A Performance Audit of the Utah Telecommunication Open ...

Figure 2.3 UTOPIA’s Expenses Exceed Revenues. The data show thedegree to which UTOPIA’s operating revenue (in green) falls short ofcovering annual operating costs (yellow) and interest payments (orange).In 2011, nearly half ofUTOPIA’s revenue wasnot customerpayments but fundsreceived from UIA, itsaffiliate.Figure 2.3 shows that UTOPIA’s revenues never grew fast enoughto cover operating costs and interest payments as expected. Until2011, UTOPIA was using part of its bond proceeds to cover thedifference between revenues and expenditures.In 2011, UTOPIA began to rely on payments from its newlyformed affiliate, the Utah Infrastructure Agency (UIA), to cover mostof its annual operating deficit. In Figure 2.3, the lighter green portionof the revenue for fiscal year 2011 represents an additional $2.1million payment from UIA that UTOPIA counted as operatingrevenue. Clearly distinguishing between revenues from subscriber salesand payments from UIA is important. The reported operating revenueincrease in 2011 resulted from a transfer of funds betweenorganizations rather than a large increase in consumer payments.UTOPIA Faces SeriousFinancial ChallengesAs shown previously in Figure 2.3, since 2003, UTOPIA has hadnine consecutive years of operating losses. These annual deficits havecaused serious damage to the agency’s financial position. At the end offiscal year 2011, UTOPIA had total net assets of negative $120million. As shown in Figure 2.4 below, in fiscal year 2011 theexpenses of both UTOPIA and UIA far exceeded their revenues.Because of continuedyearly losses with littlerevenue generation,UTOPIA’s book valuehas declined tonegative $120 million.Office of the Utah Legislative Auditor General - 9 -