07 CAFR cover FINAL.p65 - WMATA.com

Washington Metropolitan Area Transit AuthorityFY 2007 Comprehensive Annual Financial ReportManagement’s Discussion and AnalysisAs management of the Washington Metropolitan Area Transit Authority (Authority), we offer readers of the basicfinancial statements this narrative overview and analysis of the financial activities of the Authority as of June 30,2007, 2006 and 2005 and for the years ended June 30, 2007 and 2006. This discussion and analysis is designedto assist the reader in focusing on significant financial issues and activities and to identify any noteworthychanges in financial position. We encourage readers to consider the information presented here in conjunctionwith the basic financial statements taken as a whole.Fiscal Year 2007 Financial Highlights• Capital assets increased by $97.7 million or 1.2 percent, largely attributable to bus purchases, facilitiesenhancements and rail rehabilitation.• Noncurrent liabilities decreased by $60.5 million or 3.7 percent, largely due to bond repayments anddecreases in outstanding lease agreement obligations.• Operating revenues increased by $17.6 million or 2.9 percent, due to an increase in ridership. Specialevents such as Washington area capital events, sporting events, as well as an increase in gas prices allcontributed to the increase in revenue and ridership.• Operating expenses increased by $145.0 million or 9.9 percent, due primarily to an increase in labor costto cover vacancies, system maintenance cost, and additional safety and security activities. The costassociated with the increase use of the Authority’s paratransit service and rising fuel cost also contributedto this increase.Overview of the Basic Financial StatementsThis required annual report consists of three parts: Management’s Discussion and Analysis, Basic FinancialStatements and Required Supplementary Information. The basic financial statements also include notes thatprovide in more detail some of the information in the basic financial statements.Basic Financial Statements. The Authority’s basic financial statements are prepared in conformity withaccounting principles generally accepted in the United States of America (GAAP) as applied to an enterpriseusing the accrual basis of accounting. Under this basis, revenues are recognized in the period in which they areearned, and expenses are recognized in the period in which they are incurred.The Authority’s basic financial statements are the Statements of Net Assets, the Statements of Revenues,Expenses and Changes in Net Assets and the Statements of Cash Flows.The Statements of Net Assets report the Authority’s net assets. Net assets, the difference between assets andliabilities, are one way to measure the financial position of the Authority. This is only one measure, however, andthe reader should consider other indicators, such as the rate of growth of operating subsidies, passenger farelevels, ridership, general economic conditions in the metropolitan area and the age and condition of capital assetsused by the Authority.The Statements of Revenues, Expenses and Changes in Net Assets report all of the revenues earned andexpenses incurred during the reporting periods.The Statements of Cash Flows provide information on cash receipts and cash payments during the reportingperiods.The basic financial statements can be found on pages 21-26 of this report.11