Received 12-03-24
CITY OF SAN BERNARDINO $BMWD
General Manager
MUNICIPAL WATER DEPARTMENT
WATER BOARD
STAFF REPORT
TO: Miguel J. Guerrero, P.E., General Manager
FROM: Cynthia Mouser, Director of Finance
SUBJECT: PRESENTATION OF THE RESULTS OF THE FISCAL YEAR 2023-24
AUDIT, ANNUAL COMPREHENSIVE FINANCIAL REPORT, SINGLE
AUDIT REPORT ON FEDERAL AWARDS
DATE: December 2, 2024
BACKGROUND:
The Department contracted with Lance Soll & Lunghard LLP (LSL) in March 2024 to conduct the annual financial audit for the Water Department's three enterprise funds, RIX, and the Department's Federal programs (Single Audit).
On December 10, 2024, Ryan Domino, a partner at ISL, will present and distribute the Annual Comprehensive Financial Report (ACFR) for the City of San Bernardino Municipal Water Department for the fiscal year ending June 30, 2024, to the Water Board The AFR provides a summary of the Department's financial operations as of June 30, 2024. L.SL has issued an unmodified opinion on the report. The Water and Sewer enterprise funds are showing positive net income after capital contributions. A summary of the Department's finances can be foun in the Management's Discussion and Analysis section of the Annual Comprehensive Financial Report, with further details throughout the report.
A presentation of the AFR will show the Water and Sewer Fund results, highlighting differences between the budget and the audit.
GOALS AND OBJECTIVES
This proposed AFR for June 30, 2024, aligns with the Department's Strategic Plan under Target #5:
Fiscal Responsibility. It supports key values that promote responsible financial management, ensure stewardship of public funds, and maintain transparency.
FISCAL IMPACT:
There will be no financial impact associated with this item.
Agenda Item
Miguel J. Guerrero
December 2, 2024
Subject: PRESENTATION OF THE RESULTS OF THE FISCAL YEAR 2023-24 AUDIT, ANNUAL
COMPREHENSIVE FINANCIAL REPORT, SINGLE AUDIT REPORT ON FEDERAL AWARDS RECOMMENDATION:
It is recommended that the Water Board make the following motions:
• Approve the Annual Comprehensive Financial Report for the City of San Bernardino Municipal Water Department for the fiscal year ending June 30, 2024. • Direct staff to file the annual audit and Annual Comprehensive Financial Report with the Mayor and City Council.
Respectfully submitted,
Gyrther Mouser
Cynthia Mouser
Director of Finance
Attachments:
• Annual Comprehensive Financial Report, Fiscal Year Ended June 30, 2024 • Single Audit
• Audit Communications Letter
• Report on Internal Controls
• Annual Comprehensive Financial Report PowerPoint
• LSL Audit Presentation
CE BAN BEA
TER DETY
San Bernardino,
ANNUAL CA
COMPREHENSIVE
FINANCIAL
REPORT
OF THE CITY OF SAN
BERNARDINO WATER
DEPARTMENT
A COMPONENT UNIT OF
THE CITY OF SAN
BERNARDINO
for the Fiscal Year
Ended June 30, 2024
CITY OF SAN BERNARDINO
MUNICIPAL WATER DEPARTMENT
A COMPONENT UNIT OF THE CITY OF SAN BERNARDINO
Annual Comprehensive Financial Report
For Fiscal Year Ended June 30, 2024
PREPARED BY:
THE FINANCE AND ACCOUNTING DIVISION
THIS PAGE INTENTIONALLY LEFT BLANK
CITY OF SAN BERNARDINO
MUNICIPAL WATER DEPARTMENT
A COMPONENT UNIT OF THE CITY OF SAN BERNARDINO
Annual Comprehensive Financial Report
For Fiscal Year Ended June 30, 2024
Table of Contents
Page(s)
INTRODUCTORY SECTION
Letter of Transmittal.. ...i
Organizational C...................... ... vii
List of Elected and Appointed Officials vili
FINANCIAL SECTION
Independent Auditors' Report.. 1
Management's Discussion and Analysis 5
Basic Financial Statements:
Statement of Net Position. ...13
Statement of Revenues, Expenses and Changes in Net Position 14 Statement of Cash Flows. ...15
Notes to the Basic Financial Statements .. ..17
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Proportionate Share of the Net Pension Liability ..45 Schedule of Changes in Net OPEB Liability/(Asset) and Related Ratios.. ...46 Schedules of Plan Contributions... ..48
STATISTICAL SECTION
Changes in Net Position - Combined Funds 53
Changes in Net Position - Water Fund
Changes in Net Position - Sewer Fund
Changes in Net Position - Sewer Collection Fund.
Net Position by Component - Combined ...
Net Position by Component - Water Fund
Net Position by Component - Sewer Fund
Net Position by Component - Sewer Collection Fund
Water Fund Revenue by Type...
Sewer Fund Revenue by Type
Sewer Collection Fund Revenue by Type
Water Fund Expenses by Type ..
Sewer Fund Expenses by Type.
Sewer Collection Fund Expenses by Type
Water Fund Debt Service Coverage
Sewer Fund Debt Service Coverage
Ratios of Outstanding Debt by Type.
Demographic Statistics...
Major Employers...
CITY OF SAN BERNARDINO
MUNICIPAL WATER DEPARTMENT
A COMPONENT UNIT OF THE CITY OF SAN BERNARDINO
Annual Comprehensive Financial Report
For Fiscal Year Ended June 30, 2024
Table of Contents
Page(s)
STATISTICAL SECTION (CONTINUED)
Authorized Positions History ...77
Water Rates: Minimum Monthly Charge...
Water Rates: Commodity Charges..
Water Rates - Elevation Charges per $ HCF
Water Connections and Revenues by User Type.
Top Ten Water Consumers ....
Sewer Treatment Rate History
Sewer Treatment Connections and Revenue by User Type
Top Ten Sewer Treatment Customers
Sewer Collection Rate History....
Sewer Collection Connections and Revenue by User Type
CITY OF SAN BERNARDINO
MUNICIPAL WATER DEPARTMENT
CITY OF SAN BERNARDINO SAN MIGUEL J. GUERRERO, P.E
WATER BOARD General Manager
BERNARDINO ROBIN L. OHAMA
TONI CALLICOTT CITY OF Deputy General Manager
President STEVE R. MILLER
Director of Water Utility
KEVIN T. STEWART, PE
WAYNE HENDRIX •
DAVID E. MLYNARSKI
RIKKE V. JOHNSON WATER DEPT
THOMAS BRICKLEY
Director of Finance
"Trusted, Quality Service since 1905"
November 27, 2024
To the Water Board Commissioners & Ratepayers of the San Bernardino Municipal Water Department, Introduction:
State law requires that every general-purpose government publish a complete set of audited financial statements within six months of the close of each fiscal year. This report is published to fulfill that requirement for the San Bernardino Municipal Water Department ("Department") for the fiscal year ended June 30, 2024.
Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.
Lance, Soll & Lunghard, LLP has issued an unmodified opinion on the Department's financial statements for the year ended June 30, 2024. The independent auditor's report is located at the front of the financial section of this report.
Management's discussion and analysis ("MD&A") immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it.
Profile of the Department:
The San Bernardino Municipal Water Department and the Water Board of Commissioners ("Board") were established on May 8th, 1905, by the Mayor and Common Council of the City of San Bernardino in accordance with the provisions specified in the City charter. The Board assembled for the first time on May 16th, 1905, to ensure water supply needs of the community are met by providing trusted, quality service to our customers. This service has grown through the years to include water supply, water reclamation, geothermal heating supply, sewer collection, and administrative support for the growing community.
The first water distribution system of San Bernardino included water supply for approximately six thousand citizens within a one square mile service area. Today, the Department's service area is approximately 50 square miles and the water supply distribution network now encompasses over 45,000 service connections and 750 miles of water mains. Although the number of connections has increased during the past one hundred years, our commitment to providing trusted, quality service remains the same.
1350 South "E" Street, San Bernardino, California 92408 P.O. Box 710, 92402 Phone: (909) 384-5141 FACSIMILE NUMBERS: Administration: (909) 453-6399 Customer Service: (909) 453-6396 Finance: (909) 453-6383 Engineering: (909) 453-6385 Corporate Yards: (909) 453-6389 Water Reclamation Plant: (909) 453-6395 Environmental & Regulatory Compliance: (909) 453-6391 Environmental Control: (909) 453-6394
The City of San Bernardino receives the majority of its water supply from an underground aquifer called the Bunker Hill Groundwater Basin which is part of the San Bernardino Basin. The water contained in the Bunker Hill Basin is replenished with rain and snowmelt that filters through our local San Bernardino Mountains. This local water supply ensures that San Bernardino Municipal Water Department customers receive high quality, relatively inexpensive water as compared to other communities. Many other communities in Southern California must import their water supplies from remote locations via the Colorado River and State Water Project systems which adds cost. Many water supplies imported from distant locations can be impacted by certain man-made and natural contaminants as the water is transported to the customer. Reliability of imported supplies is also impacted by drought conditions and environmental impacts.
The Department has operated the Water Reclamation Plant (WRP) since 1973. The WRP is a 33 million gallons per day (MGD) regional secondary treatment facility that provides trusted, quality wastewater treatment services for the City of San Bernardino, Valley Water
(until March 2024), San Bernardino International Airport, Patton State Hospital, and unincorporated areas of San Bernardino County. The WRP serves over 60,000 customers/connections, of which 38,000 are located within the City's boundaries.
The Sewer Collection section is responsible for maintaining more than 450 miles of sewer mains, several thousand maintenance holes, and lift stations. The system encompasses approximately 38,000 connections and conveys over 8 billion gallons of sewage annually to the Department's Water Reclamation Plant for treatment.
Fiscal Management:
The Board annually adopts an operating and capital budget prior to the new fiscal year. The budget authorizes and provides the basis for reporting and control of financial operations and accountability for the Department's functions, including the Water Utility and Sewer Funds. The budget and reporting treatment applied to a fund is consistent with the accrual basis of accounting and the financial statement basis. Each year the Department adopts a balanced budget.
Local Economy:
The Department's offices are located in the City of San Bernardino ("the City") in San Bernardino County. According to the California Department of Finance, San Bernardino's population as of June 30, 2024, was 226,541. The Water Department ("Department") has been able to maintain a positive economic outlook despite rising inflationary costs, a reduction in sewer revenue and drought regulations through the long-term financial planning. The Department is currently in the third year of a five-year rate increase that was approved by the Water Board in March 2022. These adopted rate increases have allowed the Department to maintain revenue stability while experiencing increased inflationary costs for goods and services. The City has received funds from the American Rescue Plan Act (ARPA) that will help stimulate economic growth in the area. The City has given the Department ARPA funds to fund the Department's Lead Service Lateral capital project. The Department has also received over $9 million in Sonic atomi capital pret and insalion of line to t
Department's service area. Development within the City continues, which encourages economic growth within the city and creates new capital projects for the Department.
Per the Lowe Institute of Political Economy from Claremont McKenna College, in the Inland Empire, it is encouraging to see that the Logistics sector is starting to pick up economic activity. The sector was in a mini-slump after being the main driving force out of the Coronavirus recession. Most likely due to overly optimistic projections, employment in the logistics industry peaked by mid-2022 (seasonally adjusted) and since then had shown declines which were significant. Hence there were only two sectors in the Inland Empire that were holding up the economy:
Health and Government. Given the current California budget situation, we do not think that the two sectors can be the main drivers in the future, and it is therefore good to see that the third largest employer, Logistics, is expanding again. The largest percentage increases in employment were seen in Private Education and Health Services (+3,900), Logistics (+2,800), and Government (+1,200). Since June 2023, Logistics employment is up by +1,500, after increasing by 50,500 from February 2020 to December 2022. This suggests that the industry, which is the ii
third largest employer for the Inland Empire, is gradually adjusting after perhaps over-hiring resulting from overly optimistic projections in the aftermath of the pandemic. Continuous gains in the sector signal the cooling-down's alleviation and provide prospects for sustained growth. Logistics, and Private Education and Health Services are still leading all industries in post pandemic job recoveries, both adding approximately 51,000 jobs since February 2020. This strong momentum has been preserved from the previous months and is projecting a positive outlook.
The image is more promising, if and only if we look at the Year-to-Year Changes, meaning the percentage change from June 2023, Logistics has gained 1,500 jobs - small compared to its overall post-pandemic performances, but nevertheless at least a temporary reassuring sign of change from the backlashes it experienced that we have seen continuingly in the past months. Compared to a year ago (June 2023), the non-seasonally adjusted unemployment rate decreased from 4.8% (June 2023) to 4.7% (June 2024), meaning it basically remained unchanged.
Strategic planning and collaboration are essential to the long-term reliability of water supplies in the San Bernardino region. The San Bernardino Municipal Water Department has invested in efforts to secure and produce new water supply, encourage water use efficiency, and minimize water system losses. In addition to this long-standing commitment to water efficiency, SBMWD works collaboratively with water agencies in the San Bernardino Valley to preserve local water resources, ensuring adequate supply for the future. SBMWD and partnering agencies are building a more resilient portfolio of local water resources through regional groundwater management, as well as the execution of projects such as recycled water recharge, critical infrastructure and water storage, direct installation or efficient irrigation and fixtures, and water conservation education programs.
For the Department, the goal of water use efficiency remains paramount. Efficient water use is the most cost- effective and immediate way to achieve long-term conservation goals. As such, the Department is committed to sharing information, programs, and incentives to encourage and support water use efficiency for our customers.
Water Production
In Acre Feet
40,595
45,000 38,721
36,337
36,981 35,563
40,000
35,000 41,511
38,714
30,000 36,408
34,887
25,000
30,039
20,000
15,000
10,000
5,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
-Water Production AF
iii
Major Initiatives:
Advanced Metering Infrastructure
The Department has been selected to receive a $500,000 grant from the U.S. Bureau of Reclamation to start phase one of the Department's Advanced Metering Infrastructure (AMI) project. In addition to this grant, the Department was also awarded a $2 million grant by the CA Department of Water Resources Urban and Multibenefit Drought Relief Grant Program. The first phase of the AMI project will install and connect approximately one quarter of the Department's water meters to an advanced communications network to gather water consumption data in real time.
This water use data will reduce water waste by enabling the Department to identify and notify customers of leaks and abnormally high-water use more quickly.
Regional Recycled Water
The Department continues to develop its recycled water project. Construction of the Tertiary Treatment System commenced in 2023 and completion is expected in late 2024. This initial phase will produce up to 2 million gallons per day (MGD) for treatment plant use and irrigation. At the same, the Department is working with its regional partners to develop a regional recycled water system that involves connecting recycled water systems in the region and will provide flexibility to deliver produce recycled water where it is most needed in the San Bernardino Basin.
The Department has formed a recycled water coalition with San Bernardino Valley, East Valley Water District, and City of Redlands. The coalition will work collaboratively to mitigate water quality impacts that may arise from recycled water activity.
Long Term Financial Planning:
As part of the Department's Strategic Plan, long-term financial plans were developed for all three of the Department's enterprises: Water, Sewer Treatment and Sewer Collection. These financial plans assisted the Department with a cost of service study for all three enterprises. A cost of service/rate study conducted in FY 21-22 recommended an increase to the Department's water and sewer rates. As a result of the study, the water Board adopted a four-year rate increase for the water and sewer funds with the first adjustment effective April 1, 2022. The remaining increases are effective annually on July 1 starting July 1, 2022 through July 1, 2025.
These newly adopted rate structures and increases will allow for better revenue stability for the Department as costs increase and drought is a major concern for the State.
The Department's financial plan includes the revision of the existing Reserve Policy. The Department's current Reserve policy was revised and adopted by the Board in September 2021. • Operating Reserve: This reserve is established to ensure adequate cash flow is available to meet day-to-day expenses. The target balance is 45 days of the operating expenses budgeted for each respective fund. • Rate Stabilization Reserve: This reserve is established to offset revenue risk associated with low service demands years. The minimum target balance for each fund is twenty percent (20%) of their respective budgeted sales.
• Emergency Replacement Reserve: The purpose of this reserve is to minimize the impact of unforeseen capital asset and operating expenses. The target balance for each fund shall be two percent (2%) of the total recorded value of capital assets as of the previous fiscal year. • Capital Replacement Reserve: The Capital Replacement Reserve was set up in order to provide funding support of the Department's capital program. The basis for calculating the target balance for this reserve is a rolling five-year average of the Department's Capital Improvement Program projects, excluding those with external funding. The target balance will be assessed on an annual basis as part of the budgeting process. iv
The Department has begun working on expanding and updating the previous strategic plan.
Debt Administration:
The Department's outstanding debt as of June 30, 2024 consists of one Revenue Bond in the Water Utility Fund, and one Revenue Bond in the Sewer Utility Fund, as shown in the table below:
Water Fund Long-Term Debt Activity
Year of Issuance/Description Use of Proceeds
2016 California Municipal Finance Authority Funding for facility construction, seismic retrofit of Revenue Bond reservoirs and other capital improvement projects.
Sewer Fund Long-Term Debt Activity
Year of Issuance/Description Use of Proceeds
Funding for primary influent flow equalization
2016 California Municipal Finance Authority project, facility construction, and recycled water Revenue Bond project.
Relevant Financial Policies:
Internal Control Structure
Department management is responsible for the establishment and maintenance of the internal control structure that ensures that the assets of the Department are protected from loss, theft or misuse. The internal control structure also ensures that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The Department's internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived and (2) the valuation of costs and benefits requires estimates and judgments by management.
Major Initiatives and Key Values:
The activities of the Board and Department staff are driven by our key value statements as outlined below:
1. Provide the highest level of customer service to our community.
2. Responsibly establish necessary rates in the most cost-effective manner.
3. Provide the highest quality water and wastewater services.
4. Provide responsible stewardship of our resources and our environment.
5. Require ethical business practices.
6. Foster a strong, positive organizational culture and promote staff development.
Awards and Acknowledgements:
The Government Finance Officers Association (GFOA) of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting to the Department for its annual comprehensive financial report for the fiscal year ended June 30, 2022. To be awarded a Certificate of Achievement, the Department must publish an easily readable and efficiently organized annual comprehensive financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.
V
A Certificate of Achievement is valid for a period of one year only. We believe our current annual comprehensive financial report continues to meet the Certificate of Achievement program requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
Preparation of this report was accomplished by the combined efforts of Department staff. We appreciate the dedicated efforts and professionalism that these staff members contribute to the service of the Department's customers. The contributions made by Andrea Parker, Senior Accountant, Garrett Van Leuven, Senior Accountant, Rob Medina, Accountant I, and Dustin Andolsen, Finance Manager deserve special recognition. We would also like to thank and recognize the members of the Board for their continued support in planning and implementation of the Department's fiscal policies.
Respectfully submitted,
Cyria Mouse
Miguel J. Guerrero, P.E., General Manager Cynthia J. Mouser, Director of Finance
CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
RATE PAYERS
CITY COUNCIL
WATER BOARD
GENERAL MANAGER
MIGUEL J. GUERRERO, P.E.
DEPUTY GENERAL MANAGER
ROBIN L. OHAMA
HUMAN RESOURCES
CONSERVATION
CUSTOMER SERVICE
FIELD AND METER SERVICES
FLEET
INFORMATION TECHNOLOGY
WATER UTILITY FINANCE AND ACCOUNTING WATER RECLAMATION ENVIRONMENTAL AND REGULATORY STEVE R. MILLER CYNTHIA J. MOUSER KEVIN T. STEWART, P.E. JENNIFER L. SHEPARDSON
DISTRIBUTION FINANCE TREATMENT ENVIRONMENTAL AND REGULATORY
OPERATIONS URCHASING MAINTENANCE COMPLIANCE
MAINTENANCE PAYROLL ELECTRICAL/SCADA SAFETY
ENGINEERING RIX FACILITY RISK MANAGEMENT
SEWER COLLECTION ENVIRONMENTAL CONTROL
WATER QUALITY
vii
City of San Bernardino Municipal Water Department
Mayor the City of San Bernardino
Helen Tran
Water Board
Toni Callicott, President
Wayne Hendrix, P.E., Vice President
David E. Mlynarski, Commissioner
Rikke V. Johnson, Commissioner
Thomas Brickley, Commissioner
Administration
Miguel J. Guerrero, P.E., General Manager
Robin L. Ohama, Deputy General Manager
Steve R. Miller, Director of Water Utility
Kevin T. Stewart, P.E., Director of Water Reclamation
Cynthia J. Mouser, Director of Finance
Jennifer L. Shepardson, Director of Environmental & Regulatory Compliance Mission Statement
To meet the needs of the community by providing sustainable, high quality water supply and wastewater services in the most professional, environmentally responsible, and cost-effective manner possible.
Organization
The City of San Bernardino Municipal Water Department was formed in 1905 under the Charter of the City of San Bernardino and is governed by the Water Board who are appointed by the Mayor of the City of San Bernardino. The most recent Charter, approved by voters in November 2016, gave the Water Board "Responsibility to oversee and manage the City's water supply, recycled water, wastewater collection and treatment functions in accordance with State Law." The Department operated three enterprise funds: the Water Utility Enterprise Fund, the Sewer Utility Enterprise Fund and the Sewer Collection Utility Enterprise Fund. Water service encompasses the City, with the exception of the east end, which is served by East Valley Water District. Sewer treatment service encompasses all of the City of San Bernardino, the City of Loma Linda, the former Norton Air Force Base, Patton State Hospital, and portions of the City of Highland serviced by East Valley Water District. Sewer collection service is provided within the City of San Bernardino boundaries.
viii
LSL:
INDEPENDENT AUDITORS' REPORT
To the Water Board
City of San Bernardino Municipal Water Department
San Bernardino, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of City of San Bernardino Municipal Water Department (the "Department") a component unit of the San Bernardino, California (the City"), as of and for the year ended June 30, 2024, and the related notes to the financial statements, as listed in the table of contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Department of the City, as of June 30, 2024, and the changes in its financial position and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
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. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Department and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of Matter
As discussed in Note 1, the financial statements present only the Department and do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2024, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
PrimeGlobal The Association of Advisor
and Accounting Firmi
LSLCPAS.COM
LSL"
To the Water Board
City of San Bernardino Municipal Water Department
San Bernardino, California
Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material no margesent on, or end man orto, is tent are conster madel if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department's internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and required pension and other postemployment benefits schedules, as listed on the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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.
LSL°
To the Water Board
City of San Bernardino Municipal Water Department
San Bernardino, California
Other Information
Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.
In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 27, 2024, on our consideration of the Department's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Department's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the department's internal control over financial reporting and compliance.
Kana, Soll Pughard, 737P
Irvine, California
November 27, 2024
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MANAGEMENT'S DISCUSSION AND ANALYSIS
The City of San Bernardino Municipal Water Department (Department) is a water, sewer collection and treatment utility responsible for delivering high quality, economically priced water, sewer treatment and sewer collections services to a quarter of a million customers in and around the City of San Bernardino, California. This section of the Department's annual financial report presents management's analysis of the Department's financial performance during the fiscal year that ended on June 30, 2024. Please read it in conjunction with the basic financial statements which follow this section.
All amounts in the Management's Discussion and Analysis within text areas are in thousands unless otherwise noted.
Financial Highlights:
• The Department's overall net position increased by $4.8 million or 1.4%. • Operating revenues increased $3.7 million or 4.2% from the prior fiscal year. Water consumption was moderately down approximately 1.8% in FY24 from FY23 which lead to only a modest increase in Water revenues, despite a rate increase on July 1, 2023. Sewer revenues increased due to a rate increase effective July 1, 2023.
• Operating expenses increased $16.0 million, 18.2% increase from the prior fiscal year. The most significant increases were noted in the categories of depreciation, pension expense, and personnel increases. The department revised its capital asset categories which accelerated depreciation on several asset categories drastically increasing depreciation expense. Personnel expenses continue to increase due to inflation, rising costs in benefits, and salary adjustments per Department MOU's. • Net loss before capital contributions was $3.1 million. • The Department's current ratio (the ability to pay short-term obligations) was 4.4. • Cash available (the ability to cover current expenses with cash) was 558 days.
Overview of the Financial Statements
The discussion and analysis are intended to serve as an introduction to the Department's basic financial statements. The Department's basic financial statements are comprised of two components: the Financial Statements and the Notes to the Basic Financial Statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Information providing citywide financial results is available in the City's Comprehensive Annual Financial Report.
Required Financial Statements
The financial statements of the Department report information about the Department using accounting methods similar to those used by private sector companies. These statements offer short-term and long-term financial information about its activities. The Statement of Net Position (page 13) includes all of the Department's investments in resources (assets) and the obligations to creditors (liabilities). It also provides the basis for evaluating the capital structure of the Department and assessing the liquidity and financial flexibility of the Department. All of the current year's revenues and expenses are accounted for in the Statement of Revenues, Expenses and Changes in Net Position. (page 14) This statement measures the success of the Department's operations over the past year and can be used to determine whether the Department has successfully recovered all its costs through its user fees and other charges, 5 profitability, and credit worthiness. The final required financial statement is the Statement of Cash Flows (pages 15-16). The primary purpose of this statement is to provide information about the Department's cash receipts and cash payments during the reporting period. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations, investing, and financing activities and provides answers to questions such as "where did cash come from, what was cash used for, and what was the change in cash balance during the reporting period?" Financial Analysis of the Department
Our analysis of the Department begins on page 5 of the financial statements. One of the most important questions to ask about the Department's finances is "Whether the Department, as a whole, is better off or worse off as a result of the year's activities?" The Statement of Net Position, and the Statement of Revenues, Expenses and Changes in Net Position report information about the Department's activities in a way that will help answer this question. These two statements report the net position of the Department and changes in them. Measuring the change in the Department's net position - the difference between assets and liabilities - is one way to measure financial health or financial position. Over time, increases or decreases in the Department's net postion are indications of whether its financial health is improving or deteriorating. However, one will need to consider other non-financial factors such as changes in economic conditions, population growth, and zoning and new or changed government legislation.
Water Utility Fund
To begin our analysis, a summary of the Water Utility Fund's Statement of Net Position is presented in Table A-1.
TABLE A-1
Condensed Statement of Net Position - Water Utility
(amounts expressed in thousands of dollars)
2024 2023 $ Change % Change
Current and noncurrent assets $ 119,269 $ 118,112 $ 1,157 1.0% Capital assets 213,546 207,158 6,388 3.1%
Total assets 332,815 325,270 7,545 2.3%
Deferred outflows of resources 10,266 11,981 (1,715) -14.3% Current liabilities 16,031 14,898 1,133 7.6%
Noncurrent liabilities 129,021 126,673 2,348 1.9%
Total liabilities 145,052 141,571 3,481 2.5%
Deferred inflows of resources 7,471 9,220 (1,749) - 19.0% Net investment in capital assets 180,169 172,417 7,752 4.5% Restricted 2,414 1,152 1,262 109.5%
Unrestricted 7,975 12,891 (4,916) 38.1%
Total net position $ 190,558 $ 186,460 $ 4,098 2.2%
The table highlights, the Water Utility total net position increased 2.2% or $4.1 million in fiscal year 2024.
The favorable increase in net position is primarily related to the increase in total capital assets ($6.4 million).
6 TABLE A-2
Condensed Statement of Revenues, Expenses and Changes in Net Position - Water Utility (amounts expressed in thousands of dollars)
2024 2023 $ Change % Change
Operating revenue $ 45,985 $ 44,092 $ 1,893 4.3%
Capital contributions 5,130 5,976 (846) -14.2%
Other nonoperating revenue 8,764 3.222 5,542 172.0%
Total revenues 59,879 53,290 6,589 12.4%
Operating expenses $ 53,997 $ 46,711 7,286 15.6%
Nonoperating expenses 1,784 1,842 (58) -3.1%
Total expenses 55,781 48,553 7,228 14.9%
Change in net position 4,098 4,737 (639) 13.5%
Net position at the Beginning of the Year 186,460 181,723 4,737 2.6% Total net position $ 190,558 $ 186,460 $ 4,098 2.2%
Total revenues increased by 12.4% or $6.6 million. Capital grant revenue increased from the prior year due the FEMA grant monies being used for projects as intended. Investment income outperformed the prior year due to better market performance resulting in an increase in investment revenue. Water operating revenues also reflect a modest increase due to a rate increase effective July 1, 2023. Total expenses increased 14.9% or $7.2 million. Significant variances were due to increased depreciation expense. The department revised its capital asset categories which accelerated depreciation drastically increasing depreciation expense.
TABLE A-3
Capital Assets - Water Utility
(amounts expressed in thousands of dollars)
2024 2023 $ Change % Change
Land and easements $ 5,860 $ 5,989 $ (129) - 2.2%
Construction in progress 25,803 14,799 11,004 74.4%
Wells and pumping 105,767 102,740 3,027 2.9%
Distribution 185,239 166,022 19,217 11.6%
Right -of-use assets 402 402 100.0%
Plant and facilities 6,943 8,627 (1,684) - 19.5%
Other capital assets 11,377 43,996 (32,619) -74.1%
Total capital assets 341,391 342,575 (1,184) -0.3%
Less: accumulated depreciation (127,846) (135,417) 7,571 -5.6% Total capital assets, net $ 213,545 $ 207,158 $ 6,387 3.1% Total capital assets, net increased by 3.1% or $6.4 million in fiscal year 2024. The Water fund capitalized $4.3 million in various capital projects completed and placed in service during FY2024. The increase is also attributed to an increase in Construction in progress (CIP) expenditures related to Reservoir Seismic upgrades ($3.3 million), SBMWD Administration Facility ($2.8 million), and the Mountain Pressure Zone Main Replacement project ($2.1 million). The department Additional information on capital assets is presented in Note 3 of the Notes to the Basic Financial Statements.
TABLE A-4
Long-term Debt - Water Utility
(amounts expressed in thousands of dollars)
2024 2023 $ Change % Change
Bonds Payable $ 42,125 $ 43,120 $ (995) -2.3%
Bond Premium 4,414 4,612 (198) -4.3%
Leases and subscriptions 12 183 (171) -93.4%
Compensated Absences 1,545 1,338 207 15.5%
Total long-term debt $ 48,096 $ 49,253 $ (1,157) -2.3%
Total long-term debt decreased by 2.3% or $1.1 million due to annual debt service payments. Additional information on long-term debt is presented in Note 4-6 of the Notes to Basic Financial Statements.
Sewer Utility Fund
TABLE B-1
Condensed Statement of Net Position - Sewer Utility
(amounts expressed in thousands of dollars)
2024 2023 $ Change % Change
Current and noncurrent assets $ 111,716 $ 118,392 $ (6,676) -5.6% Capital assets 118,822 103,118 15,704 15.2%
Total assets 230,538 221,510 9,028 4.1%
Deferred outflow of resources 9,653 11,468 (1,815) - 15.8% Current liabilities 14,302 6,374 7,928 124.4%
Noncurrent liabilities 64,543 64,433 110 0.2%
Total liabilities 78,845 70,807 8,038 11.4%
Deferred inflow of resources 3,742 5,272 (1,530) -29.0% Net investment in capital assets 95,673 79,192 16,481 20.8% Restricted 2,152 1,069 1,083 101.3%
Unrestricted 59,779 76,638 (16,859) -22.0%
Total net position $ 157,604 $ 156,899 $ 705 0.4%
The table above highlights, the Sewer Utility net position increased 0.4% or $0.7 million in fiscal year 2024. The total net position slightly increased as a result of current year operations. There was ar ncrease Capital Assets due to the completion of the Blower Decentralization project totaling $15 millior but an offsetting increase to current liabilities for several large payments relating to current construction projects.
8 TABLE B-2
Condensed Statement of Revenues, Expenses and Changes in Net Position - Sewer Utility (amounts expressed in thousands of dollars)
2024 2023 $ Change % Change
Operating revenue $ 47,385 $ 45,544 $ 1,841 4.0%
Capital contributions 2,725 2,637 88 3.3%
Other nonoperating revenue 2,121 1,251 870 -69.5%
Total revenues 52,231 49,432 2,799 5.7%
perating expense 50,351 41,597 8,754 21.0%
lonoperating expense 1,175 1,234 (59) 4.8%
Total expenses 51,526 42,831 8,695 20.3%
Change in net position 705 6,601 (5,896) -89.3%
Net position at the Beginning of the Year 156,899 150,298 6,601 4.4% Total net position 157,604 156,899 705 0.4%
During fiscal year 2024, total revenues for the Sewer Utility increased 5.7% or $2.8 million, from the prior year, primarily due to a sewer rate increase as approved by the Board effective July 1, 2023. This increase was offset by increased operating expenditures due to increased depreciation expense. The department revised its capital asset categories which accelerated depreciation drastically increasing depreciation expense.
TABLE B-3
Capital Assets - Sewer Utility
(amounts expressed in thousands of dollars)
2024 2023 $ Change % Change
Land and easements $ 17,603 $ 17,603 $ 0.0%
Construction in progress 31,343 34,558 (3,215) -9.3%
3,958 4,065 (107) -2.6%
Buildings, plants and stores 181,029 160,649 20,380 12.7% Field and office equipment 13,510 17,799 (4,289) -24.1% Pipelines 27,019 22,921 4,098 17.9%
Total capital assets 274,462 257,595 16,867 6.5%
Less: accumulated depreciation (155,640) (154,477) (1,163) 0.8% Total net assets $ 118,822 $ 103,118 $ 15,704 15.2%
Total capital assets increased by 15.2% or $15.7 million in fiscal year 2024, primarily due to the capitalization of the Blower Decentralization project totaling $15 million and expenditures for various sewer capital projects. More information relating to capital assets can be found in Note 3 of the Notes to the Basic Financial Statements.
9 TABLE B-4
Long-term Debt - Sewer Utility
(amounts expressed in thousands of dollars)
2024 2023 $ Change % Change
Bonds Payable 29,740 30,510 (770) -2.5%
Bond Premium 144 150 (6) -4.0%
Compensated absences 617 586 31 5.3%
Total long-term debt $ 30,501 $ 31,246 $ (745) -2.4%
During the year, the Sewer Utility's long-term debt decreased 2.4% or $0.7 million which can be attributed to the annual debt service payments. Additional information on long-term debt is presented in Note 4-6 of the Notes to Basic Financial Statements.
Economic Factors and Next Year's Budgets and Rates
The Service Area (Service Area) economy served by the Department continues to grow and develop.
Development in the City has increased as San Bernardino is one of the remaining affordable areas in the Inland Empire. The City has also received funds from the American Recovery Act that will help stimulate economic growth in the area. The City has encumbered for the Department, approximately $5 million from the American Recovery Act funds, to fund the Department's Lead Service Lateral capital project.
Additionally, the Department was approved for a State Revolving Funds loan from the State Water Resource Control Board in May of 2022 and a federal grant from the Bureau of Reclamation and FEMA for designated capital projects. Development within the City continues, which has resulted in several new projects for the Department.
The Department adopted a balanced budget for Fiscal Year 2023-2024. The Fiscal Year 2023-2024 budget takes into consideration rising operational expenses, inflation, and funding our capital program to address aging infrastructure. Additional details regarding the Department's budget can be found on the Department's website. Questions or requests for information regarding the Adopted Budget should be directed to the Finance Department.
The Department completed a rate study and a cost-of-service study for the water, sewer treatment, and sewer collection utilities. As a result of the study the water Board adopted a four-year rate increase for the water and sewer funds effective April 1, 2022. The remaining increases are effective annually starting July 1, 2022, through July 1, 2025. These newly adopted rate structures and increases will allow for better revenue stability for the Department as costs increase and drought is a major concern for the State.
Contacting the Department's Director of Finance
This financial report is designed to provide our customers and creditors with a general overview of the Department's finances and to demonstrate the Department's accountability for the money it receives. If you have questions about this report or need additional financial information, please contact the Department's finance department at (909) 453-6009.
10 BASIC FINANCIAL STATEMENTS
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12 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Statement of Net Position
June 30, 2024
Water Sewer Total
ASSETS
Current assets:
Cash and investments $ 48,160,342 $ 75,368,083 $ 123,528,425 Receivables:
Accounts, net 6,244,581 5,768,588 12,013,169
Accrued interest 291,396 420,761 712,157
Leases 211,681 163,653 211,681
Due from other entities 3,364,521 3,528,174
Inventories 1,539,878 1,539,87
Prepaid expenses 400,305 609.278 1,009,583
Total current assets 60,212,704 82,330,363 142,543,067
Noncurrent:
Leases Receivable, Noncurrent 3,266.445 3,266,445
Investment in joint venture - RIX 20,499,132 20,499,132 Restricted assets:
Net OPEB asset 2,414,089 2,151,996 4,566,085
Cash and cash equivalents:
Restricted for capital 13,174,240 6,734,909 19,909,149
Investments:
Restricted for consent decree 24,448,652 : 24,448,652
Accrued interest - consent decree 154,306 154,306
Prepaid Insurance - consent decree 15,598,893 15,598,893 Capital Assets:
Land and easements 5,869,462 17,603,413 23,472,875
Construction in progress 25,803,315 31,343,003 57,146,318 Capital assets - being depreciated/amortized, net 181,872,892 69,875,533 251,748.425 Total noncurrent assets 272,602,294 148,207,986 420,810,280 Total assets 332,814,998 230,538,349 563,353,347
DEFERRED OUTFLOWS OF RESOURCES
Pension-related 8,605,096 8,172,240 16,777,336
OPEB-related 1,660,608 1,480,319 3,140.927
Total deferred outflows of resources 10,265,704 9,652,559 19,918,263
LIABILITIES
Current liabilities:
Accounts payable 7,287,693 9,166,781 16,454,474
Related parties payable 1,618,820 1,618,820
Accrued compensation 682,914 644,533 1,327,447
Claims payable 5,986,529 1,103,624 7,090,153
Due to other governments 1,267,358 466.521 1,267,358
Current portion of compensated absences 1,235,913 1,704,434 Current portion of bonds, leases, and subscriptions 1,061,994 810,000 1,871,994 Accrued interest 822,516 489,591 1,312,107
Total current liabilities 18,344,917 14,301,870 32.646,787 Noncurrent liabilities:
Consumer deposits 3,516,927 149,156 3,516,927
Compensated absences 308,978 458,134
Unearned revenue - consent decree 40,201,851 - 40,201,851 Bonds, leases and subscription payable 45,488,919 29,073,537 74,562,456 Net pension liability 37,190,712 35,319,937 72.510,649
Total noncurrent liabilities 126,707,387 64,542,630 191,250,017 Total liabilities 145,052,304 78,844,500 223,896,804
DEFERRED INFLOWS OF RESOURCES
Pension-related 40,752 38,702 79,454
OPEB-related 4,154,415 3,703,413 7,857,828
Lease-related 3,275,876 3,275,876
Total deferred inflows of resources 7,471,043 3,742,115 11,213,158
NET POSITION
Net investment in capital assets 180,168,996 95,673,321 275,842,317 Restricted for postemployment benefits 2,414,08 2,151,996 4,566,085 Unrestricted 7,974,270 59,778,976 67.753,246
Total net position $ 190,557,355 $157,604,293 $ 348,161,648 See accompanying notes to financial statements. 13
CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Statement of Revenues, Expenses and Changes in Net Position For the Year Ended June 30, 2024
Interfund
Water Sewer Eliminations Total
OPERATING REVENUES
Sales and service charges $ 45,656,974 $ 46,224,150 $ (644,713) $ 91,236,411 Other operating revenues 328,116 1,161,283 1,489,399
Total operating revenues 45,985,090 47,385,433 (644,713) 92,725,810
OPERATING EXPENSES
Administration and customer service 9,038,195 6,828,593 (193,790) 15,672,998 Utility administration 1,706,977 670,292 (5,513) 2,371,756 Sewer collection and lift stations 2,827,657 2,827,657
Plant operations 11,385,172 13,804,430 (311,989) 24,877,613 Maintenance 3,330,387 4,845,501 (106,841) 8,069,047
Environmental control 892,576 892,576
Distribution 6.414, 793 (26,580) 6,444,793
Engineering and water quality 3,074,606 2,030,808 5,078,834 General, administration and overhead 6,884,987 7,040,440 13,925,427 12,131,463 11,411,059 : 23,542,522
Depreciation and amortization
Total operating expenses 53,996,580 50,351,356 (644,713) 103,703,223 Operating income (loss) (8,011,490) (2,965,923) (10,977,413)
NONOPERATING REVENUES (EXPENSES)
Investment income 2,544,768 1,521,068 4,065,836
Rental income 358,472 358,472
Noncapital grant funds 5,566,773 : 5,566,773
Interest expense and fiscal charges (1,783,831) (1,175,040) ..... (2,958,871) Gain (loss) on disposal of capital assets 85,041 599,981 685,022 Other 206,697 206,697
Total nonoperating revenues (expenses) 6,977,920 946,009 7,923,929 Income (loss) before capital contributions (1,033,570) (2,019,914) (3,053,484)
CAPITAL CONTRIBUTIONS
Acquistion fees 2,152,064 2,152,064
Capacity fees 2,063,310 2,012,611 4,075,921
Capital contributions 914,811 712,553 1,627,364
Total capital contributions 5,130,185 2,725,164 7,855,349 Change in net position 4,096,615 705,250 4,801,865
Net position-beginning 186,460,740 156,899,043 343,359,783 Net position-ending $ 190,557,355 $ 157,604,293 $ $ 348,161,648 See accompanying notes to financial statements. 14
CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Statement of Cash Flows
For the Year Ended June 30, 2024
Water Sewer Total
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 46,693,240 $ 47,059,249 $ 93,752,489 Payments to suppliers and service providers (20,293,287) (16,330,373) (36,623,660) Payments to employees for salaries and benefits (17,119,600) (14,646,995) (31,766,595) Net cash provided by (used for)
operating activities 9,280,353 16,081,881 25,362,234
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Consent Decree Insurance Drawdowns 953,693 953,693
Operating grants and contributions 2,178,256 : 2,178,256 Net cash provided by (used for)
noncapital financing activities 3,131,949 3,131,949
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Capital contributions 4,215,374 2,012,611 6,227,985
Acquisition and construction of capital assets (18,211,579) (37,392,635) (55,604,214) Principal paid on capital debt (1,165,862) (770,000) (1,935,862) Interest paid on capital debt (2,002,197) (1,197,491) (3,199,688) Proceeds from sales of assets 692,452. 9,498,161 10,190,613 Net cash provided by (used for)
capital and related financing activities (16,471,812) (27,849,354) (44,321,166)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments 2,380,585 2,100,552 4,481,137
Leasing activities 281,211 : 281,211
Purchase of investments (882,942) (882,942)
Net cash provided by (used for)
investing activities 1,778,854 2,100,552 3,879,406
Net increase (decrease) in
cash and cash equivalents (2,280,656) (9,666,921) (11,947,577) Cash and cash equivalents-beginning 63,615,238 89,678,112 153,293,350 Cash and cash equivalents-ending $ 61,334,582 $ 80,011,191 $ 141,345,773
RECONCILIATION OF CASH AND CASH EQUIVALENTS
TO THE STATEMENT OF NET POSITION
Cash and investments $ 48,160,342 $ 75,368,083 $ 123,528,425 Restricted cash and investments 13,174,240 6,734,909 19,909,149 Less: amounts not meeting definition of cash equivalents (2,091,801) (2,091,801) Total cash and cash equivalents $ 61,334,582 $ 80,011,191 $ 141,345,773 See accompanying notes to financial statements. 15
CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Statement of Cash Flows
For the Year Ended June 30, 2024
Water Sewer Total
RECONCILIATION OF OPERATING INCOME (LOSS)
TO NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Operating income (loss) $ (8,011,490) $ (2,965,923) $ (10,977,413) Adjustments to reconcile operating income (loss) to
net cash provided by (used for) operating activities:
Depreciation/amortization expense 12,131,463 11,411,059 23,542,522 Residual nonoperating revenue and expenses 206,697 206,697 (Increase) decrease in accounts receivable 550,067 (326,184) 223,883 (Increase) decrease in inventories (93,455) (93,455)
(Increase) decrease in prepaid items (80,281) (69,470) (149,751) (Increase) decrease in net OPEB asset (1,676,307) (1,558,218) (3,234,525) Increase (decrease) in accounts payable 4,961,106 7,619,651 12,580,757 Increase (decrease) in accrued liabilities 57,523 75,494 133,017 Increase (decrease) in deposits payable (48,614) 415,302 366,688 Increase (decrease) in compensated absences 206,653 32,025 238,678 Increase (decrease) in claims and judgments (1,064,922) (200,602) (1,265,524) Increase (decrease) in net pension liability 2,141,913 1,648,747 3,790,660 Total adjustments 17,291,843 19,047,804 36,339,647
Net cash provided by (used for)
operating activities $ 9,280,353 $ 16,081,881 $ 25,362,234
SCHEDULE OF NON-CASH NONCAPITAL, CAPITAL,
AND INVESTING ACTIVITIES
Unrealized gain/(loss) on fair value of investments $ 392,014 $ 1,019,113 $ 1,411,127 Unrealized gain/(loss) on investments in joint ventures 709,450 709,450 914.811 712,553 1,627,364
Contributions of capital assets
Amortization on bond discount/(premium) (197,638) (6,404) (204,042) See accompanying notes to financial statements. 16
CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 1: REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization and Operations of the Reporting Entity
The San Bernardino Municipal Water Department (Department) is governed under the Charter of the City of San Bernardino (City). A Water Board appointed by the Mayor and approved by City Council, has Charter defined powers, with full authority for administration of the water utility and delegated authority for the sewer treatment utility. The Department has served the community since 1905.
B. Basis of Accounting and Measurement Focus
The Department reports its activities as enterprise funds, which are used to account for operations that are financed and operated in a manner similar to a private business enterprise, where the intent of the Department is that the period incurred, regardless of when the related cash flow takes place.
Operating revenues, such as charges for services (water sales, sewer services and water services) result from exchange transactions associated with the principal activity of the Department. Exchange transactions are those in which each party receives and gives up equal values. Nonoperating revenues, such as property taxes and investment income, result from nonexchange transactions or ancillary activities in which the Department gives (receives) value without directly receiving (giving) equal value in exchange.
When both restricted and unrestricted resources are available for use, the Department uses restricted resources and then unrestricted resources.
The major funds of the Department are described below:
• Water Utility Fund - The Water Utility Enterprise Fund (Water Utility) is used to account for the operations of the Department's water system and related revenues.
• Sewer Utility Fund - The Sewer Utility Enterprise Fund (Sewer Utility) is used to account for the operations of the City's wastewater treatment system and collection system and related revenues.
Administrative and engineering services are provided by the Water Utility to the Sewer.
C. Financial Reporting
The Department's basic financial statements are presented in conformance with the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, "Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments" (GASB No. 34). This statement established revised financial reporting requirements for state and local governments throughout the United States for the purpose of enhancing the understandability and usefulness of financial reports.
GASB Statement No. 34 and its related GASB pronouncements provide for a revised view of financial information and restructure the format of financial information provided prior to its adoption. A statement of net position replaces the balance sheet and reports assets, liabilities, and the difference between them as net position, not equity. A statement of revenues, expenses and changes in net position replaces both the income statement and the statement of changes in retained earnings and contributed capital. GASB Statement No. 34 also requires that the statement of cash flows be prepared using the direct method. Under the direct method, cash flows from operating activities are presented by major categories.
17 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 1: REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Assets, Liabilities and Net Position
1. Use of Estimates
The preparation of the basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported changes in net position during the reporting period. Actual results could differ from those estimates.
2. Cash and Investments
For the purpose of the statement of cash flows, cash and cash equivalents include highly liquid investments (including restricted assets) with a maturity of three months or less when purchased.
Investments are reported in the accompanying balance sheet at fair value, except for certain certificates of deposit and investment contracts that are reported at cost as they are not transferable and have terms that are not affected by changes in market interest rates.
Changes in fair value that occur during a fiscal year are recognized as investment income reported for that fiscal year. Investment income includes interest earnings, changes in fair value and any gains or losses realized upon the liquidation of investments.
3. Fair Value Measurements
Certain assets and liabilities are required to be reported at fair value. The fair value framework provides a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are described as follows:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly and fair value is determined through the use of models or other valuation methodologies including:
• Quoted prices for similar assets or liabilities in active markets. • Quoted prices for identical or similar assets or liabilities in markets that are inactive. • Inputs other than quoted prices that are observable for the asset or liability. • Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. These unobservable inputs reflect the Department's own assumptions about the inputs market participants would use in pricing the asset or liability (including assumptions about risk). These unobservable inputs are developed based on the best information available in the circumstances and may include the Department's own data.
4. Accounts Receivable
Customer or trade receivables are shown net of an allowance for uncollectible accounts based on historical and management estimates. Transactions between funds that are representative of lending or borrowing arrangements outstanding at the end of the fiscal year are referred to as "interfund receivables / payables" or "advances to/from" other funds. All interfund transactions are eliminated for financial reporting. 18 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 1: REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
5. Inventory
Materials and supplies inventory consist primarily of water meters, pipes and pipefittings for construction and repair to the Department's water transmission and distribution system and items necessary for maintenance at the sewer treatment facilities. Inventory is valued at cost using a weighted average method. Inventory items are charged to expense at the time that individual items are withdrawn from inventory or consumed.
Water inventory is stated at its purchase cost using the first in, first out method. Inventory is recorded when purchased and expensed at the time the inventory is consumed.
6. Prepaid Expense and Deposit
Certain payments to vendors reflect costs or deposits applicable to future accounting periods and are recorded as prepaid items in the basic financial statements.
7. Capital Assets and Intangible Right-to-Use Assets
Capital assets acquired or constructed are capitalized at historic cost. Department policy has set the capitalization threshold for reporting capital assets at $5,000 and a life expectancy of at least 3 years. Overhead is capitalized at the rate of 28.9% of labor and benefits, 10% of material and supplies and 2% of significant contracts.
Intangible right-to-use assets are defined by the Department as assets with an estimated useful life in excess of 3 years and with an initial, individual value of $5,000 or more. Depreciation and amortization are recorded on a straight-line basis over the estimated useful lives of the assets as follows:
Source of supply plant 8 to 50 years
Disposal plant and interceptor lines 35 to 50 years
Other facilities (shops, leasehold & yards) 5 to 25 years Tools, office equipment & communications 4 to 20 years
Computer equipment 3 to 5 years
Automotive and fleet equipment 3 to 15 years
Intangible right-to-use assets Shorter of the useful life of the underlying asset or the term
of the arrangement
8. Compensated Absences
Department policy is to permit employees to accumulate a limited amount of earned vacation and sick leave. Various negotiation groups have different sell-back and cash out options. Additionally, cash out options upon retirement or death of the employee vary based on the negotiation group. Employees' vacation and sick leave benefits are recognized as a liability of the Department.
9. Restricted Assets and Amounts Payable from Restricted Assets Amounts shown as restricted assets have been restricted by bond indentures or are to be used for specified purposes based on contract provisions, such as bonded debt service. Certain liabilities which are currently payable have been classified as current liabilities payable from restricted assets since assets have been restricted for their payment.
19 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 1: REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
10. Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by the Department.
For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.
GASB 68 requires that the reported results must pertain to liability and asset information within certain defined time limits. For this report, the following periods are used:
Valuation Date (VD) June 30, 2022
Measurement Date (MD) June 30, 2023
Measurement Period (MP) July 1, 2022 to June 30, 2023
11. Other Post-Employment Benefits (PEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Department's plan (OPEB Plan), the assets of which are held by US Bank in an irrevocable trust, and additions to/deductions from the OPEB Plan's fiduciary net position have been determined by an independent actuary. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.
Generally accepted accounting principles require that the reported results must pertain to liability and fiduciary net position information within certain defined time limits. For this report, the following timeframes are used:
Valuation Date June 30, 2022
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
12. Deferred Outflows/Inflows
In addition to assets, the Statement of Net Position will sometimes report a separate section of deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents consumption of net assets that applies to a future period and so will not be recognized as an outflow of resources (expenses/expenditures) until then. The Department has two items that qualify for reporting in this category: the deferred outflows related to pensions and OPEB.
In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to future periods and will not be recognized as inflow of resources (revenue) until that time. The Department has three items that qualify for reporting in this category, of which two relate to deferred inflows related to pensions and OPEB. Lastly, leases related items for the amount of the lease receivable plus any lease payments related to future periods, less any lease incentives paid to, or on behalf of, the lessee at or before the commencement of the lease term.
13. Interfund Eliminations
The interfund eliminations column represents entries made to eliminate interfund income and expenditure transactions between the water utility fund and the sewer utility fund for the purposes of consolidated financial statements.
20 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 1: REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
14. Net Position
The financial statements utilize a net position presentation. Net position is categorized as follows:
• Net Investment in Capital Assets - This component of net position consists of capital assets, net of accumulated depreciation and reduced by any debt outstanding against the acquisition, construction, or improvement of those assets.
• Restricted Net Position - This component of net position consists of constraints placed on net position use through external constraints imposed by creditors, grantors, contributors, or laws or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. • Unrestricted Net Position - This component of net position consists of net position that does not meet the definition of restricted or net investment in capital assets.
15. Capital Contributions
Contributions in aid of construction represent cash and utility plant additions contributed to the Department by property owners or developers desiring services that require capital expenditures or capacity commitment. In accordance with Governmental Accounting Standards Board Statement No. 33, the capital contributions are recorded on the Statement of Revenues, Expenses and Changes in Net position.
16. Budgetary Policies
The Department adopts an annual budget for planning, control, and evaluation purposes. Budgetary control and evaluation are affected by comparisons of actual revenues and expenses with planned revenues and expenses for the period. Encumbrance accounting is not used to account for commitments related to outstanding contracts for construction and services.
17. Leases
Lessee: The Department is a lessee for a noncancellable lease of a building. The Department recognizes a lease liability and an intangible right-to-use lease asset (lease asset) in the statement of net position. The Department recognizes lease liabilities with an initial, individual value of $5,000 or more.
At the commencement of a lease, the Department initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs.
Subsequently, the lease asset is amortized on a straight-line basis over its useful life. Key estimates and judgments related to leases include how the Department determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments. • The Department uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the Department uses its estimated incremental borrowing rate as the discount rate for leases.
• The lease term includes the non-cancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that the Department is reasonably certain to exercise.
21 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 1: REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Department monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease assets and liability if certain changes occur that are expected to significantly affect the amount Lease assets are reported with other capital assets and lease liabilities are reported with long-term debt on the statement of net position.
Lessor: The Department is a lessor for various noncancellable leases of land. The Department recognizes a lease receivable and a deferred inflow of resources in the statement of net position.
At the commencement of a lease, the Department initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date.
Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term.
Key estimates and judgments include how the Department determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts. • The Department uses its estimated incremental borrowing rate as the discount rate for leases. • The lease term includes the non-cancellable period of the lease. Lease receipts included in the measurement of the lease receivable are composed of fixed payments from the lessee.
The Department monitors changes in circumstances that would require a remeasurement of its lease, and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable.
18. Subscription-Based Information Technology Arrangements The Department is a subscriber for a noncancellable subscription of information technology services. The Department recognizes subscription liability and an intangible right-to-use subscription asset (subscription asset) in the government-wide financial statements. The Department recognizes subscription liabilities with an initial, individual value of $5,000 or more.
At the commencement of a subscription, the Department initially measures the subscription liability at the present value of payments expected to be made during the subscription term. Subsequently, the subscription liability is reduced by the principal portion of subscription payments made. The subscription asset is initially measured as the initial amount of the subscription liability, adjusted for subscription payments made at or before the subscription commencement date, plus certain initial direct costs. Subsequently, the subscription asset is amortized on a straight-line basis over its useful life. Key estimates and judgments related to subscriptions include how the Department determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments. • The Department uses the interest rate charged by the vendor as the discount rate. When the interest rate charged by the vendor is not provided, the Department uses its estimated incremental borrowing rate as the discount rate for subscriptions.
• The subscription term includes the noncancellable period of the subscription. Subscription payments included in the measurement of the subscription liability are composed of fixed payments that the Department is reasonably certain to exercise.
22 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 1: REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Department monitors changes in circumstances that would require a remeasurement of its subscriptions and will remeasure the subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.
Subscription assets are reported with other capital assets and subscription liabilities are reported with long-term debt on the statement of net position.
NOTE 2: CASH AND INVESTMENTS
Cash and investments are reported in the accompanying statement of net position as follows:
Water Utility Sewer Utility Total
Cash and investments $ 48,160,342 $ 75,368,083 $ 123,528,425 Restricted investments:
Restricted for Consent Decree 24,448,652 24,448,652
Proceeds from bond issuances 13,174,240 6.734,909 19,909,149 Total cash and investments $ 85,783,234 $ 82,102,992 $ 167,886,226 Cash and investments at June 30, 2024, consisted of the following:
Water Utility Sewer Utility Total
Cash on hand $ 7,000 $ - $ 7,000
Deposits with financial institutions 23,038,529 23,057,394 46,095,923 Investments 25,114,813 52,310,689 77,425,502
Restricted investments 37,622,892 6,734,909 44,357,801
Total cash and investments $ 85,783,234 $ 82,102,992 $ 167,886,226 A. Investments Authorized by the California Government Code and the Department's Investment Policy The table below identifies the investment types that are authorized by the Department and Consent Decree (see note 12) in accordance with the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City's investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. Due to its long-term nature, the Consent Decree has been explicitly exempted from maximum maturity requirements of the California Government Code, which limits maturity of most investments to five years. All other aspects of the Consent Decree investment policy are consistent with the City's investment policy.
Maximum Maturity
Consent Maximum % Maximum %
Investment Type* Department Decree of Portfolio of Portfolio US treasury 5 years 5 years None None
US agency 5 years 5 years None None
Bankers acceptances 180 days 180 days 40% 40%
Commercial paper 270 days 270 days 25% 25%
Negotiable CDs 5 years 5 years 30% 30%
Medium-term notes 5 years 5 years 30% 30%
Money market mutual funds N/A N/A 20% 20%
Mortgage pass through 5 years 5 years 20% 20%
Local Agency Investment Fund N/A N/A $40,000,000 $40,000,000 Guaranteed investment N/A N/A None None
23 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 2: CASH AND INVESTMENTS (CONTINUED)
B. Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustees are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. Investments authorized for funds held by bond trustee include, U.S. Treasury Obligations, U.S. Government Sponsored Enterprise Securities, the California Local Agency Investment Fund, Guaranteed Investment Contracts, Commercial Paper, Local Agency Bonds, Banker's Acceptance and Money Market Mutual Funds. There are no limitations on the maximum amount that can be invested in one issuer, maximum percentage allowed or the maximum maturity of an investment, except for the maturity of Banker's Acceptance which are limited to one year.
C. Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code requires that a financial institution secure deposit made by a state or local governmental unit by pledging securities in an undivided collateral pool held by a depository regulated under state law.
The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure the Department's deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.
For investment identified herein as held by bond trustee, the bond trustee selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the reporting government.
D. Investment in State Investment Pool
The Department is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the Department's investment in this pool is reported in the accompanying financial statements at amounts based upon the Department's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. LAIF is not rated by a nationally recognized statistical rating organization, but as stated previously, it is regulated by the California Government Code, and is therefore exempt from rating requirements.
E. Interest Rate Risk
Interest rate risk is the possibility that fluctuations in market interest rates will adversely affect the fair value of an investment. The longer the maturity of an investment, the greater the sensitivity of its fair value will be to changes in market interest rates. One method that the Department uses to manage its exposure to interest rate risk is by purchasing a combination of shorter term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio matures or comes close to maturity evenly over time as necessary to provide requirements for cash flow and liquidity needed for operations. 24 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 2: CASH AND INVESTMENTS (CONTINUED)
Information about the sensitivity of the fair values of the Department's investments to market interest rate fluctuations is provided by the following table that shows the distribution of the Department's investments by maturity date:
Maturities
Less than 12 13-24 25-60 More than
Investment Type months months months 60 months Total
U.S. Agency Securities $ 2,564,975 $ 4,678,498 $ 597,987 $ 7,841,460 U.S. Treasuries 4,295,766 19,115,084 23,410,850
Medium Term Corporate Notes 17105% 193,586 4,175,743 4,369,329 Non - U.S. Government and Supranational Bonds 1,380,820 817,159 3,669,782 13,363 235,516 1,626,917 1,875,796
320,597 320,597
Local Agency Investment Fund 35,937,688 : 35,937,688
U.S. Treasuries 11,453,594 156,845 11,453,594
U.S. Agency Asset Backed Securities 144,538 144,736 3,532,939 3,979,058 U.S. Agency Collateralized Mortgage Obligations 47,925 47,925 U.S. Agency Securities 969,594 969,594
orporate Note: 1,438,117 1,045,097 2,089,552 4,572,766
ertificates of Depos 701,397 701,397
Bank Note 352,471 352,471
Asset Backed Securities 265,351 2,106,496 2,371,847
Investments with Fiscal Agent:
Money Market Funds 19,909,149 19,909,149
Total Investments $ 61,800,230 $ 13.910,361 $ 45,867,942 $ 204,770 $ 121,783,303 F. Credit Risk
Credit risk is the possibility that the issuer of an investment will not fulfill its obligation to the holder of the investment.
This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the Department's investment policy, or debt agreements, and the actual rating as of year-end for each investment type.
Minimum
Investment Type Rating Rating Total
-.
U.S. Agency Securities None AA+ $ 7,841,460
U.S. Treasuries Exempt Exempt 23,410,850
Medium Term Corporate Notes AA- AA+ 4,369,329
Non - U.S. Government and Supranational Bonds AA AAA 3,669,782 Asset Backed Securities AA- AAA 1,875,796
Money Market Funds None AAA 320,597
Local Agency Investment Fund Not Rated Not Rated 35,937,688 Consent Decree:
U.S. Treasuries No Limit Exempt 11,453,594
U.S. Agency Asset Backed Securities No Limit AA+ 3,979,058 U.S. Agency Collateralized Mortgage Obligations AA AA+ 47,925 U.S. Agency Securities No Limit AA+ 969,594
Corporate Notes A+ AAA 4,572,766
Certificates of Deposit A AA- 701,397
Bank Note A At 352,471
Asset Backed Securities AA AAA 2,371,847
Investments with Fiscal Agent:
Money Market Funds AA+ AA+ 19,909,149
Total Investments $121,783,303
25 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 2: CASH AND INVESTMENTS (CONTINUED)
G. Fair Value Measurement
The Department categorizes its fair value investments within the fair value hierarchy established by generally accepted accounting principles. The Department has the following recurring fair value measurements as of June 30, 2024:
Investment Type Level 1 Level 2 Total
U.S. Agency Securities $ $ 7,841,460 $ 7,841,460
U.S. Treasuries 23,410,850 23,410,850
Medium Term Corporate Notes 4,369,329 4,369,329
Non - U.S. Government and Supranational Bonds 3,669,782 3,669,782 Asset Backed Securities 1,875,796 1,875,796
Consent Decree:
U.S. Treasuries 11,453,594 3,979,058 11,453,594
U.S. Agency Asset Backed Securities 3,979,058
U.S. Agency Collateralized Mortgage Obligations 47,925 47,925 U.S. Agency Securities 969,594 969,594
Corporate Notes 4,572,766 4,572,766
Bank Note : 352,471 352,471
Asset Backed Securities 2,371,847 2,371,847
Subtotal - investments subject to fair value $ 11,453,594 $ 53,460,878 64,914,472 Il
Investments not subject to fair value 56,868,831
Total investments $ 121,783,303
NOTE 3: CAPITAL ASSETS
A. Water Utility Fund
Capital asset activity for the water utility for the fiscal year ended June 30, 2024:
Balance Balance
July 1, 2023 Adjustments Additions Deletions Transfers June 30,2024 Capital assets, not being depreciated or amortized:
Land and easements $ 5,989,563 $ - $ - $ (120,101) $ - $ 5,869,462 Construction-in-progress 14,799,410 15,286,659 (4,282,754) 25.803.315 Total capital assets, not being depreciated or amortized: 20,788,973 15,286,659 (120,101) (4.282,754) 31.672.777 Capital assets, being depreciated or amortized:
Water rights, wells, and pumping 102,739,627 8,531,901 651,756 (6,165,875) 105,757,409 Distribution system 166,022,296 18,739,814 1,746,360 (5,552,058) 4,.282,754 185,239, 166 Buildings, plants, and stores 8,626,939 (686,829) (997,497) 6,942,613 Field and office equipment 43,995,713 (26,594,071) 1.411,615 (7,465,951) 11,377,306 Lease assets 155,243 155,243
Subscription assets 246,706 246,706
Total capital assets, being depreciated or amortized: 321,786,524 (9,185) 3,839,731 (20,181,381) 4,282,754 309,718,443 Less: accumulated depreciation and amortization:
Water rights, wells, and pumping (50,904,993) (3,866,004) (5,142,327) 5,808,038 (54,105,286) Distribution system (62,374,262) (233,875) (5,807,450) 5,550,618 (62,864,969) uildings, plants, and store (3,140,038) 89,648 (256,415) 983,423 (2,323,382) eld and office equipme (18,816,711) 4,010,231 (767,410) 7,361,173 ...... (8,212,717) Lease assets (95,534) (47,768) (143,302)
Subscription assets (85,802) (110,093) (195,895)
Total accumulated depreciation and amortization: (135,417,340) (12,131,463) 19,703,252 (127,845,551) Total capital assets, being depreciated or amortized, net 186,369,184 (9,185) (8,291,732) (478,129) 4,282,754 181,872,892 Total accumulated depreciation and amortization: $ 207,158,157 $ (9,185) $ 6,994,927 $ (598.230) S - S 213.545,669 * During the year, certain adjustments were made to correct beginning balance classifications. The net effect on total capital balance reclassifications was $0.
26 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 3: CAPITAL ASSETS (CONTINUED)
* During the year, certain adjustments were made to correct beginning balance classifications. The net effect on total capital balance reclassifications was $0.
B. Sewer Utility Fund
Capital asset activity for the sewer utility for the fiscal year ended June 30, 2024:
Balance Balance
July 1. 2023 _Adjustments* Additions Deletions Transfers June 30. 2024 Capital assets, not being depreciated or amortized:
Land and easements $ 17,603,413 $ $ - $ 17,603,413
Construction-in-progress 34,557,818 26,071,255 (29,286.070) 31,343,003 Total capital assets, not being depreciated or amortized: 52,161,231 26,071,255 (29,286,070) 48,946.416 Capital assets, being depreciated or amortized:
4,065,094 9,768,993 (9,876,030) 990,302 3,958,05
Piplines 21,319,336 3,045,033 1.683,924 (7.387,27) 27,018,59 Buildings, plants, and stores 160,649,219 (8,418,302) 7,869,675 28,315,768 181,029,083 Field and office equipment 19,399,679 (4,395,724) 2,480,334 (3.973.991) 13,510,298 Total capital assets, being depreciated or amortized: 205,433,328 12.033.933 (21.237.298) 29.286,070 225,516,033 Less: accumulated depreciation and amortization:
Pumping (4,402,604) 1,529,612 (55,446) 17,673 (2,910,765) Piplines (10,020,136) (311,716) (508,765) (10,840,617)
uildings, plants, and store (128,956, 168) (588,912) (9,734,590) 7,342,221 (131,937,449) ield and office equipmer (11,097,850) (628,984) (1,112,258) 2,887,423 (9.951,669) Total accumulated depreciation and amortization: (154.476,758) (11,411,059) 10,247,317 (155,640,500) Total capital assets, being depreciated or amortized, net 50,956,570 622,874 (10,989,981) 29,286,070 69,875,533 Total accumulated depreciation and amortization: $ 103,117,801 $ $ 26,694,129 $ (10,989.981) $ - $ 118,821,949 * During the year, certain adjustments were made to correct beginning balance classifications. The net effect on total capital balance reclassifications was $O.
NOTE 4: LONG-TERM LIABILITIES
Changes in long-term liabilities for the year ended June 30, 2024, are as follows:
Balance Balance Long-term
July 1, 2023 Additions Deletions June 30, 2024 Current Portion Portion Water Utility
Bonds payable
2016 Water Revenue Bond $ 43,120,000 $ : s 995,000 $ 42,125,000 $ 1,050,000 $ 41,075,000 Premium 4,611,557 197,638 4,413,919 4,413,919
Total bonds payable 47,731,557 1,192,638 46,538,919 1,050,000 45,488,919 Leases 59,878 47,884 11,994 11,994
Subscriptions 122,978 122,978
Total Water Utility $ 47,914,413 $ $ 1,363,500 $ 46,550,913 $ 1,061,994 $ 45,488,919 Sewer Utility
Bonds payable
2016 Sewer Revenue Bond $ 30,510,000 : s 770,000 29,740,000 $ 810,000 $ 28,930,000 Premium 149,941 6,404 143,537 143,537
Total Sewer Utility $ 30,659,941 776,404 $ 29,883,537 $ 810,000 $ 29,073,537 27 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 4: LONG-TERM LIABILITIES (CONTINUED)
A. 2016 Water Revenue Bonds
On November 3, 2016, the Water Utility issued $48,225,000 Water Revenue Bonds to finance the acquisition and construction of certain water system capital improvements and to refund outstanding obligations. The Water Revenue Bonds have interest rates ranging from 3% to 5% with maturities through August 2046. The bonds are secured by revenues pledged for the payment of debt service. In addition, a provision that in the event of default, the bond trustee may take whatever action, at law or in equity, as may appear necessary or desirable to collect the payments of the debt.
Debt service requirements on the 2016 Water Revenue Bond are as follows:
Year Ending
June 30 Principal Interest Total
2025 $ 1,050,000 $ 1,944,388 $ 2,994,388
2026 1,100,000 1,890,638 2,990,638
2027 1,160,000 1,834,138 2,994,138
2028 1,215,000 1,774,763 2,989,763
2029 1,280,000 1,712,388 2,992,388
2030-2034 7,300,000 7,659,688 14,959,688
2035-2039 9,055,000 5,901,106 14,956,106
2040-2044 11,585,000 3,366,900 14,951,900
2045-2047 8,380,000 593,763 8,973,763
Totals $ 42,125,000 $ 26,677,772 $ 68,802,772
The Water Utility Fund is required to maintain net revenues adequate to cover 110% of annual debt service.
Net Revenues means the Revenues for the Fiscal Year less Operation and Maintenance Costs for such Fiscal Year. Debt service coverage for the Water Utility Fund for the year ended June 30, 2024, was as follows:
Gross revenue $45,985,090
Operating expenses (53,996,580)
Add back: depreciation/amortization expense 12,131,463
Non-operating income 8,761,751
Less: gain on disposal (85,041)
Net revenues $12,796,683
Annual debt service $ 2,990,513
Actual coverage ratio 4.28
B. 2016 Sewer Revenue Bonds
On December 8, 2016, the Sewer Utility issued $34,445,000 of Sewer Treatment Revenue Bonds to finance the Bonds have interes tales ranging from 3% 05% with maturies those August 046. The bore are sured by revenues pledged for the payment of debt service. In addition, a provision that in the event of default, the bond trustee may take whatever action, at law or in equity, as may appear necessary or desirable to collect the payments of the debt.
28 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 4: LONG-TERM LIABILITIES (CONTINUED)
Debt service requirements on the 2016 Sewer Revenue Bond are as follows:
Year Ending
June 30 Principal Interest Total
2025 810,000 $ 1,154,775 $ 1,964,775
2026 855,000 1,113, 150 1,968, 150
2027 895,000 1,069,400 1,964,400
2028 935,000 1,033,000 1,968,000
2029 965,000 1,003,897 1,968,897
2030-2034 5,345,000 4,488,641 9,833,641
2035-2039 6,470,000 3,360,600 9,830,600
2040-2044 7,905,000 1,928,100 9,833,100
2045-2047 5,560,000 339,600 5,899,600
Totals 29,740,000 15,491,163 45,231,163
The Sewer Utility Fund is required to maintain net revenues adequate to cover 110% of annual debt service. Gross revenue is defined as Operating Revenue combined with non-operating revenue. Debt service coverage for the Sewer Utility Fund for the year ended June 30, 2024, was as follows:
Gross revenue $ 47,385,433
Operating expenses (50,351,356)
Add back: depreciation/amortization expense 11,411,059
Non-operating income 2,121,049
Less: gain on disposal (599,981)
Net revenues $ 9,966,204
Annual debt service $ 1,964,275
Actual coverage ratio 5.07
NOTE 5: LEASES AND SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS A. Leases Receivable and Deferred Inflows of Resources
The Department leases land to various companies for installation of cellular towers and fiberoptic communications.
The terms range from 27 months to 268 months as of the contract commencement date. The Department also leases land to Little League International to operate a sports complex. The term is 231 months as of the contract commencement date. Some leases have extension options ranging from 6 months to 20 years. As of June 30, 2024, the value of the lease receivable is $3,478, 126. The value of the deferred inflow of resources as of June 30, 2024, was $3,275,876, and the Department recognized lease revenue of $279,500 during the fiscal year.
The amount of revenues recognized during the fiscal year for variable and other payments not previously included in the measurement of the lease receivable was $78,972. 29 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 5: LEASES AND SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS (CONTINUED)
The principal and interest payments that are expected to maturity are as follows:
Year Ending
June 30 Principal Interest Total
2025 $ 211,681 $ 52,942 $ 264,623
2026 220,658 49,755 270,413
2027 231,942 46,412 278,354
2028 243,636 42,896 286,532
2029 253,024 39,202 292,226
2030-2034 1,384,886 134,768 1,519,654
2035-2039 613,849 52,257 666,106
2040-2044 318,450 9,856 328,306
Totals $ 3,478,126 $ 428,088 $ 3,906,214
B. Leases Payable and Lease Assets
On July 1, 2021, the Department entered into a 39-month lease as lessee for the use of a 397 Modular office. An initial lease liability was recorded in the amount of $155,243. As of June 30, 2024, the value of the lease liability is $11,994. The Department is required to make monthly fixed payments of $4,000. The lease has an interest rate of
0.3080%. The value of the lease asset as of June 30, 2024 is $155,243 with accumulated amortization of $143,302.
Future principal and interest requirements to maturity for each lease liability are as follows:
Year Ending
June 30 Principal Interest Total
2025 $ 211,681 $ 52,942 $ 264,623
C. Subscription-Based Information Technology Arrangements The Department had entered into various subscriptions as the subscriber for the use of software as a service. An initial subscription liability was recorded in the amount of $240,706 during the prior fiscal year. The terms of these subscriptions ranged from 21 to 33 months. As of June 30, 2024, the total value of the subscription liability was paid in full. The value of the subscription assets as of June 30, 2024 is $246,706, with an accumulated amortization of $195,093.
30 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 6: COMPENSATED ABSENCES
Compensated absences represent the amount of the accumulated vacation, which is expected to be liquidated with future resources. The water utility fund, sewer utility fund and sewer collection fund liquidate 100 percent of the compensated absences for business-type activities. There is no fixed payment schedule for unpaid compensated absences; see Note 1 for additional information.
Balance Balance Long-term
July 1, 2023 Net Change June 30, 2024 Current Portion Portion Water Utility Fund $ 1,338,238 $ 206,653 $ 1,544,891 $ 1,235,913 $ 308,978 Sewer Utility Fund 585,652 32,025 617,677 468,521 149,156 Total $ 1,923,890 $ 238,678 $ 2,162,568 $ 1,704,434 $ 458,134 NOTE 7: PENSION PLAN
The Department is considered to be part of the City of San Bernardino PERS pension plan, therefore all related information included in this note refers to the City as a whole unless specifically indicating otherwise. All qualified permanent and probationary employees are eligible to participate in the Department's Miscellaneous Plan, an agent multiple-employer defined benefit pension plan administered by the California Public Employees' Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statute and Local Government resolution.
CaPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CaPERS website. Additional disclosures and required supplementary information regarding the City's plan can be found in the City's audited financial statements.
A. Benefits Provided
CaPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. The Plans' provisions and benefits in effect at the measurement date, are summarized as follows:
Miscellaneous
Prior to On or after On or after
Hire date October 3, 2011 October 4, 2011 January 1, 2013 Benefit formula 2.7% @ 55 2% @55 2% @60
Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age 50-55 50-55 52-67
Monthly benefits, as a % of eligible
compensation 2.0% to 2.7% 2.0% to 2.7% 1.0% to 2.5%
Required employee contribution rates 10% 10% 10%
Required employer contribution rates 35% 35% 35%
31 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 7: PENSION PLAN (CONTINUED)
B. Employees Covered
As of the June 30, 2022 valuation date, the following employees were covered by the benefit terms of the Plan:
City-Wide Department
Inactive employees or beneficiaries currently receiving benefits 1,567 172 Inactive employees entitled to but not yet receiving benefits 1,096 36 Active employees 671 259
Total 3,334 467
C. Contribution Description
Section 20814(c) of the California Public Employees' Retirement Law (PERL) requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CaPERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended.
Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Plan contributions for the year equaled $7,744,386.
D. Actuarial Methods and Assumptions used to determine Total Pension Liability The June 30, 2022 valuation was rolled forward to determine the June 30, 2023 total pension liability, based on the following actuarial methods and assumptions:
Actuarial Cost Method Entry Age Normal Cost Method
Actuarial Assumptions
Discount rate 6.90%
Inflation 2.30%
Salary increases Varies by entry age and services
Mortality rate table Derived using CalPERS' membership data for all funds Post-retirement benefit increase The lesser of contract COLA or 2.30% until purchasing power protection allowance floor on purchasing power applies,
2.30% thereafter
The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the 2021 experience study report from November 2021 that can be found on the CaPERS website.
E. Long-Term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
32 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 7: PENSION PLAN (CONTINUED)
In determining the long-term expected rate of return, CaPERS took into account both short-term and long-term rates of return by asset class are as follows:
Assumed
Asset
Asset Class Allocation Real Return 1, 2
Global equity-cap-weighted 30.00% 4.54%
Global equity-non-cap-weighted 12.00% 3.84%
Private equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed securities 5.00% 0.50%
Investment grade corporates 10.00% 1.56%
High yield 5.00% 2.27%
Emerging market debt 5.00% 2.48%
Private debt 5.00% 3.57%
Real assets 15.00% 3.21%
Leverage -5.00% -0.59%
' An expected inflation of 2.30% used for this period.
2 Figures are based on the 2021 Asset Liability Management study F. Discount Rate
The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 33 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 7: PENSION PLAN (CONTINUED)
G. Amortization of Deferred Outflows and Deferred Inflows of Resources Under GASB Statement No. 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time.
The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense.
The amortization period differs depending on the source of the gain or loss:
Net difference between projected 5-year straight-line amortization and actual earnings on pension
plan investments
All other amounts Straight-line amortization over the expected average remaining service lifetime (EARSL) of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period.
The EARSL for the plan for the measurement period ending June 30, 2023 is 2.2 years, which was obtained by dividing the total service years of 7,412 (the sum of remaining service lifetimes of the active employees) by 3,334 (the total number of participants: active, inactive, and retired). Inactive employees and retirees have remaining service lifetimes equal to 0. Total future service is based on the members' probability of decrementing due to an event other than receiving a cash refund.
H. Changes in Net Pension Liability
The following table shows the Department's proportionate share of the net pension liability of the City's plan over the measurement period:
Increase (Decrease)
Net Pension
Total Pension Plan Fiduciary Liability
Liability (a) Net Position (b) (c) = (a) - (b)
Balance at 6/30/2023 (Measurement Date 6/30/2022) $ 234,951,657 $ 164,809,826 $ 70,141,831 Balance at 6/30/2024 (Measurement Date 6/30/2023) 242,663,139 170, 152,490 72,510,649 Net changes during 2023-2024 $ 7,711,482 $ 5,342,664 $ 2,368,818 The net pension liability of the plan is measured as of June 30, 2023, and the total pension liability for the plan used to ce 30, 20 23, using standard idates decerines The production ole opension laired, projection of the Department's long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The Department's proportionate share of the net pension lability for the plan as of June 30, 2024 and 2023 was 36 percent. 34 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 7: PENSION PLAN (CONTINUED)
I. Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Plan as of the Measurement Date, calculated using the discount rate of 6.90 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.90 percent) or 1 percentage-point higher (7.90 percent) than the current rate:
Discount Rate Current Discount Discount Rate
-1% (5.90%) Rate (6.90%) + 1% (7.90%)
Plan's Net Pension Liability
-Department Allocation
(36%) $ 103,521,332 $ 72,510,649 46,943,027
J. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions For the fiscal year ended June 30, 2024, the Department recognized pension expense of $11,783,510.
As of June 30, 2024, the Department reports other amounts for the Plan as deferred outflow and deferred inflow of resources related to pensions as follows:
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to
the measurement date $ 7,744,386 $ -
Differences between expected and actual
experience 985,694 79,454
Changes in assumptions 319,405 -
Net difference between projected and actual
earnings on pension plan investments 7,727,851 =
Total $ 16,777,336 $ 79,454
The $7,744,386 reported as deferred outflows of resources related to employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2025.
That and other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Deferred Outflows/
Year Ended (Deferred Inflows)
June 30, of Resources
2025 $ 2,395,482
2026 872,803
2027 5,478,790
2028 206,421
Total $ 8,953,496
35 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 7: PENSION PLAN (CONTINUED)
K. Pension Plan Fiduciary Net Position
The plan fiduciary net position disclosed in the GASB 68 accounting valuation report may differ from the plan assets reported in the funding actuarial valuation report due to several reasons. First, for the accounting valuations, CaPERS must keep items such as deficiency reserves, fiduciary self-insurance and OPEB expense included as assets. These amounts are excluded for rate setting purposes in the funding actuarial valuation. In addition, differences may result from early Annual Comprehensive Financial Report closing and final reconciled reserves.
NOTE 8: OTHER POST-EMPLOYMENT BENEFITS (OPEB)
A. Plan Description
The Department provides health benefits to all qualifying retirees and their spouses in accordance with Memorandums of Understanding under various labor agreements. The other post-employment benefits plan is a single-employer plan administered by the Department.
B. Employees Covered
Employees are eligible for retiree health benefits if they retire from the Department on or after age 50 with at least 10, 12, or 15 years of service, depending on bargaining unit, and are eligible for a PERS pension. As of the June 30, 2022 valuation date, the following current and former employees were covered by the benefit terms under the OPEB Plan:
Active employees electing medical coverage 221
Active employees waiving medical coverage 35
Retirees electing medical coverage 132
Retirees with only non-medical OPEB coverage
Total 413
C. Contributions
The contribution requirements of plan members and the Department are established and may be amended by the Department's contributions were $1,783,630, which include the implicit subsidy of $580,575.
D. Net OPEB Liability/(Asset)
The Department's net OPEB liability/(asset) was measured as of June 30, 2023, and the total OPEB liability used to calculate the net OPEB liability/(asset) was determined by an actuarial valuation dated June 30, 2022 that was rolled forward to determine the june 30, 2023 total OPEB liability, based on the following actuarial methods and assumptions:
Actuarial Cost Method: TEntry Age Normal
Discount Rate 6.25%
Inflation 2.50%
Mortality ased on assumptions for Public Agency Miscellaneous membe ublished in the 2021 CaPERS Experience Study. These table include generational mortality improvement using 80% of scale MP- 2020.
Healthcare Trend Rate 6.8% for not Medicare eligible and 5.4% for Medicare eligible for FY 2023, gradually decreasing over several decades to an ultimate rate of
3.9% in FY 2076 and later years.
36 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 8: OTHER POST-EMPLOYMENT BENEFITS (OPEB) (CONTINUED) The long-term expected rate of return on OPEB plan investments was determined using a building-block method in hich expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation re developed for each major asset class. These ranges are combined to produce the long-term expected rate o return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.
The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
Target Expected Real
Asset Class Allocation Rate of Return
Fixed income 40% 1.47%
Global Equity 60% 4.82%
Assumed long-term rate of inflation 2.75%
Expected long-term net rate of return 6.25%
Total
E. Discount Rate
The discount rate used to measure the total OPEB liability was 6.25 percent. The projection of cash flows used to determine the discount rate assumed that the Department's contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.
F. Changes in the Net OPEB Liability/(Asset)
The changes in the net OPEB liability/(asset) are as follows:
Increase (Decrease)
Net OPEB
Total OPEB Plan Fiduciary Liability (Asset)
Liability (a) Net Position (b) - (c) = (a) - (b)
Balance at 6/30/2023 (Measurement Date 6/30/2022) $ 33,106,372 $ 35,328,118 $ (2,221,746) Changes for the year
Service cost 809,659 809,659
:
Interest 2,066,543 2,066,543
Differences between expected and actual experience 71,864 71,864 2,31,720 (2,331,720)
Employer contributions
Net investment income 2,970,846 (2,970,846)
Benefit payments (1,702,700) (1,702,700)
Administrative expense (10,161) 10,161
Net changes 1,245,366 3,589,705 (2,344,339)
Balance at 6/30/2024 (Measurement Date 6/30/2023) 34,351,738 38,917,823 (4,566,085)
CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 8: OTHER POST-EMPLOYMENT BENEFITS (OPEB) (CONTINUED) G. Sensitivity of the Net OPEB Liability/(Asset) to Changes in the Discount Rate The following presents the net OPEB liability/(asset) of the Department if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2023:
Discount Rate Current Discount Discount Rate
-1% (5.25%) Rate (6.25%) +1% (7.25%)
Net OPEB Liability/(Asset) $ 177,681 $ (4,566,085) $ (8,468,502) H. Sensitivity of the Net OPEB Liability to Changes in the Health Care Cost Trend Rates The following presents the net OPEB liability of the Department if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2023:
1% Decrease Current Rate 1% Increase
Net OPEB Liability/ (Asset) $ (9,044,973) $ (4,566,085) 1,014,604 I. Recognition of Deferred Outflows and Deferred Inflows of Resources Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time.
Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expenses.
The recognition period differs depending on the source of the gain or loss. The net difference between projected and actual earnings on OPEB plan investments are amortized over 5 years, while all other deferred outflows and inflows are amortized over the average expected remaining service life of plan participants.
J. OPEB Income and Deferred Outflows/Inflows of Resources Related to OPEB For the fiscal year ended June 30, 2024, the Department recognized OPEB income of $1,446,918. As of fiscal year ended June 30, 2024, the Department reported deferred outflows of resources related to OPEB from the following Deferred Outflows Deferred Inflows
of Resources of Resources
OPEB contributions subsequent to
the measurement date $ 1,783,630 $ -
Differences between expected and actual
experience 94,664 5,156,242
Changes in assumptions - 2,701,586
Net difference between projected and actual
earnings on OPEB plan investments 1,262,633 -
Total $ 3,140,927 $ 7,857,828
38 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 8: OTHER POST-EMPLOYMENT BENEFITS (OPEB) (CONTINUED) The $1,783,630 reported as deferred outflows of resources related to contributions subsequent to the measurement ate will be recognized as a reduction of the net OPEB liability for the subsequent fiscal vear. Other amoun ported as deferred outflows of resources related to OPEB will be recoanized as expense as follows Deferred Outflows/
Year Ended (Deferred Inflows)
June 30, of Resources
2025 $ (1,957,124)
2026 (1,970,133)
2027 (783,069)
2028 (1,092,921)
2029 (709,508)
Thereafter 12,224
Total $ (6,500,531)
NOTE 9: JOINT VENTURES
A. Colton/San Bernardino Regional Tertiary Treatment and Water Reclamation Authority On August 2, 1994, the City of San Bernardino, through the Department formed a joint powers authority with the City of Colton to construct, operate, use, and maintain tertiary wastewater treatment, disposal, and water reclamations systems, including the Regional Rapid Infiltration and Extraction Facility (RIX). This authority is governed by a separate board consisting of four members: two appointed by the City of San Bernardino through the Department's BOWC and two appointed by the City Council of the City of Colton. Construction of RIX was administered by the Santa Ana Watershed Project Authority and was completed during 1996. Administration and operation were turned over at that time. The cities of San Bernardino and Colton each have a measurable equity interest in the net position of RIX in proportion to its contributions, which are based on an 80% / 20% split, respectively. Substantially all of the assets of RIX are in the form of capital assets. Annual revenues (in the form of contributions from the two member cities) are equal to annual expenses. The Department's equity interest in this joint venture has been reported as an investment in joint venture in the accompanying statement of net position. Below are the most currently available condensed audited financial statements of RIX as of June 30, 2024. The RIX complete financial statements may be obtained at City of San Bernardino Municipal Water Assets $ 27,455,218
Liabilities 1,780,085
Net position $ 25,675,133
Revenues $ 6,835,578
Expenses 7,691,075
Change in net position (855,497)
Net position-beginning 26,530,630
Net position-ending $ 25,675,133
39 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 9: JOINT VENTURES (CONTINUED)
B. West End Water Development, Treatment and Conservation Joint Powers Authority On August 15, 1990, the City of San Bernardino joined the West End Water Development, Treatment and Conservation Joint Powers Authority (WEJPA) as a financing vehicle for construction of water facilities. A three-member board consisting of one representative from each agency's governing body governs the WEJPA.
This joint venture was formed to provide a financing vehicle for the three member agencies. This joint venture is currently inactive.
NOTE 10: COMMITMENTS AND CONTINGENCIES
A. Risk Management
Risk management activities are recorded in all utility funds. Significant losses are covered by insurance for all major events except workers' compensation, for which the Department retains risk of loss in conjunction with the City of San Bernardino's risk management program for workers compensation. Settlement amounts have not exceeded insurance coverage for the current year or the prior three years. Insurance coverage has been increased over the past several years.
The Department records an estimated liability for workers' compensation. Claims liabilities are based on estimates of the ultimate cost of reported claims and an estimate for claims incurred but not reported based upon historical experience. Workers' compensation claims liability is not discounted.
The following are the changes in approximate aggregate liabilities for the years ended June 30, 2023 and June 30, 2024. During the past three fiscal (claims) years, the Department had no settlements or judgments that exceeded pooled or insured coverage. There were also no significant reductions in pooled or insured liability coverage in fiscal year 2024.
Claims Liabilities Water Utility Sewer Utility Total
Balance, June 30, 2022 $ 3,855,876 $ 1,085,903 $ 4,941,779 Claims and changes in estimates 3, 195,575 218,323 3,413,898 Balance, June 30, 2023 7,051,451 1,304,226 8,355,677
Claims and changes in estimates (1,064,922) (200,602) (1,265,524) Balance, June 30, 2024 $ 5,986,529 $ 1,103,624 $ 7,090,153 B. Litigation
In the ordinary course of operations, the Department is subject to claims and litigation from outside parties. After consultation with legal counsel, the Department believes the ultimate outcome of such matters, if any, will not materially affect its financial condition.
40 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 10: COMMITMENTS AND CONTINGENCIES (CONTINUED)
C. Construction Commitments
The following schedule summarizes the major contractual commitments as of June 30, 2024:
PO/Contract Expenditures Remaining
CIP Project Name/Description CIP Project # Amount to date Commitments SBMWD Water Facilities Relocation Phase I C1410589/C1700196 — 24,002,728 4,882,643 19,120,085 Tertiary Treatment System C1700194 14,083,357 6,622,994 7,460,363 East Influent Siphon - Phases I and II C2450071 12,237,650 5,857,395 6,380,255 Reservoir Seismic Upgrades Phase Ill for Devore C2311098 11,232,000 3,041,427 8,190,573 Verdemont 2300 Pz. East Water Facilities C1710828 10,115,361 1,699,847 8,415,514 Emergency Drying Beds Lining C2300286 6,750,433 4,934,576 1,815,857 2021/2022 Consultant CM and Inspection Svcs C1410689/C1700196 2,154,843 204,444 1,950,399 Long-term Biosolids Handling and Disposal Sve Cont 1,868,000 912,799 955,201 3rd Party CM and Inspection Services C1700194 1,718,368 984,132 734,236 CM and Inspection Services for Verdemont 2300 PZ Svc Cont 1,437,311 236,864 1,200,447 GPA Agreement with Itron, Inc. for AMI C2211020 1,289,363 - 1,289,363 Interactive O&M Manual M2300295/M2300296 1,250,000 733,272 516,728 Inspection Services for Four Steel Reservoirs C2311098 1,174,799 263,758 911,041 Eng. Dsgn. Multiple CIP Water Pipeline Replacements C1700194 1,056,319 270,321 785,998 Digester B Replacement C2100254 972,429 178,964 793,465 NOTE 11: FEDERAL AND STATE GRANTS
Grant funds received by the Department are subject to audit by the grantor agencies. Such an audit could lead to requests for reimbursements to the grantor agencies for expenditures disallowed under the terms of the grant. The management of the Department believes that such disallowances, if any, would not be significant. The Department produces a Single Audit that details the use of grant and Consent Decree funds (see note 12 for information on the Consent Decree).
NOTE 12: CONSENT DECREE
In 1996, the City of San Bernardino filed a complaint against the United States of America, Department of the Army to recover damages, response costs and other available remedies relating to contamination alleged to have originated at a World War I army installation known as Camp Ono. In March 2005, the United States District Court, Central Division entered judgment, in the form of a consent decree, in the matter of City of San Bernardino v. United States of America. The Consent Decree settles the City's and the State's claims arising from the groundwater contamination allegedly caused by the Army. The Consent Decree contains a number provisions obligating City (through Department) to operate and maintain the Newmark Groundwater Superfund Site (Site). The Site consists of two operable units, the Newmark Operable Unit, and the Muscoy Operable Unit. The Newmark Operable Unit was declared operational and functional in 1998. The Muscoy Operable unit was declared operational and functional in 2007.
The Consent Decree provided for a payment of $69 million from the Army to the City for performance of the work outlined in the Consent Decree. Upon acceptance of the Consent Decree, the Department received title to all facilities constructed by the United States Environmental Protection Agency (EPA) of the Site and agreed to operate and maintain the groundwater extraction and treatment system for a period of 50 years. The $69 million payment consisted of $59 million for operations and maintenance and $10 million for the construction of certain capital facilities that would be required in the future; the funds are subject to strict limitations, contained in the Consent Decree, as to how the money may be spent.
Pursuant to the Consent Decree, $10 million, including interest earned, has been set aside to be used only for (i) funding construction of treatment and directly related transmission systems that expand the Department's capacity to deliver potable water and (i) funding work performed by the Department to complete construction of the Muscoy Operable Unit extraction system. These capital facility funds may not be used for costs incurred to operate, maintain, repair, or retrofit components of the site extraction of treatment systems constructed by EPA. 41 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes to the Basic Financial Statements
For the Year Ended June 30, 2024
NOTE 12: CONSENT DECREE (COTNINUED)
In March 2006, the Department entered into a Guaranteed Investment Contract with AIG Match Funding Corporation. The Department invested $16,482,039 of excess Consent Decree funds into an interest-bearing Escrow Fund investment with an interest rate of 4.95% per annum. These funds were invested to pay costs associated with the water facilities defined in the Consent Decree for the years 2035-2056. An additional $50 million was used to purchase a blended insurance policy to provide a financial vehicle that provides cost gap coverage for the first 30 years of expenses.
The terms of the Guaranteed Investment Contract only provided the Department with the position of a secured creditor with respect to an AIG bankruptcy. As concerns arose regarding AIG's financial credibility, in October 2009, the Department negotiated and accepted a "payout" in the amount of $18,661,876 which represented the principal and accrued interest as of that date. These funds are currently invested in a diversified portfolio managed by PFM Asset Management and are presented in more detail in Note 3.
NOTE 13: SUBSEQUENT EVENTS
The Department evaluated subsequent events for recognition and disclosure through November 27, 2024, the date on which these financial statements were available to be issued. Management concluded that no material subsequent events have occurred since June 30, 2024, that required recognition or disclosure in these financial statements.
42 REQUIRED SUPPLEMENTARY INFORMATION
43 THIS PAGE INTENTIONALLY LEFT BLANK
44 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Schedule of Proportationate Share of Net Pension Liability As of June 30, for the Last Ten Fiscal Years
Proportionate Share Plan's Fiduciary
Proportion of the Proportionate of the Net Pension Net Position as a Reporting Date ' Net Pension Share of Net Liability as a % of % of the Total as of June 30, Liability Pension Liability Covered Payroll Covered Payroll Pension Liability 2024 36% 72,510,649 22,022,839 329% 70%
2023 36% 70,141,831 20,821,422 337% 70%
2022 36% 20,103,974 203% 82%
2021 36% 64,101,577 18,770,894 341% 71%
2020 36% 353% 72%
2019 36% 56,856,346 15,357,635 370% 72%
2018 36% 58,595,075 14,876,739 394% 71%
2017 36% 53,652,216 14,177,779 378% 72%
2016 36% 44,917,863 319% 76%
2015 36% 14,017,065 292% 78%
Notes to Schedule of Proportionate Share of the Net Pension Liability:
Benefit Changes: None
Changes of Assumptions: None
"The proportions and proportionate share of the net pension liability are measured as of one year behind the reporting date. Refer to notes to basic financial statements.
45 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Schedule of Changes in Net OPEB Liability (Asset) and Related Ratios As of June 30, for the Last Ten Fiscal Years'
2024 2023 2022
Measurement Date 6/30/2023 6/30/2022 6/30/2021
TOTAL OPEB LIABILITY
Service cost $ 809,659 $ 984,915 $ 956,228
Interest on total pension liability 2,066,543 2,336,141 2,240,570 Changes of benefit terms
Changes of assumptions - (2,619,432) :
Difference between expected and actual experience 71,864 (3,119,394) Benefit payments, including refunds of employee
contributions (1,702,700) (1,738,412) (1,654,270)
Net change in total OPEB liability 1,245,366 (4,156,182) 1,542,528 Total OPEB liability-beginning 33,106,372 37,262,554 35,720,026 Total OPEB liability-ending (a) 34,351,738 33,106,372 37,262,554
PLAN FIDUCIARY NET POSITION
Contributions-employer 2,331,720 1,738,412 2,737,270
Net investment income 2,970,846 (4,469,586) 7,886,756
Benefit payments, including refunds of employee
contributions (1,702,700) (1,738,412) (1,654,270)
Administrative expense (10,161) (11,068) (10,052)
Net change in fiduciary net position 3,589,705 (4,480,654) 8,959,704 Plan fiduciary net position-beginning 35,328,118 39,808,772 30,849,068 Plan fiduciary net position-ending (b) 38,917,823 35,328,118 39,808,772 Net OPEB liability/(asset) (a) - (b) $ (4,566,085) $ (2,221,746) $ (2,546,218) Plan fiduciary net position as a percentage of the
total OPE liability 113% 107% 107%
Covered-employee payroll $ 28,172,331 $ 25,597,944 $ 21,203,035 Plan net OPEB liability/(asset) as a percentage of
covered-employee payroll - 16% -9% -12%
Notes to Schedule of Changes in the Net OPEB Liability and Related Ratios:
Benefit Changes: None
Changes of Assumptions: None
1 Fiscal year 2018 was the first year of GASB Statement No. 75 implementation; therefore only seven years are shown.
46 2021 2020 2019 2018
6/30/2020 6/30/2019 6/30/2018 6/30/2017
$ 1,352,161 $ 1,312,778 $ 1,067,080 $ 1,036,000
2,651,878 2,512,269 2,449,681 2,322,000
- (640,849)
(1,784,735) (1,065,369) :
(6,747,960) 523,834
(1,658,421) (1,602,932) (1,554,389) (1,118,000)
(6,187,077) 2,222,115 779,988 2,240,000
41,907,103 39,684,988 38,905,000 36,665,000
35,720,026 41,907,103 39,684,988 38,905,000
2,602,421 2,615,932 2,673,389 2,602,000
1,564,423 2,036,956 1,848,262 2,204,000
(1,658,421) (1,602,932) (1,554,389) (1,118,000)
(8,657) (8,061) (7,855) (7,000)
2,499,766 3,041,895 2,959,407 3,681,000
28,349,302 25,307,407 22,348,000 18,667,000
30,849,068 28,349,302 25,307,407 22,348,000
$ 4,870,958 $ 13,557,801 $ 14,377,581 $ 16,557,000
86% 68% 64% 57%
$ 19,691,462 $ 17,981,957 $ 16,768,495 $ 19,132,000
25% 75% 86% 87%
47 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Schedules of Plan Contributions
As of June 30, for the Last Ten Fiscal Years '
Covered/ Contribution as a
Fiscal Year Actuarially Actual Contribution Covered- % of Covered/ Ending Determined Employer Deficiency Employee Covered Employee June 30, Contribution Contributions (Excess) Payroll Payroll Pension Plan
2024 $ 7,744,386 $ 7,744,386 24,086,933 32%
2023 7,304,613 7,304,613 22,022,839 33%
2022 6,656,656 6,656,656 20,821,422 32%
2021 6,492,199 6,492,199 20,103,974 32%
2020 5,814,288 5,814,288 18,770,894 31%
2019 5,251,737 5,251,737 17,169,126 31%
2018 4,467,847 4,467,847 15,357,635 29%
2017 3,886,888 3,886,888 14,876,739 26%
2016 3,607,950 3,607,950 14,177,779 25%
2015 2,979,160 2,979,160 14,087,004 21%
Other Post-Employment Benefits Plan
2024 $ 898,426 $ 1,783,630 (885,204) 26,706,880 7%
2023 1,559,000 2,327,743 (768,743) 28,172,331 8%
2022 1,572,000 1,738,412 (166,412) 25,597,944 7%
2021 1,652,000 2,737,270 (1,085,270) 21,203,035 13%
2020 2,728,000 2,602,421 125,579 19,691,462 13%
2019 2,760,000 2,615,932 144,068 17,981,957 15%
2018 2,592,000 2,673,000 (81,000) 16,768,495 16%
Notes to Schedule of Plan Contributions:
The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2023-24 were derived from the following:
Valuation Date: June 30, 2021 (pension plan); June 30, 2022 (OPEB plan) Actuarial Cost Method: Entry Age Normal
Asset Valuation Method: Fair Value of Assets
Inflation: 2.3% (pension plan); 2.5% (OPEB plan)
Salary Increases: Varies by entry age and service
Payroll Growth: 2.8% (pension plan)
Investment Rate of Return: 6.8% (pension plan); 6.25% (OPEB plan) Retirement Age: Based on 2017 CaPERS Experience Study, available at CalPERS website (pension) Medical Trend (OPEB): 6.8% for Non-Medicare and 5.4% for Medicare decreasing to an ultimate rate of 3.9% in 2076 and later Mortality: 2017 CaPERS Experience Study (pension); 2021 CaPERS Experience Study (OPEB) Mortality Improvement (OPEB): 80% of Scale MP-2020
' Fiscal year 2018 was the first year of GASB Statement No. 75 implementation; therefore only seven years for the Other Post- Employment Benefits Plan are shown.
48 STATISTICAL SECTION
49 THIS PAGE INTENTIONALLY LEFT BLANK
50 FINANCIAL TRENDS
These schedules contain trend informaton to help the
reader understand how the Department's financial performance and well-being have changed over time.
51 THIS PAGE INTENTIONALLY LEFT BLANK
52 City of San Bernardino Municipal Water Department
Changes in Net Position
Last Ten Fiscal Years
Total Non-
Fiscal Year Total Total Total
Operating Operating Contributed Changes in
Operating Operating Net Position
Ended Income Income
Revenue Expense Capital
(Expense)
6/30/2015 57,805,304 55,074,661 2,730,643 3,801,830 4,977,945 11,510,418 6/30/2016 55,376,650 53,529,824 1,846,826 2,059,111 4,271,325 8,177,262 6/30/2017 * 64,488,587 61,895,872 2,592,715 8,431,207 21,995,016 33,018,938 6/30/2018 76,620,620 68,734,958 7,885,662 (1,872,712) 4,854,784 10,867,734 6/30/2019 77,094,723 66,921,125 10,173,598 (7,553,171) 10,121,344 12,741,771 6/30/2020 78,184,698 70,778,987 7,405,711 748,213 4,604,699 12,758,623 6/30/2021 80,831,467 77,247,428 3,584,039 (1,980,043) 6,605,556 8,209,552 6/30/2022 83,517,341 72,109,935 11,407,406 (2,315,279) 8,071,944 17,164,071 6/30/2023 89,113,376 87,785,516 1,327,860 1,397,918 8,613,085 11,338,863 6/30/2024 92,725,810 103,703,223 (10,977,413) 7,923,929 7,855,349 4,801,865 *Fiscal Years 2014-2016 contain only the Sewer Treatment and Water Utility Funds. The Sewer Collections Fund was transferred to the Department on May 1, 2017.
Source: Department's annual reports
Changes in Net Position- Combined Funds
35,000
30,000
20,000
15,000
10,000
5,000
I Changes in Net Position
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
53 City of San Bernardino Municipal Water Department
Water Fund
Changes in Net Position
Last Ten Fiscal Years
Total Non-
Total Total Total
Fiscal Year Operating Operating Changes in
Operating Operating Contributed
Ended Income Income Capital Net Position
Revenue Expense
(Expense)
6/30/2015 33,121,128 35,504,582 (2,383,454) 2,702,953 3,905,104 4,224,603 6/30/2016 30,001,871 34,834,362 (4,832,491) 2,283,230 2,812,192 262,931 6/30/2017 33,358,907 37,074,670 (3,715,763) (546,280) 2,194,093 (2,067,950) 6/30/2018 38,280,016 34,446,105 3,833,911 1,198,161 3,323,031 8,355,103 6/30/2019 39,099,960 33,995,037 5,104,923 1,829,448 2,737,031 9,671,402 6/30/2020 40,267,376 38,626,151 1,641,225 1,655,628 2,002,637 5,299,490 6/30/2021 42,758,192 42,480,855 277,337 791,527 3,861,010 4,929,874 6/30/2022 43,150,124 37,626,046 5,524,078 483,961 4,718,864 10,726,903 6/30/2023 44,091,833 46,710,892 (2,619,059) 1,380,979 5,976,186 4,738,106 6/30/2024 45,985,090 53,996,580 (8,011,490) 6,977,920 5,130,185 4,096,615 Source: Department's annual reports
Changes in Net Position-Water Fund
11,000
9,000
7,000
5,000
Inl
3,000
1,000
(1,000)
(3,000) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 • Changes in Net Position
54 City of San Bernardino Municipal Water Department
Sewer Fund
Changes in Net Position
Last Ten Fiscal Years
Total Non-
Total Total Total
Fiscal Year Operating Operating Changes in
Operating Operating Contributed Net Position
Ended Income Income
Revenue Expense Capital
(Expense)
6/30/2015 24,734,425 19,620,328 5,114,097 1,098,877 1,072,841 7,285,815 6/30/2016 25,410,740 18,731,423 6,679,317 (224,119) 1,459,133 7,914,331 6/30/2017 28,612,019 24,139,878 4,472,141 (3,624,658) 1,355,494 2,202,977 6/30/2018 30,733,453 22,697,491 8,035,962 (3,275,704) 1,280,280 6,040,538 6/30/2019 30,546,181 24,866,681 5,679,500 (9,967,309) 7,092,785 2,804,976 6/30/2020 30,397,092 24,648,411 5,748,681 (1,537,179) 2,257,330 6,468,832 6/30/2021 30,361,116 26,986,385 3,374,731 (2,782,481) 2,502,263 3,094,513 6/30/2022 34,171,160 26,794,390 7,376,770 (2,288,006) 2,294,541 7,383,305 6/30/2023 * 45,544,260 41,597,341 3,946,919 16,939 2,636,899 6,600,757 6/30/2024 * 47,385,433 50,351,356 (2,965,923) 946,009 2,725,164 705,250 Source: Department's annual reports
* The FY 2023 budget has combined the Sewer Treatment Fund and the Sewer Collection Fund into one fund. Now called the Sewer Fund.
Changes in Net Position-Sewer Fund
8,000
6,000
4,000
2,000
• Changes in Net Position
(2,000)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
55 City of San Bernardino Municipal Water Department
Sewer Collection Fund
Changes in Net Position
Last Ten Fiscal Years
Total Non-
Total Total Total
Fiscal Year Operating Operating Changes in
Operating Operating Contributed Net Position
Ended Income Income
Revenue Expense Capital
(Expense)
6/30/2015 n/a n/a n/a n/a n/a n/a
6/30/2016 n/a n/a n/a n/a n/a n/a
6/30/2017 * 2,891,203 1,054,866 1,836,337 12,602,145 18,445,429 32,883,911 6/30/2018 7,682,946 11,667,157 (3,984,211) 204,831 251,473 (3,527,907) 6/30/2019 7,562,097 8,172,922 (610,825) 584,690 291,528 265,393 6/30/2020 7,666,309 7,650,504 15,805 629,764 344,732 990,301 6/30/2021 7,794,418 7,862,447 (68,029) 10,911 242,283 185,165 6/30/2022 6,394,623 7,888,065 (1,493,442) (511,234) 1,058,539 (946,137) 6/30/2023 ** - - - - -
6/30/2024
* The Sewer Collection Utility was transferred to the Water Department on May 1, 2017 so prior year data is ** The FY 2023 budget has combined the Sewer Treatment Fund and the Sewer Collection Fund into one fund. Now called the Sewer Fund.
Source: Department's annual reports
Changes in Net Position-Sewer Collection Fund
35,000
30,000
25,000
20,000
15,000
10,000
5,000
(5,000)
• Changes in Net Position
2015 2016 2017 2018 2019 2020 2021 2022 20232024
56 City of San Bernardino Municipal Water Department
Net Position by Component
Last Ten Fiscal Years
Fiscal Year Net Investment in Restricted Net Unrestricted Total Net Ended Capital Assets Position Net Position Position
6/30/2015 223,053,269 7,633,049 12,510,969 243,197,287
6/30/2016 235,670,073 7,814,086 7,890,390 251,374,549
6/30/2017* 250,399,481 7,944,758 26,049,248 284,393,487 6/30/2018 248,653,963 8,363,037 23,912,311 280,929,311
6/30/2019 259,671,498 33,999,894 293,671,392
6/30/2020 255,270,720 51,158,985 306,429,705
6/30/2021 253,288,732 61,350,525 314,639,257
6/30/2022 250,324,366 81,696,554 332,020,920
6/30/2023 251,609,753 2,221,746 89,528,284 343,359,783
6/30/2024 275,842,317 4,566,085 67,753,246 348,161,648
* Fiscal Years 2014-2016 contain only Sewer Treatment and Water Utility Funds. The Sewer Collections Fund was transferred to the Department on May 1, 2017.
Source: Department's annual reports
NET POSITION BY COMPONENT
COMBINED (IN 1000S)
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
• Net Investment in Capital Assets • Restricted Net Position •Unrestricted Net Position 57 City of San Bernardino Municipal Water Department
Net Position by Component - Water Fund
Last Ten Fiscal Years
Fiscal Year Net Investment in Restricted Net Unrestricted Net Total Net Ended Capital Assets Position Position Position
6/30/2015 166,963,238 n/a (15,152,937) 151,810,301
6/30/2016 169,730,998 n/a (17,657,766) 152,073,232
6/30/2017 169,569,746 n/a (19,564,464) 150,005,282
6/30/2018 171,794,031 n/a (20,699,066) 151,094,965
6/30/2019 177,158,535 n/a (16,391,858) 160,766,677
6/30/2020 168,992,121 n/a (2,926,264) 166,065,857
6/30/2021 168,553,917 n/a 2,441,814 170,995,731
6/30/2022 168,172,810 n/a 13,549,824 181,722,634
6/30/2023 172,417,321 1,152,463 12,890,956 186,460,740
6/30/2024 180,168,996 2,414,089 7,974,270 190,557,355
Source: Department's annual reports
NET POSITION BY COMPONENT:
200,000 WATER FUND (IN 1000S)
150,000
100,000
50,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
(50,000)
• Net Investment in Capital Assets • Restricted Net Position • Unrestricted Net Position 58 City of San Bernardino Municipal Water Department
Net Position by Component - Sewer Fund
Last Ten Fiscal Years
Fiscal Year Net Investment in Restricted Net Unrestricted Total Net Ended Capital Assets Position Net Position Position
6/30/2015 56,090,031 7,633,049 27,663,906 91,386,986
6/30/2016 65,939,075 7,814,086 25,548,156 99,301,317
6/30/2017 62,633,783 7,944,758 30,925,753 101,504,294
6/30/2018 59,011,109 8,363,037 33,041,181 100,415,327
6/30/2019 63,243,033 n/a 40,040,285 103,283,318
6/30/2020 66,906,874 n/a 42,845,276 109,752,150
6/30/2021 64,650,540 n/a 48,196,123 112,846,663
6/30/2022 60,853,472 n/a 59,251,320 120,104,792
6/30/2023 * 79,192,432 1,069,283 76,637,328 156,899,043 6/30/2024 95,673,321 2,151,996 59,778,976 157,604,293
Source: Department's annual reports
* The FY 2023 budget has combined the Sewer Treatment Fund and the Sewer Collection Fund into one fund. Now called the Sewer Fund.
NET POSITION BY COMPONENT:
SEWER FUND (IN 1000S)
200,000
THOUSANDS 150,000
100,000
50,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
• Net Investment in Capital Assets • Restricted Net Position • Unrestricted Net Position 59 City of San Bernardino Municipal Water Department
Net Position by Component - Sewer Collection Fund
Last Ten Fiscal Years
Fiscal Year Net Investment in Restricted Net Unrestricted Total Net Ended Capital Assets Position Net Position Position
6/30/2015 n/a n/a n/a n/a
6/30/2016 n/a n/a n/a n/a
6/30/2017 * 18,195,952 n/a 14,687,959 32,883,911
6/30/2018 17,848,823 n/a 11,507,181 29,356,004
6/30/2019 19,269,930 n/a 10,351,467 29,621,397
6/30/2020 19,371,725 n/a 11,239,973 30,611,698
6/30/2021 20,084,275 n/a 10,712,588 30,796,863
6/30/2022 21,298,084 n/a 8,895,410 30,193,494
6/30/2023 ** - - - -
6/30/2024 ** - -
* The Sewer Collection Utility was transferred to the Water Department on May 1, 2017 so prior year data is unavailable.
** The FY 2023 budget has combined the Sewer Treatment Fund and the Sewer Collection Fund into one fund. Now called the Sewer Fund.
Source: Department's annual reports
NET POSITION BY COMPONENT: SEWER
COLLECTION FUND (IN 1000S)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
2015
•Net Investment in Capital Assets • Restricted Net Position • Unrestricted Net Position 60 City of San Bernardino Municipal Water Department
Water Fund Revenue Type
Last Ten Fiscal Years
Fiscal Year Other Gain on asset Noncapital Total Non
Water Sales Service Total Operating Interest Rental Other Income Operating Ended Charges/Fees Services Revenue Income Income disposition grant funds Income
6/30/2015 31,217,534 1,789,654 113,940 33,121,128 54,786 181,809 545,840 2,089,637 2,872,072 6/30/2016 28,293,790 1,604,472 103,609 30,001,871 63,566 134,845 495,298 ... 1,696,219 2,389,928 6/30/2017 31,893,209 1,347,993 117,705 33,358,907 31,504 203,186 301,833 2,047,946 2,584,469 6/30/2018 36,825,634 1,350,623 103,753 38,280,010 975,144 208,925 206,645 46,356 1,776,883 3,213,953 6/30/2019 37,775,285 1,237,903 86,772 39,099,960 903,399 206,360 867,763 12,669 1,891,729 3,881,920 6/30/2020 39,162,485 1,020,818 84,073 40,267,376 747,477 245,784 651,031 1,991,747 3,636,039 6/30/2021 41,760,745 910,628 86,819 42,758,192 29,541 286,553 306,785 83,682 2,011,099 2,717,660 6/30/2022 42,175,623 905,674 68,828 43,150,124 347,849 530,326 28,846 1,910,435 2,817,456 6/30/2023 42,635,542 1,427,234 29,057 44,091,833 1,126,039 267,668 140,266 4,859 1,684,006 3,222,838 6/30/2024 44,697,545 1,252,884 34,661 45,985,090 2,544,768 358,472 206,697 85,041 5,566,773 8,761,751 Source: Department's annual reports
Operating Revenue by Type-Water Fund
35,000
30,000
25,000 Other Services
20,000 • Service Changes/Fees
15,000 •Water Sales
10,000
5,000
6/30/2017 6/30/2019 6/30/2020 6/30/2022
Non-Operating Revenue by Type: Water Fund
10,000
Thousands 9,000 •• Noncapital grant funds
8,000
*Gain on asset disposition
• Other Income
• Rental Income
• Interest Income
6/30/2015 6/30/2016
61 City of San Bernardino Municipal Water Department
Sewer Fund Revenue by Type
Last Ten Fiscal Years
Other Gain on Asset Total Non
Fiscal Year Sewer Treatment Industrial Waste Total Operating Interest Rental Other Income Disposition Operating Ended Revenue Operating Revenue Income Income
Revenue /Joint Venture Income
6/30/2015 24,399,415 335,010 24,734,425 481,211 700 498,247 345,884 1,326,042 :
6/30/2016 25,030,569 380,171 25,410,740 658,456 41,498 359,800 1,059,754 6/30/2017 28,022,259 589,760 28,612,019 23,391 15,908 39,299 6/30/2018 30,039,110 694,342 30,733,452 12,481 6,063 18,544 6/30/2019 29,861,192 684,989 30,546,181 1,361,936 9,417 1,371,353 6/30/2020 29,712,734 684,358 30,397,092 1,322,367 1,322,367 6/30/2021 29,587,597 773,519 30,361,116 19,472 ... 19,472 6/30/2022 33,347,882 823,278 34,171,160
6/30/2023 * 44,519,998 1,024,262 45,544,260 1,251,526 (15,420) 1,236,106 :
6/30/2024 * 46,224,150 1,161,283 47,385,433 1,521,068 599,981 2,121,049 Source: Department's annual reports
* The FY 2023 budget has combined the Sewer Treatment Fund and the Sewer Collection Fund into one fund. Now called the Sewer Fund.
Operating Revenue by Type-Sewer Fund
50,000
35,000
30,000
25,000 • Other Operating Revenue
20,000 • Industrial Waste
15,000 • Sewer Treatment Revenue
10,000
5,000
6/30/2015 6/30/2020 6/30/2022 6/30/2023 6/30/2024
Non-Operating Revenue by Type - Sewer Treatment Fund
1,500
1,000 Gain on Asset Dispositio
Joint Ventur
500 Other Income
•Rental Income
6730/2017 6/30/2018 6/39/2019
•Interest Income
62 City of San Bernardino Municipal Water Department
Sewer Collection Fund Revenue by Type
Last Ten Fiscal Years
Other Gain on asset Total Non
Fiscal Year Sewer Collection Service Total Operating Interest Rental Income disposition/Cont Revenue Operating Operating
Ended Charges/Fees Revenue ribution from
Revenue Income
City
6/30/2015 n/a n/a n/a n/a n/a n/a n/a n/a n/a
6/30/2016 n/a n/a n/a n/a n/a n/a n/a n/a n/a
6/30/2017 * 2,860,627 30,576 2,891,203 28,315 12,580,781 12,609,096 6/30/2018 7,679,020 3,926 7,682,946 201,663 251,473 3,168 456,304 6/30/2019 7,555,960 6,137 7,562,097 584,685 5 584,690
6/30/2020 7,656,675 9,634 7,666,309 626,761 3,003 629,764 6/30/2021 7,759,318 35,100 7,794,418 1,605 9,306 10,911 6/30/2022 6,306,843 87,780 6,394,623
6/30/2023 **
6/30/2024**
* The Sewer Collection Utility was transferred to the Water Department on May 1, 2017 so prior year data is unavailable.
** The FY 2023 budget has combined the Sewer Treatment Fund and the Sewer Collection Fund into one fund. Now called the Sewer Fund.
Source: Department's annual reports
Operating Revenue by Type-Sewer Collection
Fund
6,000
5,000 • Other Operating Revenue
4,000 • Service Charges/Fees
•Sewer Collection Revenue
3,000
2,000
1,000
6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 Non-Operating Revenue by Type - Sewer Collections Fund
14,000
: 12,000
10,000
Gain on asset
8,000 disposition/Contribution from
City
6,000 Other Income
4,000 • Rental Income
2,000
6/30/2015 6/30/2016 6/30/2017 6/30/2019 6/30/2021 6/30/2022 6/30/2023 63 City of San Bernardino Municipal Water Department
Water Fund Expenses by Type
Last Ten Fiscal Years
Depreciation Other Non- Total Non-
Fiscal Year Administration & Plant Operations Total Operating Interest Loss on asset Customer Service Engineering Maintenance and operating Operating Ended and Distribution Expense Expense disposition
Amortization expense Expense
6/30/2015 13,244,552 12,467,017 2,439,170 1,988,719 5,365,124 35,504,582 169,119 169,119 :
6/30/2016 13,313,085 11,406,861 2,326,551 1,978,534 5,809,331 34,834,362 106,698 106,698 6/30/2017 13,971,106 12,436,501 2,329,142 1,859,871 6,478,050 37,074,670 3,130,749 3,130,749 6/30/2018 11,300,091 12,337,763 1,943,659 2,292,625 6,571,957 34,446,095 2,015,792 2,015,792 6/30/2019 9,987,198 12,853,400 2,253,333 2,387,889 6,512,907 33,994,727 1,993,624 1,993,624 6/30/2020 13,418,886 12,472,633 2,641,641 2,528,441 7,564,550 38,626,151 1,955,317 25,094 1,980,411 6/30/2021 14,405,557 14,045,232 3,064,623 3,126,556 7,838,887 42,480,855 1,926,133 1,926,133 6/30/2022 11,921,394 14,603,130 3,001,100 2,846,997 5,253,425 37,626,046 1,877,325 456,170 2,333,495 6/30/2023 17,923,515 15,374,571 2,976,680 3,138,031 7,298,095 46,710,892 1,841,859 1,841,859 6/30/2024 17,630,159 17,829,965 3,074,606 3,330,387 12,131,463 53,996,580 1,783,831 1,783,831 Source: Department's annual reports
Operating Expenses by Type-Water Fund
60,000
40,000
Depreciation and Amortization
30,000 Maintenance
•Engineering
20,000 • Plant Operations and Distribution
Administration & Customer Service
10,000
6/30/2018 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 Non-Operating Expense by Type: Water Fund
* 3,500
•Other Non-operating expense
· 3,000 • Loss on asset disposition
• Interest Expense
2,500
2,000
1,500
1,000
500
6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 64 City of San Bernardino Municipal Water Department
Sewer Fund Expenses by Type
Last Ten Fiscal Years
Depreciation Loss on Asset Other Non- Total Non-
Fiscal Year Administration & and Total Operating Interest operating Ended Customer Service Plant Operations Engineering Maintenance Expense Disposition Operating Amortization Expense /Joint Venture expense Expense
6/30/2015 4,016,198 9,292,501 534,226 2,906,853 2,870,550 19,620,328 227,165 227,165 6/30/2016 4,299,808 9,800,283 464,554 2,874,352 1,292,426 18,731,423 167,795 1,116,078 1,283,873 6/30/2017 6,799,639 9,620,639 480,951 3,135,686 4,102,963 24,139,878 1,300,263 2,321,485 42,209 3,663,957 6/30/2018 5,690,507 9,056,518 500,009 3,281,446 4,157,550 22,686,030 1,376,009 1,247,670 733,583 3,357,262 6/30/2019 6,775,552 10,118,506 617,855 3,011,620 4,313,147 24,866,681 1,367,375 1,553,261 2,920,635 6/30/2020 5,702,973 10,470,501 369,422 3,508,534 4,596,980 24,648,411 1,313,151 1,546,396 2,859,546 6/30/2021 6,292,313 11,986,858 387,932 3,811,413 4,507,869 26,986,385 1,283,861 1,479,729 38,363 2,801,953 6/30/2022 * 3,666,547 14,648,530 385,517 3,764,618 4,329,178 26,794,390 1,249,715 1,038,291 2,288,006 6/30/2023 * 12,396,331 17,749,049 1,657,022 4,434,120 5,360,819 41,597,341 1,219,167 1,219,167 6/30/2024 •* 14,539,325 17,524,663 2,030,808 4,845,501 11,411,059 50,351,356 1,175,040 1,175,040 Source: Department's annual reports
* Joint Venture expense relating to RIX operations are now classified as Operations beginning in 2022. ** The FY 2023 budget has combined the Sewer Treatment Fund and the Sewer Collection Fund into one fund. Now called the Sewer Fund.
Operating Expenses by Type-Sewer Fund
1: 00,000
· 50,000
40,000
Genreciation and smartization
30,000
•Engineering
• Plant Operations
20,000 Administration & Customer Service
10,000
6/30/2015 6/30/20166/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 Non-Operating Expense by Type: Sewer Fund
*I Other Non-operating expense
• Loss on Asset Disposition /Joint Venture
•Interest Expense
1,000
500
6/30/2015 6/30/2016 6630/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2022 6/30/2024 65 City of San Bernardino Municipal Water Department
Sewer Collection Fund Expenses by Type
Last Ten Fiscal Years
Fiscal Year Administration & Depreciation and Total Operating Interest Loss on Asset Other Non- Total Non- Plant Operations Engineering Maintenance operating Operating Ended Customer Service Amortization Disposition
Expense
6/30/2015 *
6/30/2016
6/30/2017 * 314,265 492,675 247,926 1,054,866 6,951 6,951 6/30/2018 2,211,188 354,423 8,071,891 1,029,648 11,667,150 6/30/2019 1,608,074 439,660 5,051,773 1,073,415 8,172,922 6/30/2020 1,898,461 483,316 4,124,631 1,144,096 7,650,504 6/30/2021 3,497,969 533,619 2,549,257 1,281,602 7,862,447 6/30/2022 2,535,314 590,600 3,333,804 1,428,347 7,888,065 511,234 511,234 6/30/2023 *
6/30/2024 **
The Sewer Collection Utility was transferred to the Water Department on May 1, 2017 so prior year data is unavailat The FY 2023 budget has combined the Sewer Treatment Fund and the Sewer Collect Fund into one fund. Now called the Sewer Fund.
Source: Department's annual reports
Operating Expenses by Type-Sewer Collection Fund
8,000 Depreciation and Amortization
maintenance
6,000 • Engineering
4,000 • Plant Operations
• Administration & Customer Service
2,000
8878898888 6/30/2024
Non-Operating Expense by Type: Sewer Collection Fund
- • Other Non-operating expense
400
• Loss on Asset Disposition
Interest Expense
6/30/2035 6/30/2016 6/30/20177 6/30/2018 6/30/2019 6/30/2022 6/30/2023 6/30/2024 /2024 66 DEBT CAPACITY INFORMATION
These schedules contain information to help the reader assess the affordability of the Department's current level of
outstanding debt and ability to issue debt in the future. 67 THIS PAGE INTENTIONALLY LEFT BLANK
68 City of San Bernardino Municipal Water Department
Water Fund Debt Service Coverage
Last Ten Fiscal Years
Net Operating Net Non-
Fiscal Year Expenses Net Operating Operating Amount Total Debt Coverage Operating Income/ Available for Principal Interest Service (Excluding) Income (Loss) Ratio
Revenue (Expense) Debt Service
Depreciation
6/30/2015 33,121,128 30,139,458 2,981,670 2,702,953 5,684,623 1,748,054 570,434 2,318,488 2.45 6/30/2016 30,001,871 29,025,031 976,840 2,283,230 3,260,070 1,813,594 523,274 2,336,868 1.40 6/30/2017 33,358,907 30,596,620 2,762,287 2,584,468 5,346,755 246,887 218,819 465,706 11.48 6/30/2018 38,280,016 27,874,148 10,405,868 3,167,597 13,573,465 770,000 2,223,838 2,993,838 4.53 6/30/2019 39,099,960 27,482,130 11,617,830 3,810,403 15,428,233 795,000 2,196,388 2,991,388 5.16 6/30/2020 40,267,376 31,061,601 9,205,775 3,636,039 12,841,814 830,000 2,163,888 2,993,888 4.29 6/30/2021 42,758,192 34,641,968 8,116,224 2,633,978 10,750,202 860,000 2,130,088 2,990,088 3.60 6/30/2022 43,150,124 32,372,621 10,777,503 2,332,440 13,109,943 900,000 2,090,388 2,990,388 4.38 6/30/2023 44,091,833 39,412,797 4,679,036 3,217,979 7,897,015 950,000 2,044,138 2,994,138 2.64 6/30/2024 45,985,090 41,865,117 4,119,973 8,676,710 12,796,683 995,000 1,995,513 2,990,513 4.28 Source: Department's annual reports
69 City of San Bernardino Municipal Water Department
Sewer Fund Debt Service Coverage
Last Ten Fiscal Years
Net Operating
6/30/2015 25,410,740 16,749,778 8,660,962 1,098,877 9,759,839 4,629,425 568,888 5,198,313 1.88 6/30/2016 25,410,740 17,438,997 7,971,743 (224,119) 7,747,624 300,000 300,000 25.83 6/30/2017 28,612,019 20,036,916 8,575,103 39,299 8,614,402 300,000 132,659 432,659 19.91 6/30/2018 30,733,453 18,539,941 12,193,512 (721,103) 11,472,409 890,000 1,382,782 2,272,782 5.05 6/30/2019 30,546,181 20,841,699 9,704,482 1,361,935 11,066,417 910,000 1,356,125 2,266,125 4.88 6/30/2020 30,397,092 20,051,431 10,345,661 1,322,367 11,668,028 935,000 1,331,225 2,266,225 5.15 6/30/2021 30,361,116 22,478,516 7,882,600 19,472 7,902,072 665,000 1,301,900 1,966,900 4.02 6/30/2022 34,171,160 22,465,212 11,705,948 (1,021,981) 10,683,967 700,000 1,267,775 1,967,775 5.43 6/30/2023 45,544,260 36,236,522 9,307,738 1,251,526 10,559,264 735,000 1,231,900 1,966,900 5.37 6/30/2024 47,385,433 38,940,297 8,445,136 1,521,068 9,966,204 770,000 1,194,275 1,964,275 5.07 Source: Department's annual reports
70 City of San Bernardino Municipal Water Department
Ratios of Outstanding Debt by Type (In Thousands of Dollars) Last Ten Fiscal Years
Notes/Loans Percentage of Debt Per
Fiscal Year Revenue Bonds Certificates of
Capital Leases Total Personal
Ended Payable Participation Capita
Income
6/30/2015 22,826 6,375 29,201 0.4% 0.14
6/30/2016 - 20,569 - 20,569 0.3% 0.10
6/30/2017 88,656 900 89,556 1.0% 0.39
6/30/2018 87,092 600 87,692 1.0% 0.37
6/30/2019 85,483 300 - - 85,783 1.0% 0.39
6/30/2020 83,814 - - 83,814 1.0% 0.39
6/30/2021 82,085 - - 82,085 1.1% 0.38
6/30/2022 80,221 - 80,221 1.7% 0.36
6/30/2023 78,391 - 183 78,574 1.7% 0.35
6/30/2024 76,422 - 12 76,434 1.7% 0.34
Source: Department's annual reports
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72 DEMOGRAPHIC AND ECONOMIC INFORMATION
These schedules offer demographic and economic indicators to help the reader understand the environment within which the Department's financial activities take place.
73 THIS PAGE INTENTIONALLY LEFT BLANK
74 City of San Bernardino Municipal Water Department
Demographic Statistics
Last Ten Fiscal Years
Personal Per Capita
Fiscal Year Estimated Income (In Personal Unemployment Rate Ended Population (1) Thousands) (2) Income (2) (3)
6/30/2015 213,933 7,645,879 35,740 6.80%
6/30/2016 215,491 7,931,577 36,807 6.30%
6/30/2017 216,972 8,459,304 38,988 5.50%
6/30/2018 221,130 8,523,677 38,546 5.70%
6/30/2019 219,233 8,509,748 38,816 4.10%
6/30/2020 217,671 8,159,289 37,485 11.30%
6/30/2021 216,291 7,723,319 35,708 8.10%
6/30/2022 220,840 4,596,122 20,812 4.80%
6/30/2023 223,230 4,608,807 20,646 6.30%
6/30/2024 226,541 5,179,860 22,865 6.30%
(1) California Department of Finance
(2) U.S. Department of Commerce, Bureau of Economic Analys for 2018-2022; City of San Bernardino Economic Development Dept (3) State of California, Economic Development Department; City of San Bernardino Economic Development Dept Population Personal Income
228,000 9,000,000
226,000 8,000,000
224,000 7,000,000
222,000 6,000,000
220,000
218,000 5,000,000
216,000 4,000,000
214,000 3,000,000
212,000
210,000 2,000,000
208,000 1,000,000
206,000
6/30/2020 6/30/2018 6/30/2019 6/30/2021
Per Capita Personal Income Unemployment
45,000 12.00%
40,000
10.00%
35,000
30,000 8.00%
25,000
6.00%
20,000
15,000 4.00%
10,000 2.00%
5,000
0.00%
6630/2015 6/30/2019 6/30/2020 6/30/2015 6/30/2017 6/30/2021 6/30/2023 6/30/2024 75 City of San Bernardino Municipal Water Department
Major Employers
Current Year and Nine Years Ago
Fiscal Year 2024 Fiscal Year 2015
Employer Ranking Number of Email so Ranking Number of Employees* County of San Bernardino 1 1,000+
Stater Brothers 2 18,000 2 1,000+
San Bernardino County Human Services 3 10,000 1,000+
San Bernardino City Unified School District 4 8,343 4 1,000+ San Bernardino County Sheriff 5 4,200 5 1,000+
San Bernardino County Superintendent of Schools 6 2,500 6 1,000+ California State Unversity- San Bernardino 2,000 7 1,000+ Saint Bernadines Medical Center 8 1,708 8 1,000+
Amazon 1,600 9 1,000+
San Bernardino Community Hospital 10 1,556 10 1,000+
* Amazon employment figures between 1,200-1,600
Between 1,200-1,600
Source: Economic Development Department Labor Market Information, Agency Websites and City's Annual Financial Report. 76 City of San Bernardino Municipal Water Department
Authorized Positions History
Last Ten Fiscal Years
Sewer Treatment Sewer Collection
Year End Water Fund Fund Fund Total
2015 183.5 74.5 0.0 258.0
2016 188.5 83.5 0.0 272.0
2017 216.8 70.3 13.0 300.0
2018 215.0 72.0 12.0 299.0
2019 215.0 72.0 12.0 299.0
2020 215.0 72.0 12.0 299.0
2021 199.0 85.0 12.0 296.0
2022 199.0 84.5 12.0 295.5
2023 202.0 85.0 12.0 299.0
2024 205.0 85.0 12.0 302.0
Source: Department's records
Note: The Sewer Collection Utility was transferred to the Department on May 1, 2017. Prior year data is unavailable.
Authorized Position History
250.0
200.0
150.0
100.0
50.0 0.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
• Water Fund • Sewer Treatment Fund • Sewer Collection Fund 77 THIS PAGE INTENTIONALLY LEFT BLANK
78 REVENUE CAPACITY
These schedules contain information to help the reader assess the Department's significant revenue sources.
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80 City of San Bernardino Municipal Water Department
Water Rates: Minimum Monthly Charge
Last Ten Fiscal Years
($/month)
Effective
Date 1/2" 5/8" 3/4" 1" 1-1/2" 2" 3" 4" 6" 8" 10"
7/1/2015 12.90 12.90 16.15 22.60 38.80 58.20 103.50 168.20 330.00 524.15 750.65 10/1/2016 16.09 16.09 20.15 28.19 48.40 72.60 129.12 197.36 411.68 653.88 936.44 :
7/1/2017 19.58 19.58 24.51 34.30 58.88 88.32 157.06 240.07 500.78 795.40 1,139.12 7/1/2018 23.39 23.39 29.28 40.98 70.35 105.52 187.66 286.63 598.33 950.34 1,361.01 7/1/2019 23.39 23.39 29.28 40.98 70.35 105.52 187.66 286.63 598.33 950.34 1,361.01 * 7/1/2020 23.39 23.39 29.28 40.98 70.35 105.52 187.66 286.63 598.33 950.34 1,361.01 * 7/1/2021 23.39 23.39 29.28 40.98 70.35 105.52 187.66 286.63 598.33 950.34 1,361.01 * 4/1/2022 20.49 20.49 28.17 43.51 81.87 127.91 388.77 772.38 1,232.72 2,153.40 4,224.92 4,224.92 7/1/2022 21.72 21.72 29.87 46.13 86.79 135.59 412.10 818.73 1,306.69 2,282.61 4,478.42 4,478.42 7/1/2023 22.59 22.59 31.07 47.98 90.27 141.02 428.59 851.48 1,358.96 2,373.92 4,657.56 4,657.56 7/1/2024 23.27 23.27 32.01 49.42 92.98 145.26 441.45 877.03 1,399.73 2,445.14 4,797.29 4,797.29 * Information not reported.
Source: Department's Records
81 City of San Bernardino Municipal Water Department
Water Rates: Commodity Charges
Last Ten Fiscal Years
10/1/2015 7/1/2016 7/1/2017 7/1/2018 7/1/2019 7/1/2020 7/1/2021 4/1/2022 7/1/2022 7/1/2023 7/1/2024 Customer Class
Single Family Residential
Tier 1(0-13 HCF) 1.35 1.37 1.40 1.43 1.43 1.43 1.43 1.35 1.44 1.50 1.55 Tier 2(14-23 HCF) 1.35 1.37 1.40 1.43 1.43 1.43 1.43 1.83 1.94 2.02 2.09 Tier 3 (24+ HCF) 1.70 1.86 1.89 1.92 1.92 1.92 1.92 2.33 2.47 2.57 2.65 Multi-Faimly Residential 1.35 1.37 1.40 1.43 1.43 1.43 1.43 1.51 1.61 1.68 1.74 Commercial 1.35 1.37 1.40 1.43 1.43 1.43 1.43 1.65 1.75 1.82 1.88 Irrigation 1.35 1.37 1.40 1.43 1.43 1.43 1.43 2.32 2.46 2.56 2.64 Institutional 1.35 1.37 1.40 1.43 1.43 1.43 1.43 2.06 2.19 2.28 2.35 Other 1.35 1.37 1.40 1.43 1.43 1.43 1.43 3.82 4.05 4.22 4.35 * Prior years (07/01/14 - 07/01/21) commodity charges reflect rates including conservation, replenishment and elevation zone charges which were consolidated with the rates adopted on 04/01/22. 82 City of San Bernardino Municipal Water Department
Water Rates: Elevation Charges $ per HCF
Last Ten Fiscal Years
Effective Date Zone 1 Zone 2 Zone 3 Zone 4 Zone 5 Zone 6 07/01/15 0.11 0.19 0.17 0.14 0.23 0.23
10/01/16 0.11 0.19 0.17 0.14 0.23 0.23
07/01/17 0.11 0.19 0.17 0.14 0.23 0.23
07/01/18 0.11 0.19 0.17 0.14 0.23 0.23
07/01/19 0.11 0.19 0.17 0.14 0.23 0.23
07/01/20 0.11 0.19 0.17 0.14 0.23 0.23
07/01/21 0.11 0.19 0.17 0.14 0.23 0.23
4/1/2022* N/A N/A N/A N/A N/A N/A
7/1/2022* N/A N/A N/A N/A N/A N/A
7/1/2023* N/A N/A N/A N/A N/A N/A
7/1/2024* N/A N/A N/A N/A N/A N/A
* Elevation charge was eliminated with the rate adoption on 04/01/22.
Source: Department's records
83 City of San Bernardino Municipal Water Department
Water Connections and Revenues by User Type
Last Ten Fiscal Years
2024 2023 2022 2021
User Type Connections Revenue Connections Revenue Connections Revenue Connections Revenue Single family 36,140 $22,210,799 36,063 $21,652,852 35,744 $23,761,145 35,995 $23,875,761 Multiple family 2,932 6,148,207 2,916 5,835,444 2,905 5,562,012 2,908 5,569,436 Commercial 3,158 8,976,290 3,164 8,454,199 3,151 6,976,893 3,154 6,579,373 Landscape 1,189 6,957,544 1,196 6,742,399 1,184 5,515,046 1,192 5,277,114 Other 2,671 1,692,251 2,574 860,736 2,296 811,219 2,241 811,833 Total all users 46,090 45,985,090, 45,913 $ 43.545,629 45,280 $ 42,626,315 45,490 $ 42,113.517 2020 2019 2018 2017
_Connections Revenue Connections Revenue Connections Revenue Connections Revenue Single family 36,042 $22,909,054 36,006 $21,579,693 35,824 $20,476,866 35,825 $17,346,414 Multiple family 2,907 5,222,345 2,903 5,157,997 2,904 4,944,978 2,899 4,449,204 Commercial 3,117 6,482,560 3,104 6,320,900 3,111 6,117,493 3,131 5,750,672 Landscape 1,181 4,542,108 1,150 4,256,390 1,159 4,694,704 1,121 3,789,527 Other 2,174 781,428 2,056 808,227 2,018 748,141 1,956 557,392 Total all users 45.421 $ 39.937,495 45,220 S 38.123,207 45,016 $ 36,982,182 14.932 $ 31.893,.209 2016 Connection 3015
Connections Revenue Revenue
Single family 35,729 $15,688,749 35,695 $16,775,834
Multiple family 2,873 4,225,832 2,869 4,349,601
Commercial 3,092 4,913,942 3,097 6,332,882
Landscape 1,129 3,203,907 1,130 3,079,610
Other 1,905 677,180 1,791 679,606
Total all users 44,728 $ 28,709.610 44,582 $ 331217,533 Source: Department's records
Water Service Connections per Customer Type Water Service Revenue by User Type FY 2024 FY 2024
•Single family
4% •Multiple family
15%
17. 6% Single family •Commercisl
6% •Multiple family 48%
Landscape
•Commercisl 20%
•landscape Sheri
78% mOther 13%
84 City of San Bernardino Municipal Water Department
Top Ten Water Customers
Fiscal Year 2022
2024 Top 10 Customers
San Bernardino City Unified School District $ 1,540,033 City of SB 1,500,629
City of SB Water 757,326
Cal State San Bernardino 630,755
County of San Bernardino 348,665
Housing Authority 253,118
Cott Beverages 247,890
Rialto School District 223,154
W Dean Weidner 203,151
Crest Haven Apartments 175,580
Top Ten Customers Total $ 5,880,302
Total Water Revenue $ 45,985,090
Top Ten Customers Percent of Total 12.79%
85 City of San Bernardino Municipal Water Department
Sewer Treatment Rate History
Last Ten Fiscal Years
10/1/2015 7/1/2016 -7/1/2017 7/1/2018 7/1/2019 7/1/2020 7/1/2021 4/1/2022* 7/1/2022* 7/1/2023* 7/1/2024* Residential (monthly per EDU)
Residential 20.65 22.38 23.10 23.10 23.10 23.10 23.10 37.83 41.99 45.35 48.98 Multi-Family (2 units) 41.31 44.76 46.20 66.05 66.05 66.05 75.66 83.98 90.70 97.96 Multi-family (3 units) 61.96 67.14 69.29 99.04 99.04 99.04 99.04 113.49 125.98 136.05 146.94 All Non-Residential (including multi-family (4 or
more units) and mobile home parks) 3.18 3.42 3.52 6.62 6.62 6.62 6.62 16.56 18.38 19.85 21.44 Industrial 1.67 1.78 1.83 4.93 4.93 4.93 4.93 16.56 18.38 19.85 21.44 * The Sewer Collection rate was combined with the Sewer Treatment rate to become the sewer rate that was effective 04/01/22.
Source: Department's records
86 City of San Bernardino Municipal Water Department
Sewer Treatment Rate History
Last Ten Fiscal Years
10/1/2015 7/1/2016 7/1/2017 7/1/2018 7/1/2019 7/1/2020 7/1/2021 4/1/2022* 7/1/2022* 7/1/2023*7/1/2024* Commodity Charge (per HCF):
Low Strength Non-Residential
Laundromats 1.77 1.83 1.83 1.83 1.83 2.15 2.39 2.58 2.78 Schools, churches, nursery schools 1.29 1.33 1.33 1.33 1.33 2.15 2.39 2.58 2.78 Medium Strength Non-Residential
Multi-family, mobile home parks 1.36 1.53 1.53 1.53 1.53 1.53 2.71 3.01 3.25 3.51 Retail, commercial, light industrial 2.28 2.55 2.55 2.55 2.55 2.55 2.71 3.01 3.25 3.51 Auto repair, car wash 1.41 1.53 1.58 1.58 1.58 1.58 1.58 2.71 3.01 3.25 3.51 Offices, motels (w/o restaurants) 1.63 1.77 1.83 1.83 1.83 1.83 1.83 2.71 3.01 3.25 3.51 Hospitals, convalescent homes 1.46 1.58 1.63 1.63 1.63 1.63 1.63 2.71 3.01 3.25 3.51 High Strength Non-Residential
Restaurants, hotels 3.18 3.28 3.28 3.28 3.28 6.42 7.13 7.7 8.31 Domestic Liquid Waste (per gallon) 22930 0.0470 2280C 0.0490 0.0490 0.0490 0.0490 0.0714 0.0793 0.0856 0.0925 Industrial:
Discharge Flow (per million gallons) 977.00 1,060.00 1,094.00 1,094.00 1,094.00 1,094.00 1,094.00 1,420.83 1,577.12 1703.29 1,839.55 Biological Oxygen demand (per 1,000 Ibs) 391.00 424.00 438.00 438.00 438.00 438.00 438.00 648.28 719.59 777.16 839.33 Suspended Solids (per 1,000 lbs) 694.00 753.00 778.00 778.00 778.00 778.00 778.00 648.50 719.84 777.42 839.62 * The Sewer Collection rate was combined with the Sewer Treatment rate to become the sewer rate that was effective 04/01/22.
Source: Department's records
87 City of San Bernardino Municipal Water Department
Sewer Treatment Connections and Revenue by User Type
Last Ten Fiscal Years
2024 2023 2022 2021
User Type Connections Revenue Connections Revenue Connections Revenue Connections Revenue San Bernardino Residential 33,398 $22,851,248 33,050 $30,834,983 33,230 S14,359,415 32,365 $10,165,768 San Bernardino Nonresidential 5,598 19,465,877 5,576 2,113,002 5,566 7,279,215 5,436 8,292,874 East Valley Residential 18,735 5,003,034 18,636 5,011,215 18,710 4,797,833 East Valley Nonresidential 1,089 3,329,085 1,106 3,805,558 1,087 3,456,827 Loma Linda Residential 1,742,774 3,185 1,239,524 3,039 1,219,034 3,010 1,232,048 Loma Linda Nonresidential 2,164,251 170 2,000,370 169 1,673,445 169 1,642,250 Total all users 38,996 $46,224,150 61,805 $44,519,998 61,746 $33,347,882 60,777 $29,587,596 2020 2019 2018 2017
Connections Revenue Connections Revenue Connections Revenue Connections Revenue San Bernardino Residential 31,828 $10,191,482 33,051 $10,146,660 32,945 $10,135,132 32,960 $9,756,592 San Bernardino Nonresidential 5,340 8,463,554 5,531 8,645,032 5,526 8,834,641 5,471 8,010,240 East Valley Residential 18,477 4,778,152 18,477 4,778,152 18,477 4,765,218 18,477 4,622,944 East Valley Nonresidential 1,050 3,483,724 1,050 3,550,973 1,050 3,579,348 1,050 3,083,475 Loma Linda Residential 2,856 1,163,501 2,799 1,171,706 4,824 1,167,823 4,723 1,107,201 Loma Linda Nonresidential 168 1,622,872 345 1,557,119 703 1,548,574 593 1,441,807 Total all users 59,719 $29.703,284 61,253 $29,849,643 63,525 S30.030,737 63,274 $28.022,259 2016 2015
Connections Revenue Connections Revenue
San Bernardino Residential $8,746,617 32,874 $8.056,827 San Bernardino Nonresidential 7,125,053 5,344 7,240,533 East Valley Residential 18,477 4,008,039 18,480 4,093,625 East Valley Nonresidential 2,825.971 1,051 2,571,813
Loma Linda Residential 1,008,071 5,040 997,242
Loma Linda Nonresidential 1,308,474 1,294,612
Total all users 64,342 $25,022,225 63,377 $24,254,651
Source: Department's records
Sewer Utility Connections per Customer Type FY 2024 Sewer Utility Revenue by User Type FY 2024
•San Bernardino Residential
5,598, 0% •San Bernardino Nonresidential 1 4, 5%
•San Bernardino Residential
• East Valley Residential •San Bernardino Nonresidential •East Valley Nonresidential • East Valley Residential
-Face Valley Nonresidentin
• Loma Linda Residential
• Loma Linda Residential
33,398, 86% • Loma Linda Nonresidential
• Loma Linda Nonresidential
88 City of San Bernardino Municipal Water Department
Top Ten Sewer Treatment Customers
Fiscal Year 2022
2024 Top 10 Customers
County of San Bernardino $ 635,350
San Bernardino City Unified School District 405,431
Housing Authority 240,935
City of SB 223,242
Saint Bernardine Hospital 204,446
PAMA Management Co. 201,931
SB Comm Hospital Site #373 170,538
W. Dean Weidner 159,828
LIDO Condominiums 159,764
Broadstone Investors LLC 143,384
Top Ten Customers Total $ 2,544,849
Total Sewer Revenue $ 46,224,150
Top Ten Customers Percent of Total 5.51%
Source: Department's records
89 City of San Bernardino Municipal Water Department
Sewer Collection Rate History
Last Ten Fiscal Years
7/1/2016 7/1/2017 7/1/2018 7/1/2019 7/1/2020 7/1/2021 4/1/2022*7/1/2022* 7/1/2023* Residential (monthly per EDU) 9.45 9.90 9.90 9.90 9.90 9.90 N/A N/A N/A Multi-Family
Multi-family, 2 units 18.90 19.85 19.85 19.85 19.85 19.85 N/A N/A N/A Multi-family, 3 units 28.35 29.75 29.75 29.75 29.75 29.75 N/A N/A N/A Multi-family, 4 or more units, Non-res.
Monthly Charge 2.95 3.10 3.10 3.10 3.10 3.10 N/A N/A N/A Usage Charge (per HCF) 0.83 0.87 0.87 0.87 0.87 0.87 N/A N/A N/A * The Sewer Collection rate was combined with the Sewer Treatment rate to become the sewer rate that was effective 04/01/22.
The Sewer Collection Utility was transferred to the Water Department on May 1, 2017 so details for prior years is unavailable.
Source: Department's records
90 City of San Bernardino Municipal Water Department
Sewer Collection
Connections and Revenue by User Type
Last Ten Fiscal Years
2022 2021
User Type Connections Consumption Revenue Connections Consumption Revenue Connections Consumption Revenue Connections Consumption Revenue Residential-Single Family 42 27,748 3,061,513 32,418 $3,997,513 Residential-Multi Family 1,345 356,051 1,576 418,545
Residential- Multi Family 4 Units + 18 78,494 68,975 19 80,400 70,647 comm/Land/Lt. Industrial/Non-Res. 2,670 2,594,640 2,310,986 3,138 3,051,177 2,726,198 Education Public 2 43 127,279 110,588 124,047 109,205
Education-Private 124 58,932 55,859 149 72,141 68,086
Hospital/Convalescent Homes 164,836 144,462 197,360 172,771 Office/Motel-No Restaurant 85 76,768 57,800 93 78,338 59,307 Restaurant/ Hotel w/ Restaurant 51 43,587 39,632 51 36,181 33,232 Auto Repair/Car Wash 197 78,293 75,390 226 81,945 78,971 Laundromat 29,232 25,587 28,349 24,843
CS Irrigation
Totals IVDA 49 62,340 65,559
Total all users 32,363 3.314,401 $ 6,306,843 37,806 3,815,497 $ 7,759,318 2020 2019 2018 2017
Connections Consumption Revenue Connections Consumption Revenue Connections Consumption Revenue Connections Consumption Kevenue Residential-Single family 31,889 $4,054,020 33,127 $3 927 784 32,939 $3,916,946 32,899 $3,719,798 Residential-Multi Family 1,555 412,095 1,606 424,665 1,607 424,024 1,609 405,007 sidential- Multi Family 4 Units 63,529 § 5,921 17 50,331 44,420 16 51,092 44,945 15 45,146 41,351 mm/Land/Lt. Industrial/Non-R 3,069 2,893,018 2,588,912 3,180 2,904,054 2,601,804 3,198 2,997,422 2,668,497 3,204 2,626,645 2,467,470 Education-Public 37 54,207 4 8,082 27 24,293 21,700 27 29,478 26,118 27 29,586 27,420 Education-Private 150 63,715 6 0,941 152 64,643 61,858 150 72,936 67,985 61,381 61,779 Hospital/Convalescent Homes 35 197,787 173,367 190,191 166,768 194,560 170,063 175,241 161,182 Office/Motel-No Restaurant 92 79,321 6 1,027 88,632 69,280 85,397 66,015 71,092 58,587 Restaurant/ Hotel w/ Restaurant 52 38,762 3 5,480 47 41,583 37,750 39,909 35,963 34,788 32,509 Auto Repair/Car Wash 221 75,027 7 3,487 74,854 231 93,474 89,565 73,436 75,421 Laundromat 24,821 2 1,77 26,639 23,362 26,464 23,160 24,091 21,824 7 1,571 43 115,905 45 540,444 145,737 46 503,780 158,834 Totals IVDA 48 56,072 50 54,387 49 57,057 51 54,874
Total all users 37,192 3,901,659 $ 7,656,675 38.613 3,945,028 $ 7,570,150 38,438 4,188,233 $7,679,020 38,402 3,700,060 577231,183 2016 2015
Connections Consumption Revenue Connections Consumption Revenue Residential-Multi Family
Residential-Multi Family 4 Units +
Comm/Land/Lt. Industrial/Non-Res.
Education-Public
Education-Private
Office/Motel-No Restaurant
Restaurant/ Hotel w/ Restaurant
Auto Repair/Car Wash
laundromat
CS Irrigation
Total all users
Source: Department's records
* The Sewer Collection Utility was transferred to the Water Department on May 1, 2017 so prior year data is unavailable. Data provided for 2017 represents the entire year.
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CITY OF SAN BERNADINO MUNICIPAL WATER DEPARTMENT
FOR THE YEAR ENDED JUNE 30, 2024 SINGLE AUDIT REPORT
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CITY OF SAN BERNARDINO
MUNICIPAL WATER DEPARTMENT
Single Audit Report
For the Year Ended June 30, 2024
CITY OF SAN BERNARDINO
MUNICIPAL WATER DEPARTMENT
Single Audit Report
For the Year Ended June 30, 2024
Table of Contents
Page
Number
Independent Auditors' 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 ... 1
Independent Auditors' Report on Compliance for Each Major Program and on Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance.... ..3
Schedule of Expenditures of Federal Awards for the
Fiscal Year Ended June 30, 2024 .... ..6
Notes to the Schedule of Expenditures of Federal Awards. ...7 Schedule of Findings and Questioned Costs for the
Fiscal Year Ended June 30, 2024 .... ..8
Summary Schedule of Prior Year Findings and Questioned Costs for the Fiscal Year Ended June 30, 2023... 10
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INDEPENDENT AUDITORS' 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
To the Water Board
San Bernardino Municipal Water Department
San Bernardino, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of each major fund of the San Bernardino Municipal Water Department (the "Department"), a component unit of the City of San Bernardino, California (the "City"), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Department's basic financial statements, and have issued our report thereon dated November 27, 2024.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Department's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances 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 Department's internal control. Accordingly, we do not express an opinion on the effectiveness of the Department's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We identified certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as item 2024-001, that we consider to be a significant deficiency.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether Department's financial statements are free from 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 financial statements.
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.
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San Bernardino Municipal Water Department
San Bernardino, California
Department's Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the Department's response to the findings identified in our audit and described in the accompanying schedule of findings and questioned costs.
The Department's response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response.
Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Lana, Soll Hunghand, A2P
Irvine, California
November 27, 2024
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INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM
AND ON INTERNAL CONTROL OVER COMPLIANCE AND REPORT ON SCHEDULE OF EXPENDITURES OF
FEDERAL AWARDS REQUIRED BY UNIFORM GUIDANCE
To the Water Board
San Bernardino Municipal Water Department
San Bernardino, California
Report on Compliance for Each Major Federal Program
Opinion on Each Major Federal Program
We have audited the San Bernardino Municipal Water Department (the "Department"), a component unit of the City of San Bernardino, California (the "City")'s compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the Department's major federal programs for the year ended June 30, 2024. The Department's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.
In our opinion, the Department complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2024.
Basis for Opinion on Each Major Federal Program
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ("Uniform Guidance"). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor's Responsibilities for the Audit of Compliance section of our report.
We are required to be independent of the Department and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of the Department's compliance with the compliance requirements referred to above.
Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Department's federal Auditor's Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the Department's compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance The Association of Advisory
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San Bernardino Municipal Water Department
San Bernardino, California
and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as traud may involve collusion, torgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the Department's compliance with the requirements of each major federal program as a whole.
In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence reaardina the Department's compliance with the compliance requirements reterred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of the Department's internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the Department's internal control over compliance. Accordingly, no such opinion is expressed.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.
Report on Internal Control over Compliance
Our consideration of internal control over compliance was for the limited purpose described in the Auditor's Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance and therefore, material weaknesses or significant deficiencies may exist that were not identified.
However, as discussed below, we did identify a certain deficiency in internal control over compliance that we consider to be a significant deficiency.
A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as item 2024-001 to be a significant deficiency.
Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.
Government Auditing Standards requires the auditor to perform limited procedures on the Department's response to the internal control over compliance findings identified in our compliance audit described in the accompanying schedule of findings and questioned costs. The Department's response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. 4 LSL:
To the Water Board
San Bernardino Municipal Water Department
San Bernardino, California
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance.
Accordingly, this report is not suitable for any other purpose.
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the San Bernardino Municipal Water Department, a component unit of the City of San Bernardino, as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Department's basic financial statements. We issued our report thereon dated November 27, 2024, which contained unmodified opinions on those financial statements. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic 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 basic financial statements. The 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 basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.
Lara, Soll yAughan, ISP
Irvine, California
November 27, 2024
SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2024
Federal
Assistance Program
Federal Grantor/Pass-Through Grantor/Program Title Listing Number Expenditures U.S. Department of Treasury
Direct Award:
Coronavirus State and Local Fiscal Recovery Funds 21.027 $ 563,308 Total U.S. Department of the Interior 563,308
Environmental Protection Agency
Consent Decree * 66.000
Operations and maintenance:
Newmark $ 1,294,116
Muscoy 867,686
Site wide monitoring 100,045
Project management 246,382
Subtotal - Consent Decree 2,508,229
U.S. Department of Homeland Security
Direct Award:
Hazard Mitigation Grant Program * 97.039 $ 3,041,427
Total U.S. Department of the Interior 3,041,427
Total Federal Expenditures $ 6,112,964
* Major Program
Note a: Refer to Note 1 to the schedule of expenditures of federal awards for a description of significant accounting policies used in preparing this schedule.
Note b: There was no federal awards expended in the form of noncash assistance and insurance in effect during the year.
Note c: Total amount provided to subrecipients during the year was $0. 6 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Notes To The Schedule Of Expenditures of Federal Awards For The Year Ended June 30, 2024
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES APPLICABLE TO THE SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS
A. Scope of Presentation
The accompanying Schedule of Expenditures of Federal Awards (the "Schedule") includes the federal grant activity of he San Bernardino Municipal Water Department (the "Department ), a component unit of the City of San Bernardino, california (the "Citv"), under programs of the federal government for the vear ended June 30. 2024. The information ir this Schedule is presented in accordance with the requirements of the Uniform Guidance. Because the Schedule presents only a selected portion of the operations of the Department, it is not intended to and does not present the financial position, changes in net position or cash flows of the Department, nor does it present all federal programs of the City of San Bernardino as a whole.
B. Basis of Accounting
Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance. Under the accrual basis of accounting, expenditures are recognized when incurred. Expenditures reported include any property or equipment acquisitions incurred under the federal program. The Department did not use the 10% de minimis indirect cost rate as covered in section 200.414 of the Uniform Guidance.
NOTE 2: BACKGROUND OF THE CONSENT DECREE
In 1996, the City filed a complaint against the United States of America, Department of the Army (Army) to recover damages, response costs and other available remedies relating to contamination alleged to have originated at a World War I| Army installation known as Camp Ono. In March 2005, the United States Department Court, Central Department, entered judgment, in the form of a consent decree (Consent Decree), in the matter of arising from the groundwater contamination allegedly caused by the Army. The Consent Decree contains a number of provisions obligating the City (through the Municipal Water Department) to operate and maintain the Newmark Groundwater Superfund site (Site). The Site consists of two operable units, the Newmark Operable Unit and the Muscoy Operable Unit. The Newmark Operable Unit was declared operational and functional in 1998.
The Consent Decree provided for a payment of $69 million from the Army to the City for performance of the work outlined in the consent decree. Upon entry of the Consent Decree, the City, through the Department, received title to all facilities constructed by the United States Environmental Protection Agency (EPA) for the Site and agreed to operate and maintain the groundwater extraction and treatment system for a period of 50 years. The $69 million payment consisted of $59 million for operation and maintenance and $10 million for the construction of certain capital facilities that would be required in the future. The funds are subject to strict limitations, contained in the Consent Decree, as to how they may be spent.
Pursuant to the Consent Decree, $10 million, including interest earned, has been set aside to be used only for (i) funding construction of treatment and directly related transmission systems that expanded the Department's capacity to deliver potable water, and (i) funding work performed by the Department to complete construction of the Muscoy Operable Unit extraction system. These "capital facility" funds may not be used for costs incurred to operate, maintain, repair or retrofit components of the Site extraction or treatment systems constructed by EPA.
In September 2007, the Muscoy Operable Unit was declared operational and functional. 7 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2024
SECTION I - SUMMARY OF AUDITORS' RESULTS
Financial Statements
Type of auditors' report issued: Unmodified Opinion
Internal control over financial reporting:
• Material weaknesses identified? —yes X no
• Significant deficiencies identified? X yes _none reported voncompliance material to tinancia
tatements noted, _yes X no
Federal Awards
Internal control over major programs:
• Material weaknesses identified? yes X no
• Significant deficiencies identified? yes X_ none reported Type of auditors' report issued on compliance for major programs: Unmodified Opinion Any audit findings disclosed that are required to be
reported in accordance with Title 2 U.S. Code of
Federal Regulations (CFR) Part 200, Uniform
Administrative Requirements, Cost Principles, and
Audit Requirements for Federal Awards (Uniform
Guidance)? _yes X по
Identification of major programs:
Assistance Listing Number(s) Name of Federal Program or Cluster
66.000 Consent Decree
97.039 Hazard Mitigation Grant Program
Dollar threshold used to distinguish
between type A and type B program $750,000
Auditee qualified as low risk auditee? _X_ yes
8 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2024
SECTION II - FINANCIAL STATEMENT FINDINGS
Reference Number
2024-001
Evaluation of Finding
Significant Deficiency
Condition
San Bernardino Municipal Water Department personnel did not properly adhere to Department policies and rocedures for verifying the authenticity of vendor requests to change bank account information. As a result, ai inauthorized person was able to impersonate a legitimate vendor and submit a fraudulent request to change the banl account number associated with the vendor's invoices. The Department processed the request without verifying the identity of the requester or the validity of the new bank account information, resulting in approximately $65,000 being paid to the wrong bank account before detecting the fraud.
Criteria
Internal control standards require that organizations establish and adhere to policies and procedures to verify the authenticity of vendor requests to change bank account information. This includes contacting the vendor by phone or in person using a previously known or independently obtained contact number and confirming the request and the new bank account information with an authorized representative of the vendor.
Cause of Condition
The Department lacked a written policy and procedure for verifying vendor requests to change bank account information. Additionally, staff responsible for processing vendor payments were not adequately trained on the importance of verifying such requests.
Effect or Potential Effect of Condition
The deficiency in internal control over vendor payments exposes the Department to the risk of financial losses, reputational damage, and legal liabilities. In this instance, the Department paid approximately $65,000 to the wrong bank account before detecting the fraud.
Recommendation
To prevent and detect similar frauds in the future, we recommend that the Department implement the following measures:
1. Establish a written policy and procedure for verifying vendor requests to change bank account information.
This should include contacting the vendor by phone or in person using a previously known or independently obtained contact number, and confirming the request and the new bank account information with an authorized representative of the vendor.
2. Train the staff responsible for processing vendor payments on the new policy and procedure, emphasizing the importance of adhering to it.
3. Periodically review the vendor master file to identify any changes made to vendor bank account information.
Perform independent verification of these changes and investigate any discrepancies or anomalies.
4. Reconcile vendor payments with vendor statements and bank statements on a timely basis and follow up on any outstanding or unusual items.
Client Response
The Finance division has implemented additional procedures to mitigate the risk in the future. Vendor requests for new banking information or electronic payments submitted to Finance go into a workflow to be reviewed and independently verified. Senior staff call the requesting vendor to verify all information submitted before being approved in the Financial system. Staff have been trained and advised to not pay vendors without this verification process and physically cannot without the approval in the system.
SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
9 CITY OF SAN BERNARDINO
MUNICIPAL WATER DEPARTMENT
CITY OF SAN BERNARDINO SAN MIGUEL J. GUERRERO, P.E.
WATER BOARD General Manage
BERNARDINO ROBIN L. OHAMA
TONI CALLICOTT Deputy General Manager
President
WAYNE HENDRIX •
DAVID E. MLYNARSKI DERE
RIKKE V. JOHNSON WATER
THOMAS BRICKLEY
"Trusted, Quality Service since 1905"
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2023
No matters were reported.
1350 South "E" Street, San Bernardino, California 92408 P.O. Box 710, 92402 Phone: (909) 384-5141 FACSIMILE NUMBERS: Administration: (909) 453-6399 Customer Service: (909) 453-6396 Finance: (909) 453-6383 Engineering: (909) 453-6385 Corporate Yards: (909) 453-6389 Water Reclamation Plant: (909) 453-6395 Environmental & Regulatory Compliance: (909) 453-6391 Environmental Control: (909) 453-6394
10 LSL'
November 27, 2024
To the Water Board
City of San Bernardino Municipal Water Department
San Bernardino, California
We have audited the financial statements of each major fund of the City of San Bernardino Municipal Water Department (the "Department"), a department of the City of San Bernardino, California (the "City") for the year ended June 30, 2024. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated April 5, 2024. Professional standards also require that we communicate to you the following information related to our audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Department are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during fiscal year 2023-2024. We noted no transactions entered into by the Department during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events.
Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the Department's financial statements were:
Management's estimates of the pension, other postemployment benetits, and selt-insured claims liabilities are based on actuarial valuations. We evaluated the methods, assumptions, and data used to develop the pension, other postemployment benefits, and self-insured claims liabilities in determining that it is reasonable in relation to the financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
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To the Water Board
City of San Bernardino Municipal Water Department
San Bernardino, California
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management.
Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation letter dated November 27, 2024.
Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting rinciple to the Department's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Department's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to management's discussion and analysis, and the required pension and other postemployment benefits schedules, which are required supplementary information ("RSI") that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding 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 did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were not engaged to report on the introductory and statistical sections of the Annual Comprehensive Financial Report, which accompany the financial statements but are not RSI. 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.
LSL
To the Water Board
City of San Bernardino Municipal Water Department
San Bernardino, California
Future GASB Pronouncements
The following Government Accounting Standards Board (GASB) pronouncements will be effective for the following fiscal years' audits and should be reviewed for proper implementation by management:
Fiscal Year 2024-2025
GASB Statement No. 101, Compensated Absences.
GASB Statement No. 102, Certain Risk Disclosures.
Fiscal Year 2025-2026
GASB Statement No. 103, Financial Reporting Model Improvements.
GASB Statement No. 104, Disclosures of Certain Capital Assets Future Projects
Comprehensive Project, Revenue and Expense Recognition.
Major Project, Going Concern Uncertainties and Severe Financial Stress.
Major Project, Infrastructure Assets.
Practice Issue, Classification of Nonfinancial Assets.
Practice Issue, Risks and Uncertainties Disclosures.
Practice Issue, Subsequent Events.
Restriction on Use
This information is intended solely for the information and use of the Water Board and management of the department and is not intended to be, and should not be, used by anyone other than these specified parties.
Very truly yours,
Lana, Soll Hungard, Z2P
Lance, Soll & Lunghard, LLP
LSL"
INDEPENDENT AUDITORS' 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
To the Water Board
City of San Bernardino Municipal Water Department
San Bernardino, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the City of San Bernardino Municipal Water Department (the "Department"), a component unit of the City of San Bernardino, California (the "City"), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Department's basic financial statements, and have issued our report thereon dated November 27, 2024.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Department's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances 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 Department's internal control. Accordingly, we do not express an opinion on the effectiveness of the Department's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We identified a certain deficiency in internal control, described in the accompanying schedule of findings and responses as item 2024-001 that we consider to be a significant deficiency.
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether Department's financial statements are free from 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 financial statements.
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.
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To the Water Board
City of San Bernardino Municipal Water Department
San Bernardino, California
Department's Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the Department's response to the findings identified in our audit and described in the accompanying schedule of findings and responses. The Department's response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response.
Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Lane, Sole Hunghard, ISP
Irvine, California
November 27, 2024
LSL:
To the Water Board
City of San Bernardino Municipal Water Department
San Bernardino, California
SCHEDULE OF FINDINGS AND RESPONSES
Reference Number
2024-001
Evaluation of Finding
Significant Deficiency
Condition
bank account number associated with the vendor's invoices. The Department processed the request without verifying the identity of the requester or the validity of the new bank account information, resulting in approximately $65,000 being paid to the wrong bank account before detecting the fraud.
Criteria
Internal control standards require that organizations establish and adhere to policies and procedures to verify the authenticity of vendor requests to change bank account information. This includes contacting the vendor by phone or in person using a previously known or independently obtained contact number and confirming the request and the new bank account information with an authorized representative of the vendor.
Cause of Condition
The Department lacked a written policy and procedure for verifying vendor requests to change bank account information. Additionally, staff responsible for processing vendor payments were not adequately trained on the importance of verifying such requests.
Effect or Potential Effect of Condition
The deficiency in internal control over vendor payments exposes the Department to the risk of financial losses, reputational damage, and legal liabilities. In this instance, the Department paid approximately $65,000 to the wrong bank account before detecting the fraud.
Recommendation
To prevent and detect similar frauds in the future, we recommend that the Department implement the following measures:
1. Establish a written policy and procedure for verifying vendor requests to change bank account information.
This should include contacting the vendor by phone or in person using a previously known or independently obtained contact number, and confirming the request and the new bank account information with an authorized representative of the vendor.
2. Train the staff responsible for processing vendor payments on the new policy and procedure, emphasizing the importance of adhering to it.
3. Periodically review the vendor master file to identify any changes made to vendor bank account information.
Perform independent verification of these changes and investigate any discrepancies or anomalies.
4. Reconcile vendor payments with vendor statements and bank statements on a timely basis and follow up on any outstanding or unusual items.
Client Response
The Finance division has implemented additional procedures to mitigate the risk in the future. Vendor requests for new banking information or electronic payments submitted to Finance go into a workflow to be reviewed and independently verified. Senior staff call the requesting vendor to verify all information submitted before being approved in the Financial system. Staff have been trained and advised to not pay vendors without this verification process and physically cannot without the approval in the system.
CITY OF SAN BERNARDINO
MUNICIPAL WATER
DEPARTMENT
ANNUAL
COMPREHENSIVE
FINANCIAL REPORT
(ACFR)
AS OF JUNE 30, 2024
WATER FUND RESULTS Audit
Audit Actuals $ Increase/
FY 2024 FY 2023 (Decrease) % Change
Operating Revenue $45,985,090 $ 44,091,833 $ 1,893,257 4.29% Operating Expenses less
Depreciation 41,865,117 39,412,797 2,452,320 6.22%
Net Operating Income/(loss) 4,119,973 4,679,035 (559,063) -11.95% Non-Operating
Revenue/(Expense) 6,977,920 1,380,979 5,596,941 405.29% Net Income before Capital
Contributions 11,097,893 6,060,015 5,037,878 83.13%
WATER FUND RESULTS Budget
FY 2024 $ Increase/
Budget Actuals (Decrease) % Change
Operating Revenue $47,870,800 $45,985,090 $ (1,885,710) -3.94% Operating Expenses less
Depreciation 44,394,444 41,865, 117 (2,529,327) (5.70%) Net Operating Income/(loss) 3,476,356 4,679,036 1,202,680 34.60% Non-Operating
Revenue/(Expense) 2,198,500 6,977,920 4,779,420 217.39% Net Income before Capital
Contributions 5,674,856 11,656,956 5,982,100 105.41%
SEWER FUND RESULTS Audit
Audit Actuals $ Increase/
FY 2024 FY 2023 (Decrease) % Change
Operating Revenue 47,385,433 45,544,260 1,841,173 4.04% Operating Expenses less
Depreciation 38,940,297 36,236,522 2,703,775 7.46%
Net Operating Income/(loss) 8,445,136 9,307,738 (862,602) (9.27%) Non-Operating
Revenue/(Expense) 946,009 16,939 929,070 5,484.80%
Net Income before Capital
Contributions 9,391,145 9,324,677 66,468 0.71%
SEWER FUND RESULTSBudget
FY 2024 $ Increase/
Budget Actuals (Decrease) % Change
Operating Revenue 46,961,590 47,385,433 423,843 0.90%
Operating Expenses less
Depreciation 42,509,522 38,940,297 (3,569,225) (8.40%)
Net Operating Income/(loss) 4,452,068 8,445,136 3,993,068 89.69% Non-Operating
Revenue/(Expense) 4,800 946,009 941,209 19,608.52%
Net Income before Capital
Contributions 4,456,868 9,391,145 4,934,277 110.71%
Thank You
0 /
2024 Financial Audit
Presented by:
Ryan Domino, CPA, Partner
December 10, 2024
Islcpas.com
LSL**
000•
Your LSL Team
Ryan Domino, CPA Riley Greenlee, CPA
Partner Manager
LSL*:
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Scope of Engagement
• LSL has been engaged by SBMWD to perform the following procedures for the year ended June 30, 2024:
• Financial statement audit in accordance with generally accepted auditing standards and Government Auditing Standards
• Single audit over the federal award programs in accordance with the federal Uniform Guidance.
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•OC
Scope of Engagement
• Interim Fieldwork • Year-End Fieldwork
• Apr. 8 - Apr. 11, 2024 • Sep. 9 - Sep. 13, 2024
• Examined internal controls • Detailed testing of account • Provided feedback to balances and transactions
management • Compliance testing with laws,
• Performed our audit risk regulations, grant agreements, assessment contracts
• Planned year-end audit • Single Audit testing
procedures to respond to risk
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Results of Audit
• We will issued an unmodified auditor's opinion on the financial statements.
• Financial statements are accurate and reliable as of June 30, 2024. • We issued the Report on Internal Control and Compliance • One significant deficiency in internal control noted
• Related to a fraud event perpetuated by an external party that occurred during the year. • No material weaknesses in internal control noted.
• No material noncompliance with laws, regulations, grants, etc. noted.
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Results of Audit
• We issued an unmodified auditor's opinion on SBMWD's compliance with the requirements of major federal award programs.
• Tested the Consent Decree and Hazard Mitigation Grant Program • No compliance findings
• No control deficiencies over compliance
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Results of Audit
• We identified no going concern doubts as of June 30, 2024. • Management brought an incident of external fraud related to purchasing to our attention, and we provided recommendations to strengthen controls to prevent future occurrences of this type of fraud.
• We had no disagreements with management about application of accounting principles.
• We had no difficulties conducting our audits.
• We determined that all estimates used by management in preparing the financial statements were reasonable.
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•0O
Financial Highlights
• Net position increased $4.8M from PY to a total of $348.2M • Unrestricted net position (reserves) represented 65% of operating expenses and 19% of total net position.
• Capital assets increased $22.1M.
• Long-term debt decreased $1.9M.
• Pension liability increased $2.3M due to CalPERS returns being less than anticipated. CalPERS is 70% funded.
• OPEB asset increased $2.3M due to good investment returns, and the trust is 113% funded.
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Questions
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CALIFORNIA: Irvine | Sacramento
TEXAS: The Woodlands
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