A Performance Audit of the Utah Telecommunication Open ...

Figure 2.10 Seven Years of Operating Deficits Have Cost $27 Million.During UTOPIA’s first seven years of connecting customers (since 2005),it did not generate revenues sufficient to cover the agency’s operatingcosts, which have averaged $5.5 million a year.UTOPIA’s increasedrevenue in 2011 isattributable topayments made byUIA.Source: UTOPIA financial statements.Figure 2.10 shows that UTOPIA’s operating revenues, shown ingreen, have been consistently below its operating costs, shown inyellow. During fiscal year 2011, roughly $3 million in residentialaccess fees (green bar) plus a $2.1 million payment from the UIA(light green) comprised the operating revenues. Business installationfees also generated a small amount of revenue.As for the operating expenses (shown in yellow), the payrollrepresents the largest single operating cost at about $2.5 million infiscal year 2011. Professional services cost $1.4 million that year. Thecost of accessing the network added $1.5 million and UTOPIA spentanother $700,000 for materials and supplies.Figure 2.10 shows that after seven years of connecting customers,UTOPIA has yet to achieve a positive cash flow. In 2011, UTOPIA’srevenues increased to the point of almost equaling its operating costs.However, the increase in revenue is largely attributable to theadditional funds received from UIA. Although UTOPIA hassuggested that the increased revenue in 2011 demonstrates a markedimprovement in the agency’s financial condition, we question whetherreliance on payments from an affiliate truly represents animprovement. Because those receipts are actually payments from- 20 -A Performance Audit of the Utah Telecommunication Open Infrastructure Agency (August 2012)