprised of the following at September 30, 2017:
Chemicals $ 20,920
Parts and supplies 436,131
Total inventory $ 457,051
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
30
NOTE 4 – RESTRICTED ASSETS
Restricted assets consist of the following accounts as of September 30, 2017:
Renewal, replacement & improvement $ 503,777
Capital connection water 1,052,880
Capital connection wastewater and treatment plant 752,394
Fire hydrant 73,357
Debt service 213,096
Rate stabilization 1,953,293
Customer deposits 532,898
Total restricted assets $ 5,081,695
NOTE 5 – UNRESTRICTED NET POSITION
Unrestricted net position consists of the following as of September 30, 2017:
Designated:
Capital improvement project $ 1,277,969
Operating reserve 1,730,372
Emergency funding 567,771
Total designated 3,576,112
Undesignated 5,155,409
Total unrestricted net position $ 8,731,521
NOTE 6 – NON-OPERATING LAND
In 2014, the Authority acquired land from Land Ventures of America, LLC (LVA) through a tax
deed sale. LVA entered a Standard Developer’s Agreement in 2007 with the Authority. When
LVA did not pay their tax bill the Authority purchased tax certificates to protect their interest.
The net carrying amount of the tax certificates at the time of acquisition was $445,485, which the
Authority believes was the fair market value.
In 2015, the Authority acquired land from Freshwater Development Company (Freshwater)
through a tax deed sale. Freshwater entered a Standard Developer’s Agreement in 2007 with the
Authority. When Freshwater did not pay their tax bill the Authority purchased tax certificates to
protect their interest. The net carrying amount of the tax certificates at the time of acquisition
plus additional funds needed to acquire the property was $281,772, which the Authority believes
was the fair market value.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
31
NOTE 6 – NON-OPERATING LAND (Continued)
This land is not considered to be an investment under GASB Statement No. 72, Fair Value
Measurement and Application, however, it is not used in the operations of the Authority and is
therefore classified separately on the Statement of Net Position.
NOTE 7 – CAPITAL ASSETS
Capital assets are summarized as follows.
Beginning Ending
Balance Additions Deletions Balance
Capital assets, not
being depreciated
Land $ 2,897,455 $ $ $ 2,897,455
Construction in progress 1,211,976 1,807,906 (1,864,853) 1,155,029
Total capital assets
not being depreciated 4,109,431 1,807,906 (1,864,853) 4,052,484
Capital assets being depreciated
Buildings 948,904 36,500 985,404
Equipment 3,647,756 227,267 3,875,023
Distribution and
collection plant 89,000,640 2,166,637 91,167,277
Total capital assets
being depreciated 93,597,300 2,430,404 96,027,704
Less accumulated
depreciation for
Buildings (483,297) (35,432) (518,729)
Equipment (2,862,668) (184,499) (3,047,167)
Distribution and
collection Plant (32,836,800) (2,452,517) (35,289,317)
Total accumulated
depreciation (36,182,765) (2,672,448) (38,855,213)
Total capital assets being
depreciated, net 57,414,535 (242,044) 57,172,491
Total capital assets, net $61,523,966 $ 1,565,862 $ (1,864,853) $61,224,975
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
32
NOTE 8 – LONG-TERM LIABILITIES
Current Refunding
The Utility System Capital Improvement Refunding Revenue Note, Series 2017A was issued to
current refund the Capital Improvement Refunding Revenue Note, Series 2010A. The
reacquisition price exceeded the net carrying amount of the old debt by $397,567. This amount is
reported as a deferred outflow of resources in the statement of net position and amortized over
the remaining life of the refunded debt, which is equal to the life of the new debt issued. The
debt service requirements on the new debt are $206,312 less than the debt service requirements
on the retired debt. The economic gain on the current refunding transaction was $123,707. The
Series 2010A bonds were called and paid in full March 29, 2017.
The Utility System Capital Improvement Refunding Revenue Note, Series 2017B was issued to
current refund the Capital Improvement Refunding Revenue Note, Series 2010B. The
reacquisition price exceeded the net carrying amount of the old debt by $690,981. This amount is
reported as a deferred outflow of resources in the statement of net position and amortized over
the remaining life of the refunded debt, which is equal to the life of the new debt issued. The
debt service requirements on the new debt are $856,302 less than the debt service requirements
on the retired debt. The economic gain on the current refunding transaction was $636,062. The
Series 2010B bonds were called and paid in full March 29, 2017.
Capital Improvement Refunding Revenue Notes, Series 2017
On March 29, 2017, the Authority issued $19,425,000 Capital Improvement Refunding Revenue
Notes, Series 2017 with Branch Banking and Trust Company. The notes were issued to provide
funds to current-refund the Capital Improvement Refunding Revenue Note, Series 2010.
The Series 2017 Notes are comprised of $10,000,000 Series 2017A and $9,425,000 Series
2017B as follows:
Mandatory
Original Face Redemption
Series Amount Interest Rate Beginning October 1 Maturity
2017A $10,000,000 2.4% 2017 October 1, 2025
2017B 9,425,000 2.83% 2017 October 1, 2030
Interest is to be paid semiannually on each April 1 and October 1. Principal is to be paid annually
commencing October 1, 2017 through October 1, 2030. As of September 30, 2017, the balance
due on Series 2017A and 2017B is $9,560,000 and $9,355,000, respectively.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
33
NOTE 8 – LONG-TERM LIABILITIES (Continued)
Loan Agreement WW615100
The Authority was approved for a construction loan of $10,000,000, with an interest rate of
1.86%, by the Florida Department of Environmental Protection under the State Revolving Fund
Loan Program. The amount outstanding as of September 30, 2017, was $7,040,544. According
to the loan agreement, 40 semi-annual payments of principal and interest commence on
September 15, 2009, in the amount of $341,431. This loan is junior, inferior, and subordinate in
all regards in right of payment and security to the Capital Improvement Refunding Revenue
Note, Series 2017A and Capital Improvement Refunding Revenue Note, Series 2017B.
Loan Agreement WW615101
The Authority was approved for a construction loan of $13,056,266, with an interest rate of
2.23%, by the Florida Department of Environmental Protection under the State Revolving Fund
Loan Program. The amount outstanding as of September 30, 2017, was $3,203,766. According
to the loan agreement, 40 semi-annual payments of principal and interest commence on
September 15, 2009, in the amount of $411,026. The Authority paid off $6,422,932 of principal
on the March 2014 semi-annual payment, reducing the future semi-annual payments to
$159,322. This loan is junior, inferior, and subordinate in all regards in right of payment and
security to the Capital Improvement Refunding Revenue Note, Series 2017A and Capital
Improvement Refunding Revenue Note, Series 2017B.
Debt service requirements to amortize long term debt at September 30, 2017 are as follows:
Year Ended Principal Interest Total
2018 $ 2,045,840 $ 690,052 $ 2,735,892
2019 2,096,900 643,351 2,740,251
2020 2,143,286 595,455 2,738,741
2021 2,190,004 546,497 2,736,501
2022 2,242,060 496,411 2,738,471
2023-2027 12,018,508 1,680,000 13,698,508
2028-2031 6,422,712 284,649 6,707,361
$ 29,159,310 $ 4,936,415 $ 34,095,725
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
34
NOTE 8 – LONG-TERM LIABILITIES (Continued)
Changes in Long-Term Liabilities
A summary of changes in long-term liabilities is as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One year
Notes payable $30,984,409 $ 19,425,000 $(21,250,099) $29,159,310 $ 2,045,840
Compensated absences 232,707 153,207 (172,290) 213,624 52,700
Net pension liability 1,021,321 (491,496) 529,825
OPEB liability 93,236 (30,151) 63,085
Total long-term
liabilities $32,331,673 $ 19,578,207 $(21,944,036) $29,965,844 $ 2,098,540
Interest Expense
Total interest costs incurred during the year ended September 30, 2017, was $793,304. Of this
amount, $46,753 was capitalized as part of the cost of construction in progress. Total interest paid
during the year was $795,534.
NOTE 9 – CHANGE IN PENSION PLAN
On June 14, 2016, the Authority adopted resolution 2016-03 withdrawing from participation in
the City of Okeechobee and Okeechobee Utility Authority Employees’ Retirement System, a
cost-sharing multiple-employer defined benefit plan, and adopting the Okeechobee Utility
Authority Employees’ Retirement System, a single employer defined benefit plan.
All contributions, benefits, assets and liabilities of the City of Okeechobee and Okeechobee
Utility Authority Employees’ Retirement System attributable to current and former Okeechobee
Utility Authority employees and their beneficiaries on September 30, 2016, were transferred and
become contributions, benefits, assets and liabilities of the System on October 1, 2016, or as
soon thereafter as administratively possible. There were no lapses in plan membership or
credited service and no changes in the accrued benefits of current and former Okeechobee Utility
Authority employees and their beneficiaries under the City of Okeechobee and Okeechobee
Utility Authority Employees’ Retirement System due to the adoption of the System or the
transfer between the retirement systems.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
35
NOTE 9 – CHANGE IN PENSION PLAN (Continued)
Under the old plan, the Authority had elected to report the net pension liability, deferred inflows
and outflows, and pension expense as of the prior fiscal year. Under the new plan, these amounts
are reported as of the same date as the financial statements.
Below is a summary of the effects of withdrawing from the previous plan and starting the new
plan.
Prior Plan at New Plan at
September 30, 2016* October 1, 2016 Change
Net Pension Liability $ 1,021,321 $ 607,988 $ (413,333)
Deferred Outflows 1,088,492 693,874 (394,618)
Deferred Inflows 171,558 158,139 (13,419)
* Using a September 30, 2015, measurement date.
The net effect on the change in net position for the fiscal year ended September 30, 2017, was an
increase of $32,134.
NOTE 10 – EMPLOYEE RETIREMENT SYSTEM
General Information
The Employees’ Retirement System of the Okeechobee Utility Authority (the System) is a
single-employer, defined benefit contributory pension trust established by the Authority in
Resolution 2016-03 for the benefit of the Authority employees. The System is under the
supervision of a five-member local independent board of trustees, two of whom shall be a legal
resident within the Authority’s jurisdictional boundaries, who shall be appointed by the
Okeechobee Utility Authority Board; two of whom shall be Employee Members employed by
the Authority and elected by Member employees; and one of whom shall be the Executive
Director of the Authority or his designee. Any changes to the plan requires approval by the
Board of the Authority.
The System issues a publicly available financial report that includes financial statements, ten-
year historical trend information, and other required supplementary information. That report
may be obtained by writing to the attention of Janet McKinley, Okeechobee Utility Authority,
100 SW. 5th Avenue, Okeechobee, FL 34974-4221.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
36
NOTE 10 – EMPLOYEE RETIREMENT SYSTEM (Continued)
Basis of Accounting
The retirement system is reported on the accrual basis of accounting. Plan members
contributions are recognized as revenues in the period that the contributions are due. Employer
contributions are recognized when due and the employer has made a formal commitment to
provide the contributions. Benefits and refunds are recognized when due and payable in
accordance with the terms the plan. The plan’s fiduciary net position has been determined on the
same basis used by the pension plan. Investments are reported at fair value
Plan Description
The pension plan provides retirement, death and disability benefits for its participants. Each
person employed by the Authority as a full-time employee becomes a member of the Plan as a
condition of their employment except that the Executive Director of the Utility Authority, may
opt out of the Plan within 60 days of employment. All employees are eligible to participate on
the date of employment following attainment of age 18. Participation is mandatory. Normal
retirement is provided for at age 65 and 5 years of service, or at 30 years of service regardless of
age. The benefit is calculated at 2.1% of average monthly earnings times years of continuous
service with the employer. Benefits are payable by monthly annuity for 10 years certain and life
thereafter with other options available. Early retirement is provided for at age 55 and 10 years of
participation. Death and disability benefits are also available through the plans. Early retirement
reduction factor is 2% per year.
Upon termination of employment, with less than 5 years of service, the plan refunds accumulated
employee contributions. After 5 years of service, the pension benefit is accrued to date of
termination and payable at normal retirement age if employee contributions are left in the fund.
The Plan contains a deferred retirement option plan (DROP) whereupon the employee could
retire from the pension plan but continue employment with the Utility Authority for an additional
maximum period of up to five years. The retirement benefit is immediately calculated and the
monthly benefit is allocated to the DROP account. An election is made to either earn interest at
the rate of 6.5% per annum or credited or debited with an investment return or loss
approximating the other assets in the fund. Once a participant elects this option, he is no longer
eligible for disability or pre-retirement benefits. The Plan’s guidelines for the DROP are
designed to adhere to IRS regulations. Additional information about the DROP can be obtained
from the ordinance.
The Plan is administered by its Board of Trustees. Any changes to benefit provisions requires
approval by the Board of the Authority.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
37
NOTE 10 – EMPLOYEE RETIREMENT SYSTEM (Continued)
Members of the plan consisted of the following at September 30, 2017:
Retired Plan Members or Beneficiaries
currently receiving benefits 18
Inactive Plan Members entitled to but
not yet receiving benefits 7
Drop Participants -
Active Plan Members 48
Total 73
Contributions
Contributions are made in accordance with applicable Florida Statutes and meeting the
actuarially determined contribution requirements as based on the benefit structure established
within the Plan as approved by the plan sponsor. The employer is required to contribute an
amount equal to the difference between the normal cost, as calculated for the plan year from the
applicable actuarial valuation, less the member contributions for the current year. The October 1,
2016 actuarial valuation determined there was a prepaid contribution of $15,795 to the Plan from
the Authority. The Authority is required to fund the plan according to any contribution deficit as
determined by actuarial valuation for the plan beyond the contributions by employees and the
regular employer contributions by the Okeechobee Utility Authority. After applying the allocable
prepaid contribution from the beginning of the year, the employer contribution was sufficient to
meet the required annual contribution. As of September 30, 2017, there was no remaining
prepaid employer contributions.
The Utility Authority was to fund the pension plan at the rate of 13.91% of covered payroll for
plan participants based on the 2015 actuarial valuation. Employee contributions are at the rate of
6% of payroll.
The significant actuarial assumptions used to compute the actuarially determined contribution
requirement are the same as those used to compute the pension benefit obligation. The funding
policy for the Plan is to make an actuarially determined pension contribution in an amount, such
that when combined with the participants’ contributions, all participants’ benefits will be fully
provided for by the time they attain retirement age.
Investments Concentrations. The plan did not hold investments in any one organization that
represents 5 percent or more of the Pension Plan’s fiduciary net position.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
38
NOTE 10 – EMPLOYEE RETIREMENT SYSTEM (Continued)
Actuarial Assumptions
The total pension liability was determined by an actuarial valuation as of October 1, 2016
updated to September 30, 2017 using the following actuarial assumptions.
Inflation 2.5 %
Salary increases 6.00%, average, including inflation
Investment rate of return 7.00%, net of pension plan investment
expense, including inflation
Retirement Age 100% when first eligible for normal retirement or
DROP entry
Mortality RP-2000 mortality tables with collar adjustments
and generational projections using Scale BB
The long-term expected rate of return on pension plan investments was determined using a
building-block method in which best-estimate ranges of expected future real rates of return
(expected returns, net of pension plan investment expenses and inflation) are developed for each
major asset class. These ranges are combined to produce the long-term expected rate of return by
weighting the expected future real rates of return by the target asset allocation percentage and by
adding expected inflation. Best estimates of arithmetic real rates of return for each major asset
class included the pension plan’s target asset allocation as of September 30, 2017, are
summarized in the following table:
Long-Term
Target Real Rate of
Asset Class Allocation Return*
Domestic Equity 50% 7.5%
International Equity 10% 8.5%
Fixed Income 40% 2.5%
Cash Equivalents 0% 0.0%
Total 100%
*Net of long-term inflation assumption of 2.5%
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
39
NOTE 10 – EMPLOYEE RETIREMENT SYSTEM (Continued)
Rate of Return.
For the year ended September 30, 2017, the annual money-weighted rate of return on Pension
Plan investments, net of pension plan investment expense, was 10.83 percent The money-
weighted rate of return expresses investment performance, net of investment expense, adjusted
for the changing amounts actually invested.
Discount Rate
The discount rate used to measure the total pension liability was 7.0%. The projection of cash
flows used to determine the discount rate assumed that plan member contributions will be made
at the current contribution rate and that sponsor contributions will be made at rates equal to the
difference between actuarially determined contribution rates and the member rate. Based on
those assumptions, the pension plans’ fiduciary net position was projected to be available to
make all projected future benefit payments of current plan members. Therefore, the long-term
expected rate of return on pension plan investments was applied to all periods of projected
benefit payments to determine the total pension liability.
The components of the net pension liability at September 30, 2017, were as follows:
Total Fiduciary Net
Pension Net Pension
Description
Liability
(a)
Position
(b)
Liability
(a)-(b)
Balances at September 30, 2016 $ 7,423,763 $ 6,815,775 $ 607,988
Changes due to:
Service cost 285,610 285,610
Interest 723,860 723,860
Differences between expected
and actual experience
Change of Assumptions 109,828 109,828
Employer contributions 287,362 (287,362)
Employee contributions 130,765 (130,765)
Benefit payments and refunds (206,413) (206,413)
Net investment income 831,485 (831,485)
Administrative expenses (52,151) 52,151
Total changes 912,885 991,048 (78,163)
Balances at September 30, 2017 $ 8,336,648 $ 7,806,823 $ 529,825
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
40
NOTE 10 – EMPLOYEE RETIREMENT SYSTEM (Continued)
The Plan fiduciary net position was 93.64% of the total pension liability as of September 30,
2017.
The change of assumptions was the assumed rate of mortality were changed.
Sensitivity of the Net Position Liability to Changes in the Discount Rate
The following represents the Authority’s net pension liability calculated using the discount rate
of 7.0%, as well as what the Authority’s net pension liability would be if it were calculated using
a discount rate that is one percentage point lower (6.0%) or one percentage point higher (8.0%)
than the current rate:
1% Decrease Current Rate 1% Increase
6% 7% 8%
Net pension liability $ 1,714,869 $ 529,825 $ (461,688)
Pension expense and deferred outflows and inflows of resources
For the fiscal year ended September 30, 2017, the Authority recognized pension expense of
$326,254. In addition, the Authority reported deferred outflows of resources and deferred
inflows of resources related to the Plan from the following sources:
Deferred Deferred
Outflows Inflows
Description of Resources of Resources
Difference between expected and actual
experience $ 20,792 $ 126
Change of assumptions 207,617
Net difference between projected and actual
earnings on plan investments 400,534 210,137
Total $ 628,943 $ 210,263
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
41
NOTE 10 – EMPLOYEE RETIREMENT SYSTEM (Continued)
Pension expense and deferred outflows and inflows of resources (Continued)
The amounts reported as deferred outflows of resources and deferred inflows of resources related
to the plan will be recognized in pension expense as follows:
Year ended September 30: Amount
2018 $ 95,866
2019 95,867
2020 148,529
2021 15,015
2022 41,234
Thereafter 22,169
$ 418,680
Payables to the Pension Plan
At September 30, 2017, the Authority reported a payable in the amount of $16,332 for
outstanding contributions to the Pension Plan required for the fiscal year ended September 30,
2017.
NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB)
The Authority implemented Governmental Accounting Standards Board Statement 45
(GASB 45), Accounting and Financial Reporting by Employers for Postemployment Benefits
Other Than Pensions, effective October 1, 2009. Retirees of the Authority pay an amount equal
to the actual premium for health insurance charged by the carrier, but there is an implied subsidy
in the healthcare insurance premium for retirees because the premium charged for these retirees
is the same as the premium charged for active employees, who are younger than retirees on
average. This implied subsidy constitutes other postemployment benefits (OPEB) under
GASB 45.
Plan Description
The Authority provides a single employer defined benefit health care plan to all of its employees.
The plan allows its employees and their beneficiaries, at their own cost, to continue to obtain
health, dental and other insurance benefits upon retirement. The benefits of the plan are in
accordance with Florida Statutes, which are the legal authority for the plan. The plan has no
assets and does not issue a separate financial report.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
42
NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
Funding Policy
The Authority does not directly make a contribution to the plan on behalf of retirees. Retirees
and their beneficiaries pay the same group rates as are charged to the Authority for active
employees by its healthcare provider. However, the Authority’s actuaries, in their actuarial
valuation, calculate an offset to the cost of these benefits as an Employer Contribution, based
upon an implicit rate subsidy. This offset equals the total age-adjusted costs paid by the
Authority or its active employees for coverage of the retirees and their dependents for the year
net of the retiree’s own payments for the year.
Annual OPEB Cost and Net OPEB Obligation
The Authority’s annual other postemployment benefit (OPEB) cost is calculated based on the
annual required contribution (ARC). The Authority has elected to calculate the ARC and related
information using the alternative measurement method permitted under GASB Statement No. 45
for employers with plans that have fewer than 100 total members. 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 actuarial liabilities over a period not to exceed 30 years.
The annual OPEB cost and the net OPEB obligation for the Authority for the current year and
the related information is as follows:
Required contribution rates:
Employer Pay-as-you-go
Plan members N/A
Annual Required Contribution (ARC) $ 7,198
Interest on Net Unfunded OPEB Obligation 2,340
Adjustment to Annual Required Contribution (5,410)
Annual OPEB cost 4,128
Age Adjusted Contributions made (34,279)
Increase in net OPEB obligation (30,151)
Net OPEB obligation October 1, 2016 93,236
Net OPEB obligation September 30, 2017 $ 63,085
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
43
NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
Trend Information
Three-Year Trend Information
Percentage of
Fiscal Annual Annual Net
Year OPEB OPEB Cost OPEB
End Cost Contributed Obligation
09/30/15 $ 32,267 40.18% $ 90,092
09/30/16 $ 33,006 90.47% $ 93,236
09/30/17 $ 4,128 830.40% $ 63,085
Funded Status
The funded status of the plan as of most recent actuarial valuation date was as follows:
Actuarial valuation date 09/30/17
Actuarial accrued liability $ 86,334
Actuarial value of plan assets $
Unfunded actuarial accrued liability (UAAL) $ 86,334
Funded ratio 0.0%
Covered payroll $2,427,029
UAAL as a percentage of covered payroll 3.56%
Funding Progress
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. 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, will present
multi-year trend information that shows whether the actuarial value of plan assets is increasing or
decreasing over time relative to the actuarial accrued liability for benefits. The Authority has not
contributed assets to the plan at this time.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
44
NOTE 11 – OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued)
Actuarial Methods and Assumptions
Projections of benefits are based on the substantive plan (the plan as understood by the employer
and plan members) and include the types of benefits in force at the valuation date and the pattern
of sharing benefit costs between the Authority and the plan members to that point. Actuarial
calculations reflect a long-term perspective and employ methods and assumptions that are
designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of
assets. Significant methods and assumptions were as follows:
Actuarial valuation date 9/30/17
Actuarial cost method Entry Age
Amortization method Level percentage of payroll
Amortization period 18 years
Asset valuation method Unfunded
Actual assumptions:
Payroll growth rate 1.5%
Investment rate of return 2.51%
Healthcare cost trend 8% for 2016 decreasing to 4.7% in 2026
NOTE 12 – CONTINGENCIES
The Authority is involved in various litigations and claims arising in the course of operations. It
is the opinion of legal counsel that the likelihood of unfavorable outcomes and the amounts of
potential losses cannot be reasonably determined at this time. Accordingly, no provision for any
liability that may result has been made in the accompanying financial statements.
In the opinion of management, no present claims exist that would, in the event of an adverse
resolution, result in liabilities in excess of the Authority’s insurance coverage.
NOTE 13 – COMMITMENTS
As of September 30, 2017, the Authority had commitments on outstanding construction contracts
for improvements to the system of approximately $420,000.
NOTE 14 – RISK MANAGEMENT
The Okeechobee Utility Authority is exposed to various risks of loss related to torts; theft of,
damage to, and destruction of assets; errors and omissions; injuries to employees; and natural
disasters. During the 2017 fiscal year, coverage was maintained via membership renewal with
Preferred Governmental Insurance Trust (“PGIT”), a public entity risk pool. The Okeechobee
Utility Authority pays an annual premium to PGIT for the following coverage: property and
inland marine, general liability, automobile, crime, public official’s liability, employment
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2017
45
NOTE 14 – RISK MANAGEMENT (Continued)
practices liability, and worker’s compensation. The PGIT purchases excess of loss insurance
policies. The excess of loss insurance policies attaches at $100,000 per occurrence except for
property insurance which is $25,000 per occurrence. Since the PGIT purchases excess of loss
insurance, the pool has not billed and does not plan to bill members for additional assessments.
As of September 30, 2017, the Authority’s management is of the opinion that the PGIT is able to
pay claims incurred to date and that the Authority will not be liable to pay any submitted claims.
The Okeechobee Utility Authority continues to carry commercial insurance for the following
risks: pollution liability, health, life, and disability. Settled claims resulting from these risks
have not exceeded commercial insurance coverage in any of the past three fiscal years.
Florida Statutes limit the Authority’s maximum loss for most liability claims to $200,000 per
person and $300,000 per occurrence under the Doctrine of Sovereign Immunity. However, under
certain circumstances, a plaintiff can seek to recover damages in excess of statutory limits by
introducing a claims bill to the Florida Legislature. The limits addressed in Florida Statutes do
not apply to claims filed in Federal courts.
NOTE 15– NEW ACCOUNTING STANDARDS
Below is a brief description and effective date of new accounting standards that could have a
significant impact on the Authority’s financial statements. Management is currently evaluating
the impact of the adoption of these statements on the Authority’s financial statements.
In June 2015 the GASB issued Statement No. 75, Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions (OPEB). This Statement improves accounting
and financial reporting by state and local governments for postemployment benefits other than
pensions. It also improves information provided by state and local governmental employers
about financial support for OPEB that is provided by other entities. This Statement is effective
for the fiscal year ending September 30, 2018.
In May 2017 the GASB issued Statement No. 87, Leases. This Statement will increase the
usefulness of governments’ financial statements by requiring recognition of certain lease assets
and liabilities for leases that previously were classified as operating leases and recognized as
inflows of resources or outflows of resources based on the payment provisions of the contract. It
establishes a single model for lease accounting that is based on the foundational principle that
leases are financings of the right to use an underlying asset. This Statement is effective for the
fiscal year ending September 30, 2021.
Actuarial
Accrued UAAL as a
Actuarial Liability Unfunded Percentage
Actuarial Value of (AAL)-AAL Funded Covered of Covered
Valuation Assets Entry Age(1)(UAAL)Ratio Payroll Payroll
Date (a)(b)(b-a)(a/b)(c)((b-a)/c)
09/30/15 297,306$ 297,306$ 0.0%2,310,279$ 12.87%
09/30/16 318,064 318,064 0.0%2,384,900 13.34%
09/30/17 86,334 86,334 0.0%2,427,029 3.56%
Other Postemployment Benefits (OPEB)
OKEECHOBEE UTILITY AUTHORITY
Required Supplemental Information
Schedule of Funding Progress
Thescheduleoffundingprogresspresentedabovepresentsmulti-yeartrendinformationthatshowswhether
theactuarialvalueofplanassetsisincreasingordecreasingovertimerelativetotheactuarialaccruedliability
for benefits. The Authority has not contributed assets to the plan at this time.
September 30, 2017
46
2017
Total pension liability:
Service cost 285,610$
Interest 723,860
Differences between expected and
actual experience
Change of assumptions 109,828
Benefit payments, including
refunds of employee contributions (206,413)
Net change in total pension liability 912,885
Total pension liability - beginning 7,423,763
Total pension liability - ending (a)8,336,648$
Plan fiduciary net position
Contributions - employer 287,362$
Contributions - employees 130,765
Net investment income 831,485
Benefit payments, including
refunds of employee contributions (206,413)
Administrative expenses (52,151)
Net change in plan fiduciary net position 991,048
Plan fiduciary net position - beginning 6,815,775
Plan fiduciary net position - ending (b)7,806,823$
Net pension liability (a) - (b)529,825$
Plan fiduciary net position as a percentage
of the total pension liability 93.64%
Covered payroll 2,179,417$
Net pension liability as a percentage of
covered payroll 24.31%
NOTE: Prior to October 1, 2016, the Authority participated in the City of Okeechobee and Okeechobee Utility Authority
Employees' Retirement System, a cost-sharing multiple-employer defined benefit plan. Effective October 1, 2016, the Authority
withdrew from that plan and started the Okeechobee Utility Authority Employees' Retirement System, a single-employer
defined benefit plan with the same contribution and benefit provisions as the prior plan.
Change of Assumptions
For the year ending September 30, 2017, the assumed rates of mortality were changed.
Schedule of Changes in Net Pension Liability and Related Ratios
Thisscheduleisintendedtoshowinformationfor10years.However,untilafull10-yeartrendiscompiled,informationwillbe
presented for those years for which information is available.
Last Ten Fiscal Years
OKEECHOBEE UTILITY AUTHORITY
Required Supplemental Information
September 30, 2017
Employees' Retirement System
47
Schedule of Employer Contributions
Fiscal Year Actuarially Contribution Authority's Actual Contribution
Ended Determined Actual Excess Covered as a Percentage of
September 30 Contribution Contribution (Deficiency)Payroll Covered Payroll
2017 303,157 287,362 *(15,795) *2,179,417 13.19%
* Excess contributions from previous years totaling $15,795 were applied to satisfy the full contribution requirement.
Schedule of Annual Money-Weighted Rate of Return, Net of Investment Expense
Fiscal Year
Ending
September 30
2017 10.83%
NOTE: Prior to October 1, 2016, the Authority participated in the City of Okeechobee and Okeechobee Utility Authority'
Employees' Retirement System, a cost-sharing multiple-employer defined benefit plan. Effective October 1, 2016, the Authority
withdrew from that plan and started the Okeechobee Utility Authority Employees' Retirement System, a single-employer
defined benefit plan with the same contribution and benefit provisions as the prior plan.
Thisscheduleisintendedtoshowinformationfor10years.However,untilafull10-yeartrendis
compiled, information will be presented for those years for which information is available.
OKEECHOBEE UTILITY AUTHORITY
Required Supplemental Information
Last Ten Fiscal Years
48
The actuarially determined contribution rates are calculated as of October 1, two years prior to the end of the fiscal year
in which contributions are reported.
Valuation Date October 1, 2015
Methods and Assumptions Used to Determine Contribution Rates:
Actuarial Cost Method Aggregate
Amortization Method N/A
Remaining Amortization Period N/A
Asset Valuation Method 4-year smoothed market
Inflation 2.50%
Salary Increases 6.00%
Cost of Living Adjustments None
Investment Rate of Return 7.00%
Retirment age 100% when first eligible for normal
retierement or DROP entry
Mortality RP-2000 Combined Heathly
Participant Mortality Table with
mortality improvement projected
to all future years after 2000
using Scale AA
OKEECHOBEE UTILITY AUTHORITY
Notes to the Schedule of Contributions
September 30, 2017
49
50
INDEPENDENT AUDITOR’S 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 Honorable Chairman and Members of the
Okeechobee Utility Authority Board
Okeechobee, Florida
We have audited, in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing
Standards issued by the Comptroller General of the United States, the basic financial statements of
the Okeechobee Utility Authority as of and for the year ended September 30, 2017, and the related
notes to the financial statements, and have issued our report thereon dated June 20, 2018.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Okeechobee
Utility Authority’s internal control over financial reporting (internal control) to determine the audit
procedures that are appropriate in the circumstances for the purpose of expressing our opinion on
the financial statements, but not for the purpose of expressing an opinion on the effectiveness of
the Okeechobee Utility Authority’s internal control. Accordingly, we do not express an opinion on
the effectiveness of the Okeechobee Utility Authority’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the entity’s financial statements will not be prevented,
or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.
51
Our consideration of internal control was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control that might be
material weaknesses or, significant deficiencies. Given these limitations, during our audit we did
not identify any deficiencies in internal control that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Okeechobee Utility Authority’s
financial statements are free of material misstatement, we performed tests of the 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.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
entity’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the entity’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
West Palm Beach, Florida
June 20, 2018
52
MANAGEMENT LETTER IN ACCORDANCE WITH
THE RULES OF THE AUDITOR GENERAL
OF THE STATE OF FLORIDA
The Honorable Chairman and Members of the
Okeechobee Utility Authority Board
Okeechobee, Florida
Report on the Financial Statements
We have audited the basic financial statements of the Okeechobee Utility Authority, as of and for
the fiscal year ended September 30, 2017, and have issued our report thereon dated June 20, 2018.
Auditor’s Responsibility
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America; the standards applicable to financial audits contained in Government Auditing
Standards issued by the Comptroller General of the United States; and Chapter 10.550, Rules of
the Florida Auditor General.
Other Reporting Requirements
We have issued our Independent Auditor’s Report on Internal Control over Financial Reporting
and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in
Accordance with Government Auditing Standards and Independent Accountant’s Report on an
examination conducted in accordance with AICPA Professional Standards, AT-C Section 315,
regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor
General. Disclosures in those reports, which are dated June 20, 2018, should be considered in
conjunction with this management letter.
Prior Audit Findings
Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not
corrective actions have been taken to address findings and recommendations made in the preceding
financial audit report. There were no findings or recommendations in the prior year that required
corrective actions.
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Official Title and Legal Authority
Section 10.554(1)(i)4., Rules of the Auditor General, requires that the name or official title and
legal authority for the primary government and each component unit of the reporting entity be
disclosed in this management letter, unless disclosed in the notes to the financial statements. This
information is disclosed in Note 1 to the financial statements.
Financial Condition and Management
Section 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, require us to apply
appropriate procedures and communicate the results of our determination as to whether or not the
Okeechobee Utility Authority has met one or more of the conditions described in Section
218.503(1), Florida Statutes, and to identify the specific condition(s) met. In connection with our
audit, we determined that the Okeechobee Utility Authority did not meet any of the conditions
described in Section 218.503(1), Florida Statutes, during the fiscal year ended September 30, 2017.
Pursuant to Sections 10.554(1)(i)5.c. and 10.556(8), Rules of the Auditor General, we applied
financial condition assessment procedures for the Authority. It is management’s responsibility to
monitor the Okeechobee Utility Authority’s financial condition, and our financial condition
assessment was based in part on representations made by management and review of financial
information provided by same. Our assessment was done as of the fiscal year end. The results of
our procedures did not disclose any matters that are required to be reported.
Section 10.554(1)(i)2., Rules of the Auditor General, requires that we communicate any
recommendation to improve financial management. In connection with our audit, we did not have
any such recommendations.
Annual Financial Report
Section 10.554(1)(i)5.b. and 10.556(7), Rules of the Auditor General, require us to apply
appropriate procedures and communicate the results of our determination as to whether the annual
financial report for the Okeechobee Utility Authority for the fiscal year ended September 30, 2017,
filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida
Statutes, is in agreement with the annual financial audit report for the fiscal year ended September
30, 2017. In connection with our audit, we determined that these two reports were in agreement.
Special District Component Units
Section 10.554(1)(i)5.d, Rules of the Auditor General, requires, if appropriate, that we
communicate the failure of a special district that is a component unit of a county, municipality, or
special district, to provide the financial information necessary for proper reporting of the
component unit, within the audited financial statements of the county, municipality, or special
district in accordance with Section 218.39(3)(b), Florida Statutes.
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Based on the application of criteria in publications cited in Section 10.553, Rules of the Auditor
General, there are no special district component units of the Okeechobee Utility Authority.
Additional Matters
Section 10.554(1)(i)3., Rules of the Auditor General, requires us to communicate noncompliance
with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have
occurred, that have an effect on the financial statements that is less than material but warrants the
attention of those charged with governance. In connection with our audit, we did not note any such
findings.
Purpose of this Letter
Our management letter is intended solely for the information and use of Legislative Auditing
Committee, members of the Florida Senate and the Florida House of Representatives, the Florida
Auditor General, Federal and other granting agencies, and applicable management, and is not
intended to be and should not be used by anyone other than these specified parties.
West Palm Beach, Florida
June 20, 2018
55
INDEPENDENT ACCOUNTANT’S REPORT
ON COMPLIANCE WITH SECTION 218.415,
FLORIDA STATUTES
The Honorable Chairman and Members of the
Okeechobee Utility Authority Board
Okeechobee, Florida
We have examined the Okeechobee Utility Authority’s compliance with Section 218.415, Florida
Statutes during the year ended September 30, 2017. Management of the Okeechobee Utility Authority is
responsible for Okeechobee Utility Authority’s compliance with the specified requirements. Our
responsibility is to express an opinion on the Okeechobee Utility Authority compliance with the
specified requirements based on our examination.
Our examination was conducted in accordance with attestation standards established by the American
Institute of Certified Public Accountants. Those standards require that we plan and perform the
examination to obtain reasonable assurance about whether the Okeechobee Utility Authority complied,
in all material respects, with the specified requirements referenced above. An examination involves
performing procedures to obtain evidence about whether the Okeechobee Utility Authority complied
with the specified requirements. The nature, timing, and extent of the procedures selected depend on our
judgement, including an assessment of the risk of material noncompliance, whether due to fraud or error.
We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for
our opinion.
Our examination does not provide a legal determination on the Okeechobee Utility Authority’s
compliance with the specified requirements.
In our opinion, the Okeechobee Utility Authority complied, in all material respects, with Section
218.415, Florida Statutes for the year ended September 30, 2017.
This report is intended solely for the information and use of the Legislative Auditing Committee,
members of the Florida Senate and Florida House of Representatives, the Florida Auditor General,
applicable management, and the Okeechobee Utility Authority Board, and is not intended to be and
should not be used by anyone other than these specified parties.
West Palm Beach, Florida
June 20, 2018