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PENROSE WATER DISTRICT <br /> 340 Grant Street Penrose,CO 81240 <br /> Management's Discussion and Analysis <br /> The Management Discussion and Analysis (MD&A) is designed to provide an easy-to-read <br /> discussion of the District's financial condition and operating results and to disclose to the reader <br /> important financial activities and issues related to the District's basic operations and mission. <br /> The District has one financial category referred to as a business type activity. <br /> DESCRIPTION OF FINANCIAL STATEMENTS <br /> This annual report consists of three parts—management's discussion and analysis (this section), <br /> the basic financial statements (including the accompanying footnotes), and supplementary <br /> information. The supplementary information is not a required part of the financial statements <br /> under generally accepted accounting principles. <br /> The basic financial statements consist of the statement of Net Position, the Statement of <br /> Revenues, Expenses and Changes in Net Position, and a Statement of Cash Flows. These <br /> statements report information about the District as a whole and include all assets and liabilities <br /> using the accrual basis of accounting, which is similar to the accounting used by most private- <br /> sector companies. All of the current year's revenues and expenses are taken into account <br /> regardless of when cash is received or paid. The basic financial statements also include notes that <br /> explain some of the information in the financial statements and provide more detailed data. <br /> These statements report the District's Net Position and changes in them. The District's Net <br /> Position is one way to measure the District's financial health, or financial position. Over time, <br /> increases or decreases in the District's Net Position are one indicator of whether its financial <br /> health is improving or deteriorating. <br /> HIGHLIGHTS <br /> • In 2012 total assets were $8,864,000, an increase of$401,000 from 2011. While there are <br /> several causes for this increase, it is principally due to receiving loan proceeds for <br /> expenditures that were made in 2011 for the District's well and pipeline project. These <br /> receipts replaced amounts expended from the District's net position near the end of 2011. <br /> • In 2012 total liabilities were $4,191,000, an increase of$323,000 from 2011. <br /> • Operating income for 2012 was $129,000 compared to a loss of$157,000 in 2011. This <br /> increase (a swing of$286,000) is largely due to significant non-capitalizable engineering <br /> costs that were incurred in 2011 that did not reoccur in 2012. During that year the District <br /> incurred significant project development engineering costs that could not be capitalized <br /> because the final concept for the project was not yet known. In August of 2012 the <br /> location and final concept for the project was determined and engineering costs from that <br /> point forward will be capitalized. <br /> 1 <br />