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OFFICE OF AUDITOR OF STATE STATE OF IOWA - page 36 / 39

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(8)

(9)

Villisca Municipal Power Plant

Schedule of Findings

Year ended December 31, 2003

Deposits and Investments – Except as noted in item (1), no instances of non-compliance with the deposit and investment provisions of Chapters 12B and 12C of the Code of Iowa and the Power Plant’s investment policy were noted. However, the current investment policy adopted by the Board does not contain the correct references to the Code of Iowa.

Recommendation – An updated investment policy should be adopted by the Board with correct code references to Chapters 12B and 12C of the Code of Iowa.

Response – Along with updating our official depository, the Board will properly refer to Chapters 12B and 12C of the Code of Iowa.

Conclusion – Response accepted.

Electric Revenue Notes – The Power Plant has not established the Enterprise Fund, Electric Revenue Reserve or Improvement and Extension Accounts required by the note resolution.

Also, the Power Plant has not paid electric note principal and interest from the Electric Revenue Sinking Account and has not made the required transfers to the Electric Revenue Sinking Account, as required by the note resolution.

The note indenture authorizing and providing for the issuance of the electric revenue notes issued February 1, 2003 required any accrued interest on the sale of notes shall be credited to the Electric Revenue Sinking Account. Accrued interest on the sale of notes of $1,502 was deposited into the Enterprise Fund, Electric Operating Account.

Recommendation – The Power Plant should establish the required accounts and make the necessary transfers required by the note resolutions.

Power Plant officials should review the revenue note resolution and comply with

provisions of the resolution.

The Power Plant should also periodically review

accounts to insure the required transfers have been result in sufficient funds to meet future obligations.

made

and

established

rates

the the will

The Power Plant should make a corrective transfer from the Enterprise Fund, Electric Operating Account to the Enterprise Fund, Electric Revenue Sinking Account for $1,502 to correctly record the accrued interest on notes sold.

Response – The Board will establish separate Enterprise Funds as Operating, Electric

Revenue Reserve Fund of $141,590, Improvement and Extension Fund of $140,000 and

Sinking Fund. Monthly balances from the Operating Fund to the

will be presented with the Treasurer’s Sinking Fund will be shown by the

report. Transfers

Secretary.

Semi

annual loan payments according to the predetermined schedule will be Sinking Fund. The May 2003 and November 2003 loan payments were Operating Fund, since the Sinking Fund had not been established.

made out of the made out of the The May 2004

payment was made out of the Operating Fund, but a transfer the Super Now bank account had been made. From this point

from the Sinking Fund to forward the Secretary will

continue to make the proper monthly transfers from the Operating Fund to the Fund and all loan payments will be made out of the Sinking Fund. A corrective of $1,502 from the Operating Fund will be made to correct the accrued interest by the Power Plant at the initial issuance of bonds.

Sinking transfer received

Conclusion – Response accepted.

35

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