2012 CAFR - Encina Wastewater Authority

ENCINA WASTEWATER AUTHORITYNOTES TO FINANCIAL STATEMENTSJUNE 30, 2012 AND 2011Note 1 - Organization and Significant Accounting Policies: (Continued)Significant Accounting Policies (Continued)Capital Assets (Continued)Joint wastewater treatment (Unit I)Joint ocean outfall facilities (Unit J)Furnishings and office equipmentPump station facilitiesFlow metering system7 - 40 years25 - 75 years5 - 7 years7 - 40 years10 yearsDepreciation totaled $7,899,653 and $6,259,835 for the years ended June 30, 2012 and 2011, respectively.Classification of LiabilitiesCertain liabilities which are currently payable have been classified as noncurrent because they will be fundedfrom restricted assets.Compensated AbsencesAccumulated unpaid vacation and sick leave totaling $1,049,268 and $990,011 is accrued when incurred andincluded in noncurrent liabilities at June 30, 2012 and 2011, respectively.Risk ManagementThe Authority is exposed to various risks of loss related to torts; theft of, damage to, and destruction ofassets; errors and omissions; injuries to employees; and natural disasters. The Authority is a member of theCalifornia Sanitation Risk Management Authority (CSRMA), a public entity risk pool. The Authority pays adeposit to cover estimated losses for a fiscal year. CSRMA also serves as a joint insurance purchasing entitywith respect to certain coverage. Ba sed on pool performance, CSRMA makes additional assessments orrefunds excess pool deposits to its members based on a retrospective risk rating adjustment.The Authority’s participation in the general liability program of CSRMA provides coverage up to $15,500,000with a $25,000 deductible. Excess insurance of $20,000,000 has been purchased. The Authority’sparticipation in the workers’ compensation program of CSRMA provides coverage up to $1,000,000 with nodeductible. CSRMA has a self-insured retention of $750,000 and excess insurance for workers’ compensationstatutory limits have been purchased.The Authority pays annual premiums for this coverage. They are subject to retrospective adjustments basedon claims experienced. The nature and amounts of the adjustments cannot be estimated and are charged toexpense as invoiced. The Authority’s insurance expense and workers compensation insurance expense was$273,799 and $301,413, for the years ended June 30, 2012 and 2011, respectively. There were no instancesin the past three years where a settlement exceeded the Authority’s coverage.See accompanying independent auditors’ report.25