OUA Audit Report 9-30-2019
OKEECHOBEE UTILITY AUTHORITY
FINANCIAL STATEMENTS WITH INDEPENDENT
AUDITOR’S REPORT THEREON
SEPTEMBER 30, 2019
OKEECHOBEE UTILITY AUTHORITY
SEPTEMBER 30, 2019
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 Changes in Total OPEB Liability 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 and aggregate
remaining fund information of the Okeechobee Utility Authority as of and for the year ended
September 30, 2019, and the related notes to the financial statements, which collectively
comprise the Okeechobee Utility Authority’s basic financial statements as listed in the table of
contents.
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
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.
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.
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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 opinions.
Opinions
In our opinion, 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, 2019, and the respective changes in 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 changes in the total
OPEB liability 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.
3
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
April 14, 2020, 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
April 14, 2020
4
Okeechobee Utility Authority
Management’s Discussion and Analysis
For the Fiscal Year Ended September 30, 2019
Management’s Discussion and Analysis (MD&A) is intended to provide an objective analysis of the
Okeechobee Utility Authority (the “Authority”) financial activities for fiscal year ended September
30, 2019. The analysis provides summary financial information for the Authority and should be read
in conjunction with the audited financial statements.
FINANCIAL HIGHLIGHTS
The Authority’s assets exceeded its liabilities at September 30, 2019, by $50 million (net
position). Of this amount, approximately $6.5 million is its unrestricted net position (Table 1).
The Authority’s total assets decreased by approximately $2.7 million from FY2018.
The Authority’s operating and miscellaneous revenues increased $315,089 over FY2018 and
operating expenses increased by $146,591 or 1.65% from FY2018 (Table 2).
Operating expenses were $9.044 million, which was 8.8% less than budget.
The Authority repaid in full a $2.957 million State Revolving Fund long-term loan.
Subsequent to the end of the fiscal year, the Authority received a $6,000,000 grant from the
Florida Department of Environmental Protection to help pay for the Septic to Sewer project
referred to as the Southwest Wastewater Service Area.
The Authority’s total capital assets, before accumulated depreciation, increased by approximately
$1.5 million from FY2018 (Table 3).
OVERVIEW OF THE FINANCIAL STATEMENTS
This management discussion and analysis (MD&A) 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.
5
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 the
Statement of Cash Flows.
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 $1,425,431. The condensed analysis below focuses on
the Authority’s net position (Table 1) and changes in net position from fiscal year 2018 to fiscal year
2019.
Table 1
Net Position
FY2018 FY2019 Net Change
Net Capital Assets $ 59,643,431 $ 59,932,088 $ 288,657 0.48%
Restricted Assets 6,143,834 5,767,433 (376,401) (6.1%)
Current and Other Assets 11,088,790 8,455,640 (2,633,150) (23.75%)
Total assets $ 76,876,055 $ 74,155,161 $ (2,720,894) (3.54%)
Total deferred outflows $ 1,221,108 $ 1,216,010 $ (5,098)) (0.42%)
Noncurrent Liabilities $ 26,282,796 $ 21,463,413 $ (4,819,383) (18.34%)
Liabilities Payable from Restricted Assets 558,558 586,370 27,812 4.98%
Current Liabilities 2,681,816 2,995,307 313,491 11.69%
Total liabilities $ 29,523,170 $ 25,045,090 $ (4,478,080) (15.17%)
Total deferred inflows $ 98 $ 326,755 $ 326,657 333,323%
Net Investment in Capital Assets $ 33,396,938 $ 38,353,565 $ 4,956,627 14.84%
Restricted for Capital Projects 2,424,861 2,152,317 (272,544) (11.24%)
Restricted for Debt Service 907,122 627,806 (279,316) (30.79%)
Restricted for Rate Stabilization 2,253,293 2,400,940 147,647 6.55%
Unrestricted Net Position 9,591,681 6,464,698 (3,126,983) (32.60%)
Total Net Position $ 48,573,895 $ 49,999,326 $ 1,425,431 2.93%
7
A comparison of the Authority’s income (loss) is as follows (Table 2):
Table 2
Revenues and Expenses
FY2018 FY2019 Net Change
Revenue
Operating Revenue $ 9,845,263 $ 10,256,079 $ 410,816 4.17%
Miscellaneous Revenue 210,731 115,004 (95,727) (45.43%)
Non-Operating Revenue 950,323 446,284 (504,039) (53.04%)
Total Revenue $ 11,006,317 $ 10,817,367 $ (188,950) (1.72%)
Expenses
Operating Expenses $ 8,897,807 $ 9,044,398 $ 146,591 1.65%
Non-Operating Expenses 795,037 732,856 (62,181) (7.82%)
Total Expenses $ 9,692,844 $ 977,254 $ 85,447 0.88%
Excess Revenue over Expenses
Before Capital Contributions $ 1,313,473 $ 1,040,113 $ (273,360) (20.81%)
Capital Contributions 911,143 385,318 (525,825) (57.71%)
Total change in net position $ 2,224,616 $ 1,425,431 $ (799,185) (35,92%)
Beginning Net Position $ 46,349,279 $ 48,573,895 $ 2,224,616 4.80%
Ending Net Position $ 48,573,895 $ 49,999,326 $ 1,425,431 2.93%
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.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At the end of fiscal year 2019, the Authority had $59,932,088 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,
equipment and construction in process.
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The Authority’s total capital assets increased after accumulated depreciation from last year by
approximately $300,000 as reflected in the following table (Table 3):
Table 3
Changes in Capital Assets
FY2018 FY2019 Net Change
Land and Easements $ 2,497,428 $ 2,497,428 $ 0
Buildings 993,404 993,404 0
Equipment 4,003,354 4,158,844 155,490
Distribution & Collection System 92,445,077 93,826,246 1,381,169
$ 99,939,263 $ 101,475,922 $ 1,536,659
Less: Accumulated Depreciation (41,452,305) (43,995,091) (2,542,786)
$ 58,486,958 $ 57,480,831 $ (1,006,127)
Construction in Process 1,156,473 2,451,257 1,294,784
$ 59,643,431 $ 59,932,088 $ 288,657
The Authority plans each year for capital improvement projects. Some projects are completed within
the fiscal year, and other projects take longer than a year to complete. The SWTP Storage Water
Tank Project listed below is the construction of a 3 million-gallon water tank at a cost of
approximately $5.6 million. It is anticipated to be completed by September 30, 2020.
Table 4 below reflects the major additions and costs incurred as of September 30, 2019.
Table 4
Capital Improvement Projects
SE 8th Ave Water Main Replacement $58,614
SW Wastewater Area Septic to Sewer 93,216
SWTP Storage Water Tank Project 2,236,336
Other Projects 63,091
Total Ongoing CIP Projects $ 2,451,257
See Notes to the Financial Statements (Note 6) for additional information related to capital assets.
Debt Management
On September 30, 2019, the Authority had State Revolving Loans and notes payable outstanding in
the amount of $22,311,233. One of the Authority’s State Revolving Loans was repaid in full in
FY2019. The total principal repaid in FY2019 was $4,802,237. See Notes to the Financial
Statements (Note 7) 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 has
been modest on an annual basis. In the most recent fiscal year ended September 30, 2019, capital
connection charge revenues for 44 water and 10 wastewater equivalent residential connections
(ERC’s) were received.
9
Florida’s rural central areas do not experience the same rate of growth as both the Atlantic and Gulf
coastal areas. Given the current economic environment, a modest growth in the number of
connections is expected to be realized from new construction on vacant sites in the existing
developed sections of the Authority’s service area rather than through planned new developments.
The City of Okeechobee is approximately forty-five minutes to one hour from the Atlantic coast. The
main east and 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 its life style.
There are developers, who historically focused their activities in the Atlantic coastal areas of Palm
Beach and Saint Lucie Counties, that have purchased property within the Authority’s service area
with the intention of creating future developments in Okeechobee County.
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, which is greater than the existing customer base of approximately nine thousand five
hundred five (9,505) residential connections. The Authority’s current wastewater treatment plant
with three million gallons per day (3mgd) of total treatment capacity can accommodate
approximately twelve thousand (12,000) additional wastewater customers, which is greater than the
existing customer base of approximately four thousand four hundred twenty-four (4,424). In the
near-term projection of five years, this available capacity is more than adequate to accommodate the
projected level of customer growth.
This MD&A report is designed to provide a general overview of the Okeechobee Utility Authority’s
financial health for those interested in the Authority’s financial condition. Questions concerning 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. An audit of the 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, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents 3,372,230$
Investments 2,826,141
Interest receivable 24,970
Receivables:
Grants 342,250
Accounts receivable, less allowance for
uncollectible accounts of $57,536 1,194,089
Inventories 533,064
Prepaid expenses 9,233
Total current assets 8,301,977
NONCURRENT ASSETS
Restricted assets:
Cash and cash equivalents 5,262,639
Investments 504,794
Capital assets:
Land 2,497,428
Utility plants 98,978,494
101,475,922
Less accumulated depreciation (43,995,091)
57,480,831
Construction in progress 2,451,257
Total capital assets 59,932,088
Other noncurrent assets:
Unamortized organizational costs, net 153,663
Total noncurrent assets 65,853,184
TOTAL ASSETS 74,155,161
DEFERRED OUTFLOWS OF RESOURCES
Pension related items 483,300
Deferred loss on bond refunding, net 732,710
TOTAL DEFERRED OUTFLOWS OF RESOURCES 1,216,010
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LIABILITIES
CURRENT LIABILITIES
Accounts payable 924,214$
Accrued expenses 87,006
Due to other governments 30,568
Bonds payable (current)1,885,391
Accrued compensated absences (current)68,128
Payable from restricted assets:
Accrued interest 4,589
Customer deposits 581,781
Total current liabilities 3,581,677
NONCURRENT LIABILITIES
Long-term portion of bonds payable 20,425,842
Long-term portion of compensated absences 204,385
Net pension liability 274,282
Total OPEB liability 71,359
Unearned revenues:
Connection fees 63,143
Developer fees 424,402
Total noncurrent liabilities 21,463,413
TOTAL LIABILITIES 25,045,090
DEFERRED INFLOWS OF RESOURCES
Pension related items 326,755
NET POSITION
Net investment in capital assets 38,353,565
Restricted for capital projects 2,152,317
Restricted for debt service 627,806
Restricted for rate stabilization 2,400,940
Unrestricted 6,464,698
TOTAL NET POSITION 49,999,326$
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, 2019
OPERATING REVENUE
Charges for services 10,256,079$
Miscellaneous 115,004
Total operating revenues 10,371,083
OPERATING EXPENSES
Water services 1,168,316
Wastewater services 830,945
Maintenance 1,977,339
Meter reader 240,829
Administrative and general 2,157,046
Depreciation and amortization 2,669,923
Total operating expenses 9,044,398
OPERATING INCOME 1,326,685
NONOPERATING REVENUES (EXPENSES)
Interest revenue 197,250
Interest expense (732,856)
Operating grants 249,034
Total nonoperating revenues (expenses)(286,572)
INCOME BEFORE CAPITAL CONTRIBUTIONS 1,040,113
CAPITAL CONTRIBUTIONS
Capital grants 269,524
Capital connection fees 107,022
Developer contributions for capital projects 8,772
Total capital contributions 385,318
INCREASE IN NET POSITION 1,425,431
NET POSITION, BEGINNING OF PERIOD 48,573,895
NET POSITION, END OF PERIOD 49,999,326$
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, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 10,547,817$
Payments to suppliers (2,680,249)
Payments to employees (2,363,390)
Payments for employee benefits (880,995)
Net cash provided (used) by operating activities 4,623,183
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition and construction of capital assets (2,974,979)
Bond and loan principal payments (4,776,238)
Bond and loan interest paid (601,861)
Capital connection fees received 107,681
Captial grants 376,307
Net cash (used) by capital and related financing activities (7,869,090)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (3,174,979)
Proceeds from investments 2,312,635
Interest on investments 197,579
Net cash provided (used) by investing activities (664,765)
Net increase (decrease) in cash and cash equivalents (3,910,672)
Cash and cash equivalents at beginning of year 12,545,541
Cash and cash equivalents at end of year 8,634,869$
See notes to the financial statements.
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OKEECHOBEE UTILITY AUTHORITY
Statement of Cash Flows - Proprietary Fund (continued)
For the Fiscal Year Ended September 30, 2019
CASH AND CASH EQUIVALENTS CLASSIFIED AS:
Current assets 3,372,230$
Restricted assets 5,262,639
Total 8,634,869$
ADJUSTMENTS TO RECONCILE OPERATING INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating Income 1,326,685$
Adjustments to reconcile operating income to
net cash provided by operating activities:
Change in net pension liability and related deferred amounts (32,883)
Operating grants 106,256
Depreciation and amortization 2,669,923
Change in assets and liabilities:
(Increase) decrease in accounts receivable 39,394
(Increase) decrease in inventory (71,694)
(Increase) decrease in prepaid expenses 19,589
Increase (decrease) in accounts payable 508,329
Increase (decrease) in accrued liabilities 8,472
Increase (decrease) in compensated absences 27,429
Increase (decrease) in OPEB (10,742)
Increase (decrease) in deposits 31,084
Increase (decrease) in due to other governments 1,341
Total adjustments 3,296,498
Net cash provided (used) by operating activities 4,623,183$
See notes to the financial statements.
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ASSETS
Cash and cash equivalents 172,543$
Contributions receivable
Employee 9,861
Employer 25,918
Investments: (at fair value)
Mutual funds- fixed income 3,210,732
Mutual funds - international equity 803,565
Mutual funds - domestic equity 4,841,234
Total investments 8,855,531
TOTAL ASSETS 9,063,853
LIABILITIES
Accounts payable 11,083
Due to brokers 47,000
58,083
FIDUCIARY NET POSITION - RESTRICTED FOR PENSION BENEFITS 9,005,770$
See notes to the financial statements.
OKEECHOBEE UTILITY AUTHORITY
Statement of Fiduciary Net Position
Pension Trust Fund
September 30, 2019
15
ADDITIONS
Contributions
Employer 336,606$
Plan members 128,068
Total contributions 464,674
Investment income
Net appreciation in fair value of investments 79,574
Interest and dividends 268,403
347,977
Less: investment expenses (20,250)
Net investment income 327,727
TOTAL ADDITIONS 792,401
DEDUCTIONS
Benefits paid to participants 283,485
Refunds due on terminations 16,753
Administrative expenses 59,018
TOTAL DEDUCTIONS 359,256
NET INCREASE 433,145
FIDUCIARY NET POSITION - RESTRICTED FOR PENSION BENEFITS
Beginning of year 8,572,625
End of year 9,005,770$
OKEECHOBEE UTILITY AUTHORITY
Statement of Changes in Fiduciary Net Position
Pension Trust Fund
For the Fiscal Year Ended September 30, 2019
See notes to the financial statements.
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OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
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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 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 Employees’ Pension Trust Fund.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
18
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.
Measurement Focus and Basis of Accounting
These financial statements are prepared using the economic resources measurement focus and
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.
The Employees’ Pension Trust Fund also uses the accrual basis of accounting and the economic
resources measurement focus.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
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, 2019 on
September 11, 2018.
Deposits and Investments
Cash and cash equivalents include amounts on deposit in demand accounts, money market
accounts, and money market mutual funds. 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 the trade date.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
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 15-25 years
Equipment 3-10 years
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, 2019
21
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Outflow of Resources
In addition to assets, the Statement of Net Position reports 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 reports 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 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, 2019, 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, 2019
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 the net position consists of constraints placed on the net position by 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, restricted for debt service, or
restricted for rate stabiliation 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 may differ from these estimates.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
23
NOTE 2 – DEPOSITS AND INVESTMENTS
Authority Deposits
As of September 30, 2019, the carrying amount of the Authority’s book balance for deposits in
“Qualified Public Depositories” was $8,632,119 and the bank balance was $8,740,210. The
Authority also had $2,750 in petty cash for a total carrying amount of $8,634,869.
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 categorizes its investments according to the fair value hierarchy established
GASB Statement No. 72, Fair Value Measurement and Application. The hierarchy is based on
valuation inputs used to measure the fair value of the asset as follows: Level 1 inputs are quoted
prices in active markets for identical assets; Level 2 inputs are significant other observable inputs
to include quoted prices for similar assets in active and non-active markets; Level 3 inputs are
significant unobservable inputs.
The Authority’s investment policy authorizes investments in money market and savings
accounts, certificates of deposits with State Qualified Public Depositories, money market funds,
bonds, notes, bills 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, 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.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
24
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
Authority Investments (Continued)
The Authority had the following investments as of September 30, 2019:
Weighted Average S&P
Maturity (Days) Rating Fair Value
US Treasury Bills 79 AA+ $ 1,138,935
US Treasury Notes 144 AA+ 2,192,000
The US Treasury Bills and U.S. Treasury Notes are categorized as Level 1 of the fair value
hierarchy.
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,
2019:
Cash on hand $ 2,750
Deposits held by public depositories 8,632,119
US Treasury Bills 3,330,935
Total cash and cash equivalents and investments $ 11,965,804
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
25
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
Authority Investments (Continued)
Cash and cash equivalents and investments are presented in the statement of net position as of
September 30, 2019, as follows:
Current cash and cash equivalents $ 3,372,230
Current investments 2,826,141
Restricted cash and cash equivalents 5,262,639
Restricted investments 504,794
Total cash and cash equivalents and investments $ 11,965,804
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. 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 resolution 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.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
26
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
General Employee’s Pension Trust Fund (Continued)
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, 2019.
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.
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. 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.
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. The gain or loss on
financial instruments is recognized in the changes in net position as part of investment income.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
27
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
General Employee’s Pension Trust Fund (Continued)
The following is a list of the Plan’s investments by categories of risk as of September 30, 2019:
2019
Historical Fair
Cost Value
Money Market Mutual Funds $ 172,543 $ 172,543
Mutual Funds – Domestic Equity 3,605,329 4,841,234
Mutual Funds – International Equity 744,334 803,565
Mutual Funds - Fixed Income 3,150,641 3,210,732
$ 7,672,847 $ 9,028,074
The money market mutual funds consist of investments with financial institutions in open end,
institutional, money market funds complying with Securities and Exchange Commission (SEC)
Rule 2a7. Rule 2a7 allows SEC registered mutual funds to use amortized cost rather than fair
value to report net assets used to compute share prices if certain conditions are met. Those
conditions include restrictions on the types of investments held, restrictions on the term-to-
maturity of individual investments and the dollar-weighted average of the portfolio, requirements
for portfolio diversification, and requirements for divestiture considerations in the event of
security downgrades and defaults, and required actions if the fair value of the portfolio deviates
from amortized cost by a specified amount. Money market mutual funds are exempt from the
GASB 72 fair value hierarchy disclosures and are recorded as cash and cash equivalents on the
Statement of Fiduciary Net Position.
Investment Measurement at Fair Value
The Plan categorizes its investments according to the fair value hierarchy established GASB
Statement No. 72, Fair Value Measurement and Application. The hierarchy is based on valuation
inputs used to measure the fair value of the asset as follows: Level 1 inputs are quoted prices in
active markets for identical assets; Level 2 inputs are significant other observable inputs to
include quoted prices for similar assets in active and non-active markets; Level 3 inputs are
significant unobservable inputs.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
28
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
Employee’s Pension Trust Fund (Continued)
Investment Measurement at Fair Value (Continued)
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. 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.
The Plan categorizes its fair value measurement within the fair value hierarchy established by
generally accepted accounting principles. The Plan has the following fair value measurements as
of September 30, 2019:
Fair Value Measurement
Balance Level 1 Level 2 Level 3
Investments by fair value level
Mutual Funds – Domestic Equity $ 4,841,234 $ 4,841,234 $ $
Mutual Funds – International Equity 803,565 803,565
Mutual Funds - Fixed Income 3,210,732 2,942,141
$ 8,855,531 $ 5,644,799 $ 2,942,141 $
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.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
29
NOTE 2 – DEPOSITS AND INVESTMENTS (Continued)
Employee’s Pension Trust Fund (Continued)
Investment Measurement at Fair Value (Continued)
Credit risk – Credit risk is the risk that an issuer or other counter party to an investment will not
fulfill its obligations. Credit risk does not apply to the Plan’s investments at this time.
Interest rate risk – Interest rate risk is the risk that changes in interest rates will adversely affect
the fair value of an investment. Generally, the longer the time to maturity, the greater the
exposure to interest rate risks.
At September 30, 2019, the fixed income mutual fund was invested 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 of September 30, 2019.
Concentrations of credit risk – Concentration of credit risk is defined as the risk of loss attributed
to the magnitude of an investment in a single user. Not more than five (5) percent of the Plan’s
assets shall be invested in the common stock or capital stock of any one issuing company.
Investing in Foreign Markets – Investing in foreign markets may involve special risks and
considerations not typically associated with investing in companies in the United States of
America. These risks include revaluation of currencies, high rates of inflation, repatriation
restrictions on income and capital, and future adverse political, social, and economic
developments. Moreover, securities of foreign governments may be less liquid, subject to
delayed settlements, taxation on realized or unrealized gains, and their prices are more volatile
than those of comparable securities in U.S. companies.
NOTE 3 – INVENTORY
Inventory was comprised of the following at September 30, 2019:
Chemicals $ 20,920
Parts and supplies 512,144
Total inventory $ 533,064
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
30
NOTE 4 – RESTRICTED ASSETS
Restricted assets consist of the following accounts as of September 30, 2019:
Renewal, replacement & improvement $ 504,794
Capital connection water 572,478
Capital connection wastewater and treatment plant 953,741
Fire hydrant 121,304
Total restricted for capital projects 2,152,317
Debt service 632,395
Rate stabilization 2,400,940
Customer deposits 581,781
Total restricted assets $ 5,767,433
NOTE 5 – UNRESTRICTED NET POSITION
Unrestricted net position consists of the following as of September 30, 2019:
Designated:
Capital improvement project $ 947,891
Operating reserve 1,883,604
Emergency funding 623,584
Total designated 3,455,079
Undesignated 3,009,619
Total unrestricted net position $ 6,464,698
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
31
NOTE 6 – CAPITAL ASSETS
Capital assets are summarized as follows.
Beginning Ending
Balance Additions Deletions Balance
Capital assets, not
being depreciated
Land $ 2,497,428 $ $ $ 2,497,428
Construction in progress 1,156,473 2,500,282 (1,205,498) 2,451,257
Total capital assets
not being depreciated 3,653,901 2,500,282 (1,205,498) 4,948,685
Capital assets being depreciated
Buildings 993,404 993,404
Equipment 4,003,354 234,026 (78,536) 4,158,844
Distribution and
collection plant 92,445,077 1,446,169 (65,000) 93,826,246
Total capital assets
being depreciated 97,441,835 1,680,195 (143,536) 98,978,494
Less accumulated
depreciation for
Buildings (548,742) (30,280) (579,022)
Equipment (3,143,501) (183,736) 78,536 (3,248,701)
Distribution and
collection Plant (37,760,062) (2,446,307) 39,001 (40,167,368)
Total accumulated
depreciation (41,452,305) (2,660,323) 117,537 (43,995,091)
Total capital assets being
depreciated, net 55,989,530 (980,128) (25,999) 54,983,403
Total capital assets, net $59,643,431 $ (1,520,154) $ (1,231,497) $59,932,088
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
32
NOTE 7 – LONG-TERM LIABILITIES
Loans Payable from Direct Borrowings and Direct Placements
Pledged Revenues
All rates, fees, charges, or other income, received by the Authority excluding (1) Pledged Capital
Connection Charges, (2) Unpledged Capital Connection Charges, (3) Special Assessments, (4)
capital contributions, and (5) earnings and investment income derived from moneys described in
clauses (1) through (3) are pledged for the payment of the Capital Improvement Refunding
Revenue Notes, Series 2017 and Loan Agreement WW615100.
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 Senior Debt). The notes were
issued to provide funds to refund the Capital Improvement Refunding Revenue Notes, 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
Principal and interest is to be paid semiannually on each April 1 and October 1, through October
1, 2030. As of September 30, 2019, the balance due on Series 2017A and 2017B is $7,340,000
and $9,050,000, respectively.
The Authority is to 1) maintain a Debt Service Account that is funded monthly to fund semi-
annual Debt Service Payments, and 3) maintain a Renewal Replacement and Improvement
Account of 5% of Gross Revenues of the preceding fiscal year. In the event that default shall be
made in the payment of interest on or the principal of any of the bonds issued or any other event
of default and any such default shall continue for a period of sixty days, any Holder shall be
entitled to the appointment of a receiver of the System in an appropriate judicial proceeding.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
33
NOTE 7 – LONG-TERM LIABILITIES (Continued)
Loans Payable from Direct Borrowings and Direct Placements (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 (the Department) under the State
Revolving Fund Loan Program (The Junior Debt). The amount outstanding as of September 30,
2019, was $5,921,233. 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.
The Authority is to 1) establish rates and collect fees to provide Net Revenues of at least 1.15%
of the Annual Debt Service Requirement for the Notes, 2) maintain a Debt Service Account that
is funded monthly to fund semi-annual Debt Service Payments, and 3) satisfy the debt service
coverage requirements of the Senior Debt. Any amount due and not paid when due shall bear
interest rate at a default rate equal to 3.86% per annum from and after five days after the date
due. Upon any event of default and subject to the rights of others having prior liens on the
Pledged Revenues the Department may (1) apply to a court of competent jurisdiction, cause to
appoint a receiver to manage the Water and Sewer System, or (2) may accelerating the
repayment schedule or increase the interest rate on the unpaid principal of the loan to as much as
1.667 times the default rate.
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. 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
this loan in February 2019.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
34
NOTE 7 – LONG-TERM LIABILITIES (Continued)
Loans Payable from Direct Borrowings and Direct Placements (Continued)
Debt service requirements to amortize long term debt at September 30, 2019 are as follows:
Year Ended Principal Interest Total
2020 $ 1,885,391 $ 531,775 $ 2,417,166
2021 1,926,143 488,715 2,414,858
2022 1,972,096 444,663 2,416,759
2023 2,018,253 399,616 2,417,869
2024 2,064,619 353,407 2,418,026
2025-2029 10,749,731 994,409 11,744,140
2030 1,695,000 36,082 1,731,082
$ 22,311,233 $ 3,248,667 $ 25,559,900
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
Direct borrowings and
placements
Notes payable $27,113,470 $ $ (4,802,237) $22,311,233 $ 1,885,391
Compensated absences 245,084 167,274 (139,845) 272,513 68,128
Net pension liability 504,653 (230,371) 274,282
Total OPEB liability 82,101 (10,742) 71,359
Total long-term
liabilities $27,945,308 $ 167,274 $ (5,183,195) $22,929,387 $ 1,953,519
Interest Expense
Interest expense for the year ended September 30, 2019 was $733,893, which consisted of
$135,304 amortization of deferred costs from the issuance of bonds in prior years and interest costs
incurred of $598,589. Total interest paid during the year was $601,860.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
35
NOTE 8 – 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 present and former 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.
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.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
36
NOTE 8 – EMPLOYEE RETIREMENT SYSTEM (Continued)
Plan Description (Continued)
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.
Members of the plan consisted of the following at September 30, 2019:
Retired Plan Members or Beneficiaries
currently receiving benefits 20
Inactive Plan Members entitled to but
not yet receiving benefits 4
Drop Participants -
Active Plan Members 50
Total 74
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 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, prepaid employer contributions.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
37
NOTE 8 – EMPLOYEE RETIREMENT SYSTEM (Continued)
Contributions (Continued)
The Utility Authority funded the pension plan at the rate of 15.74% of covered payroll for plan
participants based on the 2017 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 does not hold security investments in any one
organization that represents 5 percent or more of the Pension Plan’s fiduciary net position.
Actuarial Assumptions
The total pension liability was determined by an actuarial valuation as of October 1, 2018
updated to September 30, 2019 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 Combined Healthy Participant Mortality Table (for pre-
retirement mortality) and the RP-2000 Mortality Table for Annuitants
(for post-retirement mortality), with mortality improvements
projected to all future years using Scale BB. For males, the base
mortality rates include a 50% blue collar adjustment and a 50% white
collar adjustment. For females, the base mortality rates include a
100% white collar adjustment.
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.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
38
NOTE 8 – EMPLOYEE RETIREMENT SYSTEM (Continued)
Best estimates of real rates of return for each major asset class included the pension plan’s target
asset allocation as of September 30, 2019, 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%
Rate of Return.
For the year ended September 30, 2019, the annual money-weighted rate of return on Pension
Plan investments, net of pension plan investment expense, was 3.21 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.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
39
NOTE 8 – EMPLOYEE RETIREMENT SYSTEM (Continued)
The components of the net pension liability at September 30, 2019, were as follows:
Total Fiduciary Net
Pension Net Pension
Description
Liability
(a)
Position
(b)
Liability
(a)-(b)
Balances at September 30, 2018 $ 9,077,280 $ 8,572,627 $ 504,653
Changes due to:
Service cost 269,093 269,093
Interest 616,927 616,927
Differences between expected
and actual experience (383,010) (383,010)
Change of Assumptions
Employer contributions 336,605 (336,605)
Employee contributions 128,067 (128,067)
Benefit payments and refunds (300,238) (300,238)
Net investment income 327,727 (327,727)
Administrative expenses (59,018) 59,018
Total changes 202,772 433,143 (230,371)
Balances at September 30, 2019 $ 9,280,052 $ 9,005,770 $ 274,282
The Plan fiduciary net position was 97.04% of the total pension liability as of
September 30, 2019.
Sensitivity of the Net Pension 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 $ 1,529,761 $ 274,282 $ (776,196)
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
40
NOTE 8 – EMPLOYEE RETIREMENT SYSTEM (Continued)
Pension expense and deferred outflows and inflows of resources
For the fiscal year ended September 30, 2019, the Authority recognized pension expense of
$303,722. 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 $ 141,133 $ 326,755
Change of assumptions 133,119
Net difference between projected and actual
earnings on plan investments 209,048
Total $ 483,300 $ 326,755
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 $ 143,186
2019 9,672
2020 35,890
2021 46,246
2022 (33,389)
Thereafter (45,060)
$ 156,545
Payables to the Pension Plan
At September 30, 2019, the Authority did not have a payable for outstanding contributions to the
Pension Plan for the fiscal year ended September 30, 2019.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
41
NOTE 9 – OTHER POSTEMPLOYMENT BENEFITS (OPEB)
General Information about the OPEB Plan
Effective October 1, 2017, the Authority implemented Governmental Accounting Standards
Board Statement 75 (GASB 75), Accounting and Financial Reporting for Postemployment
Benefits Other Than Pensions. Retirees of the Authority pay an amount equal to the actual
premium for health insurance charged by the carrier. The premium charged includes an implied
subsidy, as the amount charged for all participants (active employee or retiree) is the same,
regardless of age. Under GASB 75, an implied subsidy is considered other post-employment
benefits (OPEB).
Plan Description
The Authority provides a single employer defined benefit health care plan to all of its employees
and the plan is administered by the Authority. The plan has no assets and does not issue a
separate financial report.
Benefits Provided
The plan allows its employees and their beneficiaries, to continue to obtain health and dental
benefits upon retirement. Normal retirement is provided for at age 65 and 5 years of service, or
at 30 years of service regardless of age. The benefits of the plan are in accordance with Florida
Statutes, which are the legal authority for the plan.
Employees Covered by Benefit Terms
At September 30, 2019, the following employees were covered by benefit terms:
Participants
Active employees 52
Inactive employees currently receiving benefits 2
Inactive employees entitled to but not receiving benefits -
Total 54
Contribution Requirements: The Authority does not make direct contributions to the plan on
behalf of retirees. Retirees and their beneficiaries pay the same group health rates as active
employees. 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 annual age-adjusted costs paid by the Authority, or its active employees,
for coverage of the retirees and their dependents net of the retiree’s own payments for the year.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
42
NOTE 9 – OTHER POSTEMPLOYMENT BENEFITS (OPEB) (Continued)
Total OPEB Liability
The Authority’s total OPEB liability of $71,359 was measured as of September 30, 2019 and
was determined by the actuarial valuation as of that date.
Actuarial Assumptions and Methods
The total OPEB liability was determined using the following actuarial assumptions and other
methods:
Valuation Date: September 30, 2019
Discount Rate: 3.22% per annum
Average Retirement Age 63
Age adjustment factor 2.229439
Health Care Trend Rate: Medical – 4.60% initially trending to 4.70% in 10 years
Pharmacy – 7.60% initially trending to 4.70% in 10 years
Dental – 3.50% initially trending to 3.00% in 10 years
Vision – 3.00%
Actuarial Cost Method: Entry Age Normal
Plan Participation Percentage: 13%
Mortality Rates: RP2000 Mortality Table for Males and Females
Projected 18 years
Discount Rate
The Authority does not have a dedicated Trust to pay retiree healthcare benefits. Per GASB 75,
the discount rate is a yield or index rate for 20-year, tax-exempt municipal bonds. As a result, the
calculation used a rate of 3.22%.
Changes in the Total OPEB Liability
Total OPEB
Liability
Balance at September 30, 2018 $ 82,101
Changes for the Year:
Service Cost 3,493
Interest Cost 3,107
Changes of Assumptions and Other Inputs 4,796
Differences Between Expected and
Actual Experience
(22,138)
Benefit Payments
Net Change in Total OPEB Liability (10,742)
Balance at September 30, 2019 $ 71,359
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
43
NOTE 9 – OTHERPOST EMPLOYMENT BENEFITS (OPEB) (Continued)
Changes in Assumptions
The discount rate was 3.63% at 10/1/18 and 3.22% at 9/30/19.
Sensitivity of the Total OPEB Liability to Changes in the Discount Rate
The following presents the total OPEB liability of the Authority, as well as what the Authority’s
total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-
point lower or 1-percentage-point higher then the current discount rate:
1.0% Decrease Discount Rate 1.0% Increase
(2.22%) (3.22%) (4.22%)
Total OPEB Liability $ 85,065 $ 71,359 $ 60,359
Sensitivity of the Total OPEB Liability to Changes in the Healthcare Trend Rates
The following presents the total OPEB liability of the Authority, as well as what the Authority’s
total OPEB liability would be if it were calculated using healthcare cost trends that are 1-
percentage-point lower or 1-percentage-point higher (then the current healthcare cost trend rates:
Healthcare cost
1.0% Decrease Trend Rates 1.0% Increase
Total OPEB Liability $ 58,567 $ 71,359 $ 87,859
OPEB Expense and Deferred Outflows and Inflows of Resources Related to OPEB
For the year ended September 30, 2019, the Authority recognized OPEB credit of $10,742.
NOTE 10 – 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.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
44
NOTE 11 – COMMITMENTS
As of September 30, 2019, the Authority had commitments on outstanding construction contracts
for improvements to the system of approximately $3,745,504.
NOTE 12 – 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 2019 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
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, 2019, 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 13– CHANGE IN ACCOUNTING PRINCIPLES
Implementation of GASB Statements: The Authority implemented the following GASB
Statement during the fiscal year ended September 30, 2019:
GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and
Direct Placements. The primary objective of this Statement is to improve the information that is
disclosed in notes to government financial statements related to debt, including direct borrowings
and direct placements. It also clarifies which liabilities governments should include when
disclosing information related to debt.
OKEECHOBEE UTILITY AUTHORITY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
45
NOTE 13– CHANGE IN ACCOUNTING PRINCIPLES (Continued)
GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction
Period. This Statement requires that interest cost incurred before the end of a construction period
be recognized as an expense in the period in which the cost is incurred. As a result, interest cost
incurred before the end of a construction period will not be included in the historical cost of a
capital asset.
NOTE 14– 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 this statement on the Authority’s financial statements.
GASB 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.
NOTE 15– SUBSEQUENT EVENT
Subsequent to September 30, 2019, the Authority approved refunding the Series 2017A and
2017B Capital Improvement Refunding Revenue Notes totaling $16,390,000 with a closing date
on April 1, 2020. The new notes will have the same term as the previous notes with a reduction
in interest expense that will result in approximately $482,000 of savings.
2018 2019
Service cost 2,113$ 3,493$
Interest on total OPEB liability 1,636 3,107
Effect of economic/demographic
gains or losses 26,276 (22,138)
Effect of assumption changes (11,009) 4,796
Net change in total OPEB Liability 19,016 (10,742)
Total OPEB liability - beginning 63,085 82,101
Total OPEB liability - ending (a)82,101$ 71,359$
Covered employe-employee payroll (b)2,339,518$ 2,388,548$
Total OPEB liability as a percentage of
covered-employee payroll (a)/(b)3.51%2.99%
Change of Assumptions
For 2018 the discount rate was 2.51% at 10/1/17 and 3.63% at 9/30/18.
For 2019 the discount rate was 3.22%.
Thisscheduleisintendedtoshowinformationfor10years.However,untilafull10-yeartrendiscompiled,
information will be presented for those years for which information is available.
Last Ten Fiscal Years
OKEECHOBEE UTILITY AUTHORITY
Required Supplemental Information
Schedule of Changes in the Total OPEB Liability
46
2017 2018 2019
Total pension liability:
Service cost 285,610$ 282,926$ 269,093$
Interest 723,860 595,025 616,927
Differences between expected and
actual experience 181,813 (383,010)
Change of assumptions 109,828
Benefit payments, including
refunds of employee contributions (206,413) (319,132) (300,238)
Net change in total pension liability 912,885 740,632 202,772
Total pension liability - beginning 7,423,763 8,336,648 9,077,280
Total pension liability - ending (a)8,336,648$ 9,077,280$ 9,280,052$
Plan fiduciary net position
Contributions - employer 287,362$ 325,097$ 336,605$
Contributions - employees 130,765 129,178 128,067
Net investment income 831,485 703,480 327,727
Benefit payments, including
refunds of employee contributions (206,413) (319,132) (300,238)
Administrative expenses (52,151) (72,819) (59,018)
Net change in plan fiduciary net position 991,048 765,804 433,143
Plan fiduciary net position - beginning 6,815,775 7,806,823 8,572,627
Plan fiduciary net position - ending (b)7,806,823$ 8,572,627$ 9,005,770$
Net pension liability (a) - (b) = (c)529,825$ 504,653$ 274,282$
Plan fiduciary net position as a percentage
of the total pension liability (b)/(a)93.64%94.44%97.04%
Covered payroll (d)2,179,417$ 2,152,963$ 2,134,469$
Net pension liability as a percentage of
covered payroll (c)/(d)24.31%23.44%12.85%
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
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%
2018 302,922 325,097 22,175 2,152,963 15.10%
2019 335,965 336,605 640 2,134,469 15.77%
* 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%
2018 8.11%
2019 3.21%
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, 2017
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%
Retirement age 100% when first eligible for normal
retirement or DROP entry
Mortality RP-2000 Combined Healthy
Participant Mortality Table with
mortality improvement projected
to all future years using Scale
BB
OKEECHOBEE UTILITY AUTHORITY
Notes to the Schedule of Contributions
September 30, 2019
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, 2019 and have issued
our report thereon dated April 14, 2020.
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
April 14, 2020
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, 2019, and have issued our report thereon dated April 14, 2020.
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 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 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 April 14, 2020, 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.
53
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, 2019.
Pursuant to Sections 10.554(1)(i)5.b. 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
recommendations to improve financial management. In connection with our audit, we did not have
any such recommendations.
Special District Component Units
Section 10.554(1)(i)5.c, 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.
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.
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Single Audits
The Okeechobee Utility Authority expended less than $750,000 of federal awards and less than
$750,000 of state financial assistance for the fiscal year ended September 30, 2019, and was not
required to have a federal single audit or a state single audit.
Purpose of this Letter
Our management letter is intended solely for the information and use of the Legislative Auditing
Committee, members of the Florida Senate and the Florida House of Representatives, the Florida
Auditor General, Federal and other granting agencies, members of the Authority’s Board, 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
April 14, 2020
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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, 2019. 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, 2019.
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
April 14, 2020