2012 COMPREHENSIVE · 2013. 7. 8. · 6 BJWS T 2012 This ninth Comprehensive Annual Financial Report (CAFR) provides an overview of BJWSA’s accomplishments and financial performance

BEAUFORT-JASPER WATER & SEWER AUTHORITY

OKATIE, SOUTH CAROLINA

Fiscal Year July 1, 2011–June 30, 2012

2012 COMPREHENSIVEANNUAL FINANCIAL REPORT

Beaufort-Jasper Water and Sewer Authority843.987.9292 • 6 Snake Road • Okatie, SC 29909

www.bjwsa.org

Board of Directors and Organizational Chart 4

Message from the General Manager 6

Mission and Vision 6

Values 7

Highlights and Initiatives 8

Message from Management 18

Profile of the Government 18

Financial Information 19

Report of Independent Auditors 26

Management’s Discussion and Analysis 27

Overview 27

Financial Highlights 27

Financial Position – Condensed Balance Sheet 29

Debt and Debt Service Coverage 30

Revenues – Condensed Statement of Revenues, 31 Expenses, and Changes in Net Assets

Expenses 33

Operating Margin 33

Selected Data for Analysis 34

Cash Flow Activity 35

Capacity Fees and Grants 36

Capital Assets 37

Economic Outlook and Final Comments 37

Financial Statements 38

Balance Sheets 38

Statement of Revenues, Expenses, and Changes in Net Assets 40

Statements of Cash Flows 41

Notes to Financial Statements 42

Required Supplementary Information 62

Report of Internal Control 64

Supplementary Financial Data 66

Budgetary Comparison Schedule 66

Budgetary Comparison Schedule by Functional Classification 67

Budget Summary 68

Schedule of Expenses by Natural Classification 69

Schedule of Net Earnings for Debt Service and Debt Coverage 69

Contents of Statistical Section 72

Introduction

Financial

Statistical

Comprehensive Annual Financial Report for the fiscal year ending June 30, 2012. Prepared by Sarah Linkimer, Controller.

CONTENTS

1CONTENTS

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INTRODUCTION

4 BJWSA COMPREHENSIVE ANNUAL FINANCIAL REPORT 20124 BJWSA COMPREHENSIVE ANNUAL FINANCIAL REPORT 2012

BRANDY M. GRAY Town of Port Royal ChairExecutive Committee – ChairFinance Committee

W.R. “SKEET” VON HARTENBeaufort CountyCapital Projects Committee – Chair

DONNA L. ALTMANBeaufort CountyFinance Committee

MICHAEL L. BELLTown of BlufftonVice ChairExecutive CommitteePersonnel Committee

BJWSA Board of Directors

General Manager Kenneth C. Griffin PhD, P.E. (2)

PLANNING MANAGERVacant (1)

CHIEF FINANCIAL OFFICERDottie Hofmann (1)

DIRECTOR OF ADMINISTRATIVE SERVICESJohn Wells (1)

HUMAN RESOURCESJulie Voges (4)

CUSTOMER SERVICEKelly Alston (18)

BILLING AND METER READINGMike Jones (7)

PUBLIC AFFAIRSMatthew Brady (2)

FINANCESarah Linkimer (9)

INFORMATION SYSTEMSJon Lohr (5)

SAFETY & RISKKen Jordan (2)

ORGANIZATION & BOARD

5INTRODUCTION

JAMES N. SCOTTCity of HardeevilleCapital Projects Committee

DR. WILLIAM SINGLETONJasper CountyPersonnel Committee – Chair

Beaufort County VACANT

JAMES “PAT” O’NEALBeaufort CountyCapital Projects CommitteeExecutive Committee

JOHN D. ROGERSTown of RidgelandPersonnel Committee

LORRAINE W. BONDJasper CountySecretary/Treasurer Executive CommitteeFinance Committee – Chair

DAVID S. LOTTCity of BeaufortCapital Projects Committee

DEPUTY GENERAL MANAGER – OPERATIONSEd Saxon, P.E. (2)

ENGINEERINGCharles Sexton, P.E. (15)

MAINTENANCEAl Legare (17)

WATER & WASTEWATER OPERATIONSChris Petry (39)

FIELD OPERATIONSJoe Devito (53)

NOTE: Divisions are presented alphabetically and the contact manager for each is listed. The number of authorized positions in each division is noted next to the division head, with 178 positions total for the entire organization.

6 BJWSA COMPREHENSIVE ANNUAL FINANCIAL REPORT 2012

This ninth Comprehensive Annual Financial Report (CAFR) provides an overview of BJWSA’s accomplishments and financial performance for the fiscal year ending June 30, 2012. Although we continued to experience economic challenges and slow growth in the Lowcountry, BJWSA has retained a relatively strong fiscal position over the last year.

BJWSA’s theme of a focus on rehabilitation and repair (R&R) continued in FY12. The R&R model employed by BJWSA considers an asset’s replacement value, age, and condition when forecasting when and how to pay for these projects. This, coupled with our developing asset management program, will ensure that the Authority behaves in a fiscally prudent manner, but will maintain our infrastructure in a sound way with an eye toward the future.

BJWSA also continued partnerships with other government organizations in the Lowcountry. We currently have projects with Beaufort County, Jasper County, and the Town of Bluffton – through use of Community Development Block Grant funds – to bring critical water and sewer infrastructure to low-to-moderate income citizens. We also work with other municipalities in our region on projects to update water and sewer lines as they continue to age. In the next fiscal year, our staff will continue to work with neighborhood partners, cities, counties, and the Lowcountry Council of Governments to secure these projects for deserving communities.

We’ve also started construction of the new infrastructure necessary to remove the Levy-Limehouse Bellinger Hill system off of the Floridan Aquifer. The Purrysburg water line project will provide treated Savannah River water to this area, as well as enhance service to southern Beaufort and Jasper counties. We remain committed to reducing our reliance on the Floridan, and our staff works continually with other stakeholders to address and fix the issues with saltwater intrusion in that aquifer.

This CAFR is my first as the General Manager at this organization. Over the course of my first full fiscal year here, I have been impressed by a well-run organization with a group of dedicated staff working hard to provide reliable and high quality service to their neighbors. I am pleased that BJWSA continues to be fiscally sound and strong. It is the vision of the Board of Directors that we remain stable; it is through the dedication and hard work of our staff that we fulfill that vision.

Our VisionBeaufort-Jasper Water and Sewer Authority will be the

safest, most efficient, effective, and professional water and

sewer utility in South Carolina. We will provide superior

customer service and affordable, reliable water and sewer

services in an environmentally sound manner to meet

the needs of all Beaufort and Jasper County citizens.

Our Mission The mission of the

Beaufort-Jasper Water and Sewer Authority is to protect

the public health and the environment by providing,

on a non-profit basis, to the residents, businesses, and land owners within its service area:

• Affordable, High Quality Drinking Water

• Environmentally Sound, Affordable Wastewater Treatment and Disposal

• Efficient, Reliable, and Courteous Service

MESSAGE FROM THE GENERAL MANAGER

7INTRODUCTION

• Accountability We are proudly responsible for everything we do or say.

• Communication We regularly share facts, opinions, and perspectives with each other and our customers.

• Customer Service We always treat our customers as we would want to be treated.

• Efficiency We waste neither time nor money.

Our Values

• Environmental Stewardship We at all times protect the area’s environment.

• Fairness The same rules and opportunities apply to everyone.

• Honesty We always tell the truth to ourselves and to others.

• Integrity We do what is right, every time.

• Quality We produce the best possible product from every job.

• Safety We protect ourselves, our coworkers, and the public at all times.

• Teamwork We work together to accomplish our mission and realize our vision.

Taken together, these values define professionalism; the signature value of the Beaufort-Jasper Water and Sewer Authority.

Beaufort-Jasper Water and Sewer Authority will work to realize its vision and accomplish its mission always in accordance with the following values:


HIGHLIGHTS & INITIATIVES

Excellence in Operations On a daily basis, BJWSA treats and delivers an average of 21 million gallons of drinking water to over 170,000 Lowcountry residents and collects, treats, and recycles approximately 8.2 million gallons of reclaimed water safely back into the environment, including over a dozen golf courses for irrigation. BJWSA has consistently met or surpassed all the water quality standards and inspections from both the EPA and the South Carolina Department of Health and Environmental Control (SCDHEC) in FY2012. And again this year, BJWSA has maintained a high standard of excellence, earning many state and national awards.

OUTSTANDING PERFORMANCE

SCDHEC Facilities Excellence Award for achieving excellence in all aspects of operations, meeting or exceeding compliance expectations, and environmental protection at our wastewater treatment plants and water reclamation facility. BJWSA has received this award for the sixth consecutive year.

National Association of Clean Water Agencies (NACWA) Peak Performance Award for outstanding compliance with national Pollutant Discharge Elimination System (NPDES) permits.

EPA Phase III Partnership for Safe Drinking Water Director’s Award for achieving water quality standards that exceed both state and federal mandates at our water treatment plants. The Chelsea Water Treatment plant has earned this award for ten consecutive years and the Purrysburg Water Treatment plant has earned it for eight years – ever since its opening.

The Purrysburg plant is currently working towards the EPA’s Phase IV Partnership designation, and the Chelsea plant is working towards Phase IV Partnership eligibility. The Phase IV Excellence in Water Treatment Award is the highest possible level of performance that can be achieved in the Partnership program, and is considered the pinnacle award for water treatment plants.

South Carolina Department of Health and Environmental Control (SCDHEC) Facilities Excellence Award 6th year

National Association of Clean Water Agencies (NACWA) Peak Performance Award 7th year

EPA Phase III Partnership for Safe Drinking Water Director’s Award Purrysburg – 8th year Chelsea – 10th year

Despite the continuation of a challenging economic environment, BJWSA continues to hold a financially stable position. Thanks to the leadership of our Board and management, BJWSA remains a fiscally responsible organization, a progressive utility, and a leader regionally, statewide, and nationally in water and wastewater issues. We continue to be recognized by our peers for operational excellence, and our customers trust us to deliver safe, high-quality and dependable water and environmentally sound wastewater services.

awards of excellence


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9INTRODUCTION

SCDHEC Area Wide Optimization Program (AWOP) Award for continual production of superior quality water. The Chelsea Water Treatment plant has earned this award for the tenth time and the Purrysburg Water Treatment Plant has earned it for eight years – ever since its opening.

Annual SCDHEC Sanitary Survey completion with no deficiencies detected for the seventh consecutive year. The survey is an evaluation of critical components of the water system, including treatment plants, wells, tank sites, booster pump stations, and distribution system operations.

Certificate of Achievement for Excellence in Financial Reporting, the highest form of recognition in governmental accounting and financial reporting. BJWSA has received this award for the eighth consecutive year.

SAFETY

In FY2012, we strengthened our ongoing commitment to safety by enhancing the emphasis on employee personal safety goals. Every employee was asked to commit to specific goals, including no recordable lost workday injuries. The slogan “safe production, done right, the first time” is the guiding principle that drives BJWSA’s renewed focus on our Safety Program. The ultimate goal of the program is providing all of our employees with a safe work environment.

BJWSA’s In-House Safety Training Program is now in its fourth year. The program uses nearly 20 in-house subject experts to provide timely, quality training to coworkers in important work-related topics. Our employees benefit from having well-known and respected colleagues who can communicate effectively with a focus on BJWSA’s culture of safety.

BJWSA has also upgraded the format of Integrated Contingency Plan (ICP), moving it to a new, user-friendly website that employees can access from any internet connection. The new, interactive site will allow management to communicate with staff remotely in the event of an emergency, providing real time updates to staff that may be far removed from BJWSA’s service area. In addition to mastering the website, employees are also trained on the “Incident Command System” that is part of the National Incident Management System.

Other safety initiatives included facility gate upgrades, Arc Flash analysis at all major facilities, a wellness initiative led by our office safety team, and an introduction of the Industry Safe corrective action safety software program.

Annual SCDHEC Sanitary Survey Completion with No Deficiencies Detected 7th year

Certificate of Achievement for Excellence in Financial Reporting 8th year

Our customers trust us to deliver safe, high-quality water and environmentally sound wastewater services.

SCDHEC Area Wide Optimization Program (AWOP) Award Purrysburg – 8th year Chelsea – 10th year

9INTRODUCTION


MAINTAINING WASTEWATER SYSTEM INTEGRITY

BJWSA has invested over $316 million in facilities dedicated to collecting, treating, and recycling wastewater. Our goal is to protect the sensitive waters, marshes, and surrounding areas in our community. To ensure effective system operations, the Board of Directors updated BJWSA’s Sewer Use Regulation, which provides the criteria for connecting to the sewer system and controls the substances that can be discharged into it. The regulations, first adopted in 1989 and last updated in November 2003, were revised to reflect current regulations and practices, as well as to clarify requirements for customers. The regulations encompass BJWSA’s Development Policy and Procedures Manual, Grease Trap Standards, and the Industrial Pre-treatment Program.

ENERGY EFFICIENCY

BJWSA’s Power Management Plan focuses on energy efficiency. Electricity is our second largest expense and we are continually working on creative ways to reduce this cost. Seeking increased efficiency through administrative controls, staff developed a series of metrics to display daily average usage, and work to keep that use below a certain level. We work with electricity providers to ensure that the rates and demand charges are appropriate as system operations and power demands change. Negotiations with providers and special rates – such as Palmetto Electric’s “interruptible rate” and SCE&G’s “time of day rate” – help limit energy use and control costs.

Operations and process controls also have played a key role in increased energy efficiency and lower costs. Our SCADA systems works with “smart” electrical controls, allowing us to monitor and meet variable demand in our water and wastewater systems. BJWSA uses a variety of energy efficient technologies, including “smart” switch gears, variable frequency drives (VFD), premium efficiency and soft-start motors, standby generators, and energy efficient lighting.

BJWSA will continue pursuing ways to increase energy efficiency. Current plans include VFD replacement, high service pump station modifications, and even the possibility of using solar or other alternative energy sources.

BJWSA uses a variety of

energy efficient technologies,

including “smart” switch gears and efficient lighting.

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11INTRODUCTION

MAINTENANCE EFFICIENCY

BJWSA regionalized the maintenance division during FY2012 for improved efficiency and response times. Typically, one centralized department provided all maintenance needs for our assets and infrastructure. We have divided the department into two groups that are responsible for maintenance in the northern and southern portions of our service area. This regionalized approach allows for increased efficiency and response to maintenance needs without adding additional employees.

CAPITAL IMPROVEMENTS

BJWSA’s Capital Improvement Program (CIP) continues to serve as critical tool to plan, define, and schedule upgrades, replacement/rehabilitation, and expansion projects. The CIP is updated every three years, with both a short-term (3 year) and long-term (10 year) look at infrastructure needs and funding options. With growth and development minimal in our service area, BJWSA’s CIP remains focused on replacement and rehabilitation (R&R) projects.

BJWSA replaced aging Downtown Beaufort waterlines with cement lined ductile iron pipelines that will improve drinking water quality and delivery. The downtown waterlines, some as old as 100 years, were made of unlined cast iron that had corroded, causing water discoloration.

Using a low-interest State Revolving Fund loan, BJWSA completed the rehabilitation of the aging sewer system at Tansi Village. We have substantially improved the reliability and condition of the system’s infrastructure by using pipe bursting, relining, and point repair technologies. Along with the rehabilitation, BJWSA acquired the system, and the estimated 150 sewer customers have been converted from wholesale to retail customers.

BJWSA is rehabilitating sewer systems in the Cherry Hill (Shell Point), Charles Street (Hardeeville), Duke Street and Laurens Street (Beaufort) basin areas. Using the same technologies as with the Tansi Village project, this rehabilitation will reduce inflow and infiltration and increase reliability. In addition, pump station rehabilitations are scheduled and completed every year based on criticality, age and historical maintenance costs.

This year, BJWSA started the largest water transmission line project ever undertaken by the Authority. The project consists of approximately 12.4 miles of 36-inch ductile iron pipe installed along Purrysburg Road in southern Jasper County. The pipe will be installed through the Levy Limehouse – Beringer Hill (LLBH) area and along Highway 46 to connect to the western part of the Bluffton system in southern Beaufort County. Once completed, the new pipeline will eliminate the LLBH system’s reliance on the Floridan Aquifer. In addition, this project will provide an alternative to increase the supply of water to Bluffton and the surrounding area.

MAJOR CAPITAL IMPROVEMENT PROJECTSNear completion or completed in fiscal year 2012

CostProject

Purrysburg Road Waterline Project $4.3 million

$1.8 millionMeter Replacement

$1.5 millionISM-PI-Gravity Sewer System Relining

$1.2 millionISM-AS-Group 2 Pump Stations

$1 millionDowntown Beaufort Waterline Replacement

$1.4 millionISM-PI-Group 2 Div II Pump Stations – Pipe Lines

$1.2 millionNorth of Broad Operations Center

$1 millionSewer Rehabilitation

$1.2 millionISM-PI-Group 2 Div I Pump Stations

In FY2012, the majority of completed projects were related to the Military Initial System Modifications (ISMs) and renewal and rehabilitation projects.


ONGOING MILITARY INSTALLATION PARTNERSHIP AND OPERATIONS

In 2008, BJWSA signed an agreement with the Department of the Navy to acquire, operate, and maintain the water and wastewater systems on the Marine Corps Air Station, Laurel Bay Housing, the Naval Hospital Beaufort, and the Marine Corps Recruit Depot Parris Island. BJWSA successfully began operating these facilities and completed the majority of the projects over the last four years not only to bring the facilities up to BJWSA standards, but also improve operational efficiencies. With an anticipated completion in FY2013, these planned improvements will be finished well ahead of schedule. For the fourth consecutive year, BJWSA received a rating of “very good” on our annual contract performance review from the Department of the Navy. Overall, the military system modification projects total approximately $42.6 million.

Extending Water and Sewer ServicesBJWSA continues to extend water and sewer services to many deserving communities by partnering with municipal and county governments, the Lowcountry Council of Governments (LCOG) regional planning agency, and the Community Development Block Grant (CDBG) program. Through the CDBG program, BJWSA is bringing water and wastewater services to communities with a high percentage of low-to-moderate income residents, often in rural areas. BJWSA is also pursuing possible grant funding from other state and federal sources for extending water and sewer to several specific rural areas.

The Bluffton CDBG project extends both water and sewer service to the Bluffton community. Phase II of the project has been physically completed to sixty homes, and meters and services are currently being connected to the new customers. Design for Phase III is underway by the Town of Bluffton and BJWSA is assisting with outreach to these residents. The Burton CDBG project is also in progress and will bring water service to about forty homes. BJWSA is currently working with community partners to explore CDBG grant opportunities for other areas, including Stuart Point, Port Royal, and Purrysburg.

13INTRODUCTION

Source Water ProtectionBJWSA has an active leadership role at regional, state, and national levels in protecting and preserving water supply resources and protecting water quality. Staff members hold board positions in numerous organizations, including the Water Utility Council, the AWWA Public Affairs Council and the S.C. Water Quality Association. In addition, BJWSA staff supports and sponsors the efforts of our previous General Manager, Dean Moss, that are associated with the Savannah River Governor’s Water Committee and the Maritime Commission.

Our General Manager led the Legislative Committee session at the Association of Metropolitan Water Agencies (AMWA) Annual 2012 Water Policy Conference in Washington. D.C. The Legislative Committee assists in developing AMWA’s position on various water policy issues before Congress.

SAVANNAH RIVER

BJWSA played a key role in the negotiation associated with the allocation of the aggregate waste load for the Savannah River, which was established by the federally mandated Total Maximum Daily Load (TMDL) for Dissolved Oxygen. The TMDL waste load represented an approximate 80% reduction in the allowable pounds of oxygen demanding pollutants that could be discharged into the Savannah River from Augusta to the Savannah Harbor. The negotiation process involved 23 dischargers from Georgia and South Carolina who represented small and large municipal/public and industrial wastewater facilities. BJWSA was successful in protecting the Hardeeville Wastewater Treatment Plant’s (WWTP) NPDES Permit and was able to increase South Carolina’s percentage share of the waste load allocation. We will continue to work in FY2013 with EPA and SCDHEC to develop the appropriate permit language that will allow us to expand and upgrade the Hardeeville WWTP as demand increases.

FLORIDAN AQUIFER

BJWSA continues to work with Governor Nikki Haley, the Bi-state Savannah River Committee, the SC DHEC, Georgia EPD and Floridan users in Georgia and South Carolina on efforts to halt the saltwater intrusion into the Floridan Aquifer and increase the sustainability of this valuable water supply resource. The goal is to develop a plan acceptable by all in FY2014. BJWSA staff met with the South Carolina Congressional Delegation and their staff to educate them on this issue and to discuss possibilities for federal funding assistance for BJWSA’s infrastructure projects needed to help resolve this critical problem.

BJWSA has an active leadership role in protecting and preserving water supply resources and protecting water quality.


Employee DevelopmentBJWSA places a high priority on employee development to maintain a strong and adaptable professional staff as we face future challenges. BJWSA employees have earned multiple awards from state and regional organizations, including the Golden Manhole Award from the SC Environmental Conference, Engineer of the Year, Water Treatment Operator of the Year, and Wastewater Operator of the Year from the Water Environment Association of South Carolina.

AWARD PROGRAMS

In addition to our Employee of the Month and Employee of the Year programs, BJWSA’s Board of Directors implemented an annual “Board of Directors Leadership Award” this year. This Leadership Award recognizes significant contributions to the overall operations of BJWSA by an employee or staff department, by a community member, firm, business, or other entity that is considered above and beyond normal duties or contractual requirements. BJWSA’s Director of Administrative Services, John Wells, received the inaugural award.

EMPLOYEE SURVEY

This year, BJWSA took a new step in staff and culture development by initiating an Employee Climate Survey. The survey aimed to learn more about employee needs, concerns, and perceptions. Based on the results of the survey, five employee task groups were formed to discuss the topics of recognition, relationships, communication, compliance, and promotion. After a series of meetings geared at sharing ideas, each group was able to present suggestions in order to strengthen BJWSA both as a

utility and as a regional employer of choice.

COMMUNICATION TRAINING

BJWSA’s supervisors and managers participated in a communication and feedback training program called “Candid Culture” that focused on relationship building and providing feedback effectively. With the goal of helping co-workers “say anything to anyone,” this interactive training focused on maximizing the potential of employees and improving our overall culture at BJWSA.

EQUAL OPPORTUNITY AND AFFIRMATIVE ACTION

BJWSA is committed to Equal Employment Opportunity and Affirmative Action in all of our employment practices. This year, our Human Resources personnel met with the Human Resources staffs of the Beaufort County Department of Veterans Affairs, S.C. Department of Vocational Rehabilitation, S.C. Department of Employment & Workforce, and the Career Resource Management Center on Parris Island to ensure their awareness of our affirmative action and employment policies. We presented the full range of BJWSA positions and invited the organizations to tour BJWSA facilities.

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15INTRODUCTION

Customer ServiceBJWSA’s commitment to customers encompasses every aspect of service – from efficiently answering customer calls to maintaining a reliable system. Communicating well and keeping customers informed are essential to providing high quality service.

THAD COLEMAN FUND

BJWSA continues to promote the special funding program that assists low-income people with the initial connection fees to our system. This year, our customer service representatives met the challenge of increasing contributions to the Thad Coleman Fund by encouraging customer participation. Through the efforts of our representatives, the round up program is now averaging about $1,200 a month in contrast to about $300 a month before the initiative. The Fund assisted eleven families this fiscal year by giving $18,956 in support.

FOCUS GROUP

This year, BJWSA conducted a customer focus group to gain insight on how we can better communicate with and serve our customers. While a wide range of issues were discussed, the primary focus of the group was water quality, customer service, communication, rates, billing, and water conservation. Overall, the focus group participants were satisfied with BJWSA’s customer service and employees, and BJWSA is using the results to develop targeted community outreach tools.

INFORMATION AND EDUCATION

Keeping customers informed and educated on water issues continues to be a priority. Recognizing the wide-reaching advantages of social media, BJWSA has expanded real-time customer communications by launching a Facebook page and a Twitter account. BJWSA’s NewsSplash newsletter is distributed semi-annually to all of our customers, providing important and helpful information about rates, operations, water quality, and water conservation. Our annual Water Quality Report gives customers important information on the quality and safety of their drinking water.

The BJWSA website, a highly informative communication tool, has nearly 10,000 visits monthly. Our website not only enables customers to make payments online and educates visitors about BJWSA operations, but also notifies customers of important events and issues. This year, BJWSA developed a series of videos to help customers learn about our water and wastewater treatment processes, environmental commitment, and our dedication to safety. The videos can be accessed through our website or on YouTube.

Keeping customers informed and educated on water issues is a priority.


Community OutreachBJWSA works not only for the community but also with the community to help enhance the quality of life in Beaufort and Jasper counties. We focus not only on providing safe and reliable services, but also on activities and education to help increase awareness and support for our water resources.

TOURS

BJWSA remains committed to giving all citizens the opportunity to learn more about their drinking water and our wastewater treatment process by offering tours of our treatment and reclamation facilities. This year, BJWSA conducted tours for numerous groups, including the Osher Lifelong Learning Institute, Sun City residents, classes from the Technical College of the Lowcountry, civic and government organizations, naturalist classes, and several school classes.

LOCAL EVENTS

As active members of the communities we serve, BJWSA employees participated in many local events, including Earth Day, the Catfish Festival, and Camp Treasure Chest for developmentally disabled children. At the annual Water Festival, employees competed in the raft race and provided free drinking water on Children’s Day. Every year, BJWSA encourages local student involvement in National Clean Drinking Water Week by sponsoring a poster contest focused on improving water knowledge and conservation. “Water: celebrate the essential” was this year’s theme and the entries from schools across the service area were displayed at the BJWSA administration building.

SPEAKING ENGAGEMENTS

BJWSA’s Board and staff continue to present water and wastewater topics and issues to numerous local, regional, and national organizations, including the Greater Island Counsel and the National Active and Retired Federal Employees Association. BJWSA staff presented at City Council meetings, the South Carolina Environmental Conference, the North Carolina/South Carolina/Georgia Confluence Conference on interstate water issues, and the Water Environment Association of South Carolina.

PARTNERSHIP

The partnership with Clemson University’s Extension Service continues to serve as a powerful outreach tool. Through this cooperative agreement with Clemson, BJWSA is able to reach a wide audience both locally and statewide. The Extension Service attends events throughout the community, and distributes our information to attendees interested in water efficiency and smart irrigation. They also spread BJWSA’s message at workshops and events that they host in the area.

MESSAGE FROM MANAGEMENT


MESSAGE FROM MANAGEMENTThe management and staff of Beaufort-Jasper Water and Sewer Authority (“the Authority”) are pleased to present the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2012. This is the ninth report issued as a CAFR. In keeping with the Authority’s objective to provide greater information to the public in a more efficient manner, the CAFR is also available online at www.bjwsa.org.

Management is responsible, in all material respects, both for the accuracy of the data and the completeness and fairness of the presentation, including all disclosures. The data is reported in a manner designed to fairly present the financial position and the results of operations of the Authority. All disclosures necessary to enable the reader to gain an understanding of the Authority’s financial and operational activities are included.

Profile of the GovernmentThe Authority was created under provisions of Act No. 784 - enacted during the 1954 Session of the General Assembly of the State of South Carolina - as a public, nonprofit corporation to acquire and distribute supplies of fresh water for industrial and domestic purposes within its service area. During its 1969 Session, the General Assembly enacted Act No. 598, which enlarged the functions and powers of the Authority to include the construction of facilities that provide for the collection, treatment, and disposal of wastewater in thickly populated areas of Beaufort County. In 1971, the General Assembly created the Jasper County Water and Sewer Authority to provide an entity capable of providing water and wastewater service in Jasper County for areas not served by municipal governments. In 1983, the Authority and the Jasper County Water and Sewer Authority were consolidated into the entity now called the Beaufort-Jasper Water and Sewer Authority. The Authority was governed by a Board that consisted of nine members appointed by the Governor of South Carolina, upon recommendation of the legislative delegations for Beaufort County and Jasper County. In May 2009, the South Carolina Legislature passed Act S793, which consolidated all past enabling legislation amendments relating to the powers, service area and membership of the Authority and adjusted its powers and duties to recognize the changed environment of the 21st century. As part of the Act, the Board membership was expanded from nine to eleven members. The two additional members are recommended to the Governor by the Jasper County Delegation. The Authority provides direct services to the citizens in the incorporated areas of the City of Beaufort, the Town of Bluffton, the City of Hardeeville, the Town of Port Royal, as well as to areas of unincorporated Beaufort and Jasper counties. Additionally, the Authority indirectly serves thousands of additional citizens in the Beaufort and Hilton Head Island areas through wholesale services provided to other water and sewer utilities. The Authority’s customer base as of June 30, 2012 was 47,797 retail water accounts and the following wholesale water customers: Military installations – Naval Hospital, Parris Island Recruit Depot, Marine Corps Air Station Beaufort, Laurel Bay Housing Facility; Utilities – Hilton Head Island PSD, Fripp Island PSD, Harbor Island Utilities, Callawassie/CUC, Inc., Water Oak Utility, and Warsaw Eustis Oaks Water Company. These wholesale customers resell and/or redistribute the Authority’s water to their residents, resulting in total customers directly and indirectly serviced by the Authority in excess of 155,000. The Authority’s headquarters are located on Highway 170, approximately thirteen miles south of the City of Beaufort.

November 15, 2012

6 SNAKE ROAD, OKATIE, SC 29909-3937 Phone 843.987.9292 Fax 843.987.9293

Customer Service 843.987.9200Operations & Maintenance 843.987.9220

Engineering 843.987.9250www.bjwsa.org

KEN GRIFFIN, PhD, PE, ICMA-CM, General Manager

19INTRODUCTION

The Authority provides reliable high quality supplies of potable water used for drinking, irrigation, fire protection, and other purposes. The Chelsea Water Treatment Plant (located on Highway 170 at the Authority’s headquarters) and the Purrysburg Water Treatment Plant (located in Jasper County) are the principal treatment facilities, both utilizing the Savannah River as their source. Ground water systems supplement the main system and also provide water to Point South and Palm Key in Jasper County.

The wastewater system serves 30,935 retail customers and 1 wholesale customer. The wastewater collection systems consist of gravity pipelines, lift stations, and force mains conveying wastewater to nine (9) treatment plants. The three largest wastewater treatment plants are Cherry Point Water Reclamation Facility, Port Royal Island Water Reclamation Facility, and the Hardeeville Wastewater Treatment Plant, with respective capacities of 7.5, 7.5, and 1.01 MGD (millions of gallons per day). The additional six plants’ combined capacity is approximately 2.84 MGD. Other wastewater services include industrial pretreatment programs, water reclamation for irrigation, and sludge and septage disposal.

Financial InformationManagement’s Discussion and Analysis (found in the financial section of this report) serves as an introduction to the financial statements, and should be read in conjunction with the supplementary information and this portion of the management transmittal letter.

ACCOUNTING SYSTEM AND BUDGETARY CONTROL

The Authority’s financial accounting system is based on the full accrual basis in accordance with generally accepted accounting principles in the United States of America (GAAP). BJWSA has no taxing power. All activities of the Authority are accounted for within a single proprietary (enterprise) fund, which is utilized when the intent of the governing body is that the cost of providing goods or services to the general public be financed primarily through user charges. Operational and maintenance costs, including certain equipment purchases, are funded from customer fees and charges. The acquisition and construction of capital assets are funded by capital (cash and systems) contributions from customers, including other utilities and developers, Federal and State grants and loans, and customer revenues.

The Authority’s Board approves the annual budget for recommended rates, expenses, and capital outlay. The Authority controls current expenses at both the functional and operating division levels by continuously monitoring costs compared to budget and by reporting variances and other significant financial data monthly to the Finance Committee. Managers are responsible for budgetary items that are controllable at their respective functional levels. This dual monitoring of expenses by both management and the Finance Committee of the Board serves to strengthen overall budgetary and management controls.

INTERNAL ACCOUNTING CONTROLS

The financial management policies of the Authority provide the framework and direction for financial reporting, planning, and decision making by management and the Board. Additionally, they are designed to ensure the financial integrity of the Authority and a service delivery system that addresses the needs of users of financial information, including the reliability of such data. Policies are documented and periodically reviewed to reflect changes in Board policy, legal and professional requirements, and changes in accepted industry practices.

Internal accounting controls are designed to provide reasonable assurance that assets are safeguarded from unauthorized use or disposition, and that records used for preparing financial reports and maintaining asset accountability are reliable. A system of internal controls is established and monitored by management after weighing the cost of such controls against the benefits derived. Due to the inherent limitations of the effectiveness of any system of internal accounting control, management cannot provide absolute assurance that the objectives of internal accounting control will be met. However, as a part of the Authority’s ongoing effort to employ comprehensive and cost-effective internal accounting controls, the Controller reviews controls and procedures on a continuing basis and immediately reports any concerns to the Chief Financial Officer for resolution. As part of this initiative, the Controller oversees the documentation and periodic review of financial standard operating procedures (SOPs) to ensure that internal audit functions and professional skepticism are


incorporated as part of the analytical and reporting function. Management of the Authority is further charged, through personnel policies, with providing the leadership that promotes ethical behavior within the control environment.

The Finance Committee of the Board of Directors serves as the Audit Committee of the Authority. It is composed of four members of the Board who are not employees and who provide a broad overview of management’s financial reporting and control functions. Generally, this Committee meets with management on a monthly basis to review the financial status of the Authority. Additionally, the Committee meets with management and the independent external auditors to ensure that both parties are fulfilling their obligations with regard to auditing, controls, and other financial reporting factors.

RATES AND CHARGES

In order to provide adequate service to its customers, the Authority must receive sufficient total revenue to cover operation and maintenance expenses, planned cash capital outlays, debt payments, and required cash reserves. While the Authority prepares long-range rate projections based upon revenue sufficiency, these projections are reviewed annually through the budgetary and rate-making process of the Authority.

Management recommends rates based upon a cost of service analysis, which incorporates the principle of revenue sufficiency and equity among customer classes. Rate recommendations and the supporting budgets are presented through the Finance Committee to the Board for approval annually. An analysis is presented with the budget and rate recommendation to ensure that utility revenues are sufficient to recover total cash needs for a three-year projection period. The general revenue policies which guide the Authority are outlined as follows:

• Sufficient total revenue to cover operation and maintenance expenses, planned cash capital outlays, debt payments, and required cash reserves;

• Rates based upon a cost of service analysis, which incorporates the principle of revenue sufficiency and equity among customer classes;

• Effective collections to assure that obligations to BJWSA are paid in a timely and appropriate manner to maximize resources and efficiency; and

• Conservative revenue and customer growth projections for consistent budgeting and adequate cash planning.

Over the years, the Authority has been able to minimize rate increases because of its aggressive capital contribution fee structure, ongoing operational improvements, consistent control of expenses, and careful financial planning. Until 2002, the Authority’s retail rates had not changed in fourteen (14) years. From 2002-2006, the Authority implemented a series of planned rate changes designed to gradually increase revenue and to encourage water conservation. After no increases to water and sewer rates in fiscal years 2007 and 2008, the Board approved on June 26, 2008 a wholesale and retail water and wastewater rate increase effective July 1, 2008. These rates remained in place for fiscal years 2009-2011. On June 23, 2011, the Board approved a wholesale and retail water and wastewater rate increase effective July 1, 2011. The Board agreed that a rate increase was necessary to ensure the Authority’s strong financial condition, with adequate cash and debt service coverage. The Authority believes that the customer rate increases are supported by the cost of services provided.

21INTRODUCTION

OPERATING REVENUES AND EXPENSES, EXCLUDING DEPRECIATION

$50,000,000

$40,000,000

$30,000,000

$20,000,000

$10,000,000

201120102008 20122009

Operating Expense (excl. depreciation) Debt Service (principal & interest)Operating Revenue

FINANCIAL CONDITION

Management believes the Authority’s financial condition remains strong as a result of stringent financial planning and conservative budgeting. The Authority identifies and responds to external factors, such as minimal developer activity and rising costs, while still maintaining a fiscally sound organization and delivering the level of service its customers have come to expect. Operating revenues, operating expenses (excluding depreciation), and debt service payments for the last five fiscal years are shown in the following graph:

While commercial and residential development has not shown a full recovery from the economic downturn, customer growth continues to show a positive trend. Total water customer accounts increased 2.2% from 2011 to 2012 compared to an increase of 1.1% from 2010 to 2011. Total wastewater customers increased 3.4% from 2011 to 2012 compared to an increase of 2.4% from 2010 to 2011. At year-end, the Authority served 47,801 water customers, an increase over prior year of 1,016 customers with approximately 65% of the customers also receiving wastewater services.

The following two charts show the comparability between customer growth and kgal (thousand gallons) billings for water and wastewater, respectively. The “Water Sales and Customer History” reflects customer growth outpacing water sales from 2003 to 2012. Total water usage in fiscal year 2012 remains relatively flat compared to prior year. This is primarily due to a decrease in special commercial water usage of (12.4)% resulting from a temporary shutdown of a power plant, while wholesale water usage increased 14.6% from prior year. Retail residential and commercial water usage had a minimal decrease of (0.9)% compared to prior year, which is mainly attributed to the increase in rainfall during the year.

WATER SALES & CUSTOMER HISTORY

kgal

s

cust

omer

s10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

40,000

30,000

20,000

10,000

50,000

2010 20112003 2004 2005 2006 2007 2008 2009 2012

Kgal Sales Customers


CASH MANAGEMENT

It is the policy of the Authority to maintain an effective program of cash and investment management that complies with prevailing state and federal regulations, and adheres to guidelines and standards promulgated by the American Institute of Certified Public Accountants (AICPA), the Governmental Accounting Standards Board (GASB), and the Government Finance Officers Association (GFOA). Investments of the Authority must comply with South Carolina Code, Section 6-5-10.

The Authority’s cash management program seeks to achieve three objectives with regard to investments: safety of principal, adequate liquidity to meet daily cash needs and a reasonable yield commensurate with the preservation of principal and liquidity. Cash balances and investment rates are reported to the Finance Committee monthly. Details of deposits and investments at year-end can be found in the notes to the financial statements.

RISK MANAGEMENT

In addition to maintaining sufficient resources to address financial risk through the Contingency and Depreciation Fund, the Authority purchases insurance for general and automobile liability and participates with the State Accident Fund in providing workers’ compensation coverage to limit exposure to risk. Consultants or independent carriers generally provide rates based upon actuarial studies of risk and the Authority performs a ‘cost versus benefit’ analysis to determine appropriate coverage. A detail of coverage may be found in the Statistical Section of the Comprehensive Annual Financial Report.

Even the most conscientious efforts cannot eliminate all risk, because risk is inherent in most productive activities. Proactive steps can, however, help the Authority avoid or reduce the impact of risk on operations. The Authority has implemented policies regarding insurance coverage on various assets, ensuring that high-risk assets are adequately insured and that those assets which are less risk adverse and less costly to replace are removed from the insurable assets register. The insurance register is continually updated to comply with these policies.

INDEPENDENT AUDIT

The accompanying financial statements have been audited by the Authority’s independent auditors, Cherry, Bekaert, and Holland, L.L.P., and their report on the financial statements resulting from their audit is included in the financial section of this report.

WASTEWATER SALES & CUSTOMER HISTORY

kgal

s

cust

omer

s2,500,000

2,000,000

1,500,000

1,000,000

500,000


3,000,000

3,500,000

25,000

20,000

15,000

10,000

5,000

– –

30,000

35,000

2010 2011 20122003 2004 2005 2006 2007 2008 2009

23INTRODUCTION

CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING

The Government Finance Officer Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Beaufort-Jasper Water and Sewer Authority for its comprehensive annual financial report for the fiscal year ended June 30, 2011. This was the eighth consecutive year that the Authority has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. Management believes that the current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and is submitting it to the GFOA to determine its eligibility for another certificate.

Final CommentsManagement has developed policies and procedures that direct personnel actions toward the Board’s adopted mission of providing affordable, efficient, and reliable water and wastewater services. These policies and procedures are the foundation of the Authority, allowing management to operate a self-sustaining business enterprise that responds to the needs of its customers, as well as creating value for its stakeholders, the community at large. Through ongoing assessments by management of where the Authority is, where it needs to be in the future, and how we can get there, the Authority’s leaders are able to address future challenges both fiscally and effectively in a manner consistent with our mission.

We are thankful to all the employees of the Authority for their hard work and dedication. Additionally, we would like to recognize the Authority’s General Manager and Board of Directors for their leadership, support, and continued commitment to excellence.

Dottie Hofmann, Chief Financial Officer

Sarah Linkimer, Controller


FINANCIAL


We have audited the accompanying financial statements of Beaufort-Jasper Water & Sewer Authority (the “Authority”) as of and for the year ended June 30, 2012 and 2011, and the related statements of revenues, expenses, and changes in net assets and cash flows for the years then ended. These financial statements are the responsibility of the Authority’s management. 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Authority, as of June 30, 2012 and 2011, and the respective changes in financial position, and cash flows thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 16 to the financial statements, certain errors resulting in the understatement of beginning net assets as of June 30, 2011, were discovered by management of Beaufort-Jasper Water & Sewer Authority during the current year. Accordingly, the 2011 financial statements have been restated.

In accordance with Government Auditing Standards, we have also issued our report dated November 9, 2012, on our consideration of the 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 27-37 and the schedule of funding progress for the postemployment healthcare plan on page 62 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.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority’s basic financial statements as a whole. The supplementary financial data on pages 66–69 is presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The supplementary information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary financial data is fairly stated in all material respects in relation to the financial statements as a whole.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority’s basic financial statements. The introductory and statistical sections are presented for the purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

Augusta, Georgia November 9, 2012

Report of Independent AuditorsBeaufort-Jasper Water and Sewer Authority Governing Board Beaufort, South Carolina

27FINANCIAL

OverviewThe following Management’s Discussion and Analysis (MD&A) serves as an introduction to the financial statements of the Beaufort-Jasper Water and Sewer Authority (the Authority) for the fiscal years ended June 30, 2012 and 2011. The MD&A represents management’s examination and analysis of the Authority’s financial condition and performance and should be read in conjunction with the financial information of the transmittal letter in the introductory section, the financial statements as presented in the financial section of this report, and the supplementary financial data. The financial statements include: balance sheets; statements of revenues, expenses, and changes in net assets; statements of cash flows; and notes to the financial statements.

The balance sheets present the financial position of the Authority as of a specific date. This statement provides information about the nature and amount of resources (assets) and obligations (liabilities), with the difference reported as net assets. Increases and decreases in net assets may serve as an indicator of whether the financial position of the Authority is improving or deteriorating.

The statements of revenues, expenses, and changes in net assets present the results of the business activities and information about how the net assets changed during the course of the fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. This statement also provides certain information on the Authority’s cost recovery. Rate setting policies use different methods of cost recovery not fully addressed by generally accepted accounting principles. These policies seek to improve equity among customer classes and to ensure that capital costs are allocated on the basis of long-term capacity needs, ensuring that growth pays for growth.

The statements of cash flows present the cash activities of the Authority segregated in the following three major categories: operating, investing, and capital and related financing activities. This statement presents cash receipts and cash disbursement information without consideration of the earnings event, when an obligation arises, or depreciation of capital assets.

The notes to the financial statements provide required disclosures and other information essential to fully understand the data provided in the statements. Supplementary information contains additional financial data, such as budgetary comparisons, expenses by classification, and debt service coverage. Although not a required part of the financial statements, this data enhances information provided to users.

Financial Highlights• Financial Position continues to be strong, with adequate cash and debt service coverage. Of the $38.3 million unrestricted net assets,

$3.1 million is Board-designated for capital funding and $35.2 million is available to provide for current operations. Unrestricted net assets decreased approximately $5.1 million, or 12%, below prior year (as compared to an increase of approximately $15.2 million, or 54%, from 2010 to 2011). The decrease in unrestricted net assets is due to the decrease in capital funds from prior year.

• Debt service coverage (excluding capacity fees) increased from 156% to 174% for fiscal year 2012, which continues to remain above the 125% requirement established by the Board. This increase in debt service coverage (excluding capacity fees) is largely the result of an increase in net cash from operations. Debt service coverage (including capacity fees) increased from 162% in prior year to 189%, exceeding the 110% required by the bond covenants.

MANAGEMENT’S DISCUSSION & ANALYSIS


• Total operating revenues for fiscal year 2012 were $45.8 million, an increase of approximately 6.7%, or $2.9 million, over the prior year primarily as a result of wastewater service revenue. The increase in wastewater service revenue is mainly attributed to a rate increase as well as customer growth in fiscal year 2012, reporting 1,008 new customers at year end. Residential water consumption had a slight decrease of 1.9% or 65,000 kgals (thousands of gallons) over prior year. The average residential customer monthly water consumption in kgals for the year decreased from 6.77 to 6.49. In addition to fiscal year 2012 having more rainfall compared to prior year, the rain fell over a greater number of days, which has a direct impact on residential water sales. The largest increase in rainfall was during the spring and summer high production months. The Authority exceeded its conservative projection of 325 water customers for fiscal year 2012 reporting 1,016 new water customers at year end (compared to 506 new water customers in 2011). Fiscal year 2011 total operating revenues were $42.9 million, an increase of approximately 5.9%, or $2.4 million, over the prior year due to the impact of dry weather. Residential water consumption increased by 6.6% or 214,000 kgals (thousands of gallons) over prior year and average residential customer monthly water consumption in kgals for the year increased from 6.41 to 6.77. While customer conservation continues to be an initiative, the lack of rainfall in the spring and summer months resulted in a dramatic increase in both retail water and irrigation revenues. The Authority exceeded its conservative projection of 300 water customers for fiscal year 2011 reporting 506 new water customers at year end (compared to 815 new water customers in 2010).

• Total operating expenses for fiscal year 2012 were approximately $47.9 million, an increase of 4.0%, or $1.8 million, over the prior year. Depreciation expense accounted for $23.2 million of total operating expense and was an increase of approximately $665 thousand over prior year depreciation. Excluding depreciation, total operating expenses were $24.7 million, an increase of 4.9%, or $1.2 million, over the prior year. Excluding depreciation, water operating expenses increased 6.0%, or $785 thousand, over the prior year, and wastewater operating expenses increased 3.6%, or $376 thousand, over the prior year. These increases are attributed to repairs and maintenance as well as salaries and wages.

• Fiscal year 2011 total operating expenses were approximately $46.1 million, an increase of 3.1%, or $1.4 million, over the prior year. Depreciation expense accounted for $22.6 million of total operating expense and was an increase of approximately $500 thousand over prior year depreciation. Excluding depreciation, total operating expenses were $23.5 million, an increase of 3.9%, or $875 thousand, over the prior year. Excluding depreciation, water operating expenses increased 6.3%, or $776 thousand, over the prior year, and wastewater operating expenses increased 1.0%, or $99 thousand, over the prior year. These increases are due to rising costs in fuel, chemicals, and power combined with the increase in production.

• Operating loss was ($2.10 million) for 2012 compared to ($3.14 million) operating loss for 2011, an increase in operating margin of approximately $1.0 million. This increase resulted primarily from the increase in wastewater services revenue of $2.0 million over prior year. For fiscal year 2012, $1.86 was generated from operating revenues for every $1.00 expensed (excluding depreciation and non-operating expenses), an increase of $0.03 or 2% from prior year’s operating ratio of $1.83.

• Net cash provided by operating activities represented 48.0% and 49.1% of operating revenues for fiscal years ended 2012 and 2011, respectively. The Authority generated $22.0 million from operations to support capital and financing activities, an increase of $923 thousand or 4% over prior year.

• Capacity fees and developer contributions of systems were $1.9 million and $980 thousand, respectively, for fiscal year 2012. Capacity fees increased $1.1 million, or 142.9%, over the prior year. While commercial and residential development has not shown a full recovery from the economic downturn, customer growth has shown a positive trend. Although the Authority has experienced an increase in the demand for capacity over the past year, it still fell below projections. Developer contributions, which were $2.7 million in 2011, decreased approximately 63% or $1.7 million. The Authority continues to ensure that current customers do not bear the cost of growth by internally designating capacity fees to expand or upgrade the system. As a result of the dramatic decrease in capacity fees over the past several years, numerous capital projects relating to growth continue to be deferred until future years or until the demand for capacity increases.

29FINANCIAL

CONDENSED BALANCE SHEET

Financial PositionThe following comparative condensed balance sheets provide an analysis of the change in financial position from the previous fiscal years:

Total net assets as of June 30, 2012 were approximately $304 million, representing an increase of 0.3% from the prior year. Total net assets increased by approximately $1.0 million over fiscal year 2011, primarily as a result of the reduction in long term liabilities by $12.1 million. This decrease in liabilities can be largely attributed to payments on existing debt as well as the recognition of Military construction revenue as Military Initial System Modifications (ISMs) were completed during the year thus releasing the corresponding unearned revenue. The decrease in current assets is due to the decline in water and sewer cash balances as construction continues on the Military phase II ISM projects but repayment of these ISM projects is being spread over 20 years. In 2011, net assets increased by $15.7 million or 5.5% from prior year. This increase was due to the reduction of long term liabilities through the recognition of Military unearned revenue. Of the $38.3 million unrestricted net assets, $3.1 million is Board-designated for capital funding and $35.2 million is available to provide for current operations.

Producing assets decreased a net $10.4 million (compared to an $8.4 million increase in 2011), which reflects additions of $980 thousand from developer noncash contributions; $9.7 million capitalized construction in progress (CIP) projects and $2.1 million in capital purchases, as well as a decrease of ($23.2 million) from depreciation. Major contributed capital additions representing 63% of the total include: Fort Frederick Circle (approximately $254 thousand); May River Village Apartments (approximately $138 thousand); Del Webb (approximately $115 thousand); and Lopez Pump Station (approximately $115 thousand). These developments included pump stations in addition to water and wastewater lines. The $2.1 million operating capital purchases consisted of approximately $887 thousand in capitalized engineering salaries, approximately $470 thousand in capitalized meters and transponders, and approximately $727 thousand in equipment purchases and vehicles. The Authority disposed of $4.4 million in assets (compared to $309 thousand in 2011). Disposals in fiscal year 2012 consisted primarily of vehicles, meters, and Military assets.

Construction in progress increased a net of approximately $9.3 million over prior year (compared to a net decrease of $14.1 million in 2011) as a result of the Military phase II ISM projects and the Hardeeville to Pritchardville water main project. The Authority expended $18.9 million on capital assets related to construction projects during fiscal year 2012, with approximately $9.7 million completed and moved to producing assets. Major projects (over $1 million) completed during fiscal year 2012 include; Military Group II ISM gravity system relining and manhole rehab project (approximately $1.8 million); Military Group II ISM pump stations project (approximately $1.2 million); and Meter/Transponder replacement project (approximately $1.3 million).

Of the $16.3 million in construction in progress at the end of fiscal year 2012, $4.4 million is related to the remaining Military phase II ISM projects, $4.3 million to the Hardeeville to Pritchardville water main project, and $1.4 million to the North of Broad Operations Center. Additional information on capital assets may be found in the footnotes to the financial statements.

2012 2011 2010Restated Restated Dollars % Dollars %

Capital assets:Producing assets 391,164,499$ 401,574,366$ 393,157,353$ (10,409,867)$ -2.6% 8,417,013$ 2.1%Construc�on in progress 16,275,471 6,926,686 21,026,680 9,348,785 135.0% (14,099,994) -67.1%

Current assets (including designated restricted) 34,716,156 39,837,829 36,462,239 (5,121,673) -12.9% 3,375,590 9.3%Other noncurrent assets 26,865,155 27,226,978 33,718,346 (361,823) -1.3% (6,491,368) -19.3%

182,120,964Total assets $ 475,565,859$ 484,364,618$ (6,544,578)$ -1.4% (8,798,759)$ -1.8%

Current liabili�es 20,387,196$ 15,871,807$ 21,270,822$ 4,515,389$ 28.4% (5,399,015)$ -25.4%Long term liabili�es 144,519,384 156,594,113 175,659,455 (12,074,729) -7.7% (19,065,342) -10.9%

085,609,461seitilibaillatoT 172,465,920 196,930,277 (7,559,340) -4.4% (24,464,357) -12.4%Net assets:

Invested in capital assets, net of related liabili�es 264,294,488 258,046,260 257,568,457 6,248,228 2.4% 477,803 0.2%Restricted for capital ac�vity and debt service 1,509,006 1,606,380 1,631,269 (97,374) -6.1% (24,889) -1.5%Unrestricted 38,311,207 43,447,299 28,234,615 (5,136,092) -11.8% 15,212,684 53.9%

107,411,403Total net assets 303,099,939 287,434,341 1,014,762 0.3% 15,665,598 5.5%Total liabili�es and net assets $469,021,281 $475,565,859 484,364,618$ (6,544,578)$ -1.4% (8,798,759)$ -1.8%

June 30,

Increase (decrease)Increase (decrease)

2010 to 20112011 to 2012


Debt and Debt Service CoverageLong-term liabilities decreased approximately $12.1 million net over the prior fiscal year due to a decrease in Military unearned revenue of $4.9 million. Long term debt decreased by $7.9 million due to principal payments. In 2011, long-term liabilities decreased approximately $19.1 million over 2010 due to a decrease in Military unearned revenue of $18.6 million.

Equity to Long-Term Debt increased from 2.13 for 2011 to 2.26 for 2012. This translates to each $1 of long-term debt being represented by $2.26 in equity, which indicates that the Authority has increased equity at a rate greater than debt during the current fiscal year. The Authority believes that the ratio is appropriate for its current operations, and it clearly demonstrates the strength of its equity.

In the Bond Resolutions the Authority covenants and agrees that it will, at all times, prescribe, maintain, and thereafter collect rates and charges for the services and facilities furnished by the Authority, together with other income, that will yield annual Net Earnings in the fiscal year equal to at least one hundred ten percent (110%) of the sum of the annual debt service payments for all bonds outstanding. “Net Earnings” is defined by the Bond Resolution to mean, for the period in question, the net operating income of the System (i.e., the Authority) determined in accordance with generally accepted accounting principles, adding back depreciation, and including interest income not restricted to bond construction and cash capital contributions not received by government grants.

The rate covenant in the Bond Resolution obligates the Authority to review rates not less than once a year and to revise such rates and charges as necessary to meet the coverage test. The Authority further covenants in the Bond Resolution that it will maintain rates and charges that are at all times sufficient to provide for the payment of the bonds; to maintain the debt service funds, debt service reserve funds, and any other related funding instruments related to the debt of the System; to provide for the payment of administrative and operational expenses of the System preserving the System in good repair and working order; and to build and maintain a reserve for depreciation of the System.

Although the Bond Resolutions allow the use of capacity fee revenue (i.e., cash capital contributions) in the calculation of debt service coverage, the Authority has adopted a more stringent internal policy of maintaining one hundred and twenty-five percent (125%) debt service coverage without consideration of capacity fee revenue. Revenue bond debt service coverage for 2012 and 2011 was 189% and 162%, respectively, including cash capital contributions, and 174% and 156%, without the contributions. The following table presents the required net earnings as defined by the bond covenants; actual net earnings, including capital contributions, available for debt service; and total annual debt service. Additional information regarding Long-Term Debt can be found in Note 7 of the Financial Statements.

NET EARNINGS AVAILABLE FOR DEBT SERVICE

$25,000,000

$20,000,000

$15,000,000

$10,000,000

$5,000,000

2010

$11,867,118

$18,568,259

$10,788,289

2012

$13,573,120

$23,362,633

$12,339,200

2011

$13,716,563

$20,246,895

$12,469,603

Required Net Earnings Net Earnings Debt Service

31FINANCIAL

RevenuesRevenues from operations fall into three general categories: water service, wastewater service, and ancillary charges. Ancillary charges include tap fees, account set up and penalty fees, engineering and inspection services, and charges for other miscellaneous services. The Authority has two classes of water and wastewater customers: wholesale and retail, with retail customers further subdivided into residential, commercial and military.

The following Condensed Statement of Revenues, Expenses, and Changes in Net Assets, shows the results of operations for the current and the prior two fiscal years:

CONDENSED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETSThree year comparison – year ended June 30,

2012 2011 2010Actual Actual Actual

Restated Restated Dollars % Dollars %Revenues:

Water service revenues 24,516,425$ 23,709,802$ 21 ,417,448$ 806,623$ 3 .4% 2,292,354$ 10 .7%Other water revenues 2,039,395 1,948,417 2 ,415,640 90 ,978 4 .7% (467,223) -19 .3%Wastewater service revenues 19,084,644 17,071,938 16 ,475,026 2 ,012,706 11 .8% 596,912 3 .6%Other wastewater revenues 158,871 196,739 208,731 (37 ,868) -19 .2% (11,992) -5 .7%

Total opera�ng revenues 45 ,799,335$ 42,926,896$ 40 ,516,845$ 2 ,872,439$ 6 .7% 2,410,051$ 5 .9%

Expenses:Opera�ng, before deprecia�on, but including franchise fees

Water opera�ons 9,428,814 8,706,212 8,007,195 (722,602) -8 .3% (699,017) -8 .7%Wastewater opera�ons 7,713,595 7,397,108 7,350,577 (316,487) -4 .3% (46,531) -0 .6%

Deprecia�on - water 10,060,686 9,825,830 9,524,139 (234,856) -2 .4% (301,691) -3 .2%Deprecia�on - wastewater 13,169,552 12,739,599 12,547,518 (429,953) -3 .4% (192,081) -1 .5%General, administra�ve, customer

service and engineering - water 4,495,747 4,433,291 4,356,237 (62,456) -1 .4% (77,054) -1 .8%General, administra�ve, customer

service and engineering - wastewater 3,028,933 2,969,669 2,917,261 (59,264) -2 .0% (52,408) -1 .8%

Total opera�ng expenses 47,897,327 46,071,709 44 ,702,927 (1 ,825,618) -4 .0% (1,368,782) -3 .1%

(2 ,097,992)Opera�ng Income (Loss) (3 ,144,813) (4 ,186,082) 1 ,046,821 33 .3% 1,041,269 24 .9%Non-opera�ng revenue (expense):

Interest expense & amor�za�on (5 ,586,017) (6 ,181,414) (6 ,236,516) 595,397 9 .6% 55,102 0 .9%Investment Income 373,170 61,901 56 ,827 311,269 502.8% 5,074 8 .9%Military Construc�on Revenue 5,409,238 20,598,959 1 ,974,652 (15 ,189,721) -73 .7% 18,624,307 943.2%Gain on sale of assets 78,689 477,041 40 ,074 (398,352) -83 .5% 436,967 -1090.4%

Increase (decrease) in net assets,before contribu�ons (1 ,822,912) 11,811,674 (8 ,351,045) (13 ,634,586) 115.4% 20,162,719 241.4%

Capital contribu�ons:Grants - 419,924 - (419,924) -100.0% 419,924 100.0%Capacity fees 1,857,518 764,679 629,060 1 ,092,839 142.9% 135,619 21 .6%Developer contribu�ons of systems 980,156 2,669,321 6 ,505,027 (1 ,689,165) -63 .3% (3,835,706) -59 .0%

Total capital contribu�ons 2 ,837,674 3,853,924 7 ,134,087 (1 ,016,250) -26 .4% (3,280,163) -46 .0%

Increase (decrease) in net assets 1,014,762$ 15,665,598$ (1 ,216,958)$ 303,099,939Net assets at beginning of year 287,434,341 288,651,299

107,411,403stessA teN latoT $ 303,099,939$ 287,434,341$

Over/(Under)

2012 to 2011 to2011 Actual 2010 Actual


Total operating revenues were $45.8 million, an increase of 6.7%, or $2.9 million, over the prior year due primarily to wastewater service revenue. As discussed in the financial highlights section, a rate increase and customer growth contributed to the increase in wastewater revenues. Though the Authority increased rates for water as well, the increased rainfall reduced the effect of the rate increase. From fiscal year 2011 to 2012, water customers increased 1,016, or 2.2% (compared to an increase of 506 or 1.1% from 2010 to 2011), and wastewater customers increased 1,008, or 3.4% (compared to an increase of 714 or 2.4% from 2010 to 2011). Retail residential and commercial water consumption figures, as measured by billings, decreased approximately 65,000 kgals (thousands of gallons), or 1.9% from prior year. Wastewater volume increased approximately 51,000 kgals or 1.6% from prior year.

The following chart shows the change in rates for an average customer (defined as 7 thousand gallons per month residential water usage) from fiscal year 2009 to fiscal year 2012, utilizing the fiscal year 2009, 2010, 2011, and 2012 rates as adopted.

The average realized rate from retail water sales was $4.11 per thousand gallons in 2011 and $4.22 in 2012, an increase of 2.7%. The average realized rate from retail wastewater sales was $4.55 per thousand gallons in 2011 and $4.93 in 2012, an increase of 8.4%.

MONTHLY WATER & WASTEWATER BILL FOR 7KGAL RESIDENTIAL CUSTOMER

$70.00$80.00$90.00

$50.00$40.00$30.00$20.00$10.00

2009

$74.24

$29.24

$45.00

2010

$74.24

$29.24

$45.00

2011

$74.24

$29.24

$45.00

Water Only Wastewater Total Bill

2012

$78.22

$30.22

$48.00

33FINANCIAL

ExpensesThe Authority operates and maintains a potable water treatment and delivery system and a wastewater collection, treatment, and effluent disposal system. The bulk of the water production occurs at the two surface water treatment plants. Wells are also used for some remote service areas and for peak management in the main system. The wastewater system includes nine wastewater treatment plants and associated transmission and disposal facilities.

Total operating expenses were approximately $47.9 million, an increase of 4.0%, or $1.8 million over the prior year. Depreciation expense accounted for $23.2 million of total operating expense and was an increase of approximately $665 thousand over prior year. Excluding depreciation, total operating expenses were $24.7 million, an increase of 4.9%, or $1.2 million, over the prior year.

Excluding depreciation, water operating expenses increased 6.0%, or $785 thousand, over the prior year. The significant increases from the prior year primarily related to the following expenses:

• Repairs and maintenance, including storage tanks (increased $297 thousand or 22%);

• Salaries and wages, including overtime (increased $244 thousand or 5%);

• Power (increased $63 thousand or 4%);

• Chemicals (increased $62 thousand or 9%);

• Other increases over the prior year include general supplies, tools, franchise fees, training, and travel.

Excluding depreciation, wastewater operating expenses increased 3.6%, or $376 thousand, over the prior year. The significant increases from the prior year primarily related to the following expenses:

• Salaries and wages, including overtime (increased $205 thousand or 5%)

• Power (increased $104 thousand or 9%);

• Other increases over the prior year include franchise fees, travel and training costs. Decreases over prior year include processing costs.

As noted in the following analytical data, water expense per kgal (unit cost) excluding depreciation increased 2.0% from fiscal year 2011 due to expenses increasing at a higher rate than consumption in this fiscal year. Wastewater expense per kgal (unit cost) excluding depreciation increased 2.1% from prior year due to the increase in wastewater expenses; while the volume of retail residential and commercial wastewater treated in fiscal year 2012 remained relatively flat.

Operating MarginWhile operating expenses, excluding depreciation, increased $1.2 million compared to fiscal year 2011, total operating revenue of the Authority increased $2.9 million, increasing the operating margin by $1.71 million before depreciation. Actual 2012 operating loss was $2.10 million compared to an operating loss of $3.14 million in 2011, an increase in operating margin of approximately $1.05 million.

For fiscal year 2012, $1.86 was generated from operating revenues for every $1.00 expensed (excluding depreciation and non-operating expenses), which increased by $0.03 or 2% compared to prior year. For comparative purposes, the operating ratios (operating revenues divided by operating expenses less depreciation) were 1.86, 1.83, 1.79, and 1.68, for 2012, 2011, 2010, and 2009, respectively.


Selected Data for AnalysisThe following chart demonstrates and compares to prior year some of the key statistical data for the Authority:

2012 2011 Amount %

Selected data for analysis:Employees at year end 162 164 (2) -1.2%Average number of employees 163 164 (1) -0.6%Water and wastewater customer accounts at year end:

Water customers 47,801 46,785 1,016 2.2%Wastewater customers 30,936 29,928 1,008 3.4%

Water consumption (millions of gallons):Wholesale 2,296 2,003 293 14.6%Special commercial 1,733 1,978 (245) -12.4%Retail residential and commercial 4,530 4,573 (43) -0.9%

Total water consumption 8,559 8,554 5 0.1%Wastewater treated (millions of gallons):

Wholesale 7 24 (17) -70.8%Retail residential and commercial 3,185 3,117 68 2.2%

Total wastewater treated 3,192 3,141 51 1.6%New Taps:

Water 865 747 118 15.8%Wastewater 695 569 126 22.1%

Capacity :Water treatment (millions gallons/day) 39 39 - 0.0%Main system well production (incl. ASRs) (millions gallons/day) 15.60 12.80 2.80 21.9%Wastewater treatment (millions gallons/day) 18.850 18.850 - 0.0%Number of wastewater pump stations 446 483 (37) -7.7%

Per average employee:Total operating revenues 280,978$ 261,749$ 19,229$ 7.3%Total operating expenses 293,849$ 280,925$ 12,924$ 4.6%

Revenues per thousand gallons consumed/treated:Water service revenues:

Wholesale 1.63$ 1.66$ (0.03)$ -1.8%Special commercial 0.21$ 0.19$ 0.02$ 10.5%Retail residential and commercial 4.22$ 4.11$ 0.11$ 2.7%

Wastewater service revenues:Wholesale 5.39$ 4.69$ 0.70$ 14.9%Retail residential and commercial 4.93$ 4.55$ 0.38$ 8.4%

Expenses per thousand gallons consumed/treated:Water service expenses:

Expenses excluding depreciation, overhead & franchise 1.29$ 1.23$ 0.06$ 4.9%Expenses excluding depreciation 2.04$ 2.00$ 0.04$ 2.0%Total expenses 3.51$ 3.49$ 0.02$ 0.6%

Wastewater service expenses:Expenses excluding depreciation, overhead & franchise 2.26$ 2.21$ 0.05$ 2.3%Expenses excluding depreciation 3.37$ 3.30$ 0.07$ 2.1%Total expenses 7.49$ 7.36$ 0.13$ 1.8%

Ratio of operating revenue to:Operating expenses 0.96 0.93 0.03 3.2%Operating expenses net of depreciation 1.86 1.83 0.03 1.6%Total assets 0.10 0.09 0.01 11.1%Net assets 0.15 0.14 0.01 7.1%

Debt related ratiosEquity to Long-Term Debt (Net assets over long-term debt) 2.26 2.13 0.13 6.1%Current ratio (current nonrestricted assets/

current liabilties to be paid from nonrestricted assets) 1.80 1.60 0.20 12.5%Operating ratio (operating income/operating expenses less

depreciation) 1.86 1.83 0.03 1.6%Debt service coverage (including capacity fees) 1.89 1.62 0.27 16.7%Debt service coverage (excluding capacity fees) 1.74 1.56 0.18 11.5%

Change

35FINANCIAL

Cash Flow ActivityCash was generated throughout the year from operating and non-operating activities to provide sufficient resources to cover operations and debt service. At year end, the unrestricted cash balances were above $9.4 million, which represents three months coverage for both operating expenses and debt service. At the end of the fiscal year unrestricted cash and cash equivalents were $14.36 million, as compared to $10.89 million prior year.

The following table shows the Authority’s ability to generate net operating cash. Net cash provided by operating activities is shown both in total dollars and as a percentage of operating revenues.

Although a retail rate increase enabled the Authority to generate $22.0 million from operations to support capital and financing activities, which surpassed the $21.1 million for the prior fiscal year, increased operating expenses decreased the percentage of net cash provided as compared to revenues. In addition to the $22.0 million generated from operating activities, the Authority generated $373 thousand from investing activities as compared to $62 thousand in the prior year. This increase is a direct result of the interest associated with the ISM Receivable payments that started this fiscal year.

Cash payments for construction and acquisition of capital assets increased from $15.5 million in 2011 to $17.4 million in 2012. The $17.4 million in capital expenditures were funded by the issuance of long term debt and capital funding from capacity fees and depreciation (renewal and replacement) funds. Total cash payments for debt service, which were anticipated in the fiscal year budget, were approximately $13.9 million, compared to $19.0 million in prior year. Of the $22.4 million generated from operating and investing activities, a net of $27.2 million was expended on financing activities, leaving a decrease in cash and cash equivalents of $4.8 million for 2012, as compared to an increase of $4.3 million for 2011.

IN THOUSANDS

2012 2011 VARIANCE

Total operating revenues $45,799 $42,927 $2,872

Net cash provided by operations $21,993 $21,069 $924

Net operation cash as a % of operating revenue 48.0% 49.1%


CAPITAL CONTRIBUTIONS (IN THOUSANDS)

$30,000

$20,000

$10,000

Capacity Fees Contributed Capital Grants

$13,801

$2,175 $248

2009

$6,505$629 $765

2010

$0 $0$2,669

2011

$420 $980$1,858

2012

There were no grants received by the Authority in fiscal year 2012. In fiscal year 2011, the Authority received $419,924 in grants as a sub-recipient of a Community Development Block Grant (CDBG) for the Dale area.

Capacity Fees and GrantsThe Authority collects water and wastewater capacity fees to ensure that current customers do not bear the entire burden of growth. These fees are paid by all new customers and represent, on a residential equivalent unit basis, the cost of the water and/or wastewater capacity represented by the new account.

On November 16, 2006, the Board adopted amended capacity fees to become effective June 1, 2007, as follows:

• Water Capacity $1,200/Residential Equivalent Unit ($3.00/gpd x 400 gallons)

• Wastewater Capacity $2,760/Residential Equivalent Unit ($9.20/gpd x 300 gallons)

Prior to this fee increase, the cost per residential equivalent unit (REU) of water and wastewater was $800 and $2,700, respectively.

Capacity fee revenues increased 143% or $1.1 million for 2012, as compared to 2011. While 2012 experienced an increase in capacity fees compared to 2011, it still fell below projections. In response to the continued lack of development, which in turn decreases demand for capacity, the Authority has focused its Fiscal Years 2012–2014 Capital Improvements Plan on renewal and replacement projects rather than expansion/growth projects. The Authority restricts the use of capacity fee revenue to capital investment in growth related projects and these fees are reported in the Statement of Cash Flows as a capital financing source.

Commercial and residential real estate developers also construct and then convey to the Authority water and wastewater systems that serve their developments. GASB 33 and 34 define these fees as non-operating revenues and require reporting the amounts through the Statement of Revenues, Expenses and Changes in Net Assets. Developers contributed utility systems valued at $980 thousand during fiscal year 2012. The developments at Fort Frederick Circle of $254 thousand, May River Village Apartments of $138 thousand, Del Webb of $115 thousand, and Lopez Pump Station of $115 thousand accounted for 63% of system contributions. Developers convey primarily residential systems to the Authority upon completion in accordance with plans and specifications approved by the Authority. These contributions are not budgeted as they are generally non-cash, of limited relevance to rate setting, and the timing is not subject to Authority control.

The following chart depicts capital contribution activity for the last four fiscal years:

37FINANCIAL

Capital AssetsDuring the year ended June 30, 2012, the Authority received approximately $980 thousand in contributed capital, spent approximately $18.9 million on the capital improvement program, and spent $2.1 million on operating capital (meters, equipment and vehicles). Disposals of fully depreciated assets were recorded in the amount of $4.3 million, with a net gain on disposals of assets relating to equipment, vehicles, and scrap sales for the year in the amount of $79 thousand.

During the year ended June 30, 2011, the Authority received approximately $2.7 million in contributed capital, spent approximately $12.2 million on the capital improvement program, and spent $2.3 million on operating capital (meters, equipment and vehicles). Disposals of fully depreciated assets were recorded in the amount of $294 thousand, with a net gain on disposals of assets relating to equipment, vehicles, and scrap sales for the year in the amount of $90 thousand. The Authority recorded a net gain on assets held for sale of $387 thousand relating to the materials of the Port Royal Railroad.

Additional information in changes in capital assets can be found in Note #6 of the financial statements.

Economic Outlook and Final CommentsFinancial management strives to maintain a clear understanding of the utility’s overall financial condition and determine what actions are required to maintain fiscal stability in light of the future economic outlook. Through a well-defined financial management system including timely reporting, established control systems, and competent personnel, the Authority ensures the utilization of resources in the most effective and efficient manner, as well as the future security of those assets.

The Authority has demonstrated its ability to operate a self-sustaining business enterprise that responds to the needs of its customers as well as creating value for the stakeholders, the community at large. The Authority continues its focus on sustainability and preservation. The Authority is optimistic the positive trend in customer growth will continue and development will gradually begin to expand as evidenced in the increase in capacity fees over prior year.

Questions concerning this report or requests for additional information should be directed to Sarah Linkimer, Controller, at 843-987-9253 or at 6 Snake Road, Okatie, South Carolina, 29909-3937.


BALANCE SHEETS

FINANCIAL STATEMENTS

2012 2011Restated

Current Assets:Cash and cash equivalents 14,364,106$ 10,892,865$ Accounts receivable 6,042,483 6,269,476 Inventory and other assets 1,151,532 833,078

121,855,12)detcirtsernu( stessa tnerruc latoT 17,995,419

Designated & restricted assets:Cash and cash equivalents - Designated 8,099,729 16,301,700 Cash and cash equivalents - Restricted 4,893,811 4,986,724 Designated receivables 164,495 553,986

530,851,31stessa detcirtser & detangised latoT 21,842,410

651,617,43stessa tnerruc latoT 39,837,829

Noncurrent Assets:Capital assets

Land and land rights 9,901,251 9,901,251 Administra�ve Facili�es 9,413,817 9,413,817 Water Systems 235,709,846 235,024,504 Wastewater Systems 316,892,190 309,989,478 Equipment 8,774,826 8,090,617 Vehicles 3,887,868 3,691,019

U�lity plant in service before deprecia�on 584,579,798 576,110,686

Less accumulated deprecia�on (193,415,299) (174,536,320) Net u�lity plant in service 391,164,499 401,574,366

Construc�on work in progress 16,275,471 6,926,686

079,934,704stessa latipac latoT 408,501,052

Other AssetsISM Receivable -Department of the Navy 25,137,686 25,422,290 Bonds/loans issuance costs 1,727,469 1,804,688

551,568,62stessa rehto latoT 27,226,978

521,503,434stessa tnerrucnon latoT 435,728,030

182,120,964stessa latoT $ 475,565,859$

Assets

June 30

The accompanying notes to financial statements are an integral part of these statements.

39FINANCIAL

BALANCE SHEETS (continued)

2012 2011Restated

Current liabili�es:Accounts payable and accrued expenses 4,311,895$ 4,097,280$ Accrued wages and benefits 1,182,610 1,136,349 Revenue bonds 3,626,589 3,396,666 State revolving fund 2,093,017 1,872,291 Notes payable 774,241 734,259

11,988,352 11,236,845

Current liabili�es payable from designated & restricted assets:Accounts payable for capital items 5,014,039 1,254,618 Revenue bonds 1,813,411 1,698,334 State revolving fund 201,482 204,500 Interest payable 1,369,912 1,477,510

8,398,844 4,634,962

691,783,02seitilibail tnerruc latoT 15,871,807

Long term liabili�es:Revenue bonds 82,275,211 88,045,589 State revolving fund 37,932,890 39,303,194 Notes payable 14,428,641 15,199,959 Other post re�rement benefits liability 3,428,000 2,737,000 Unearned revenue -Levy projects & rates 413,634 413,634 Unearned revenue -Department of the Navy 6,041,008 10,894,737

483,915,441seitilibail mret gnol latoT 156,594,113

085,609,461seitilibail latoT 172,465,920

Net assets:Invested in capital assets, net of related liabili�es 264,294,488 258,046,260 Restricted for capital ac�vity and debt service 1,509,006 1,606,380 Unrestricted 38,311,207 43,447,299

107,411,403stessa ten latoT 303,099,939

182,120,964stessa ten dna seitilibail latoT $ 475,565,859$

Liabili�es and Net Assets

June 30


Total current liabili�es payable from designated & restricted assets

Total current l iabil i�es (unrestricted)


2 0 12 2 0 11R e s t a t e d

Opera�ng revenues:Water: 3 ,7 4 3 ,3 4 4$ 3 ,3 3 4 ,0 7 2$

Retail 1 9 ,4 9 4 ,5 1 7 1 9 ,1 5 2 ,8 9 4 Military Retail 1 ,2 7 8 ,5 6 4 1 ,2 2 2 ,8 3 6 Other 2 ,0 3 9 ,3 9 5 1 ,9 4 8 ,4 1 7

Total water revenues 2 6 ,5 5 5 ,8 2 0 2 5 ,6 5 8 ,2 1 9

Wastewater: 1 5 ,7 4 1 ,7 0 8 1 4 ,2 8 7 ,3 4 5 Military Retail 3 ,3 4 2 ,9 3 6 2 ,7 8 4 ,5 9 3 Other 1 5 8 ,8 7 1 1 9 6 ,7 3 9

Total wastewater revenues 1 9 ,2 4 3 ,5 1 5 1 7 ,2 6 8 ,6 7 7

Total opera�ng revenues 4 5 ,7 9 9 ,3 3 5 4 2 ,9 2 6 ,8 9 6

Opera�ng expenses:Water: Source of supply 6 1 8 ,1 4 7 5 3 3 ,5 3 8

Water treatment 4 ,1 9 0 ,5 7 3 3 ,9 5 3 ,6 1 2 Transmission and distribu�on 3 ,6 5 8 ,7 7 7 3 ,2 8 7 ,6 1 4 Laboratory and tes�ng 3 4 1 ,2 1 7 3 2 8 ,2 7 9 Franchise fee 6 2 0 ,1 0 0 6 0 3 ,1 6 9 Deprecia�on 1 0 ,0 6 0 ,6 8 6 9 ,8 2 5 ,8 3 0 General, administra�ve, customer service and other 4 ,4 9 5 ,7 4 7 4 ,4 3 3 ,2 9 1

Total water opera�ng expenses 2 3 ,9 8 5 ,2 4 7 2 2 ,9 6 5 ,3 3 3

Wastewater: Collec�on and transmission 3 ,4 0 9 ,1 7 0 3 ,1 9 0 ,3 0 1 Wastewater treatment 2 ,8 9 3 ,4 9 7 2 ,7 8 1 ,7 6 5 Wastewater disposal 2 2 2 ,7 3 1 2 5 1 ,6 0 7 Sludge management 3 2 1 ,8 8 5 3 3 3 ,7 2 2 Laboratory and tes�ng 3 7 7 ,1 5 6 3 7 4 ,3 3 6 Franchise fee 4 8 9 ,1 5 6 4 6 5 ,3 7 7 Deprecia�on 1 3 ,1 6 9 ,5 5 2 1 2 ,7 3 9 ,5 9 9 General, administra�ve, customer service and other 3 ,0 2 8 ,9 3 3 2 ,9 6 9 ,6 6 9

Total wastewater opera�ng expenses 2 3 ,9 1 2 ,0 8 0 2 3 ,1 0 6 ,3 7 6

Total opera�ng expenses 4 7 ,8 9 7 ,3 2 7 4 6 ,0 7 1 ,7 0 9

Opera�ng loss (2 ,0 9 7 ,9 9 2 ) (3 ,1 4 4 ,8 1 3 )

Non - opera�ng revenue (expense):Interest expense (5 ,4 6 2 ,7 5 5 ) (6 ,0 5 9 ,7 7 7 ) Investment income 3 7 2 ,8 6 9 6 1 ,6 0 0 Easement revenue 3 0 1 3 0 1 Military Construc�on Revenue 5 ,4 0 9 ,2 3 8 2 0 ,5 9 8 ,9 5 9 Net gain (loss) on disposal of assets 7 8 ,6 8 9 4 7 7 ,0 4 1 Amor�za�on of bond issuance costs (1 2 3 ,2 6 2 ) (1 2 1 ,6 3 7 )

Total non-opera�ng revenue (expense) 2 7 5 ,0 8 0 1 4 ,9 5 6 ,4 8 7

)219,228,1( 1 1 ,8 1 1 ,6 7 4

Capital contribu�ons:

Increase in net assets

Net assets at beginning of year, as restated

Net assets at end of year

Decrease in net assets, before capital contribu�ons

Grants - 4 1 9 ,9 2 4 Capacity fees, net of bad debt 1 ,8 5 7 ,5 1 8 7 6 4 ,6 7 9 Developer contribu�ons of systems 9 8 0 ,1 5 6 2 ,6 6 9 ,3 2 1

Total capital contribu�ons 2 ,8 3 7 ,6 7 4 3 ,8 5 3 ,9 2 4

267,410,1 1 5 ,6 6 5 ,5 9 8 3 0 3 ,0 9 9 ,9 3 9 2 8 8 ,9 1 9 ,4 5 9

PriorNet assets at the beginning of year, as previously reported

period adjustment - (1 ,4 8 5 ,1 1 8 )

939,990,303 2 8 7 ,4 3 4 ,3 4 1

107,411,403$ 3 0 3 ,0 9 9 ,9 3 9$


Y e a r E n d e d J u n e 3 0 ,

Wholesale

Service

STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS


41FINANCIAL

2012 2011Restated

Cash flows from opera�ng ac�vi�es:Cash received from customers 46,026,326$ 42,842,575$ Cash paid for wages and benefits (12,158,543) (11,515,719) Cash

Net cash provided by opera�ng ac�vi�es

Net cash provided by inves�ng ac�vi�es

paid to suppliers (11,875,123) (10,257,371)

21,992,660 21,069,485

Cash flows from inves�ng ac�vi�es:Interest income 372,869 61,600

372,869 61,600

Cash flows from capital and related financing ac�vi�es:Purchase/construc�on of property, plant, and equipment (17,430,826) (15,519,885) Proceeds from sale of assets 79,936 1,436,558 Proceeds from issuance of long term debt 981,987 6,787,391 Principal payments on debt (7,960,921) (12,794,178) Interest paid on borrowings (5,899,535) (6,199,605) Payment of bond issuance costs (47,236) - Grant capital contribu�ons 10,391 440,250 Military Construc�on Reimbursements 840,113 8,334,093 Proceeds from easements 301 301 Capacity fees, collected or received 2,236,618 732,204

Net cash used in financing ac�vi�es (27,189,172) (16,782,871)

)346,328,4(stnelaviuqe hsac dna hsac ni )esaerceD( esaercnI 4,348,214 Cash and cash equivalents at beginning of year 32,181,289 27,833,075

646,753,72raey fo dne ta stnelaviuqe hsac dna hsaC $ 32,181,289$

Reconcilia�on to balance sheet:Unrestricted cash and cash equivalents 14,364,106$ 10,892,865$ Designated cash and cash equivalents 8,099,729 16,301,700 Restricted cash and cash equivalents 4,893,811 4,986,724

Total cash and cash equivalents 27,357,646$ 32,181,289$

Reconcilia�on of opera�ng loss to net cash provided by opera�ng ac�vi�es:Opera�ng loss (2,097,992)$ (3,144,813)$ Adjustments:

Deprecia�on 23,230,238 22,565,429 Changes in assets and liabili�es

Decrease (increase) in: Receivables, excluding interest income 226,993 (13,973) Inventory and other assets (318,454) 42,199

Increase (decrease) in: Accounts payable and accrued expenses 260,875 778,991 Unearned Revenues - (100,348) Other Post Re�rement Benefits Liability 691,000 942,000

066,299,12$ 21,069,485$

Noncash ac�vi�es:

Net cash provided by opera�ng ac�vi�es

Developer contribu�ons of systems 980,156$ 2,669,321$ Principal reduc�on of note payable-Department of the Navy )993,563($ (350,783)$ Military construc�on revenue 521,965,4$ 12,264,866$


Year Ended June 30,

STATEMENTS OF CASH FLOWS



June 30, 2012 and 2011

1. Description of EntityThe Beaufort-Jasper Water and Sewer Authority (the Authority) was established by an act of the General Assembly of the State of South Carolina on April 23, 1954. The Authority is a special purpose governmental entity engaged in business-type activities. The Authority provides water to various areas of Beaufort and Jasper Counties, South Carolina, and the three military installations, and wastewater services to several areas within the two counties.

2. Summary of Significant Accounting Policies

BASIS OF ACCOUNTING AND PRESENTATION

All activities of the Authority are accounted for within a single proprietary (enterprise) fund. Proprietary funds are used to account for operations that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the cost (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. Accordingly, the Authority’s financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America (GAAP).

The Authority applies all Governmental Accounting Standards Board (GASB) pronouncements. GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting, offers the option of following all Financial Accounting Standards Board (FASB) standards issued after November 30, 1989, unless the latter conflict with or contradict GASB pronouncements, or not following FASB standards issued after such date. The Authority has elected the option to not follow FASB standards after November 30, 1989. The Authority has adopted GASB Statements 33 through 53, and related interpretations issued through June 30, 2012.

These GASB statements require the presentation of Management’s Discussion and Analysis which precedes the financial statements, in addition to several changes to the financial statements such as: (1) the classification of the Equity section of the balance sheet into Net Assets with categories of Invested in Capital Assets net of related debt, Restricted, and Unrestricted; (2) the statement of revenues, expenses and changes in net assets formatted to report changes in net assets in lieu of changes in retained earnings; and (3) additional note disclosures to the financial statements.

The accounting and financial reporting treatment applied to the Authority is determined by its measurement focus. The transactions of the Authority are accounted for on a flow of economic resources measurement focus. Therefore, all assets and all liabilities associated with the operations are included on the balance sheet.

OPERATING/NONOPERATING REVENUES AND EXPENSES

Operating revenues and expenses are those that result from providing water and wastewater services. Non-operating revenues and expenses include capital, financing, investing and other activities not related to the provision of water and wastewater services.

REVENUE RECOGNITION AND RECEIVABLES

All water and wastewater revenues are recognized on the accrual basis when the related services are provided and the earning process is complete. Services are provided to customers under a rate structure designed to produce revenue sufficient for operating and maintenance costs, capital outlay, debt service, reserves and debt service coverage.

NOTES TO FINANCIAL STATEMENTS

43FINANCIAL

Customer receivables represent various volume, availability, impact, and special service fees earned, but not yet collected. Unbilled receivables have been estimated and accrued as revenue from the date of the last reading of the meters based on the billing cycle. Unbilled accounts receivable was approximately $2.26 million and $1.69 million as of June 30, 2012 and 2011, respectively. The allowance for doubtful accounts is determined by the following assumptions regarding the aging report: (1) accounts over ninety (90) days are deemed 90% uncollectible and (2) accounts over sixty (60) days are deemed 50% uncollectible. Payment plan amounts included in the delinquent accounts, which are considered collectible based upon the date of last payment, are added back to the allowance. The allowance for doubtful accounts was $806 thousand and $695 thousand as of June 30 2012, and 2011, respectively.

BUDGETARY ACCOUNTING

The Authority adopts flexible annual operating and capital budgets. Budgets are adopted on a basis consistent with GAAP. The current operating budget details the Authority’s plans to earn and expend funds for charges incurred for operation, maintenance, certain interest and general functions, and other charges for the fiscal year. The Authority budgets depreciation expense based upon prior year actual and estimates of acquisitions and contributed capital. The capital budget details the plan to receive and expend cash capital contribution fees, special assessments, grants, borrowings, and certain revenues for capital projects.

All unexpended and unencumbered appropriations in the operating budget lapse at the end of the fiscal year. No appropriation for a capital project in the capital budget lapses until the purpose for which the appropriation was made has been accomplished or abandoned.

Management submits a proposed budget to the Authority’s Board of Directors prior to the May Board meeting. A budget is adopted by resolution prior to July 1. During the year, management is authorized to transfer budgeted amounts between line items within the Authority’s divisions.

CASH EQUIVALENTS, DEPOSITS AND INVESTMENTS

Cash and cash equivalents, for purposes of the statement of cash flows, include: restricted and unrestricted cash on hand or on deposit; interest in State Treasurer’s Pool; and certificates of deposit, repurchase agreements and investments with a maturity of three months or less.

Investments are reported at their fair value. The Authority is permitted to invest through various investment advisors in a pool managed by the South Carolina State Treasurer, certificates of deposit, repurchase agreements, and United States or State of South Carolina general obligations.

DESIGNATED AND RESTRICTED ASSETS

Restricted assets represent cash, investments, and receivables maintained in accordance with bond resolutions, loan agreements, grant awards, and other resolutions by agreement for funding certain debt service payments. Designated assets represent cash, investments, and receivables that have been designated formally and consistently by Board action for depreciation and contingency activities, and improvements and extensions to the utility systems. These funds are utilized to support the Board’s approved capital improvement program budget, which is generally approved every three (3) years; includes estimates of anticipated capacity fees and set aside revenues; and projects capital funding required.

Capacity fees, or impact fees, which are held in water and wastewater capital funds, are considered designated assets. These fees are cash contributed capital received in exchange for the purchase of capacity in the system. The capacity certificate represents ownership of system capacity, and, as such, the Authority must ensure that the funds are utilized for growth infrastructure. Any receivables generated from extension of credit for capacity payments or construction reimbursements from front foot assessments are also considered designated.

During fiscal year 2000, the Authority began accepting letters of credit from certain developers and commercial customers for the payment of capacity fees. There were no receivables for capital contributions under letters of credit recorded in fiscal year ended June 30, 2012 and $379,100 for fiscal year ended June 30, 2011 where the capacity certificate had been issued and the earnings process had been completed.


INVENTORIES

Materials and supplies inventories are stated at the lower of average cost or market.

CAPITAL ASSETS

Property acquired with an initial individual cost of $5,000 or more and an estimated useful life (i.e., generates an economic benefit) in excess of one year are recorded at cost. Major outlays for construction of capital assets and improvements are capitalized at cost. Maintenance and repairs that do not significantly extend the value or life of property, plant, and equipment are expensed as incurred. During fiscal year 1999, the Authority began capitalizing meters as a result of using significantly more radio-read meters versus the less expensive standard meters. The Authority capitalizes meter transponder replacements for entire areas where the retrofit significantly adds to the estimated useful life of all meters for that development.

Assets acquired through contributions from developers or other customers are capitalized at their estimated fair market value, if available, or at engineers’ estimated fair market value or cost to construct at the date of the contribution. Utility systems acquired from other governmental service providers are recorded at the purchase price, limited to fair market value. Internal engineering costs are capitalized to the extent of direct support and contribution to construction and expansion projects. Costs of studies that directly result in specific construction projects are capitalized.

Interest cost is capitalized on the construction of qualified assets, whether or not borrowings exist for such projects, to the extent of amounts funded by debt or operating results. Interest is not capitalized on project costs funded by contributed capital, such as grants, gifts, and impact fees. Interest costs of tax-exempt borrowings are capitalized net of related investment earnings on the proceeds. Interest costs are not capitalized for small projects that will be constructed in less than six months or for those with estimated costs under $250,000 because these amounts are considered immaterial for purposes of interest capitalization.

Annualized depreciation expense, expressed as a percent of net depreciable capital assets, was 5.9% and 5.6% for the fiscal years ended June 30, 2012 and 2011, respectively. The Authority utilizes the straight-line depreciation method and estimated useful lives of assets in service are as follows:

Years

Source of supply equipment 15–50

Water treatment plant 10–50

Wastewater treatment plant 10–50

Transmission and distribution systems 10–50

Equipment 3–20

Structures and improvements, including buildings 10–50

Office furniture, equipment and vehicles 3–20

Meters 8

CAPITAL CONTRIBUTIONS

Contributions are recognized in the Statement of Revenues, Expenses and Changes in Net Assets when earned. Contributions include capacity fees; developer contributed utility systems; capital grants; and other supplemental support by other utilities and industrial customers; and federal, state and local grants in support of system improvements.

45FINANCIAL

LONG-TERM OBLIGATIONS AND COSTS

Long-term obligations are reported at face value, net of applicable premiums and discounts. Premiums and discounts, issuance costs, and gains or losses on advance refunding and defeasances after June 30, 1994, are deferred and amortized over the life of the bonds.

COMPENSATED ABSENCES

The Authority accounts for compensated absences by accruing a liability for employees’ compensation for future absences according to the guidelines of GASB Statement No. 16, Accounting for Compensated Absences. Compensated absences are classified as a current liability, because 1) each employee is eligible to “cash in” compensated absences up to $1,000 twice annually, 2) it is payable upon voluntary or involuntary termination, and 3) the use of accrued leave is unpredictable.

CLAIMS AND JUDGMENTS

These events and obligations are recorded on the accrual basis, when the event occurs and the obligation arises.

NET ASSETS

Net assets comprise the various net earnings from operating and non-operating revenues, expenses and contributions of capital. Net assets are classified in the following three components: invested in capital assets, net of related liabilities; restricted for capital activity and debt service; and unrestricted net assets. Invested in capital assets, net of related debt, consists of all capital assets, net of accumulated depreciation and reduced by outstanding debt that is attributable to the acquisition, construction and improvement of those assets; debt related to unspent proceeds or other restricted cash and investments is excluded from the determination. Restricted for capital activity and debt service consists of net assets that are constrained by external parties, such as lenders, grantors, contributors, laws, regulations, and enabling legislation, including self-imposed legal mandates, less any related liabilities. Unrestricted consists of all other net assets not included in the above categories.

GENERAL AND ADMINISTRATIVE EXPENSE ALLOCATIONS

For the purposes of the Statement of Revenues, Expenses, and Changes in Net Assets, general and administrative expenses were allocated 60% and 40% to the water and wastewater divisions for fiscal years 2012 and 2011. This allocation is based on the number of proportionate water to wastewater customers and is reviewed each year during the budgeting process. The allocation of 60% and 40% will remain for fiscal year 2013.

USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Estimates are used to determine depreciation expense, the allowance for doubtful accounts and certain claims and judgment liabilities, among other accounts. Actual results may differ from those estimates.

RECLASSIFICATIONS

Certain reclassifications have been made to the 2011 financial statements to conform to the current year presentation.


3. Cash, Cash Equivalents, and InvestmentsDeposits include demand deposits and certificates of deposit in financial institutions. The carrying (balance sheet) amounts were $27,357,646 and $32,181,289 at June 30, 2012 and 2011, respectively. The bank balances were $28,274,455 and $33,075,840 at June 30, 2012 and 2011, respectively. At June 30, 2012 and 2011, demand deposits and investments were as follows:

JUNE 30, 2012 JUNE 30, 2011

CREDIT RISK

Investments of the Authority must comply with South Carolina Code Section 6-5-10, which states that the Authority may invest money subject to its control and jurisdiction in, obligations of the United States and agencies thereof, general obligations of the State of South Carolina or any of its political units, savings and loan associations to the extent that the same are insured by an agency of the federal government, certificates of deposit where the certificates are collaterally secured by the U. S. Treasury or its agencies, and repurchase agreements when collateralized by securities as set forth in this section. The provisions of South Carolina Code Section 6-5-10 do not impair the power of the Authority to hold funds in deposit accounts with banking institutions as otherwise authorized by law. All investments of the Authority were redeemable on demand without penalty as of June 30, 2012 and 2011, respectively, and are, therefore, classified as cash and cash equivalents.

All deposits that are not U. S. Treasury investment securities held in the Authority’s name are collateralized with securities held by the pledging financial institution’s agent in the Authority’s name. All investments of the Authority are rated Aaa by Moody’s and AAA by Standard and Poors.

The following reconciles deposits and investments to cash and cash equivalents, and investments, as presented in the balance sheet:

JUNE 30

Interest Y ie ld Book Balan ce Bank Balan ce

Interest Y ie ld Book Balan ce Ban k Balan ce

Demand Deposits $ 1 ,6 0 8 ,6 2 4$ 0 .8 0 % 9 4 2 ,9 3 2$ 1 ,4 4 6 ,9 6 4$Demand Deposits - - 0 .2 0 % 1 ,8 6 1 1 ,8 6 1Demand Deposits 2 1 ,9 1 4 ,5 4 7 0 .0 0 % 2 6 ,6 6 2 ,1 1 1 2 6 ,7 0 7 ,6 8 6

936,678,22Total Demand Deposits 171,325,32$ 409,606,72$ $ 2 8 ,1 5 6 ,5 1 1$

Collateral Held by Agent in Authority's Name 1 2 ,4 1 0 ,5 1 5 684,823,03$ $

Trust Accounts - U.S. Gov'tAgencies (Rule 2a -7) 4 ,7 5 1 ,2 8 4 0 .0 0 % 4 ,5 7 2 ,8 8 5 4 ,9 1 9 ,3 2 9

705,974,4Total Investments 482,157,4$ 588,275,4$ $ 4 ,9 1 9 ,3 2 9$

June 30, 2011June 30, 2012

1,534,4590.13%0.00%0.00%

0.00%

21,342,180

4,479,507

2 0 1 2 2 0 1 1Disclosures regarding deposits and investments:

Cash on 005,1dnaH $ 1 ,5 0 0$936,678,22Deposits 2 7 ,6 0 6 ,9 0 4705,974,4Investments 4 ,5 7 2 ,8 8 5

646,753,72Total $ 3 2 ,1 8 1 ,2 8 9$

Balance Sheet and cash flow statement amounts:Cash and cash equivalents

601,463,41Unrestricted $ 1 0 ,8 9 2 ,8 6 5$927,990,8Designated 1 6 ,3 0 1 ,7 0 0118,398,4Restricted 4 ,9 8 6 ,7 2 4

Total cash and cash eq u i va l en ts $ 3 2 ,1 8 1 ,2 8 9$

June 30

2 7 ,3 5 7 ,6 4 6

47FINANCIAL

5. Designated and Restricted AssetsCertain proceeds of revenue bonds and notes, as well as resources set aside for their repayment or to satisfy certain restrictive covenants of the bond agreements, are classified as restricted assets on the balance sheet because their use is limited by those covenants. The “debt service fund” accounts are used to segregate resources accumulated for debt service payments over the next twelve months. The “debt service reserve fund” accounts are used to report resources set aside to make up potential future deficiencies in revenue bond debt service funds or to effect whole or partial redemption of the bonds. Bond construction funds are restricted for the purposes of funding capital projects.

Designated assets are established by consistent Board action and are included in the funding sources available for Board approval of the capital improvement program budget. The “contingency and depreciation fund” accounts are used to accumulate resources to be used for contingencies and for improvements, betterments, and extensions of the system; the Authority establishes these amounts annually. The “capital projects fund” accounts are funds designated by Board approval of the capital projects budget.

The components of designated receivables as of June 30 were as follows:

4. Accounts ReceivableAccounts receivable were composed of the following:

JUNE 30

JUNE 30

2012 2011Wholesale and retail water and wastewater customers:

Billed services 317,591,4$ 5,019,246$Unbilled services 024,752,2 1,693,664

Allowance for doub�ul )017,508(stnuocca (695,000)Other receivables 060,593 251,566

Total 6,042,483$ 6,269,476$

June 30

2012 2011

Capacity fees receivable -$ 379,100$

Front Foot Assessment receivable 164,495 174,886 Total 164,495$ 553,986$


The components of the designated and restricted assets, and liabilities payable from designated and restricted assets as of June 30, 2012 and 2011 were as follows:

6. Capital AssetsCapitalized interest for construction reimbursement projects is determined at the repayment date and calculated based on the construction draws for the project, and added to the cost of the project at that time. No interest expense was capitalized for fiscal year 2012. During 2011 the Authority capitalized interest of $6,231 on the Aquifer Storage and Recovery System (ASR3) project and $90,154 on the Military Consolidation project.

Construction in progress increased a net of approximately $9.3 million primarily as a result of the Military phase II ISM projects and the Hardeeville to Pritchardville water main project. Of the $16.3 million in construction in progress at the end of fiscal year 2012, $4.4 million is related to the remaining Military phase II ISM projects, $4.3 million to the Hardeeville to Pritchardville water main project, and $1.4 million to the North of Broad Operations Center. The Authority expended $19.1 million on capital assets related to construction projects during fiscal year 2012, with approximately $9.8 million completed and moved to producing assets.

JUNE 30, 2012

JUNE 30, 2011

Total Designated &Restricted Assets

Liabili�es Payable from Designated &

Restricted Assets

Board designated:Con�ngency and deprecia�on 3,506,055$ -$ 3,506,055$Capital projects (incl. Receivables) 4,758,169 (5,014,039) (255,870)

Restricted:Capital projects - Levy 414,304 - 414,304Debt service and reserves 4,479,507 (3,384,805) 1,094,702

13,158,035$ (8,398,844)$ 4,759,191$

June 30, 2012

Excess

Total Designated & Restricted Assets

Liabili�es Payable from Designated &

Restricted Assets Excess

Board designated:Con�ngency and deprecia�on 5,947,615$ -$ 5,947,615$Capital projects (incl. Receivables) 10,908,071 (1,254,618) 9,653,453

Restricted:Capital projects - Levy 413,839 - 413,839Debt service and reserves 4,572,885 (3,380,344) 1,192,541

21,842,410$ (4,634,962)$ 17,207,448$

June 30, 2011

49FINANCIAL

Capital asset activity during the prior two fiscal years was as follows:

DETAILED SCHEDULE OF CHANGES IN CAPITAL ASSETS Year ended June 30, 2012

DETAILED SCHEDULE OF CHANGES IN CAPITAL ASSETS Year ended June 30, 2011

O&M Capital System Addi�ons & Improvement

30-Jun-10 Contribu�ons Deprecia�on Program Disposals Reclass 30-Jun-11Capital Assets, not being depreciated:Land and Land 152,109,9sthgiR $ -$ -$ -$ -$ -$ 9,901,251$Construc�on in 086,620,12ssergorP - 11,899,138 (25,999,132) - - 6,926,686

30,927,931$ -$ 11,899,138$ (25,999,132)$ -$ -$ 16,827,937$

Capital Assets, being depreciated:Administra�ve Fac. & 718,314,9.vorpmI - - - - - 9,413,817Source of 924,296,9ylppuS - - 2,997,334 - - 12,689,763Water Treatment 356,935,65tnalP - - 234,025 - - 56,773,678Wastewater Treatment 200,872,001tnalP - - 240,956 - - 100,518,958Water System Transmission & Distribu�on 158,681,138 1,110,795 1,293,925 4,475,205 - - 165,561,063Wastewater System Collec�on & Transmission 188,198,517 1,558,526 340,241 17,729,934 - - 207,827,218Wastewater Disposal 203,346,1smetsyS - - - - - 1,643,302Other General 608,555,7tnempiuqE - 260,474 321,678 (47,341) - 8,090,617

062,035,3selciheV - 422,318 - (261,559) - 3,691,019Total capital assets, being depreciated 535,532,924 2,669,321 2,316,958 25,999,132 (308,900) - 566,209,435

Less accumulated deprecia�on:Administra�ve Fac. & )743,406,1(.vorpmI - (302,558) - - - (1,906,905)Source of )339,555,4(ylppuS - (426,037) - - - (4,981,970)Water Treatment )381,749,41(tnalP - (1,609,948) - - - (16,557,131)Wastewater Treatment )545,469,81(tnalP - (2,835,344) - - - (21,799,889)Water System Transmission & Distribu�on (50,033,153) - (7,069,912) - - - (57,103,065)Wastewater System Collec�on & Transmission (54,372,696) - (8,700,091) - - - (63,072,787)Wastewater Disposal )033,461(smetsyS - (65,732) - - - (230,062)Other General )999,286,4(tnempiuqE - (1,148,314) - 47,341 - (5,783,972)

)636,159,2(selciheV - (407,492) - 258,589 - (3,100,539))228,672,251( - (22,565,428) - 305,930 - (174,536,320)

383,256,102 2,669,321 (20,248,470) 25,999,132 (2,970) - 391,673,115Total capital assets, being depreciated, netTotal accumulated deprecia�on

Total capital assets, net 414,184,033$ 2,669,321$ (8,349,332)$ -$ (2,970)$ -$ 408,501,052$

Total capital assets, not being depreciated

O&M Capital System Addi�ons & Improvement

30-Jun-11 Contribu�ons Deprecia�on Program Disposals Reclass 30-Jun-12Capital Assets, not being depreciated:Land and Land Rights 152,109,9$ -$ -$ -$ -$ -$ 9,901,251$Construc�on in Progress 686,629,6 - 19,093,516 (9,744,731) - - 16,275,471Total capital assets, not being depreciated 16,827,937$ -$ 19,093,516$ (9,744,731)$ -$ -$ 26,176,722$

Capital Assets, being depreciated:Administra�ve Fac. & .vorpmI 718,314,9 - - - - - 9,413,817Source of Supply 367,986,21 - - - - - 12,689,763Water Treatment 876,377,65tnalP - - 332,601 - - 57,106,279Wastewater Treatment 859,815,001tnalP - 5,263 234,535 (155,752) - 100,603,004Water System Transmission & Distribu�on 165,561,063 265,065 1,001,796 2,622,080 (3,536,200) - 165,913,804Wastewater System Collec�on & Transmission 207,827,218 715,091 367,514 6,076,954 (390,767) - 214,596,010Wastewater Disposal 203,346,1smetsyS - - 49,874 - - 1,693,176Other General 716,090,8tnempiuqE - 255,522 428,687 - - 8,774,826

910,196,3selciheV - 466,636 - (269,787) - 3,887,868Total capital assets, being depreciated 566,209,435 980,156 2,096,731 9,744,731 (4,352,506) 574,678,547

Less accumulated deprecia�on:Administra�ve Fac.& Improv. )509,609,1( - (298,506) - - - (2,205,411)Source of )079,189,4(ylppuS - (577,128) - - - (5,559,098)Water Treatment Plant )131,755,61( - (1,617,606) - - - (18,174,737)Wastewater Treatment Plant )988,997,12( - (2,798,686) - 155,752 - (24,442,823)Water SystemTransmission & Distribu�on - (7,171,473) - 3,536,200 - (60,738,338)Wastewater System Collec�on & Transmission - (9,258,564) - 390,767 - (71,940,584)Wastewater Disposal Systems )260,032( - (68,226) - - - (298,288)Other General )279,387,5(tnempiuqE - (1,079,165) - - - (6,863,137)

)935,001,3(Vehicles - (360,884) - 268,540 - (3,192,883))023,635,471(noitaicerpeddetalumuccalatoT - (23,230,238) - 4,351,259 - (193,415,299)

Total capital assets, being depreciated, net 391,673,115 980,156 (21,133,507) 9,744,731 (1,247) 381,263,248Total capital assets, net 408,501,052$ 980,156$ (2,039,991)$ -$ (1,247)$ -$ 407,439,970$

(57,103,065)(63,072,787)


7. Long-Term DebtLong-term debt includes various bonds, loans, and notes payable that have been issued or approved by the Authority for the improvement or acquisition of water and wastewater infrastructure, and defeasance of outstanding debt. General covenants, along with debt service requirements, are disclosed below. See Note 5, Designated & Restricted Assets, for a discussion of the accounts used in accounting for proceeds and reserves pledged as a result of the issuance of the various forms of debt.

Revenue bonds and State Revolving Loan payables are collateralized by an irrevocable pledge of income and revenues derived from the operation of the systems. The revenues derived from the operation of the respective systems are to be used for expenses in connection with the administration and operation of the systems.

The Authority’s debt instruments contain various covenants and restrictions, which among other things, requires the Authority to provide certain financial information and meet certain financial tests. The Authority’s Bond Resolutions require that “Net Earnings” (as defined in the Bond Resolution) are equal to at least 110% of the annual principal and interest requirements of all series of bonds outstanding in that year. For the years ended June 30, 2012 and 2011, the Authority’s “Net Earnings” were 189% and 162%, respectively, of its annual principal and interest requirements of all series of bonds. Management believes that the Authority was in compliance with all covenants and restrictions of all debt instruments at June 30, 2012 and 2011.

REVENUE BONDS

Series 2001, Waterworks and Sewer System Improvement and Refunding Bonds (Second Lien), dated December 1, 2001, were issued in the original principal amount of $47,140,000, taking advantage of the favorable interest rate to advance refund the Series 1992B Bonds, to pay the amount outstanding under an Equipment Lease/Purchase Agreement with First Union National Bank, and to provide funds for capital improvement projects, including the Purrysburg Water Treatment Plant. Proceeds in the amount of $4,884,267 were deposited into an irrevocable trust with an escrow agent to provide all future debt service payments on the outstanding Series 1992B Bonds, which were called on March 1, 2002. The refunding transaction resulted in an accounting loss of $275,103 when the net carrying value of the two bond issues were compared to the reacquisition price paid to defease those issues. This loss on refunding was recorded as a reduction in the carrying balance of the bonds payable and is amortized using the effective interest method through fiscal year 2013. Amortization was recorded in the amounts of $16,093 and $19,511 for fiscal years 2010 and 2009, respectively. The portion of these bonds related to the construction fund was refunded in fiscal year 2007 with the issuance of the 2006 revenue bonds, restating the bond principal amount due for the original refunding as of November 29, 2006, to $3,350,000. As restated, payments are due in annual principal installments ranging from $430,000 to $530,000 through 2013, with interest at 3.55% to 4.3%, due March 1, and September 1.

Series 2006, Waterworks and Sewer System Improvement and Refunding Bonds, dated November 28, 2006, were issued in the original principal amount of $58,750,000, taking advantage of the favorable interest rate to advance refund the Series 2001 Bonds and to provide funds for the Cherry Point Water Reclamation Facility capital improvement project. Proceeds in the amount of $43,710,291 (along with $526,645 of the Authority’s accrued debt service fund) were deposited into an irrevocable trust with an escrow agent to provide all future debt service payments on the improvement portion of the 2001 Revenue Bonds. The refunding transaction resulted in a deferred amount on the refunding of $2,609,222, which was recorded as a reduction in the carrying balance of the bonds payable and is amortized using the effective interest method through fiscal year 2026, with amortization recorded in the amount of $88,779 and $178,977 for fiscal years 2010 and 2009, respectively. The new bonds were issued at a premium of $2,888,721, which is recorded as an increase in the carrying balance of the bonds payable and is amortized using the effective interest method through fiscal year 2031, with amortization recorded in the amount of $290,388 and $239,361 for fiscal years 2010 and 2009, respectively. Payments are due in annual principal installments ranging from $525,000 to $7,110,000 through 2031, with interest at 4.0% to 5.0%, due March 1, and September 1.

Series 2010B, Waterworks and Sewer System Refunding Revenue Bonds, dated April 22, 2010, were issued in the original principal amount of $38,065,000, taking advantage of the favorable interest rate to refund the Series 1999 and 2000 Revenue Bonds; Series 1994, 1996, 1998, 1998B, 1993 (COB), 2000B, 2000C, 2000D, 2002A, 2002B, 2003A, 2003B, and 2003C State Revolving Fund Loans; and 2002 City of Hardeeville and 2004 Beaufort County School District Notes Payable. Proceeds in the amount of $5,991,206 (along with $128,239 of the Authority’s accrued debt service fund) were paid to Bank of America, N.A., the holder of the 1999 Bond, to pay

51FINANCIAL

the principal, accrued interest, and redemption premium due on the bond as of April 22, 2010. Proceeds in the amount of $5,606,365 (along with $130,767 of the Authority’s accrued debt service fund) were paid to Wachovia Bank, the holder of the 2000 Bond, to pay the principal, accrued interest, and redemption premium due on the bond as of April 22, 2010. All State Revolving Fund Notes are held by the South Carolina Budget and Control Board. Proceeds of $26,597,332 (along with $494,328 in debt service reserve funds and $2,239,955 of the Authority’s accrued debt service fund) were paid to US Bank, trustee, to pay the principal and accrued interested due on all refunded State Revolving Fund Notes as of April 22, 2010. Proceeds in the amount of $1,151,011 were paid to Branch Banking & Trust Co (BB&T), the holder of the 2002 City of Hardeeville Note Payable, to pay the principle, accrued interest, and premium due as of April 22, 2010. Proceeds in the amount of $966,938 were paid to the Beaufort County School District, as holder of the March 2004 note payable, to pay the principal and accrued interest due on the note as of April 22, 2010. The refunding transaction resulted in a deferred amount on the refunding of $490,213, which was recorded as a reduction in the carrying balance of the bonds payable and is amortized using the effective interest method through fiscal year 2023, with amortization recorded in the amount of $52,505 for fiscal year 2010. The new bonds were issued at a premium of $2,660,805, which was recorded as an increase in the carrying balance of the bonds payable and is amortized using the effective interest method through fiscal year 2023, with amortization recorded in the amount of $89,379 for fiscal year 2010. Payments are due in annual principal installments ranging from $1,060,000 to $4,820,000 through 2023, with interest at 2.5% to 5.0%, due March 1, and September 1.

STATE REVOLVING LOANS PAYABLE TO THE SOUTH CAROLINA STATE BUDGET AND CONTROL BOARD

Series 1990 (COH), Waterworks and Sewer System Improvement Revenue Parity Bonds, originally dated 1990 of the City of Hardeeville (COH), were assumed by the Authority as part of the City of Hardeeville acquisition on January 25, 2002, original principal amount of $2,414,566 (SC Water Pollution Control Revolving Fund Number 014-90-427-04). Funds were utilized to upgrade the Hardeeville Wastewater Treatment Plant. Interest is accrued at 4.5%, with principal and interest due in quarterly payments of $46,043 through January 1, 2012. This loan was paid in full in fiscal year 2012.

Series 2000 (COH), Waterworks and Sewer System Improvement Revenue Parity Bonds, originally dated 1990 of the City of Hardeeville (COH), were assumed by the Authority as part of the City of Hardeeville acquisition on January 25, 2002, original principal amount of $875,085 (SC Water Pollution Control Revolving Fund Number 1-067-00-427-04). Funds were utilized to upgrade the Hardeeville pump stations. Interest is accrued at 3.75%, with principal and interest due in quarterly payments of $15,586 through October 1, 2021. The interest was reduced to 2.25% in fiscal year 2012 resulting in remaining quarterly principal and interest payments of $14,495.

Series 2001B, Waterworks and Sewer System Improvement Revenue Bonds, dated December 5, 2001, were issued in the original principal amount of $875,458, final draw amount of $814,410 (SC Drinking Water Revolving Loan Fund Number 3-011-02-0720003-06) to provide funds for improvements to the aquifer storage recovery system. Interest, in the amount of $6,005, was capitalized in 2003 when the project was substantially complete and payments became due on the loan. Interest is accrued at 3.75%, with principal and interest due in quarterly payments of $14,623 through March 1, 2023. The interest was reduced to 2.25% in fiscal year 2012 resulting in remaining quarterly principal and interest payments of $13,464.

Series 2004, Waterworks and Sewer System Improvement Revenue Bonds, dated June 25, 2004, were issued with an original principal amount of $24,781,500, final draw amount of $24,263,937 (SC Water Pollution Control Revolving Loan Fund Number X1-093-04-520-17) to provide funds for the Port Royal Island Water Reclamation Facility expansion. Interest, in the amount of $738,442, was capitalized in 2006 when the project was substantially complete and payments became due on the loan. Interest is accrued at 3%, with principal and interest due in quarterly payments of $416,745 through August 1, 2026. The interest was reduced to 2.25% in fiscal year 2012 resulting in remaining quarterly principal and interest payments of $395,486.


Series 2005, Waterworks and Sewer System Improvement Revenue Bonds, dated June 24, 2005, were issued with an original principal amount of $2,802,500 (SC Water Pollution Control Revolving Loan Fund Number X1-100-05-520-18), final draw amount of $2,701,734, to provide funds for the Battery Creek crossing and Beaufort River Outfall effluent line and force main related to the Port Royal Island Water Reclamation Facility. No draws were made as of the payment initiation date, October 1, 2005, and, therefore, no interest was capitalized. Interest is accrued at 3.25%, with principal and interest due in quarterly payments of $46,061 through October 1, 2025. The interest was reduced to 2.25% in fiscal year 2012 resulting in remaining quarterly principal and interest payments of $43,104.

Series 2008, Waterworks and Sewer System Improvement Revenue bonds, dated October 27, 2008, were issued with an original principal amount of $2,561,486, final draw amount of $2,440,331 (SC Drinking Water Revolving Loan Fund Number 3-034-08-0720003-14) to provide funds for the construction of a Sodium Hypochlorite system and new communications tower at the Chelsea Water Treatment Plant. Interest is accrued at 3.00%, with principal and interest due in quarterly payments of $40,676 through May 1, 2029. The interest was reduced to 2.25% in fiscal year 2012 resulting in remaining quarterly principal and interest payments of $38,262.

Series 2009A, Waterworks and Sewer System Improvement Revenue bonds, dated September 23, 2009, were issued with an original principal amount of $3,331,410 (SC Drinking Water Revolving Loan Fund Number X3-047-09-0720003-15) to provide funds for the construction of an aquifer storage and recovery system (ASR3) connected to the Authority’s water system. Interest in the amount of $6,231 will be capitalized as of the payment initiation date of September 1, 2010. Interest is accrued at 3.50%, with principal and interest due in quarterly payments of $58,188 through June 1, 2030. The interest was reduced to 2.25% in fiscal year 2012 resulting in remaining quarterly principal and interest payments of $49,106.

Series 2010A, Waterworks and Sewer System Improvement Revenue bonds, dated February 26, 2010, were issued with an original principal amount of $13,773,549 (SC Drinking Water Pollution Control Revolving Loan Fund Number 1-132-10-520-20) to provide funds for the Consolidation of the Military Wastewater Treatment Plants. Interest is accrued at 3.50%, with principal and interest due in quarterly payments of $241,696 through October 1, 2030. The interest was reduced to 2.25% in fiscal year 2012 resulting in remaining quarterly principal and interest payments of $208,498.

Series 2011A, Waterworks and Sewer System Improvement Revenue bonds, dated September 23, 2011, were issued with an original principal amount of $411,418 (SC Drinking Water Pollution Control Revolving Loan Fund Number X1-146-11-520-28) to provide funds for the Tansi Village Sewer System Rehabilitation. Interest is accrued at 1.00%, with principal and interest due in quarterly payments of $5,681 through April 1, 2032.

Series 2011B, Waterworks and Sewer System Improvement Revenue bonds, dated September 23, 2011, were issued with an original principal amount of $4,013,125 (SC Drinking Water Pollution Control Revolving Loan Fund Number X1-147-11-520-23) to provide funds for the Rehabilitation of Four Collection Systems. Interest is accrued at 3.00%, with principal and interest due in quarterly payments of $66,892 through August 1, 2032. The interest was reduced to 2.25% on December 28, 2011 resulting in remaining quarterly principal and interest payments of $62,433.

OTHER NOTES PAYABLE

2003 Town of Port Royal is a note payable issued from the Authority in the amount of $3,935,700, to the Town of Port Royal financing the purchase price for the Town of Port Royal water and wastewater system. Interest is accrued at 5%, with payments of principal and interest in the amount of $109,530, due quarterly through June 30, 2015.

2008 Department of the Navy is an unsecured note payable between the Authority and the US Department of the Navy, in the amount of $15,039,628 to finance the purchase price of the water and wastewater assets on the 4 military installations (Naval Hospital, Parris Island, Air Station, and Laurel Bay). Interest is accrued at 5% with monthly payments of principal and interest in the amount of $90,505 through May 31, 2033.

2009 Bank of America BAN is a $5,000,000 bond anticipation note, dated September 24, 2009 with a fixed rate per annum of 1.71%. The Series 2009 BAN was issued in anticipation of two State Revolving Fund bonds 2009A-ASR 3 and 2010A-Military Consolidation Project. Series 2009 BAN matured on September 24, 2010 when interest of $85,500 was due along with the principal balance of $5,000,000. This note was paid in full in fiscal year 2011.

53FINANCIAL

CHANGES IN LONG-TERM LIABILITIES

A summary of the long-term liability activity for 2011 and 2012 is presented in the following table:

Descrip�on Rate 6/30/2010 Addi�ons Reduc�ons 6/30/2011 Addi�ons Reduc�ons 6/30/2012 Current

2011

Revenue Bonds:Series 2001 3.55 to 4.3% 1,550,000$ - (495,000) 1,055,000$ - (525,000) 530,000$ 530,000Series 2006 4.0 to 5.0% 57,045,000 - (630,000) 56,415,000 - (690,000) 55,725,000 720,000Series 2010B 2.5 to 5.0% 38,065,000 - (3,995,000) 34,070,000 - (3,880,000) 30,190,000 4,190,000

96,660,000 - (5,120,000) 91,540,000 - (5,095,000) 86,445,000 5,440,000Add: 2006 & 2010 Bond Premiums 4,555,928 - (534,782) 4,021,146 - (606,373) 3,414,773 -Less: Deferred Amount on Refundings (2,704,957) - 284,400 (2,420,557) - 275,995 (2,144,562) -

179,015,89sdnoBeuneveRlatoT - (5,370,382) 93,140,589 - (5,425,378) 87,715,211 5,440,000

State Revolving Fund Loans:Series 1990 (COH) 2.25% 265,697$ - (175,143) 90,554$ - (90,554) -$ -Series 2000 (COH) 2.25% 570,070 - (41,547) 528,523 - (45,572) 482,951 47,511Series 2001B 2.25% 590,647 - (36,857) 553,790 - (40,813) 512,977 42,672Series 2004 2.25% 21,377,456 - (1,037,252) 20,340,204 - (1,100,077) 19,240,127 1,158,772Series 2005 2.25% 2,208,575 - (113,841) 2,094,734 - (124,027) 1,970,707 129,162Series 2008 2.25% 2,345,332 - (88,758) 2,256,574 - (99,501) 2,157,073 105,400Series 2009 2.25% 1,022,343 1,925,265 (117,463) 2,830,145 188,889 (118,395) 2,900,639 132,269Series 2010A 2.25% 8,091,286 4,958,511 (364,336) 12,685,461 284,512 (515,644) 12,454,329 558,461Series 2011A 1.00% - - - - - - - -Series 2011B 2.25% - - - - 508,586 - 508,586 120,252Total State Revolving Loans 36,471,406 6,883,776 (1,975,197) 41,379,985 981,987 (2,134,583) 40,227,389 2,294,499

Notes Payable2003 Town of PortDepartment of

Royal 5.00% 1,927,650$ - (348,198) 1,579,452$ - (365,937) 1,213,515$ 384,580Navy 5.00% 14,705,549 - (350,783) 14,354,766 - (365,399) 13,989,367 389,661

2009 Bank of America BAN 1.71% 5,000,000 - (5,000,000) - - - - -991,336,12elbayaPsetoNlatoT - (5,698,981) 15,934,218 - (731,336) 15,202,882 774,241

Total Long Term Liabili�es 156,615,576$ 6,883,776 $ 981,987 (8,291,297)(13,044,560) 150,454,792 143,145,482$ 8,508,740Less current por�on (12,791,589) )050,609,7( )047,805,8(

Total Long- 789,328,341tbeDmreT 247,845,241$ 247,636,431$ $

2012


Remaining debt service payments at June 30, 2012, including annual sinking fund payments, are as follows:

The components of the balance sheet entitled revenue bonds, state revolving fund, and notes payable from current liabilities, current liabilities payable from restricted assets, and long-term liabilities for 2011 and 2012 are as follows:

Principal Deferred Amounts 6/30/2011Current liabili�es:

Revenue Bonds 3,396,666$ -$ 3,396,666$ State Revolving Fund 1,872,291 - 1,872,291Notes 952,437elbayaP - 734,259

6,003,216Current liabili�es payable from designated & restricted assets:

Revenue Bonds 1,698,334 - 1,698,334State Revolving Fund 204,500 - 204,500Notes Payable - - -

1,902,834Long-term liabili�es:

Revenue Bonds 86,445,000 1,600,589 88,045,589State Revolving Fund 39,303,194 - 39,303,194Notes Payable 15,199,959 - 15,199,959

142,548,742

302,458,841SLATOT 985,006,1$ $ 150,454,792$

Principal Interest Principal Interest Principal Interest Principal Interest

2013 5,440,000 3,849,815 2,294,499 942,461 774,241 752,862 8,508,740 5,545,1382014 5,660,000 3,630,625 2,387,099 912,295 810,247 713,932 8,857,346 5,256,8522015 5,455,000 3,356,025 2,441,263 859,130 851,142 673,038 8,747,405 4,888,1932016 6,340,000 3,204,275 2,383,226 751,190 447,698 638,362 9,170,924 4,593,8272017 4,660,000 2,958,975 2,378,405 671,255 470,084 615,977 7,508,489 4,246,2072018-2022 26,250,000 11,541,375 12,682,720 2,522,100 2,727,381 2,702,919 41,660,101 16,766,3942023-2027 22,140,000 4,805,275 12,186,719 1,054,616 3,480,906 1,949,394 37,807,625 7,809,2852028-2032 10,500,000 1,207,125 3,473,458 132,386 4,442,620 987,679 18,416,078 2,327,1902033 & a�er - - - - 1,198,563 68,546 1,198,563 68,546

86,445,000$ 34,553,490$ 40,227,389$ 7,845,433$ 15,202,882$ 9,102,709$ 141,875,271$ 51,501,632$

TotalNotes PayableSRF LoansRevenue Bonds

55FINANCIAL

8. Pension Plan BJWSA is a member of the South Carolina Retirement System (SCRS), a division of the State Budget and Control Board. The Plan is a cost sharing, multi-employer defined benefit pension plan, offering retirement and disability benefits, group life insurance benefits, and survivor benefits. The SCRS grants cost-of-living adjustments on an ad hoc basis, subject to approval by the State Budget and Control Board. The provisions of the SCRS are established under Title 9 of the South Carolina Code of Laws. A Comprehensive Annual Financial Report containing financial statements and required supplementary information for the SCRS is publicly available on their website at www.retirement.sc.gov, or a copy may be obtained by submitting a request to SCRS.

All part-time and full-time, permanent employees must participate in the SCRS unless specifically exempted by statute or are eligible and elect to participate in the State Optional Retirement Plan (ORP). Mandatory employee contributions of 6.50% of earnable compensation were made through payroll deductions for fiscal years June 30, 2011 and 2010. All employers contribute at the actuarially required contribution rates. BJWSA, as a Class II employer, was required to contribute at a rate of 9.39%, 9.24%, and 9.24% of employee earnable compensation for fiscal years June 30, 2012, 2011, and 2010, respectively. For years ended June 30, 2012, 2011, and 2010, wages of $9,503,163, $9,154,916, and $9,080,571 were subject to retirement, representing 96.56%, 97.49%, and 97.35%, respectively, of total gross salaries. Total salaries were $9,842,188, $9,390,716, and $9,327,810 for 2012, 2011, and 2010 respectively. BJWSA is also required to contribute 0.15% of earnable compensation to the system for group life insurance. BJWSA’s contribution for retirement and life insurance for the fiscal years ended June 30, 2012, 2011, and 2010 were $906,127, $859,649, and $852,666 respectively, which is 9.54%, 9.39%, and 9.39%, respectively, of covered salaries. BJWSA contributed 100% of its annual required contributions for fiscal years 2012, 2011, and 2010.

An employee is vested after five years of service. Employees who retire at or after age 65 or have 28 years of credited service are entitled to an annual retirement benefit for life equal to 1.82% of average final compensation times years of credited service. Vested employees may retire at age 55 with 25 years of service, reduced 4% for each year of service under 28; or at age 60 with a 5% reduction for each year under age 65. The System also provides for disability retirement, which is based on the projection of service to age 65 with an actuarial reduction.

Principal Deferred Amounts

Premium net

6/30/2012Current liabili�es:

Revenue Bonds 3,626,589$ -$ 3,626,589$ State Revolving Fund 2,093,017 - 2,093,017Notes 142,477elbayaP - 774,241

6,493,847Current liabili�es payable from designated & restricted assets:

Revenue Bonds 1,813,411 - 1,813,411State Revolving Fund 201,482 - 201,482Notes Payable - - -

2,014,893Long-term liabili�es:

Revenue Bonds 81,005,000 1,270,211 82,275,211State Revolving Fund 37,932,890 - 37,932,890Notes Payable 14,428,641 - 14,428,641

134,636,742

172,578,141SLATOT 112,072,1$ $ 143,145,482$


9. Other Postemployment Benefits

PLAN DESCRIPTION

Other postemployment benefits (OPEB) are part of the total compensation offered to attract and retain the services of qualified employees. The Authority provides other postemployment benefits under a single-employer benefit plan. OPEB includes postemployment healthcare, as well as other forms of postemployment benefits (i.e., life insurance) when provided separately from a pension plan. Effective January 2005, the Authority authorized paying the total cost of individual health care insurance of “funded” retirees. Additional expenses for spouse, family, dental, etc., are not covered by the Authority. This plan does not issue separate financial statements.

A retiring employee under the South Carolina Budget and Control Board State Retirement Plan, who has at least 5 years of service with the Authority and in a full time, regular position, is eligible to elect post retirement coverage. Benefit eligibility is as follows:

• Retire at least age 60 with 5 years of service (if retire with less than 10 years of service, the participant will pay the full premium rates).

• Retire at least age 55 and 25 years of service (participant will pay full premium costs until age 60 or would have obtained 28 years of service, whichever is first, at which time they will pay the funded insurance rates).

• Retire with 28 years of service (participant will pay the full funded premium rates).

The medical plans offered provide hospital, medical, and pharmacy coverage. Eligible retirees are able to select from five medical plans as follows:

• Medical Savings Plan

• Standard State Health PPO

• Medicare Supplement Health Plan

• Blue Choice HMO

• Cigna HMO

FUNDING POLICY

The Authority contributed $98 monthly per retiree medical plan in fiscal year 2012. The Authority’s monthly per retiree contribution was $93, $93 and $93 for fiscal years 2011, 2010 and 2009 respectively. Retirees pay the full cost of dental coverage. The postretirement medical benefits are funded on a pay-as-you-go basis with inclusion in the annual expense budget. No assets have been segregated and restricted to provide postretirement benefits.

ANNUAL OPEB COST AND NET OPEB OBLIGATION

The Authority’s annual other post-employment benefit (OPEB) expense is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years.

57FINANCIAL

The Authority’s annual OPEB cost for the fiscal year 2012 is as follows:

The Authority’s annual OPEB cost, the percentage of annual cost contributed to the plan and the net OPEB obligation for fiscal years 2012, 2011, and 2010 are as follows:

2012 2011 2010Re stated Restate d

Annual OPEB 000,758Cost $ 1,103,000$ 1,068 ,000$

% of Annual OPEB Cost %6.41%6.41%4.91Contributed

Net OPEB 000,824,3Obliga�on $ 2,737,000$ 1,795 ,000$

FUNDED STATUS AND FUNDING PROGRESS

The below schedule shows the balance of the Authority’s actuarial accrued liability (AAL):

Actuarial valua�on date 1/1/2012

Actuarial value of plan assets (a) -

Actuarial accrued liability (AAL) (b) 7,830,678

Unfunded actuarial accrued liability (UAAL) (b-a) 7,830,678

Funded ra�o (a/b) %0

Es�mated covered payroll (c) 9,800,000

UAAL as % of covered payroll ([b-a]/c) 79.9%

The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of the plan assets is increasing or decreasing over time relative to the actuarial accrued liability.

Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events in the future. This may include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions by the Authority are subject to continual revision as actual results are compared to past expectations and new estimates are made concerning the future.

Funding interest %05.4etar

Annual required contribuon (ARC) 848,000$Interest on NOO (i) 000,321Amorzaon of NOO (ii) 000,411Annual OPEB cost (ARC+i-ii) 000,758

Annual employer contribuon 000,661Change in net OPEB obligaon 000,196

Net OPEB obligaon (NOO) as of beginning of year 2,737,000Net OPEB obliga�on end of year $ 3,428,000


Further, the valuation assumes that the Authority will continue to fund the liability on a pay-as-you-go basis and that its contribution for retiree benefits will remain the same.

ACTUARIAL METHODS AND ASSUMPTIONS

Actuarial calculations reflect a long-term perspective and employ methods and assumptions that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The actuarial cost method used in this valuation to determine the Actuarial Accrued Liability (AAL) and the Actuarial Required Contribution (ARC) was the Projected Unit Credit Method. Under this method, for each participant, benefits earned to date are calculated based on projected benefits based on accrual to the date of expected retirement and the participants benefit service, when eligible. Costs are attributed from the date of hire to the date first eligible for full benefits. The individual’s service cost is the actuarial present value of the benefit earned at the end of the plan year, less the beginning of the plan year. The individual’s actuarial accrued liability is the actuarial present value of benefits earned as of the beginning of the plan year. The Plan’s total annual normal cost and actuarial liability are the sum of the individual participant amounts.

Significant methods and assumptions used in valuing the AAL and benefits under the plan were as follows:

10. Net Assets Net assets represent the difference between assets and liabilities. The net asset amounts for fiscal years ended June 30, 2012 and 2011 were as follows:

Actuarial Methods and Assumptions

Investment rate of return 4.50%, net of expensesActuarial cost method Projected Unit Credit Cost MethodAmortization method Level as a percentage of employee payrollAmortization period Open 30 year periodSalary Growth 3.00% per annumInflationMedical Trend Starting at 7.25% and decreasing to 4.50% after 11 yearsDrug Trend

3.00% per annum

Starting at 7.25& and decreasing to 4.50% after 11 years

11022102Restated

Invested in Capital Assets, Net of Related Debt:Net property, plant and equipment in 079,934,704ecivres $ 408,501,052$Less: Debt as disclosed in note )172,578,141(7 (148,854,203)

Premium on 2006 & 2010 )377,414,3(sdnoB (4,021,146)Deferred amount on refunding 2,144,562 2,420,557

264,294,488 062,640,852

Restricted for Capital Ac�vity and Debt Service:Restricted Cash and Cash 118,398,4stnelaviuqE $ 4,986,724$Less: Debt service )508,483,3(liabili�es (3,380,344)

1,509,006 083,606,1

702,113,83Unrestricted 992,744,34

107,411,403Total Net Assets 939,990,303

JUNE 30

59FINANCIAL

11. Commitments and Contingencies

CONSTRUCTION COMMITMENTS

In the normal course of its business, BJWSA has numerous contracts for construction and other activities related to the capital improvement program that it is committed to complete and pay. As of June 30, 2012, BJWSA had open contracts (purchase orders) of $7,388,704, including approximately $398,772 retainage payable, to be paid upon further progress by contractors. As of June 30, 2011, the Authority had open contracts (purchase orders) of $6,492,976, including approximately $172,664 retainage payable, to be paid upon further progress by contractors.

SERVICE CONTRACTS

The Authority has entered into various long-term contracts to provide water and wastewater treatment services to retail and wholesale customers, including other local governments and utilities. Contracts vary as to the system’s capacity allocations and periodic revision in service rates.

GRANTS

Amounts received or receivable from government agencies are subject to audit and adjustment by those agencies. The Authority has never experienced noncompliance and has never been subject to adjustments or refunds as a result of such audits.

12. Risk ManagementThe Authority is exposed to various risks of loss relating to torts; theft of, damage to, and destruction of assets; errors and omissions; job-related injuries or illnesses to employees; natural disasters; and employee health and accident. To insure against casualty risks the Authority is a member of the State of South Carolina Insurance Reserve Fund, a public entity risk pool currently operating as a common risk management and insurance program for local governments in South Carolina.

The Authority acquires insurance from the State Accident Fund for job related injury and illness (Workers’ Compensation) to its employees. Through June 30, 2012, medical insurance coverage, encompassing health, dental, life, and other medical benefits to employees and their dependents, was obtained via the State’s group insurance program with an independent insurance company.

During 2012 and 2011, the Authority did not experience any significant uninsured claims. Accordingly, there was no liability or expense recorded for actual claims, and management does not believe any provision for unasserted claims is necessary.

13. Major CustomersRevenues from the largest three customers represented 6.61% and 6.22% of total operating revenues for fiscal years 2012 and 2011, respectively. No sales to a single major customer exceeded 10% of total operating revenues.


14. Department of the NavyIn 1997 the Department of the Navy (Navy) solicited proposals for the privatization of the water and sewer utilities on the Marine Corp Air Station (MCAS), Parris Island Marine Corp Recruit Depot (PI), Laurel Bay Housing (LB), and Naval Hospital Beaufort (NH). After many years of negotiation, the Authority’s proposal was accepted by the Navy in late 2007. In February 2008 the Authority and the Navy signed a 50-year, $252 million contract to privatize the water and sewer utilities effective September 1, 2008.

Under the terms of the contract, the Authority purchased the water and sewer facilities and agreed to provide operations and maintenance (O&M) services to the four installations for a set annual charge (Facility Charge). The Facility Charge is a flat monthly charge based on cost of service which can be re-determined every three years. On September 1, 2008, the Authority began providing O&M services to the four installations. The Authority recognized $1.28 million and $1.22 million in Military Retail Water revenue in fiscal years 2012 and 2011, respectively. The Authority recognized $3.34 million and $2.78 million in Wastewater revenue in fiscal years 2012 and 2011, respectively.

The Authority purchased the Navy water and sewer facilities for $15.3 million through a liability payable over 25 years at 5% interest. Payments began in September 2008, will end on August 31, 2033 and are made as a credit (purchase price credit) on the Navy’s monthly Facility charge invoice. During the years ended June 30, 2012 and 2011, the Navy liability was reduced by $365 thousand and $351 thousand via purchase price credits with an ending balance of $14.0 million and $14.4 million, respectively.

The Navy agreed to pay the Authority $42.1 million to bring the military water and wastewater systems up to industry standards. These construction projects are Initial System Modifications (ISMs) and represent a receivable for the Authority. The ISM’s will be reimbursed by the Navy in the following manner: (1) $8.97 million at commencement of contract which is the Navy’s share of the completed Port Royal Island Water Reclamation Facility (PRIWRF) plant expansion, (2) $7.32 million when consolidation construction is completed (paid September 2010) and (3) $11.99 million paid over 20 years at 4% interest with partial payments beginning in fiscal year 2012 and full payments starting in fiscal year 2015. The Authority did not receive any payments in fiscal year 2010, however the receivable and unearned revenue for the ISM’s were reduced by a price adjustment of $1.33 million resulting in a remaining receivable balance of $31.8 million. During fiscal year 2011, the Authority received an ISM payment of $7.32 million reducing the receivable. Additionally during fiscal year 2011, the receivable and unearned revenue for the ISM’s were increased by a price adjustment of $959 thousand resulting in a remaining receivable balance of $25.4 million for fiscal year 2011. The Authority received $285 thousand in principal payments in fiscal year 2012.

On September 1, 2008, the Authority recorded $42.1 million of unearned revenue for the ISM projects. During the fiscal year 2011 the Authority recognized Military construction revenue of $13.8 million for the completion of the consolidation project and $4.9 million for completion of phase I ISM projects. During the fiscal year 2012 $4.9 million in construction revenue was recognized for the phase II ISM projects completed. Military construction revenue is non-operating revenue and appears as such on the financial statements.

15. New Accounting PronouncementsNo new accounting pronouncements have an impact on the Authority’s financial statements.

61FINANCIAL

16. Prior Period AdjustmentsNet assets for fiscal year 2011 have been restated as a result of the correction of an error in previous periods. Errors in financial statements result from mathematical mistakes, mistakes in the application of accounting principles, or oversight or misuse of facts that existed at the time the financial statements were prepared. The Authority’s prior period adjustments are the result of an oversight or misuse of facts that existed during preparation of the financial statements. The prior period adjustments relate to 1) capacity fee revenue recognized in fiscal years 2009 and 2011 and 2) the Authority’s annual OPEB cost calculated by the prior actuarial firm in fiscal years 2009, 2010, and 2011. The prior period adjustments reversed capacity fee revenue of $186,118 and $471,240 in fiscal years 2009 and 2011, respectively. The full amount of subsidies provided by the Authority were not included in the calculation of prior year OPEB costs, thus prior period adjustments recognized additional Other Post Retirement Benefits liability in the amounts of $604,000, $695,000, and $717,000 for the fiscal years 2009, 2010, and 2011, respectively. The effect of the prior period adjustments on fiscal year 2012 beginning net assets is $2,673,358. The effect of the prior period adjustments on fiscal year 2011 beginning net assets is $1,485,118. Net assets reported on the financial statements reflect these adjustments.

The following summarizes the effect of the prior period adjustments on the financial statements at June 30, 2011:

17. Subsequent Events

CHANGES IN LONG-TERM DEBT

On July 26, 2012 the BJWSA Board of Directors approved the “2012 Series Resolution” approving the financing of the Purrysburg-Levy water line through the borrowing of not exceeding $14,084,900 from the South Carolina Water Quality Revolving Fund. This State Revolving Fund loan was officially closed on July 27, 2012.

On July 26, 2012 the BJWSA Board of Directors approved the resolution allowing debt service reserve funds to be released and applied to the respective loan payments in accordance with changes to the program procedures of the South Carolina Water Quality Revolving Fund.

Restated ChangeBalance SheetCurrent liabili�es:

Accounts payable and accrued expenses 3,439,922$ 4,097,280$ 657,358$Long term liabili�es:

Other post re�rement benefits liability 721,000 2,737,000 2,016,000Net assets:

756,021,64Unrestricted 43,447,299 (2,673,358)

Statement of Revenues, Expenses and Changes in Net AssetsOpera�ng expenses:Water:

General, administra�ve, customer service and other 4,003,091 4,433,291 430,200Wastewater:

General, administra�ve, customer service and other 2,682,869 2,969,669 286,800

Capital contribu�ons:Capacity fees 1,235,919 764,679 (471,240)

Increase (decrease) in net 838,358,61assets 15,665,598 (1,188,240)

2011As previously

reported


SCHEDULE OF FUNDING PROGRESS FOR THE POSTEMPLOYMENT HEALTHCARE PLAN

REQUIRED SUPPLEMENTARY INFORMATION

Actuarial Valua�on

Date

Actuarial value of

plan assets (a)

Actuarial accrued

liability (AAL) (b)

Unfunded actuarial accrued

liability (UAAL) (b-a)

Funded ra�o (a/b)

Es�mated covered payroll

(c)

UAAL as % of covered payroll

([b-a]/c)

1/1/2010 - 9,603,000 9,603,000 0% 9,400,000 102.2%1/1/2012 - 7,830,678 7,830,678 0% 9,800,000 79.9%

63FINANCIAL



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 Board of Directors of Beaufort-Jasper Water & Sewer Authority Beaufort, South Carolina

We have audited the financial statements of Beaufort-Jasper Water & Sewer Authority (the “Authority”) as of and for the year ended June 30, 2012, and have issued our report thereon dated November 9, 2012. 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.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Authority is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the Authority’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control over financial reporting.

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.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we identified certain deficiencies in internal control over financial reporting, described below that we consider to be significant deficiencies in internal control over financial reporting. 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.

Significant Deficiency related to prior period adjustments

CONDITION

Restatement of prior periods was required due to errors in previously issued reports.

CAUSE

Unique clauses included in engineering contracts were not relayed to the finance department prior to the reporting of revenues earned under those contracts. The result was that revenue was recognized for capacity sold in 2009 and 2011, for which no revenue was actually earned.

65FINANCIAL

The prior actuary engaged by the Authority to determine the valuation of Other Post Employment Benefit (OPEB) expense and liability excluded subsidies paid by the Authority in the calculation of the Net OPEB Obligation. The result was that the OPEB liability and expense were understated and net assets were overstated in prior years.

RECOMMENDATION

Our understanding is that management has already drafted and implemented a new Standard Operating Procedure to address this item. We recommend that management follow through with this implementation, which should include additional communication between the engineering and finance departments and that all new engineering contracts are reviewed by finance for clauses that could affect financial amounts reported.

Since Management has already engaged a different actuarial firm from the firm used for the June 30, 2011 and prior financial statements, to assist in calculation of the OPEB expense and liability, we recommend management continue to review the information provided by the actuarial firm, in order to assess the reasonableness of the information provided.

MANAGEMENT’S RESPONSE AND CORRECTIVE ACTION PLAN

Management concurs with the finding and has already taken steps to implement the recommendation as practically possible.

COMPLIANCE AND OTHER MATTERS

As part of obtaining reasonable assurance about whether the Authority’s financial statements are free of material misstatement, we performed tests of 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.

We noted certain matters that we reported to management of the Authority, in a separate letter dated November 9, 2012.

Beaufort-Jasper Water & Sewer Authority’s response to the findings identified in our audit is described above. We did not audit the Authority’s response and, accordingly, we express no opinion on it.

This report is intended solely for the information and use of management, the Governing Board, others within the Authority, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.

Augusta, Georgia November 9, 2012


The following system schedules and analysis are furnished solely as supplementary information and are not required by GAAP.

BUDGETARY COMPARISON SCHEDULEYear ended June 30, 2012

(with comparative amounts for the fiscal year ended June 30, 2011)

SUPPLEMENTARY FINANCIAL DATA

NOTE: For purposes of comparison to budget, the actual data excludes developer capital contributions and grants which were not budgeted.

2011Actual Budget Actual Dollars % Dollars %

RestatedOpera�ng revenuesCivilian wholesale 2,644,205$ 2,068,485$ 2,301,922$ 575,720$ 27.8% 342,283$ 14.9%Military wholesale 1,099,139 1,142,478 1,032,150 (43,339) -3.8% 66,989 6.5%Retail 20,773,081 20,726,493 20,375,730 46,588 0.2% 397,351 2.0%Other 2,039,395 1,801,400 1,948,417 237,995 13.2% 90,978 4.7%

Total water opera ng revenues 26,555,820 25,738,856 25,658,219 816,964 3.2% 897,601 3.5%

Wastewater service 19,084,644 18,585,227 17,071,938 499,417 2.7% 2,012,706 11.8%Other 158,871 165,000 196,739 (6,129) -3.7% (37,868) -19.2%

Total wastewater opera ng revenues 19,243,515 18,750,227 17,268,677 493,288 2.6% 1,974,838 11.4%

533,997,54Total opera�ng revenues 44,489,083 42,926,896 1,310,252 2.9% 2,872,439 6.7%

Opera�ng expensesWater opera ng expenses:

Source of supply 618,147 569,307 533,538 (48,840) -8.6% (84,609) -15.9%Water treatment 4,190,573 4,123,875 3,953,612 (66,698) -1.6% (236,961) -6.0%Transmission and distribu on 3,658,777 3,551,102 3,287,614 (107,675) -3.0% (371,163) -11.3%Laboratory and tes ng 341,217 347,265 328,279 6,048 1.7% (12,938) -3.9%Engineering & construc on services, incl. mapping 435,429 454,666 401,923 19,237 4.2% (33,506) -8.3%Franchise fee 620,100 610,000 603,169 (10,100) -1.7% (16,931) -2.8%Customer service, including meter reading 1,223,482 1,263,029 1,157,517 39,547 3.1% (65,965) -5.7%General and administra ve 2,836,836 2,810,887 2,873,851 (25,949) -0.9% 37,015 1.3%

Total water opera ng expenses (excl. depr.) 13,924,561 13,730,131 13,139,503 (194,430) -1.4% (785,058) -6.0%

Wastewater opera ng expenses:Collec on & transmission 3,409,170 3,421,564 3,190,301 12,394 0.4% (218,869) -6.9%Wastewater treatment 2,893,497 2,871,817 2,781,765 (21,680) -0.8% (111,732) -4.0%Wastewater disposal 222,731 220,936 251,607 (1,795) -0.8% 28,876 11.5%Sludge management 321,885 331,116 333,722 9,231 2.8% 11,837 3.5%Laboratory and tes ng 377,156 364,336 374,336 (12,820) -3.5% (2,820) -0.8%Engineering & construc on services, incl. mapping 294,788 303,466 268,056 8,678 2.9% (26,732) -10.0%Franchise fee 489,156 479,000 465,377 (10,156) -2.1% (23,779) -5.1%Customer service, including meter reading 811,814 834,472 762,443 22,658 2.7% (49,371) -6.5%General and administra ve 1,922,331 1,878,506 1,939,170 (43,825) -2.3% 16,839 0.9%

Total wastewater opera ng expenses (excl. depr.) 10,742,528 10,705,213 10,366,777 (37,315) -0.3% (375,751) -3.6%

Opera�ng expenses before deprecia�on 24,667,089 24,435,344 23,506,280 (231,745) -0.9% (1,160,809) -4.9%Deprecia on - Water 10,060,686 9,922,000 9,825,830 (138,686) -1.4% (234,856) -2.4%Deprecia on - Wastewater 13,169,552 13,127,000 12,739,599 (42,552) -0.3% (429,953) -3.4%

723,798,74sesnepxegnitarepolatoT 47,484,344 46,071,709 (412,983) -0.9% (1,825,618) -4.0%

)299,790,2()ssol(emocnignitarepO (2,995,261) (3,144,813) 897,269 30.0% 1,046,821 33.3%Non-opera ng revenues (expenses), net 275,080 1,979,473 14,956,491 (1,704,393) -86.1% (14,681,411) 98.2%

Increase (decrease) in net assets,)219,228,1(snoitubirtnoclatipacerofeb (1,015,788) 11,811,678 (807,124) 79.5% (13,634,590) 115.4%

815,758,1seefyticapaC 2,000,000 764,679 (142,482) -7.1% 1,092,839 142.9%

Increase (decrease) in net assets (see note) 34,606$ 984,212$ 12,576,357$ (949,606)$ -96.5% (12,541,751)$ 99.7%

NOTE:

lautcA11022102

For purposes of comparison to budget, the actual data excludes developer capital contribu ons and grants which were not budgeted.

Variance of FY 2012 Actual Data To

Favorable (Unfavorable)

Budget

67FINANCIAL

BUDGETARY COMPARISON SCHEDULE BY FUNCTIONAL CLASSIFICATIONYear ended June 30, 2012

(with comparative amounts for the fiscal year ended June 30, 2011)

NOTE: For purposes of comparison to budget, the actual data excludes developer capital contributions and grants which were not budgeted.

2011Actual Budget Actual Dollars % Dollars %

RestatedOpera�ng revenues

Civilian wholesale 2,644,205$ 2,068,485$ 2,301,922$ 575,720$ 27.8% 342,283$ 14.9%

Military wholesale 1,099,139 1,142,478 1,032,150 (43,339) -3.8% 66,989 6.5%

Retail 20,773,081 20,726,493 20,375,730 46,588 0.2% 397,351 2.0%

Other 2,039,395 1,801,400 1,948,417 237,995 13.2% 90,978 4.7%

Total water opera ng revenues 26,555,820 25,738,856 25,658,219 816,964 3.2% 897,601 3.5%

Wastewater service 19,084,644 18,585,227 17,071,938 499,417 2.7% 2,012,706 11.8%

Other 158,871 165,000 196,739 (6,129) -3.7% (37,868) -19.2%

Total wastewater opera ng revenues 19,243,515 18,750,227 17,268,677 493,288 2.6% 1,974,838 11.4%

533,997,54seunevergnitarepolatoT 44,489,083 42,926,896 1,310,252 2.9% 2,872,439 6.7%

Opera�ng expenses by Func�on

Source of supply 618,147 569,307 533,538 (48,840) -8.6% (84,609) -15.9%

Water treatment 4,190,573 4,123,875 3,953,612 (66,698) -1.6% (236,961) -6.0%

Transmission and distribu on 3,658,777 3,551,102 3,287,614 (107,675) -3.0% (371,163) -11.3%

Collec on & transmission 3,409,170 3,421,564 3,190,301 12,394 0.4% (218,869) -6.9%

Wastewater treatment 2,893,497 2,871,817 2,781,765 (21,680) -0.8% (111,732) -4.0%

Wastewater disposal 222,731 220,936 251,607 (1,795) -0.8% 28,876 11.5%

Sludge management 321,885 331,116 333,722 9,231 2.8% 11,837 3.5%

Laboratory and tes ng 718,373 711,601 702,615 (6,772) -1.0% (15,758) -2.2%

Franchise fee 1,109,256 1,089,000 1,068,546 (20,256) -1.9% (40,710) -3.8%

Engineering & construc on services, incl. mapping 730,217 758,132 669,979 27,915 3.7% (60,238) -9.0%

Customer service, including meter reading 2,035,296 2,097,501 1,919,960 62,205 3.0% (115,336) -6.0%

General and administra ve 4,759,167 4,689,393 4,813,021 (69,774) -1.5% 53,854 1.1%

Opera�ng expenses before deprecia�on 24,667,089 24,435,344 23,506,280 (231,745) -0.9% (1,160,809) -4.9%

Deprecia on 23,230,238 23,049,000 22,565,429 (181,238) -0.8% (664,809) -2.9%

723,798,74sesnepxegnitarepolatoT 47,484,344 46,071,709 (412,983) -0.9% (1,825,618) -4.0%

)299,790,2()ssol(emocnignitarepO (2,995,261) (3,144,813) 897,269 30.0% 1,046,821 33.3%

Non-opera ng revenues (expenses), net 275,080 1,979,473 14,956,491 (1,704,393) -86.1% (14,681,411) 98.2%

Increase (decrease) in net assets,

(1,015,788) 11,811,678 (807,124) 79.5% (13,634,590) 115.4%

2,000,000 764,679 (142,482) -7.1% 1,092,839 142.9%

Increase (decrease) in net assets (see note) $ 984,212$ 12,576,357$ (949,606)$ -96.5% (12,541,751)$ 99.7%

NOTE: For purposes of comparison to budget, the actual data excludes developer capital contribu ons and grants which were not budgeted.

Favorable (Unfavorable)

Budget lautcA11022102

Variance of FY 2012 Actual Data To

34,606

Capacity fees 1,857,518before capital contribu�ons (1,822,912)


Budget SummaryOperating revenues were $45.8 million, an increase of 6.7%, or $2.9 million, compared to prior year actual, and 2.9%, or $1.3 million, over budget. The revenue overage to budget is primarily in the areas of civilian wholesale and residential wastewater sales. Civilian wholesale consumption was greater than anticipated. Residential wastewater sales overage to budget is a result of customer growth and a rate increase.

Total water operating revenues were $26.6 million, an increase of 3.5%, or $900 thousand, compared to prior year actual, and 3.2% or $817 thousand above budget. The overage to budget is due to the addition of 1,016 new water customers in fiscal year 2012 compared to projections of 325, as well as an increase in wholesale water consumption.

Total wastewater operating revenues were $19.2 million, an increase of 11.4%, or $2 million, over the prior year actual, and 2.6%, or $493 thousand, over budget. The increase compared to budget was due to an increase in commercial sewer sales. Average monthly commercial sewer volume increased from 25.70 kgals in fiscal year 2011 to 27.98 kgals in fiscal year 2012.

Direct operational costs for water (excluding depreciation) were over budget 1.4% or approximately $194 thousand. Over budget expenditures for water were primarily related to the following functions and accounts:

• Source of supply – $49 thousand over budget due primarily to power costs and unanticipated maintenance on pumps and treatment equipment.

• Water treatment – $67 thousand over budget due to chemical costs as a result of the increase in production.

• Transmission and distribution – $108 thousand over budget is a result of the removal of the center pedestal and bulwarks associated with the Port Royal Railroad in the Whale Branch.

• Franchise fees – $11 thousand over budget due to the increase in water sales.

• General and administrative – $26 thousand over budget as a result of an increase in other postemployment benefits.

Direct operational costs for wastewater (excluding depreciation) were over budget 0.3% or approximately $37 thousand. Over budget expenditures for wastewater were primarily related to the following functions and accounts:

• Wastewater treatment – $22 thousand over budget due primarily to fuel.

• Laboratory and testing – $13 thousand over budget largely due to additional lab sampling and supplies.

• Franchise fees – $10 thousand over budget due to the increase in sewer sales.

• General and administrative – $44 thousand over budget as a result of an increase in other postemployment benefits.

Although total operating expenses (excluding depreciation) increased $1.2 million, operating revenues increased $2.9 million compared to prior year, thus the Authority’s operating margin increased by 2% compared to prior year. As compared to the $1.83 generated in fiscal year 2011, $1.86 was generated for every $1.00 expensed in 2012.

69FINANCIAL

SCHEDULE OF EXPENSES BY NATURAL CLASSIFICATIONBUDGET AND ACTUALYear ended June 30, 2012

(with comparative actual amounts for the fiscal year ended June 30, 2011)

SCHEDULE OF NET EARNINGS FOR DEBT SERVICE AND DEBT COVERAGEYears ended June 30, 2012 and 2011

Budge t Actual

V ariance -

Favorable

(Unfavorable )

2 0 1 1

Actual

Re state d

Incre ase

(De cre ase )

from 2 0 1 1 to

2 0 1 2

Salaries and 146,470,9agesw $ 9 ,1 3 4 ,9 8 6$ (6 0 ,34 5 )$ 8 ,68 6 ,3 3 2$ 5 .2 %Payroll taxes and benefits 796,404,3 3 ,7 6 0 ,8 1 7 (3 5 6 ,1 2 0 ) 3 ,81 9 ,8 7 8 1 .5 %Repairs and maintenance 009,572,2 2 ,4 7 4 ,3 5 7 (1 9 8 ,4 5 7 ) 2 ,25 3 ,9 58 9 .8 %

101,889,1Supplies 1 ,9 7 7 ,1 2 4 1 0 ,97 7 1 ,7 7 0 ,3 7 2 1 1 .7 %Professional 008,000,1services 7 6 7 ,6 7 0 2 3 3 ,1 3 0 8 0 1 ,5 7 4 4 .2 %

076,823,3U�li�es 3 ,3 2 7 ,5 4 4 1 ,1 2 6 3 ,1 0 8 ,0 52 7 .1 %Opera�ng leases, fees, memberships 1 ,00 6 ,24 2 9 7 9 ,9 7 1 2 6 ,2 7 1 1 ,02 4 ,5 5 9 4 .4 %Franchise fees, licenses and permits 1 ,2 1 5 ,1 6 3 1 ,2 1 5 ,8 2 0 (6 5 7 ) 1 ,17 3 ,1 1 7 3 .6 %Safety training, supplies & services 1 5 2 ,1 8 5 1 2 8 ,6 9 1 2 3 ,49 4 8 8 ,9 3 9 4 4 .7 %Travel and training 537,022 1 5 9 ,0 4 4 6 1 ,69 1 1 3 3 ,6 74 1 9 .0 %

012,052Insurance 2 4 7 ,7 6 4 2 ,4 4 6 2 3 2 ,3 15 6 .7 %Other 000,815expense 4 9 3 ,3 0 1 2 4 ,69 9 4 1 3 ,5 10 1 9 .3 %Deprecia�on 000,940,32expense 2 3 ,2 3 0 ,2 3 8 (1 8 1 ,2 3 8 ) 2 2 ,5 6 5 ,4 2 9 2 .9 %Before interest expense & amor�za�on 4 7 ,4 8 4 ,3 4 4 4 7 ,8 9 7 ,3 2 7 (4 1 2 ,9 8 3 ) 4 6 ,0 7 1 ,7 0 9 %0.4Interest expense and amor�za�on 6 ,3 2 0 ,8 2 8 5 ,5 8 6 ,0 1 7 7 3 4 ,8 1 1 6 ,1 8 1 ,4 1 4

271,508,35Total expenses $ 5 3 ,4 8 3 ,3 4 4$ 3 2 1 ,8 2 8$ 5 2 ,2 5 3 ,1 2 3$

2012

2012 2011Restated

Opera�ng income )299,790,2()ssol( $ (3,144,813)$

Deprecia�on 832,032,32esnepxe 22,565,429Contributed capital - cash 815,758,1 764,679Interest income, excluding bond interest income 372,869 61,600

336,263,32Net earnings per bond resolu�on $ 20,246,895$

002,933,21Total debt service paid $ 12,469,603$

98.1Debt coverage 1.62

47.1Debt coverage without capacity fees 1.56

Adjustments to derive net earnings:


STATISTICAL


STATISTICAL CONTENTS

These schedules contain trend information showing the changes in the Authority’s financial performance over time, the affordability of current levels of outstanding debt, and the Authority’s ability to manage debt in the future:

Schedule of Changes in Revenues and Expenses, and 73 Debt Service Coverage – Last Ten Fiscal Years

Schedule of Changes in Net Assets – Last Ten Fiscal Years 74

Net Assets at End of Year Graph 74

Net Assets by Component – Last Ten Fiscal Years 75

Ratio Analysis 75

Ratio of Outstanding Debt by Type 76

Debt Service Coverage Analysis 76

These schedules contain infrastructure data which shows how the Authority’s financial reports relate to its activities:

Detailed Schedule of Changes in Capital Assets – Last Ten Fiscal Years 77

Schedule of Net Property, Plant, and Equipment – Last Ten Fiscal Years 77

These schedules contain information identifying the factors affecting the Authority’s ability to generate revenue:

Wholesale and Retail Water Sales Volume Historical Data – Last Ten Fiscal Years 78

Retail Water Sales Volume Historical Data by Area – Last Ten Fiscal Years 78

Wholesale Water Revenues by Area and Average Revenue 79 per Thousand Gallons (kgal) – Last Ten Fiscal Years

Retail Water Revenues by Area and Average Revenue 80 per Thousand Gallons (kgal) – Last Ten Fiscal Years

Wastewater Flows and Capacities by Plant – Last Nine Fiscal Years 81

Wastewater Customer Base by Plant – Last Nine Fiscal Years 82

Wastewater Revenues by Area and Average Revenue 83 per Thousand Gallons (kgal) – Last Nine Fiscal Years

These schedules offer demographic and economic indicators showing the environment in which the Authority operates:

Customer Statistics at Fiscal Year-End from 1997 84

Billings at Fiscal Year-End from 2000 84

Water Sales & Customer History Graph 85

Wastewater Sales & Customer History Graph 85

Water and Wastewater Ten-Year Rate Comparisons and Graph 86

Population/Per Capita Income Chart 87

Wage/Salary Employment Chart 87

Unemployment Rate Chart 87

Principal Employers 88

These schedules contain operational and service information to convey how the Authority’s financial reports relate to its services:

Full-time Equivalent Employees by Function 89

Ten Largest Water Customers 90

Ten Largest Wastewater Customers 91

Insurance in Force 92

FINANCIAL TRENDS AND DEBT CAPACITY

CAPITAL ASSETS

REVENUE CAPACITY

DEMOGRAPHIC AND ECONOMIC

INFORMATION

OTHER OPERATIONAL INFORMATION

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(1) T

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94,8

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23,7

611

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665

14

143,

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426

16

$

2004

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1,57

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6$

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117

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7,7

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5220

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2007

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92,3

41

255,

148,

367

280,

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$

$

2009

(4,6

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56)

(4$

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288

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7$

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$

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$

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275,

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NET

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$350

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$250

,000

,000

$200

,000

,000

$50,

000,

000

$100

,000

,000

$150

,000

,000

2010

2011

2012

2003

2004

2005

2006

2007

2008

2009

Net

Ass

ets

at E

nd o

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net o

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liab

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21$

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2003

2004

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1,81

913

4,9

$

3,16

6,85

21,

7

20,2

20,7

5324

,1

3,80

9,42

416

0,8

$

2005

17,5

1414

4,97

6,4

$

57,8

261,

177,

5

86,0

8732

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61,4

2717

8,18

7,7

$

2006

0115

9,18

0,13

0$

951,

910,

358

5643

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5220

4,96

2,34

1$

2007

208,

102,

985

$$

319,

864

46,7

25,5

18

255,

148,

367

$

$

2008

2

240,

777,

137

25$

311,

601

2

39,1

51,9

703

280,

240,

708

28

8$

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201

4,63

9,49

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7,56

$

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1,63

1,29

5,43

628

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287,

43$

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11

8,45

725

8,04

6,26

$

1,26

91,

606,

38

4,61

543

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4,34

130

3,09

9,93

$

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026

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01,

509,

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sted

in c

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20

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20

05

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20

07

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0

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2010

2011

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2003

2004

2005

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2008

2009

Ope

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Last

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75STATISTICAL – FINANCIAL TRENDS AND DEBT CAPACITY


Fisc

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2010

2003

2004

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2006

2007

2008

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Cas

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Serv

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Cov

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nd R

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1.40

2011

1.74

2012

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123,

295,

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167

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12

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8$

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-

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40

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NO

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ity a

cqui

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ns in

clud

e:To

wn

of P

ort R

oyal

172,993,4

$Ju

ly,2

003

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

PPE

in S

ervi

ce20

5,44

3,62

4$

239,

214,

852

$30

7,05

3,58

8$

324,

183,

811

$41

4,87

3,36

3$

447,

732,

878

$52

1,74

5,68

3$

545,

434,

175

$57

6,11

0,68

6$

584,

579,

798

$A

ccum

ulat

edde

prec

ia�o

n(4

6,30

6,45

7)(5

7,36

5,54

0)(6

9,92

2,73

2)(8

3,23

8,49

6)(9

7,06

1,06

5)(1

15,0

47,1

72)

(130

,734

,806

)(1

52,2

76,8

22)

(174

,536

,320

)(1

93,4

15,2

99)

Net

PPE

in

Serv

ice

159,

137,

167

181,

849,

312

237,

130,

856

240,

945,

315

317,

812,

298

332,

685,

706

391,

010,

877

393,

157,

353

401,

574,

366

391,

164,

499

Cons

truc

�on

in p

rogr

ess

50,6

00,0

4759

,784

,443

27,2

53,9

4748

,480

,417

24,8

79,7

6747

,449

,043

13,9

26,1

4821

,026

,680

6,92

6,68

616

,275

,471

209,

737,

214

$

241,

633,

755

$

264,

384,

803

$

289,

425,

732

$

342,

692,

065

$

380,

134,

749

$

404,

937,

025

$

414,

184,

033

$

408,

501,

052

$

407,

439,

970

$

Net

PPE

SCH

EDU

LE O

F N

ET P

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RTY,

PLA

NT

& E

QU

IPM

ENT

(PP

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st te

n fis

cal y

ears

DET

AIL

ED S

CH

EDU

LE O

F C

HA

NG

ES IN

CA

PITA

L A

SSET

SLa

st te

n fis

cal y

ears

77STATISTICAL – CAPITAL ASSETS


Tow

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uss

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Dep

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(tho

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In Ju

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ser

vice

to th

e fo

rmer

cus

tom

ers

o

he T

own

of P

ort R

oyal

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

City

of B

eauf

ort

487,

437

505,

568

491,

854

496,

045

524,

882

528,

623

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6,77

91.

67M

CAS

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fort

132,

533

192,

174

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02M

CAS

Beau

fort

171,5916

0,85

81.

6980

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146,

309

1.82

89,8

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396

$ 2,

003,

070

3,

334,

072

$ 2,

296,

118

3,

743,

344

$

2007

2010

2003

2004

2005

2006

2011

2009

2008

2012

WH

OLE

SALE

WA

TER

REV

ENU

ES B

Y A

REA

AN

D A

VER

AG

E RE

VEN

UE

PER

KGA

LLa

st te

n fis

cal y

ears

79STATISTICAL – REVENUE CAPACITY


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2003

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2004

2009

2010

2011

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WA

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S A

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WA

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2009

2004

2007

2005

2006

2011

2010

2012



Year Water % Inc Wastewater % Inc

1997 6,900 038,1 26.52%

1998 9,090 31.7% 3,000 63.9% 33.00%

1999 18,780 106.6% 8,910 197.0% 47.44%

2000 21,453 14.2% 11,033 23.8% 51.43%

2001 22,899 6.7% 11,981 8.6% 52.32%

2002 25,234 10.2% 14,014 17.0% 55.54%

2003 28,930 14.6% 16,120 15.0% 55.72%

2004 32,687 13.0% 19,167 18.9% 58.64%

2005 37,182 13.8% 21,499 12.2% 57.82%

2006 40,546 9.0% 24,647 14.6% 60.79%

2007 43,499 7.3% 27,232 10.5% 62.60%

2008 45,311 4.2% 28,786 5.7% 63.53%

2009 45,464 0.3% 28,483 -1.1% 62.65%

2010 46,279 1.8% 29,214 2.6% 63.13%

2011 46,785 1.1% 29,928 2.4% 63.97%

2012 47,801 2.2% 30,936 3.4% 64.72%

Number of Customers

Ra�o of Customers with Both services

Year Water % Inc Wastewater % Inc

2000 4,625,622 1,071,0002001 5,726,883 23.8% 1,401,000 30.8%

2002 6,071,751 6.0% 1,619,000 15.6%

2003 5,484,617 -9.7% 1,774,000 9.6%

2004 6,069,040 10.7% 1,978,467 11.5%

2005 6,300,397 3.8% 2,081,527 5.2%

2006 6,918,014 9.8% 2,412,162 15.9%

2007 8,538,526 23.4% 2,871,476 19.0%

2008 8,046,684 -5.8% 3,091,499 7.7%

2009 7,726,434 -4.0% 2,942,817 -4.8%

2010 7,583,604 -1.8% 2,778,950 -5.6%

2011 8,553,637 12.8% 3,036,790 9.3%

2012 8,559,110 0.1% 3,031,391 -0.2%

CUSTOMER STATISTICSNumber of customers at fiscal year-end

BILLINGS AT FISCAL YEAR-END Reported in kgals (thousands of gallons)

WATER SALES & CUSTOMER HISTORY

kgal

s

cust

omer

s10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

40,000

30,000

20,000

10,000

50,000

2010 20112003 2004 2005 2006 2007 2008 2009 2012


WASTEWATER SALES & CUSTOMER HISTORY

kgal

s

cust

omer

s2,500,000

3,000,000

3,500,000

2,000,000

1,500,000

1,000,000

500,000

20,000

15,000

10,000

5,000


25,000

30,000

35,000

2010 2011 20122003 2004 2005 2006 2007 2008 2009

85STATISTICAL – DEMOGRAPHIC AND ECONOMIC INFORMATION


The following chart shows the change in rates for an average customer (defined as 7 thousand gallons per month residential water usage) from fiscal year 2004 to fiscal year 2013 Budget, utilizing the fiscal year 2004 through 2012 rates as adopted, and the budgeted rate effective July 1, 2012, for fiscal year 2013.

Commercial

Residen�al

MinimumUsageMinimumUsage

$5.00$3.05

$3.05

$5.00 $5.00$3.32 $3.32$5.00 $5.00$3.32 $3.32

$5.00 $5.00$3.32 $3.32$5.00 $5.00$3.32 $3.32

$6.00 $6.00$3.32 $3.32$6.00 $6.00$3.32 $3.32

$6.00 $6.00$3.32 $3.46$6.00 $6.00$3.32 $3.46

$6.00$3.46$6.00$3.46

Basic Facili�es Chargeper thousand gallonsBasic Facili�es Chargeper thousand gallons

Commercial

Residen�al

MinimumPer Thousand GallonsMinimum

Maximum per month $38.00

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Bud

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Bud

$5.00$4.75$5.00$4.75

$5.00$5.30$5.00$5.30

$42.00

$5.00$5.30$5.00$5.30

$42.00

$5.00$5.05$5.00$5.05

$40.00

$5.00$5.30$5.00$5.30

$42.00

$6.00$5.60$6.00$5.60

$45.00

$6.00$6.05$6.00$6.05

$48.00

$6.00$5.60$6.00$5.60

$45.00

$6.00$5.60$6.00$5.60

$45.00

$6.00 Basic Facili�es Charge$6.05 per thousand gallons$6.00 Basic Facili�es Charge$6.05 per thousand gallons

$48.00 Residen�al Maximum

WATER RATE COMPARISONS Effective date

WASTEWATER RATE COMPARISONS Effective date

MONTHLY WATER & WASTEWATER BILL FOR 7KGAL RESIDENTIAL CUSTOMER

$70.00$80.00

$50.00$50.00

$40.00$30.00$20.00$10.00

2007200620052004 2008 2009 2010

Water Only Wastewater Only Total Bill

$74.24$74.24$70.24$70.24$70.24

$29.24

$45.00

2011

$74.24

$29.24

$45.00

2012

$78.22

$30.22

$48.00

Budget2013

$78.22

$30.22

$48.00$45.00

$29.24$28.24$28.24

$42.00$42.00

$28.24

$42.00

$68.24

$28.24

$40.00

$64.35

$26.35

$38.00

Year Popula�on

South Carolina (SC) Beaufort County Jasper County

Per Capita Popula�on Per Capita Popula�on Per Capita

2001 4,061,844 24,981 124,740 34,230 20,867 18,1214,102,211 25,364 128,415 33,855 20,832 18,9054,143,420 25,873 130,793 34,696 20,836 20,4054,196,799 27,069 134,595 37,561 20,907 22,7184,249,385 28,292 138,969 39,840 21,122 24,3364,324,799 30,041 143,091 43,183 21,490 25,7704,404,914 31,103 146,722 45,427 21,900 26,4154,503,280 32,947 152,164 44,191 22,746 26,9654,561,242 32,505 155,215 42,918 23,221 26,6254,625,364 32,193 155,550 42,430 23,634 26,282

200220032004200520062007200820092010

South Carolina Beaufort % of Jasper %Year (SC) County S.C. County of S.C.2003 1,927,428 73,671 3.82% 5,967 0.31%2004 1,947,847 75,071 3.85% 6,814 0.35%2005 1,974,675 76,663 3.88% 7,511 0.38%2006 2,017,654 78,690 3.90% 8,373 0.41%2007 2,052,720 80,361 3.91% 8,980 0.44%2008 1,874,633 61,652 3.29% 8,039 0.43%2009 1,924,059 59,101 3.07% 9,250 0.48%2010 1,825,900 60,223 3.30% 9,499 0.52%2011 1,839,400 60,046 3.26% 9,471 0.51%2012 1,947,936 60,067 3.08% 9,672 0.50%

Source: South Carolina Department of Employment and Workforce and Bureau ofEconomic Analysis, Regional Economic Informa�on Systems, US Department of Commerce

Source: U.S. Census Bureau and Bureau of Economic Analysis, Regional Economic Informa�on Systems, US Department of Commerce

POPULATION/PER CAPITA INCOMELast ten available years

WAGE/SALARY EMPLOYMENTNUMBER OF JOBS BY COUNTY (COMPARED TO STATE)

Last ten available years

87STATISTICAL – DEMOGRAPHIC AND ECONOMIC INFORMATION

ECONOMIC STATUS – UNEMPLOYMENT RATELast ten fiscal years

FiscalYear End South Carolina Beaufort County Jasper County

2003 6.9% 5.2% 6.3%2004 6.9% 5.4% 5.7%2005 6.7% 4.9% 5.0%2006 6.4% 5.0% 4.7%2007 5.5% 4.4% 4.7%2008 6.5% 5.2% 6.0%2009 12.1% 9.1% 11.2%2010 11.5% 8.6% 10.0%2011 11.2% 9.7% 11.1%2012 9.4% 8.8% 9.2%

Unemployment Rate

Source: South Carolina Department of Employment and Workforce and U.S. Bureau of Labor Sta�s�cs, Local Area Unemployment Sta�s�cs Informa�on and Analysis


Employees Rank

Percentage of Total County Employment Employees Rank

Percentage of Total County Employment

BEAUFORT COUNTYBeaufort Memorial Hospital 1,000-4,999 1 N/A N/A N/A N/ANaval Hospital 1,000-4,999 2 N/A N/A N/A N/AHilton Head Regional Med Ctr 500-999 3 N/A N/A N/A N/AMals 31 Headquarters 500-999 4 N/A N/A N/A N/AWes�n Hilton Head Island Resort 500-999 5 N/A N/A N/A N/ARobbers Row Grill 500-999 6 N/A N/A N/A N/AWal-Mart Supercenter 500-999 7 N/A N/A N/A N/ABeaufort County Sherrif 250-499 8 N/A N/A N/A N/AFripp Island 250-499 9 N/A N/A N/A N/AMarrio� Vaca�on Club Intl 250-499 10 N/A N/A N/A N/A

Employees Rank

Percentage of Total County Employment Employees Rank

Percentage of Total County Employment

JASPER COUNTYDepartment of Correc�ons 250-499 1 N/A N/A N/A N/AWal-Mart Supercenter 250-499 2 N/A N/A N/A N/ACoastal Carolina Hospital 250-499 3 N/A N/A N/A N/APearls�ne Distributors Inc. 100-249 4 N/A N/A N/A N/ACleland Construc�on Company 100-249 5 N/A N/A N/A N/APublix Super Market 100-249 6 N/A N/A N/A N/ARidgeland Elementary School 100-249 7 N/A N/A N/A N/AWest Hardeeville Elementary School 100-249 8 N/A N/A N/A N/AHaven Custom Homes 100-249 9 N/A N/A N/A N/AKey Nissan 100-249 10 N/A N/A N/A N/A

20032012

20032012

PRINCIPAL EMPLOYERSCurrent year and nine years ago

Source: http://jobs.scworks.org. N/A – Information not available.

Source: http://jobs.scworks.org. N/A – Information not available.

89STATISTICAL – OTHER OPERATIONAL INFORMATION

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Water

Water Source of Supply 3.7 3.7 3.6 3.6 2.7 2.9 2.4 2.4 2.4Water Treatment Ops 19.1 19.1 20.4 21.4 21.4 22.5 22.5 22.0 21.0Transmission & Distribu�on 22.4 24.0 25.6 26.4 24.0 26.1 25.1 26.3 26.1

WastewaterWastewater Treatment Ops 13.3 14.3 13.6 13.4 14.5 16.3 15.3 15.0 13.1Collec�on & Transmission 19.1 21.5 22.5 23.8 29.4 31.0 30.6 31.3 30.5Waste Disposal Ops - - - - - - - - - -Sludge Management Ops 1.5 1.5 1.4 1.4 2.0 2.2 2.1 1.0 1.9

Laboratory and Tes�ng 3.0 3.0 3.0 4.0 5.0 5.0 5.0 5.0 5.0Engineering & Mapping 10.0 11.0 11.0 11.0 13.0 15.0 14.0 15.0 15.0Customer Service 12.0 13.0 13.0 16.0 16.0 17.0 18.0 16.0 17.0Meter Reading 7.0 4.0 4.0 6.0 6.0 6.0 6.0 6.0 6.0Financial Services 7.0 8.0 8.0 8.0 9.0 8.0 7.0 8.0 8.0General & Administra�ve 9.0 11.0 11.0 11.0 12.0 12.0 11.0 11.0 12.0Informa�on Technology 2.0

4.514.322.3

9.321.0

1.02.0

10.010.0

7.07.09.01.0 2.0 2.0 3.0 3.0 4.0 5.0 5.0 4.0

149.00 158.00 168.00 164.00 164.00 162.00118.40 129.10 136.10 139.10Total

Full-�me Equivalent Employees as of June 30

FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTIONLast ten fiscal years


User Name User’s Service Or Business2012 Billed Revenues

% of Total 2012 Billed Revenues

1 SCE&G Regulated u�lity $ 1.83%2 Sun City Community Associa�on Residen�al Community (IR) 0.50%3 Bluffton House Apartments Mul�family residen�al 0.38%4 Hampton Hall Club Residen�al Club (IR) 0.33%5 Beaufort Memorial Hospital Hospital 0.25%6 Old South Apartments Mul�family residen�al 0.20%7 Beaufort County Council Jail 0.14%8 Waterford Apartments Mul�family residen�al 0.12%9 City of Beaufort Governmental (IR) 0.12%

10 Oldfield Club Residen�al Community (IR) 0.10%Other (including Bulk Customers) 96.02%

424,229117,204

89,03777,48158,06645,88332,36828,71028,21723,807

22,312,86023,237,861Total water revenues $

IR - Denotes Irriga�on service meters

Bulk Water Users:Hilton Head PSD Public service district $ 6.34%Parris Island Recruit Depot Military installa�on 2.73%Fripp Island PSD Public service district 1.96%Moss Creek/Water Oak U�lity Private u�lity 1.49%Laurel Bay Housing Military installa�on 1.30%Callawassie CUC Private u�lity 0.93%MCAS Beaufort Military installa�on 0.51%Harbor Island U�li�es Private u�lity 0.36%Warsaw-Eus�s-Oaks Private u�lity 0.30%Naval Hospital Military installa�on 0.19%

16.11%

1,472,569634,694456,287346,369301,657216,076118,548

82,56970,33644,240

3,743,344Total wholesale revenuesOther water opera�ng revenues 19,494,517

23,237,861Total water revenues, including other $

NOTE: Customers under one contract (I.e., military installa�ons) are considered one bulk customer intotal number of bulk customers. Military retail charge not included in Total Water Revenues.

TEN LARGEST WATER USERSFiscal year ended June 30, 2012

Ten largest water users (not including bulk customers) and any user representing 5.0% or more of total annual billed revenues

91STATISTICAL – OTHER OPERATIONAL INFORMATION

User Name User’s Service Or Business2012 Billed Revenues

% of Total 2012 Billed Revenues

1 Bluffton House Apartments Mul�family residen�al $ 0.98%2 Resort Services Laundry 0.97%3 SCE&G Regulated u�lity 0.56%4 Village at Old South Mul�family residen�al 0.47%5 Beaufort Memorial Hospital Hospital 0.47%6 Beaufort County Council Jail 0.33%7 Waterford Apartments Mul�family residen�al 0.31%

# 8 Hilton Head Lakes Residen�al community 0.27%9 SC DOT Public Transporta�on 0.23%

10 Beaufort High School School 0.22%Other 95.18%

155,001153,367

88,80074,34273,36451,57049,48943,23736,50235,189

14,980,84715,741,708Total wastewater revenues $

# DENOTES reclaimed water

SewerBulk customers:1Total bulk customers

Total opera�ng revenues 15,741,708$Wholesale (bulk) customer revenues 37,763$

0.2%% of billed revenue

TEN LARGEST WASTEWATER USERSFiscal year ended June 30, 2012

Ten largest wastewater users plus any user representing 5.0% or more of total annual billed revenues


INSURANCE IN FORCE

Type of Coverage & Insurance Provider

Policy NumberPolicy Period

Details of Coverage

Limits of Liability

COMMERCIAL CRIME BOND

Selective Insurance Co. of America

B60121261/23/12–1/23/2013

Employee dishonesty & theft of money and securities

$100,000 bond

$40,000 inside premise$20,000 outside premise

DATA PROCESSING

SC State Budget & Control Board Insurance Reserve Fund

D1300797131/24/12–1/24/2013

Computer hardware and software

$4,886,958$250 or $1,000 deductible

BUILDING & PERSONAL PROPERTY


F130079713; F130079713A1/24/12–1/24/2013

“All risk” coverage on real & personal property

$5,000,000 per accident$100,000 per ordinance & law

$3,000 deductible

AUTOMOBILE LIABILITY & COLLISION


L130079713;C1300797131/24/12–1/24/2013

Vehicle comprehensive, collision & liability

$1,000,000 each accident; $200 deductible for each comprehensive & $500 for each collision; $1,000 medical each person

INLAND MARINE (MOBILE EQUIPMENT)


M1300797131/24/12–1/24/2013

Heavy equipment, trailers, pumps and generators

$604,390 each occurrence; Deductible is 2% with $500 minimum

INLAND MARINE (WELLS & BRIDGE LINES)


M130079713A1/24/12–1/24/2013

Wells & bridge lines $500 each occurrence

GENERAL TORT LIABILITY


T1300797131/24/12–1/24/2013

Person injured, reputation marred, property damaged

$1,000,000 per occurrence

WORKER’S COMPENSATION

State Accident Fund 10-064144-81/1/12–12/31/2012

Employee injured on the job

Statutory coverage pursuant to Article 1, Chapter 7, title 42 of the SC Code of Laws

POLLUTION LEGAL LIABILITY

Chartis Causality Company 70927918/1/11–8/01/2016

Environmental liability

$25,000 deductible each incident & $10,000,000 limit per incident

COMMERCIAL LINES POLICY

Philadelphia Insurance Companies

PHSD7315246/1/12–6/01/2013

D&O liability & employment practices

$1,000,000 each policy period & 10,000 retention for each claim

BEAUFORT-JASPER WATER & SEWER AUTHORITY

OKATIE, SOUTH CAROLINA

Fiscal Year July 1, 2011–June 30, 2012

2012 COMPREHENSIVEANNUAL FINANCIAL REPORT

Beaufort-Jasper Water and Sewer Authority843.987.9292 • 6 Snake Road • Okatie, SC 29909

www.bjwsa.org

Documents

2012 COMPREHENSIVE · 2013. 7. 8. · 6 BJWS T 2012 This ninth Comprehensive Annual Financial Report (CAFR) provides an overview of BJWSA’s accomplishments and financial performance