03-30-2016 HUCMMINUTES
Regular Meeting — Hutchinson Utilities Commission
Wednesday, March 30, 2016
Call to order — 3:00 p.m.
President Luhring called the meeting to order. Members present: President Donna
Luhring; Vice President Monty Morrow; Secretary Mark Girard; Commissioner Anthony
Hanson; Commissioner Robert Wendorff; Attorney Marc Sebora; General Manager
Jeremy Carter.
1. Conflict of Interest
Secretary Girard declared a conflict of interest in voting on the agenda item 2b,
Ratify Payment of Bills, as he is listed in the Payment of Bills. Both Secretary
Girard and Commissioner Hanson declared a conflict of interest in voting on
agenda item 9d, Designate Depositories for Utility Funds, as Girard is a director
and Hanson is an employee of Citizens Bank and Trust.
2. Approve Consent Agenda
a. Approve Minutes
b. Ratify Payment of Bills
A motion was made by Vice President Morrow, seconded by Commissioner
Hanson to approve the Consent Agenda. Motion was unanimously carried.
3. Approve 2015 Financial Audit — Presentation by Paul Harvego
Paul Harvego of Conway, Deuth & Schmiesing was welcomed to the meeting.
Mr. Harvego presented the 2015 financial audit. A motion was made by
Commissioner Hanson, seconded by Secretary Girard to approve the 2015
financial audit. Motion was unanimously carried. (Audit attached.)
4. Approve Financial Statements
GM Carter presented the financial statements. Carter noted starting this month, an
HUC investment report will be included in the financial statements.
After discussion, a motion was made by Secretary Girard, seconded by
Commissioner Wendorff to approve the financial statements. Motion was
unanimously carried.
5. Open Forum
6. Communication
a. City Administrator — Matthew Jaunich
L Preparing for a busy development season.
b. Divisions
i. Randy Blake —
1. Shermco Industry will be performing tests for Plant 1 to comply with the
boiler machinery insurance requirements.
2. Emissions performance testing on four units will be scheduled to be
performed by Interpol Laboratories next Tuesday.
3. Had a surprise visit from a MPCA representative. Reported no violations.
ii. Dave Hunstad —
1. Nothing to report.
iii. Dan Lang —
1. Nothing to report.
iv. Jared Martig -
1. Update on the consideration of implementing BS&A software at HUC - IT
is still seeking a credit card processing company which has the customer
calling feature for disconnect notices. The preliminary estimates are still
showing less than a 3 -year payback if HUC switches to BS&A.
v. John Webster -
1 . The, Public Utilities Commission is requesting United Farmers Coop
(UFC) become a regulated utility. Therefore, United Farmers Coop and
Greater Minnesota Transmission is putting the project of building an
interconnect station in Lafayette on hold until about July as UFC is filing
to remain a non-regulated utility.
2. Distributed to the Board a utility rate comparison document which
Owatonna performs twice per year.
vi. Brenda Ewing —
1. Continuing to work toward completion of the HUC job evaluation' study.
c. Legal — Attorney Sebora
i. Nothing to report.
d. General Manager — Jeremy Carter
i. Special meeting tomorrow at 7:30 a.m. at HUC to discuss wholesale
generation.
ii. Continuing to be part of the technical stakeholder meetings.
iii. Planning on presenting fleet infrastructure information at April commission
meeting.
iv. Contacting MRES next week regarding HUC's base load contract.
7. Policies
a. Review Policies
i. Right -of -Way Clearing
ii. Tree Removal or Trimming
No changes were recommended at this time.
b. Approve Changes
i. Life Insurance
The changes recommended were for clarification.
2
ii. Health/Dental Insurance
The changes recommended were for clarification.
iii. Disability Insurance
The changes recommended were for clarification.
iv. Meter Testing - Electric
A grammatical addition was made to provide clarification.
After discussion, a motion was made by Commissioner Hanson, seconded
by Secretary Girard to approve the changes to Life Insurance, Health/Dental
Insurance, Disability Insurance, and Meter Testing - Electric. Motion was
unanimously carried. (Changes attached.)
8. Unfinished Business
a. Update on Pack Gas Discussions
New Ulm is reviewing the response from HUC. They plan on contacting HUC
after their review.
9. New Business
a. HUC Receives Recognition for Exceptional System Reliability for 2015
The Board congratulated HUC on receiving national recognition for Exceptional
System Reliability for 2015. The recognition comes from American Public
Power Association (APPA). (Recognition letter attached.)
b. Approve 3M Rebate
Jared Martig presented the rebate of $39,828.01 to be paid to 3M for their 2015
CIP projects. A motion was made by Commissioner Hanson, seconded by
Secretary Girard to approve the 3M rebate of $39,828.01. Motion was
unanimously carried.
c. Approve a Sub -Committee for Union Negotiations
The Board elected Commissioner Morrow and President Luhring to be on the
sub -committee for Union negotiations. A motion was made by Secretary Girard,
seconded by Commissioner Hanson to approve Commissioner Morrow and
President Luhring as sub -committee members for Union negotiations. Motion
was unanimously carried.
d. Designate Depositories for Utility Funds
i. Citizens Bank & Trust
ii. Wells Fargo Bank
iii. Home State Bank
Due to two commissioners having a conflict of interest on this agenda item at
the January's regular commission meeting, the agenda item was tabled until
March's meeting to allow for a quorum to approve designation of depositories.
3
A motion was made by Commissioner Wendorff, seconded by Vice President
Morrow, to designate Citizens Bank & Trust, Wells Fargo Bank, and Home
State Bank as depositories for utility funds. Motion was unanimously carried.
10. Adjourn
There being no further business, a motion was made by Vice President Morrow,
seconded by Secretary Girard to adjourn the meeting at 3:50 p.m. Motion was
unanimously carried.
ATTEST: 46z Al/k
Donna Luhring, President
4
Mark Girard, Secretary
Audit Report
December 31, 2015
www.cdscpa.com
Independent Auditor's Report
Pages 2-4:
Financial statements are the responsibility of the
Commission's management
Our responsibility is to express an opinion on these financial
statements based on our audit
Conducted audit in accordance with Generally Accepted
Auditing Standards and Government Auditing Standards
Obtain reasonable assurance financials are free from
material misstatement
Financial statements of the Commission are presented fairly
in our opinion CDS
Independent Auditor's Report (Cont'd)
Pages 2-4:
MD&A (pages 5-9) and the Schedules of
Proportionate Share of the Net Pension Liability and
Employer Contributions (page 30) are required
supplementary information and unaudited
Supplementary information is fairly stated in relation
to financial statements taken as a whole
Internal control letter on pages 43-44
2
Statement of Net Position
2015
,.: .
2014
I ASSETS AND DEFERRED
OUTFLOWS OF RESOURCES
Current $ 17,407,829
$ 13,494,096
Noncurrent
Resin ted 2,567,940
2,577,815
Other
262,972
Net Capital Assets
Total Assets
Deferred OLHA of Resources
Total Assets and Deferred
Do— of Resources
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND NET POSITION
Uabilities
Current Liabilities
Noncurrent Liabilities
Total Liabilities
Deferred Inflows of Resources
Net Position
Net Investment in Capital Assets
Restncted
Unrestricted
Total Net Position
Total Liabilities, Deferred Infl— of
Resources and Net Position
73,356,625 76.363,215
93,332,394 92,698,098
517,600
$ 93.849, 994 $ 92, 698, 098
$6896'623
$ 5.969941
22,974,956 20,733.921
29,871,579 26.703.862
528,302
55,066,625 56,848.215
541,716365,983
7,841,772 8,780,038
63,450,113 65.994.236
S 93.849,994 S 92,698.098
CDS
3
Cash and Investment Balances
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
■ Operating
6 Restricted
at Designated
Statement of Revenues, Expenses an
Changes in Net Position
OPERATING REVENUES
OPERATING EXPENSES
Production
Purchased Power/Gas
Other Operating Expense
Administrative and General
Depreciation
Contribution to City of Hutchinson
Total Operating Expenses
Operating Income (Loss)
NET NONOPERATING REVENUES (E)PENSES)
Change in Net Position
NET POSITION, BEGINNING OF YEAR, AS ORIGINALLY STATED
PRIOR PERIOD ADJUSTMENT
NET POSITION, BEGINNING OF YEAR, AS RESTATED
NET POSITION, END OF YEAR
2015
2014
$ 38,143,563
$ 42,208,053
3,066,764
3,065.423
20,695,451
24,847,602
4,679,259
4,436,574
3,299,819
31282,616
3,824,434
3,747,573
738,110
1,729,073
36,303,837
41,108,861
1,839,726
1,099,192
(737,486)
(1,056,683)
1,102,240
42,509
65,994,236
66,268,287
(3,646,363)
(316,560)
62,347,873
65,951,727
$ 63,450,113
$ 65,994,236
Ms
S
Electric Division
$30,000,000 $2......121
$25,000,000
$20,000,000
$15,000,000
$10,000.000
$5,000,000
$0
-$5,000,000
$27.309.636 --------- $16,802,066
21
2011 2012
Total Operating Revenues
Net Nonoperating Revenues (Expenses)
2013 2014 2015
Total Operating Expenses
CDS
6
Electric Division
$1,500,000 $1,199,428
$1,000,000
$500,000
$0
-$500,000
-$1,000,000
-$1,500,000
-$2,000,000
2011
$444,629
$(568,722)
$(1,610,831) $(1,484,869)
2012 2013 2014 2015
Change in Net Position
CDS
7
1
Revenue per KWH
( Natural Gas Division
Year
Ended December 31.
201 .5 ...,._._ ... _...,, ,...,,,_r.::,,,,_..�
::.:...,:..._ ._.... ..::........ ............. .. .......�:.,,.,+r•.+��,,�,
$18,000,000
,�..._ ._.m;......�. �.o :;c.,..,, .,. :, ,. ,,; ,:_..z;. a:::..�aw���
Revenue Per
f16,134.757
CLASSAmount
KWH sold
KWH
$16,000,000
Residential
$ 4,844,525
49,467,886
$ 0.0979
$14,221,916$14,002.018
513,888.170
All Bectric
236,439
2,453,150
0.0964
$14,000,000 _;__—
Srnell General Service
1,621,751
16,955,897
0.0956
$12,000,000 -1— 51),530359
$11,341,497
Large General Service
7,141,340
78,054,119
x0915
510,920,196
Industrial
11,399,155
142,752,000
0.0799
$10,000,000 _— $9,727,396
__ 59,134,516
Sale for Resale
1,114,918
13,928,000
0.0800
k$12,123,271
$8,000,000
Sheet Lighting
146,931
103.976
14131
$6,000,000
$ 26,505,059
303,715,030
0.0873
$4,000,000
Year
Ended December 31,
2014
Revenue Per
$2,000,000
CLASS
Amount
KWH Sold
KVJH
Residential
$ 4,905,668
50,550,607
$ 0.0970
$0
All Electric
256,404
2,694.481
0.0952
42,000,000 $(929.711) $(989.1641
5(992.1611 $(605,361) $(s36,019)
Snell General Service
1,612,428
16,964,230
0.0950
20 2012
2013 2014 20 S
Large General Service
7,175,480
79,087,541
0.0907
Industrial
11,001,396
134,419,000
0.0818
Sale for Resale
678,293
11,790,000
0.0575
Street Lighting
139,532
104,710
1.3326
■ Total Operating Revenues
■ Total Operating Expenses
■ Net Nonoperating Revenues (Expenses)
_L_25.76 9,201
295,610,569
0.0872 CD^
V`
�
CDS
8
9
Natural Gas Division
$2,500,000
$2,000,000
$1,500,000
9
$1,000,000
$500,000
$0
$1,975,813
2011 2012 2013 2014 2015
■ Change in Net Position ^T„
10
Revenue per MCF
Year Ended December 31,
2015
Revenue Per
Thousand
Amount
CF Sold
MCF
CLASS
Residential
$ 3,731,066
387,205,342
$ 9.6359
Commercial
2,748,161
295,185,902
9.3099
Large industrial
3,444,273
796,959,420
4.3218
$ 9,923,500
1,479,350,664
$ 6.7080
Year Ended December 31,
2014
Revenue Per
Thousand
Amount
CF Sold
MCF
CLASS
Residential
$ 4,706,389
475,386,739
$ 9.9001
Commercial
3,853,504
401,727,130
9.5923
Large industrial
6,066,290
833,083,000
7.2817
$ 14,626,183
1,710,196,869
$ 8.5523
CDS
11
Questions or Comments?
Contact information:
Paul Harvego, CPA
gharvego@)cdscpa.com
320-693-7975
CDS
� 14
Communications
Accounting Practices
Difficulties Encountered
Corrected and Uncorrected Misstatements
Disagreements with Management
Management Representations
Management Consultations with Other Accountants
Other Audit Findings or Issues
u
General Recommendations
• Cross -training
• Capital Asset Accounting
• Discussion of Fraud and Fraud Risks with Employees
• Withholding Affidavits
HUTCHINSON UTILITIES COMMISSION
HUTCHINSON, MINNESOTA
MANAGEMENT LETTER
DECEMBER 31, 2015
Conway, Deuth & Schmiesing, PLLP
Certified Public Accountants
Litchfield, Minnesota
HUTCHINSON UTILITIES COMMISSION
TABLE OF CONTENTS
DECEMBER 31, 2015
PAGE
Required Communications 1-3
Comparative Financial Data 4
Graphical Information 5-12
Schedule of Findings on Accounting Issues and Internal Controls 13-14
1
This page intentionally left blank
Ci)S
CERTIFIED PUBLIC ACCOUNTANTS
& CONSULTANTS
REQUIRED COMMUNICATIONS
March 30, 2016
Members of the Hutchinson Utilities Commission
Hutchinson, Minnesota
We have audited the financial statements of Hutchinson Utilities Commission, a fund of the City of Hutchinson,
Minnesota, as of and for the year ended December 31, 2015. Professional standards require that we provide you with
information about our responsibilities under generally accepted auditing standards and Government Auditing Standards,
as well as certain information related to the planned scope and timing of our audit. We have communicated such
information in our letter to you dated December 30, 2015. Professional standards also require that we communicate to
you the following information related to our audit.
Significant Audit Findinos
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting
policies used by the Commission are described in Note 1 to the financial statements. As described in Note 8, the
Commission implemented Governmental Accounting Standards Board Statement No. 68 and 71. Adoption of the
provisions of this statement results in significant changes to the reporting of the net pension liability, variables impacting
the calculation of the liability and its related disclosures. We noted no transactions entered into by the Commission
during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been
recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are based on
management's knowledge and experience about past and current events and assumptions about future events. Certain
accounting estimates are particularly sensitive because of their significance to the financial statements and because of
the possibility that future events affecting them may differ significantly from those expected. The most sensitive
estimates affecting the financial statements were:
Management's estimate of the allowance for doubtful accounts is based on historical electric and natural gas revenues,
historical loss levels, and an analysis of the collectibility of individual accounts. We evaluated the key factors and
assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements
taken as a whole.
Management's estimate of depreciation is based on the number of years an asset is in service. We evaluated the key
factors and assumptions used to develop the depreciation estimate in determining that it is reasonable in relation to the
financial statements taken as a whole.
Members: American Institute of Certified Public Accountants, Minnesota Society of Certified Public Accountants
Willmar Office
Benson Office
Morris Office
Litchfield Office
St. Cloud-Sartell Office
331 Third St SW, Ste 2
1209 Pacific Ave, Ste 3
401 Atlantic Ave
820 Sibley Ave N
Ste 110
PO Box 570
Benson, MN 56215
Morris, MN 56267
Litchfield, MN 55355
2351 Connecticut Ave
Willmar, MN 56201
P (320) 843-2302
P (320) 589-2602
P (320) 693-7975
Sartell, MN 56377
P (320) 235-3311
P (320) 252-7565
T (888) 388-1040
www.cdscpa.com
T (800) 862-1337
Management's estimate of pension and other post -employment benefit liabilities is based on actuarial valuations
performed by consultants specializing in those areas. We evaluated the key factors and assumptions used to develop
those estimates in determining that it is reasonable in relation to the financial statements taken as a whole.
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than
those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected
all such misstatements.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter,
whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We
are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation letter
dated March 30, 2016.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters,
similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting
principle to the Commission's financial statements or a determination of the type of auditor's opinion that may be
expressed on those statements, our professional standards require the consulting accountant to check with us to
determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other
accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with
management each year prior to retention as the Commission's auditors. However, these discussions occurred in the
normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to Management's Discussion and Analysis and the Schedules of Proportionate
Share of the Net Pension Liability and Employer Contributions which is required supplementary information that
supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the
methods of preparing the information and comparing the information for consistency with management's responses to
our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial
statements. We did not audit the required supplementary information and do not express an opinion or provide any
assurances on the required supplementary information.
We were engaged to report on the statements and schedules listed in the table of contents as supplementary
information, which accompany the financial statements but are not required supplementary information. With respect to
this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods
of preparing the information to determine that the information complies with accounting principles generally accepted in
the United States of America, the method of preparing it has not changed from the prior period, and the information is
appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the
supplementary information to the underlying accounting records used to prepare the financial statements or to the
financial statements themselves.
We were not engaged to report on the Organizational Data, which accompany the financial statements but are not RSI.
We did not audit or perform other procedures on this other information and we do not express an opinion or provide any
assurance on it.
Restriction on Use
This information is intended solely for the use of the Commission and management of Hutchinson Utilities Commission
and is not intended to be and should not be used by anyone other than these specified parties.
CONWAY, DEUTH & SCHMIESING, PLLP
Certified Public Accountants
Litchfield, Minnesota
March 30, 2016
3
ELECTRIC DIVISION
Residential
General Service
Industrial
Street Lighting
Resale
Total Electric Sales
Other Operating Revenues
Total Operating Revenues
Purchased Power - Electric
Other Operating Expenses
Total Operating Expenses
Net Nonoperating Revenues (Expenses)
Change in Net Position
GAS DIVISION
Residential
Commercial
Industrial
Total Gas Revenues
Gas Transportation
Total Operating Revenues
Purchased Power - Gas
Other Operating Expenses
Total Operating Expenses
Net Nonoperating Revenues (Expenses)
Change in Net Position
HUTCHINSON UTILITIES COMMISSION
COMPARATIVE FINANCIAL DATA
2009
2010
2011
2012
2013
2014
2015
$ 4,871,894
$ 5,107,357
$ 5,255,333
$ 5,202,559
$ 5,176,489
$ 5,162,073
$ 5,080,964
8,660,281
8,990,929
9,075,811
9,264,941
8,903,085
8,787,907
8,763,091
10, 650, 886
11,471, 748
11,692, 880
10, 763, 758
10, 375, 605
11, 001, 396
11, 399,155
144,249
147,248
143,378
148,968
143,002
139,532
146,931
935,577
986,386
1,234,285
1,618,582
891,276
678,293
1,114,918
25,262,887
26,703,668
27,401,687
26,998,808
25,489,457
25,769,201
26,505,059
294,418
301,653
306,435
310,828
308,590
304,095
297,007
25,557,305
27,005,321
27,708,122
27,309,636
25,798,047
26,073,296
26,802,066
15,929,085
15,225,550
15,990,893
15,521,329
14,607,779
15,034,661
15,429,451
9,201,402
9,837,680
9,790,120
11,014,195
12,271,736
12,072,182
11,739,870
25,130,487
25,063,230
25,781,013
26,535,524
26,879,515
27,106,843
27,169,321
780,678
(1,082,723)
(727,681)
(329,483)
(529,363)
(451,322)
(201,467)
$ 1,207,496
$ 859,368
$ 1,199,428
$ 444,629
$ (1,610,831)
$ (1,484,869)
$ (568,722)
$ 4,426,071
$ 3,979,581
$ 4,327,788
$ 3,697,538
$ 4,626,722
$ 4,706,388
$ 3,731,066
4,020,619
3,638,751
3,823,161
3,150,925
3,729,790
3,853,504
2,748,161
4,380,874
4,890,551
4,246,780
2,826,424
3,646,509
6,066,290
3,444,273
12,827,564
12,508,883
12,397,729
9,674,887
12,003,021
14,626,182
9,923,500
1,819,272
1,821,218
1,824,187
1,855,472
1,885,149
1,508,575
1,417,997
14, 646, 836
14, 330,101
14, 221, 916
11, 530, 359
13, 888,170
16,134, 757
11, 341, 497
10,057,683
9,806,771
9,028,704
6,400,838
7,500,621
10,460,268
5,988,821
3,253,649
3,158,859
3,094,567
3,326,558
3,419,575
3,541,750
3,145,695
13,311,332
12,965,630
12,123,271
9,727,396
10,920,196
14,002,018
9,134,516
(1,007,145)
(930,880)
(929,711)
(989,164)
(992,161)
(605,361)
(536,019)
$ 328,359
$ 433,591
$ 1,168,934
$ 813,799
$ 1,975,813
$ 1,527,378
$ 1,670,962
4
HUTCHINSON UTILITIES COMMISSION
ELECTRIC DIVISION
Operating Revenues & Expenses and Net Nonoperating Revenues (Expenses)
$30,000,000 $27 706122
$25,557,305 $27,005,321 $27,309,636 $26,802,066
$25,798,047 $26,073,2
$25,000,000
$25,063,230 $25,781,013 $26,535,524 $26,879,515 $27,106,843 $27,169,321
$25,130,487
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$780,678
$0 , 11
$(1,082,723) $(727,681) $(329,483) $(529,363) $(451,322) $(201,467)
-$5,000,000
2009 2010 2011 2012 2013 2014 2015
•Total Operating Revenues ■Total Operating Expenses ■Net Nonoperating Revenues (Expenses)
$1,500,000
$1,207,496
$1,000,000
$500,000
$0
-$500,000
-$1,000,000
-$1,500,000
-$2,000,000
2009
Change in Net Position
$1,199,428
$859,368
$444,629
$(568,722)
$(1,610,831) $(1,484,869)
2010 2011 2012 2013 2014 2015
■Change in Net Position
5
$13,000,000
$12,000,000
$11,000,000
$10,000,000
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
2009
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$0 4--
2009
HUTCHINSON UTILITIES COMMISSION
ELECTRIC DIVISION
Major Revenue by Source
2010 2011
■Residential
I�
I _
I`
2012 2013 2014 2015
■General Service 01ndustrial
Purchased Power & Fuel Costs Compared to Total Sales
2010 2011 2012
■Purchased Power- Electric
6
2013
■Total Electric Sales
2014 2015
HUTCHINSON UTILITIES COMMISSION
ANALYSIS OF OPERATIONS
ELECTRIC DIVISION
YEARS ENDED DECEMBER 31, 2015 AND 2014
The Statement of Revenues and Expenses set forth the results of the operations in detail for the years ended December
31, 2015 and 2014. Operating revenues, kilowatt hours (KWH) sold, and average revenue per kilowatt hour sold by class
of service are as follows:
7
Year Ended December 31, 2015
Revenue Per
Amount
KWH Sold
KWH
CLASS
Residential
$ 4,844,525
49,467,888 $
0.0979
All Electric
236,439
2,453,150
0.0964
Small General Service
1,621,751
16,955,897
0.0956
Large General Service
7,141,340
78,054,119
0.0915
Industrial
11, 399,155
142, 752, 000
0.0799
Sale for Resale
1,114,918
13,928,000
0.0800
Street Lighting
146,931
103,976
1.4131
$ 26,505,059
303,715,030
0.0873
7
Year Ended December 31, 2014
Revenue Per
Amount
KWH Sold
KWH
CLASS
Residential
$ 4,905,668
50,550,607 $
0.0970
All Electric
256,404
2,694,481
0.0952
Small General Service
1,612,428
16,964,230
0.0950
Large General Service
7,175,480
79,087,541
0.0907
Industrial
11, 001, 396
134,419, 000
0.0818
Sale for Resale
678,293
11,790,000
0.0575
Street Lighting
139,532
104,710
1.3326
$ 25,769,201
295,610,569
0.0872
7
HUTCHINSON UTILITIES COMMISSION
ANALYSIS OF OPERATIONS
ELECTRIC DIVISION
YEARS ENDED DECEMBER 31, 2015 AND 2014
KWH Sold
13, 928, 000
Sale for Resale1"11,790,000
Industrial
Large General Service
16, 955, 897
Small General Servicet2,453,150
16,964,230
All Electric4,481
49,467,888
Residential 50,550,607
i
50, 000, 000 100, 000, 000 150, 000, 000
02015 KWH Sold 02014 KWH Sold
Average $/KWH
Industrial " $0.0818
$0.0915
Large General Service $0.0907
$0.0956
Small General Service F$0.0950
$0.0964
All Electric $0.0952
$0.0979
Residential - $0.0970
$0.08 $0.09 $0.10
■2015 Revenue Per KWH 02014 Revenue Per KWH
0
200,000,000
$0.11
HUTCHINSON UTILITIES COMMISSION
NATURAL GAS DIVISION
Operating Revenues & Expenses and Net Nonoperating Revenues (Expenses)
$18,000,000
$16,000,000 $14,646,636
$13,311,332 $14,330,101 $14,221,916
$14,000,000
$12,965,630 $12,123,271
$11,530,359
$12,000,000
$10,000,000 $9,727,396
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$0
_$2'000,000 $(1,007,145) $(930,880) $(929,711) $(989,164)
2009 2010 2011 2012
■Total Operating Revenues ■Total Operating Expenses
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000 $433,591
$328,359
$0 ,
2009 2010
Change in Net Position
$1,168,934
$813,799
2011 2012
■Change in Net Position
9
$16,134,757
$13,888,170 1 $14,002,018
$11,341,497
$10,920,196
$9,134,516
$(536,019)
$(992,161) $(605,361)
2013 2014 2015
®Net Nonoperating Revenues (Expenses)
$1,975,813
$1,670,962
$1,527,378
2013 2014 2015
HUTCHINSON UTILITIES COMMISSION
NATURAL GAS DIVISION
Major Revenue by Source
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
2009 2010 2011 2012 2013
■ Residential •Commercial
$16,000,000
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$0
2009
2010
Purchased Gas Compared to Total Sales
2011 2012
■ Purchased Power - Gas
2014 T
Olndustrial
2013 2014
■Total Gas Revenues
2015
2015
HUTCHINSON UTILITIES COMMISSION
ANALYSIS OF OPERATIONS
NATURAL GAS DIVISION
YEARS ENDED DECEMBER 31, 2015 AND 2014
The Statement of Revenues and Expenses set forth the results of the operations in detail for the years ended December
31, 2015 and 2014. Operating revenues, cubic feet sold, and average revenue per thousand cubic feet sold by class of
service are as follows:
11
Year Ended December 31, 2015
2014
Revenue Per
Revenue Per
Thousand
Thousand
Amount
CF Sold
MCF
CLASS
CLASS
Residential
$ 3,731,066
387,205,342
$ 9.6359
Commercial
2,748,161
295,185,902
9.3099
Large industrial
3,444,273
796,959,420
4.3218
7.2817
$ 9,923,500
1,479,350,664
$ 6.7080
11
Year (Ended December 31,
2014
Revenue Per
Thousand
Amount
CF Sold
MCF
CLASS
Residential
$ 4,706,388
475,386,739
$ 9.9001
Commercial
3,853,504
401,727,130
9.5923
Large industrial
6,066,290
833,083,000
7.2817
$ 14,626,182
1,710,196,869
$ 8.5523
11
Large industrial
Commercial
HUTCHINSON UTILITIES COMMISSION
ANALYSIS OF OPERATIONS
NATURAL GAS DIVISION
YEARS ENDED DECEMBER 31, 2015 AND 2014
CF Sold
295,185,902
401,727,130
387,205,342
796,959,420
33,083,000
Residential 1475,386,739 I I
200 000 000 300 000 000 q00 000 000 500 000 000 600 000 000 'f 00 000 000 900 000 000 900 000 000
02015 CF Sold 02014 CF Sold
Large industrial
Commercial
Residential
Average $/MCF
$5.00 $6.00 $7.00 $8.00
02015 Revenue per 1000 MCF
12
$9.00 $10.00
02014 Revenue Per 1000 MCF
$9.5923
$9.6359
$9.9001
$11.00
HUTCHINSON UTILITIES COMMISSION
SCHEDULE OF FINDINGS ON ACCOUNTING ISSUES AND INTERNAL CONTROLS
DECEMBER 31, 2015
We noted certain matters involving the internal control structure and its operation that we consider being deficiencies in
internal control under standards established by the American Institute of Certified Public Accountants. A deficiency in
internal control exists when the design or operation of a control does not allow management or employees, in the normal
course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis.
INTERNAL CONTROL
The objective of internal accounting control is to provide reasonable, but not absolute, assurance as to the safeguarding
of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial
statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a
system of internal accounting control should not exceed the benefits derived and also recognizes that the valuation of
these factors necessarily requires estimates and judgments by management.
It should be recognized that within the Commission, an inherent risk is present with certain positions. It is very common
for entities such as Hutchinson Utilities Commission, to assign many major responsibilities to a few key individuals in an
attempt to operate within limited budgets. The inherent risk is again addressed only to maintain the awareness of the
internal control structure and to encourage the Commission's continual review of financial information at monthly
meetings.
GENERAL RECOMMENDATIONS
Throughout the course of the audit, we spoke with management regarding certain items that we see as an opportunity to
improve. None of these were considered significant within the scope of the audit. The items discussed requiring action
have been resolved or are in the process of resolution. We would like to acknowledge the assistance and courtesies
extended to us by the personnel of the Hutchinson Utilities Commission.
CROSS -TRAINING
In small public entities, it is common for one person to be primarily responsible for handling all financial matters (payroll,
disbursements, receiving, recording transactions, etc). This concentration of duties in one person is not desirable for a
sound control environment and contingency planning. One measure to help counter this weakness involves training a
second person in specific duties related to the entities finances.
Cross -training has numerous benefits. It allows a second person to perform the duties when the employee primarily
responsible is unavailable. Having someone else perform the job duties also provides a method of detecting errors
and/or irregularities created by the person primarily responsible for those duties. Finally, cross -training provides continuity
during periods of employee transitions. Cross -training offers advantages from both an accounting and a managerial point
of view.
As the Commission has undergone employee transitions in fiscal year 2015, we find this an opportune time to review the
various responsibilities and cross -train other staff to perform non -routine duties on a timely basis in the absence of the
individual typically responsible for such duties. Other remedies would be to have an outside source familiar in these
specific areas be contracted when deemed necessary to keep the Commission current in the financial area.
CAPITAL ASSET ACCOUNTING
The Commission maintains its capital asset activity and balances using spreadsheet software (Microsoft Excel). While
Excel is an automated software program, it is not the most effective and efficient program for capital asset accounting. A
relational database program would operate more effectively and efficiently to manage and account for capital asset
inventory. Because the Commission segregates capital assets by activity and function, the complexity of the
spreadsheets increases annually and is very susceptible to human error.
13
HUTCHINSON UTILITIES COMMISSION
SCHEDULE OF FINDINGS ON ACCOUNTING ISSUES AND INTERNAL CONTROLS
DECEMBER 31, 2015
CAPITAL ASSET ACCOUNTING (Contd)
We recommend the City use relational database software to maintain and account for its capital asset inventory.
Implementation of this type of software will strengthen internal controls over capital asset accounting and provide
efficiencies in the perpetual maintenance of capital assets.
DISCUSSION OF FRAUD AND FRAUD RISKS WITH EMPLOYEES
The Commission does not currently discuss fraud and fraud risks with their employees on an annual basis. It is important
to communicate this to employees to make them aware that fraud could occur. This would also ensure they understand
the process if they come across or have suspicions of fraud.
WITHHOLDING AFFIDAVITS
The Commission did not obtain a Withholding Affidavit confirmation by the Commissioner of Revenue before making final
settlement with any contractor under a contract requiring the employment of employees for wages by said contractor and
by subcontractors. We recommend the Commission have procedures in place to ensure a Withholding Affidavit
confirmation is being obtained prior to final settlement.
L
14
HUTCHINSON UTILITIES COMMISSION
AUDITED FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
DECEMBER 31, 2015
Conway, Deuth & Schmiesing, PLLP
Certified Public Accountants
Litchfield, Minnesota
it
HUTCHINSON UTILITIES COMMISSION
TABLE OF CONTENTS
DECEMBER 31, 2015
ORGANIZATIONAL DATA
INDEPENDENT AUDITOR'S REPORT
REQUIRED SUPPLEMENTARY INFORMATION
Management's Discussion and Analysis
BASIC FINANCIAL STATEMENTS
Statement of Net Position
Schedule of Revenues, Expenses and Changes in Net Position
Statement of Cash Flows
Notes to the Financial Statements
REQUIRED SUPPLEMENTARY INFORMATION
Schedules of Proportionate Share of Net Pension Liability and Employer Contributions
SUPPLEMENTARY INFORMATION
Combining Statement of Net Position
Combining Schedule of Revenues and Expenses
Statement of Net Position - Electric Division
Detailed Schedule of Revenues, Expenses and Changes in Net Position -
Budget and Actual - Electric Division
Statement of Net Position - Natural Gas Division
Detailed Schedule of Revenues, Expenses and Changes in Net Position -
Budget and Actual - Natural Gas Division
COMPLIANCE SECTION
Independent Auditor's Report on Minnesota Legal Compliance
Independent Auditor's Report on Internal Control Over Financial
Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with
Government Auditing Standards
PAGE
1
2-4
5-9
10
11
12-13
14-29
0(
31
32
33
34-37
38
39-41
42
43-44
HUTCHINSON UTILITIES COMMISSION
ORGANIZATIONAL DATA
DECEMBER 31, 2015
A Light and Power Commission was formed under the provisions of an amendment to the Hutchinson City Charter in
1935; the Commission was charged with the operation of the Municipal Electric Plant. Charter amendments approved
December 17, 1954, provided for a change in the name to Hutchinson Utilities Commission. Additional duties under that
amendment provided for the control and management of a municipal gas distribution system.
A revised city charter was adopted at a special election September 17, 1987. Some of the pertinent sections of this new
charter are briefly summarized in the following paragraphs.
The Commission shall have control and management of the Light Plant, the Light Plant distribution system, the Gas Plant
and the Gas Plant distribution system.
The Commission shall consist of five persons, qualified voters of the City, who shall be appointed by the Council. A
member shall be appointed every year for a term of five years, to fill the place of the member whose term has expired.
No member shall be appointed to more than two successive terms. The members of the Commission shall receive
compensation for their services as determined annually by the Council.
The Commission shall provide for its own organization and rules of procedure and annually shall elect a president and
vice president from among its members. It shall also appoint a secretary who may or may not be a member of the
Commission.
The Commissioners and their official titles were as follows:
Anthony Hanson
Donna Luhring
Mark Girard
Dwight Bordson
Monty Morrow
President
Vice President
Secretary
Commissioner
Commissioner
CIL)s
CERTIFIED PUBLIC ACCOUNTANTS
& CONSULTANTS
INDEPENDENT AUDITOR'S REPORT
Members of the Hutchinson Utilities Commission
Hutchinson, Minnesota
Report on the Financial Statements
We have audited the accompanying financial statements of Hutchinson Utilities Commission, a fund of the City of
Hutchinson, Minnesota, as of and for the year ended December 31, 2015, and the related notes to the financial
statements, which collectively comprise the Commission's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
2
Members: American Institute of Certified Public Accountants, Minnesota Society of Certified Public Accountants
Willmar Office
Benson Office
Morris Office
Litchfield Office
St. Cloud-Sartell Office
331 Third St SW, Ste 2
1209 Pacific Ave, Ste 3
401 Atlantic Ave
820 Sibley Ave N
Ste 110
PO Box 570
Benson, MN 56215
Morris, MN 56267
Litchfield, MN 55355
2351 Connecticut Ave
Willmar, MN 56201
P (320) 843-2302
P (320) 589-2602
P (320) 693-7975
Sartetl, MN 56377
P (320) 235-3311
P (320) 252-7565
T (888) 388-1040
www.cdscpa.corn
T (800) 862-1337
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial
position of Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, as of December 31, 2015, and
the changes in financial position, and cash flows for the year then ended in accordance with accounting principles
generally accepted in the United States of America.
Change in Accounting Principle
As described in Note 8 to the financial statements, for the year ended December 31, 2015, the Commission adopted new
accounting guidance, Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting
for Pension Plans - an Amendment of GASB Statement No. 27 and Governmental Accounting Standards Board
Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an Amendment of
GASB Statement No. 68. Our opinion is not modified with respect to this matter.
Report on Partial Comparative Information
We have previously audited the Commission's 2014 financial statements, and we expressed unmodified audit opinions
on those audited financial statements in our report dated March 25, 2015. In our opinion, the partial comparative
information presented herein as of and for the year ended December 31, 2014 is consistent, in all material respects, with
the audited financial statements from which it has been derived. Refer to Note 13 of the Notes to the Financial
Statements for additional information regarding the prior year partial comparative information.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and
Analysis and the Schedules of Proportionate Share of Net Pension Liability and Employer Contributions as listed in the
table of contents be presented to supplement the basic financial statements. Such information, although not a part of the
basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or
historical context. We have applied certain limited procedures to the required supplementary information in accordance
with auditing standards generally accepted in the United States of America, which consisted of inquiries of management
about the methods of preparing the information and comparing the information for consistency with management's
responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provide any assurance on the information because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary and Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the
Commission's basic financial statements. The statements and schedules listed in the table of contents as supplementary
information and the Organizational Data section are presented for purposes of additional analysis and are not a required
part of the basic financial statements.
The supplementary information is the responsibility of management and was derived from and relates directly to the
underlying accounting and other records used to prepare the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional
procedures, including comparing and reconciling such information directly to the underlying accounting and other records
used to prepare the basic financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the
supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
The Organizational Data section has not been subjected to the auditing procedures applied in the audit of the basic
financial statements and, accordingly, we do not express an opinion or provide any assurance on the information
presented.
3
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated March 30, 2016 on our
consideration of the Commission's internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing,
and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part
of an audit performed in accordance with Government Auditing Standards in considering Hutchinson Utilities
Commission's internal control over financial reporting and compliance.
Cone I &W& g , PLO
CONWAY, DEUTH & SCHMIESING, PLLP
Certified Public Accountants
Litchfield, Minnesota
March 30, 2016
4
REQUIRED SUPPLEMENTARY INFORMATION
HUTCHINSON UTILITIES COMMISSION
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
Overview of the Financial Statements
Hutchinson Utilities Commission is a fund of the City of Hutchinson, Minnesota, and is responsible for the full operation
and management of the electric and natural gas systems of the City. The annual report of Hutchinson Utilities
Commission includes the financial statements, the independent auditor's report, and notes detailing the financial
statements and this management's discussion and analysis report. The report also includes supplementary information
for each of Hutchinson Utilities Commission's divisions.
Financial Statements Required
The financial statements report information about Hutchinson Utilities Commission using accounting methods similar to
those used by private sector companies. These statements offer short-term and long-term financial information about its
activities.
The Statement of Net Position includes all of the Commission's assets, liabilities, and net position and provides
information regarding the nature and amount of investments in various assets and obligations to the Commission's
creditors. They also provide the basis for computing rate of return, evaluating the capital structure, and determining the
liquidity and financial flexibility of the Commission.
The Statement of Revenues, Expenses and Changes in Net Position accounts for all the current year's revenues and
expenses. This statement measures the success of operations over the past year and can be used to determine
whether all costs are recovered through user fees and other charges. This statement measures the Commission's
profitability and credit worthiness.
The Statement of Cash Flows provides information about the Commission's cash receipts and cash payments during the
reporting period. This statement reports cash receipts, cash payments, and net changes in cash resulting in cash
balances during the reporting period.
Financial Statement Analvsis
Total gross investment in capital assets increased to $134,100,290 in 2015 from $133,282,446 in 2014. Capital assets
increased in 2015 primarily because of typical upgrades and improvements to the generating plant and distribution
systems as well as equipment purchases.
Operating revenues and expenses decreased from 2014 by $4,064,490 and $4,805,024, respectively. Operating income
increased from 2014 by $740,534. The primary decrease in operating revenues was due to a decrease in gas sales in
2015, which decreased by $4,702,682 from 2014 due to volume and pricing.
The primary area of the decrease in operating expenses was due to a decrease in purchased natural gas. Purchases of
natural gas decreased by $4,471,447 due to decreased sales.
Payment in Lieu of Taxes decreased by $990,963 due to current agreement with the City of Hutchinson.
5
HUTCHINSON UTILITIES COMMISSION
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
Sianificant Transactions
In 2015, the Commission transferred $738,110 per agreement to the City of Hutchinson.
Condensed Financial Statements
A summary of the Statement of Net Position is presented in Table 1.
Table 1
Condensed Statement of Net Position
Increase
2015 2014 (Decrease)
Net Capital Assets
Restricted Assets
Current Assets
Other Assets
Total Assets
Deferred Outflows of Resources
Total Assets and Deferred
Outflows of Resources
Current Liabilities
Long -Term Liabilities
Total Liabilities
Deferred Inflows of Resources
Net Position
Net Investment in Capital Assets
Restricted
Unrestricted
Total Net Position
$ 73,356,625 $ 76,363,215 $ (3,006,590)
2,567,940
2,577,815
(9,875)
17,407,829
13,494,096
3,913,733
22,974,956
262,972
(262,972)
93,332,394
92,698,098
634,296
517,600
517,600
$ 93,849,994
$ 92,698,098 $
1,151,896
$ 6,896,623
$ 5,969,941 $
926,682
22,974,956
20,733,921
2,241,035
29,871,579
26,703,862
3,167,717
528,302
55,066,625
541,716
7,841,772
63,450,113
56,848,215
365,983
8,780,038
65,994,236
528,302
(1,781,590)
175,733
(938,266)
(2,544,123)
Total Liabilities, Deferred Inflows of
Resources and Net Position $ 93,849,994 $ 92,698,098 $ 1,151,896
2
HUTCHINSON UTILITIES COMMISSION
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
Condensed Financial Statements (Cont'd)
A summary of the Statement of Revenues, Expenses and Changes in Net Position is presented in Table 2.
Table 2
Condensed Statement of Revenues, Expenses and Changes in Net Position
Increase
2015 2014 (Decrease)
Operating Revenues $ 38,143,563 $ 42,208,053 $ (4,064,490)
Operating Expenses
Cost of Operations
Depreciation
Total Operating Expenses
Operating Income (Loss)
Nonoperating Revenues (Expenses)
Change in Net Position
Net Position, Beginning of Year,
As Originally stated
Prior Period Adjustment
Net Position, Beginning of Year,
As Restated
Net Position, End of Year
Budoetary Hiahiiahts
32,479,403
37,361,288
(4,881,885)
3,824,434
3,747,573
76,861
36,303,837
41,108,861
(4,805,024)1
1,839,726
1,099,192
740,534
(737,486)
(1,056,683)
319,197
1,102,240
42,509
1,059,731
65,994,236 66,268,287 (274,051)
(3,646,363) (316,560) (3,329,803)
62,347,873 65,951,727 (3,603,854)1
$ 63,450,113 $ 65,994,236 $ (2,544,123)
The Commission adopts an annual Operating Budget and a Capital Improvement Budget. Because of its enterprise
nature and in order to comply with Federal Energy Regulatory Commission accounting and reporting requirements, the
budgets are not operated as statutory budgets. The Commission and Utilities staff review budget results monthly and the
budget is used as a financial management tool. A summary of the 2015 Budget Analysis is presented in Table 3.
7
HUTCHINSON UTILITIES COMMISSION
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
Budaetary Hi hlg j hts (Cont'd)
Operating Revenues
Operating Expenses
Cost of Operations
Depreciation Expense
Total Operating Expenses
Operating Income (Loss)
Nonoperating Revenues (Expenses)
Change in Net Position
Net Position, Beginning of Year,
As Originally stated
Prior Period Adjustment
Net Position, Beginning of Year,
As Restated
Net Position, End of Year
Table 3
Condensed Budget Analysis
2015 Budget 2015 Actual Over (Under)
$ 39,226,644 $ 38,143,563 $ (1,083,081)
34,928,112
32,479,403
(2,448,709)
3,756,000
3,824,434
68,434
38,684,112
36,303,837
(2,380,275)
542,532
1,839,726
1,297,194
(850,876) (737,486) 113,390
(308,344) 1,102,240 1,410,584
65,994,236 65,994,236
(3,646,363) (3,646,363)i
65,994,236 62,347,873 (3,646,363)
$ 65,685,892 $ 63,450,113 $ (2,235,779),
Actual operating revenues were $1,083,081 under budgeted revenues while operating income (loss) was over budget by
$1,297,194. This is mainly due to natural gas purchased gas expenses coming in under budget by $1,591,603. The
actual operating revenues for the Commission had a negative variance of approximately 2.76% from budgeted operating
revenues. This difference was caused entirely by the gas division, while the electric division had a positive variance of
$957,262.
Operating expenses were $2,380,275 lower than budgeted. This is mainly due to a decrease of purchased natural gas
expenses. Electric production expenses were also lower than budgeted amounts in the current year.
In 2015, the Commission entered into agreement for a specific Payment in Lieu of Taxes (PILOT). The agreement
requires the Commission to make payments equaling $939,000 less $200,890 for specific services provided for a net
total of $738,110.
For calendar year 2007, the Commission reallocated its common expenses between the two divisions. Formulas were
developed and used to establish the common expenses between the two utilities, in particular, Customer Service and
Collection Accounts and the Administrative and General Accounts.
0
HUTCHINSON UTILITIES COMMISSION
MANAGEMENT'S DISCUSSION AND ANALYSIS
DECEMBER 31, 2015
Capital Assets and Lona -Term Debt Activitv
The Commission's investment in capital assets increased to $134,100,290 in 2015. This is an increase of $817,844 from
2014. Refer to Note 4 of the Notes to the Financial Statements for the Commission's 2015 capital asset activity.
At year-end, the Commission had $18,290,000 in bonds outstanding. Refer to Note 6 of the Notes to the Financial
Statements for a schedule showing the Commission's long-term debt activity.
Economic Factors and Next Year's Budget
The Commission considered many factors when setting the fiscal year 2016 budget, rates, and fees that will be charged
to the users. Of particular significance for 2007 was the City and also the Commission used a formula approach to the
General Funds Transfer. In the past, the General Funds Transfer has been accounted for like a transfer. Beginning in
2007, the Commission began accounting for the General Funds Transfer like a Payment in Lieu of Taxes (PILOT). This
was done so that the Commission came into compliance with its by-laws. The practical result of this is the PILOT will
show as an expense item above the Operating Income. This practice continued in 2015 and will continue into 2016 with
the perception that it will no longer be formula based having been set at $1,900,000.
In addition, the Commission "bundled" its electric wholesale rate to its retail customers. What this means is the operating
income the Commission receives from its wholesale KWHR sales will be applied to the wholesale rate it charges its retail
customers to stabilize the rate it charges its retail customers.
Contact Information
Any questions regarding information contained in this report and requests for additional information should be addressed
to the Hutchinson Utilities Commission, 225 Michigan Street SE, Hutchinson, MN 55350 or by phone at (320) 587-4746.
BASIC FINANCIAL STATEMENTS
HUTCHINSON UTILITIES COMMISSION
STATEMENT OF NET POSITION
DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS AS OF DECEMBER 31, 2014
2015
2014
ASSETS AND DEFERRED OUTFLOWS OF RESOURCES
Assets
Current Assets
Cash and Investments
$
12,640,223
$
7,786,171
Accounts Receivable (Net of Allowance for Doubtful Accounts of
$49,206 and $60,489, Respectively)
3,123,543
3,915,476
Inventory
1,514,693
1,531,534
Sales Tax Receivable
128,359
244,783
Prepaid Items
1,011
16,132
Total Current Assets
I
17,407,829
13,494,096
Noncurrent Assets
Restricted Assets
Cash and Investments
2,567,940
2,577,815
Other Assets
MIRES Agreement
262,972
Capital Assets
Assets Not Being Depreciated
4,590,287
4,590,287
Other Capital Assets, Net of Depreciation
68,766,338
71,772,928
Net Capital Assets
73,356,625
76,363,215
Total Noncurrent Assets
75,924,565
79,204,002
Total Assets
93,332,394
92,698,098
Deferred Outflows of Resources
Related to Pensions
517,600
Total Assets and Deferred Outflows of Resources
$
93,849,994
$
92,698,098
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION
Liabilities
Current Liabilities
Current Portion of Long -Term Debt
$
1,488,409
$
1,428,243
Accounts Payable
2,993,675
2,593,819
Due To Other Governments
1,757,601
1,327,476
Customer Deposits
478,305
441,195
Accrued Expenses
Interest
67,676
71,759
Salaries Payable
110,957
107,449
Total Current Liabilities
6,896,623
5,969,941
Long -Term Liabilities
Noncurrent Portion of Long -Tenn Debt
22,974,956
20,733,921
Total Liabilities
29,871,579
26,703,862
Deferred Inflows of Resources
Related to Pensions
528,302
Net Position
Net Investment in Capital Assets
55,066,625
56,848,215
Restricted
541,716
365,983
Unrestricted
7,841,772
8,780,038
Total Net Position
63,450,113
65,994,236
Total Liabilities, Deferred Inflows of Resources and Net Position
$
93,849,994
$
92,698,098
See Accompanying Notes to the Financial Statements
10
HUTCHINSON UTILITIES COMMISSION
SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
YEAR ENDED DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
2015 2014
OPERATING REVENUES
Electric Energy Sales $ 26,505,059 $ 25,769,201
Natural Gas Sales 9,923,500 14,626,182
Other Operating Revenues 1,715,004 1,812,670
Total Operating Revenues 38,143,563 42,208,053
OPERATING EXPENSES
31,956
29,721
Production
6,765
72,993
Operations
2,602,581
2,565,551
Maintenance
464,183
499,872
Purchased Power/Gas
20,695,451
24,847,602
Other Power Supply
361,553
337,733
Transmission
(262,972)
(525,943)
Operations
2,045,208
1,763,161
Maintenance
27,568
51,896
Distribution
(737,486)
(1,056,683)
Operations
1,054,088
1,044,642
Maintenance
478,999
432,999
Customer Accounts Expense
417,218
346,614
Sales Expense
294,625
459,529
Administrative and General
3,299,819
3,282,616
Depreciation
3,824,434
3,747,573
Contribution to City of Hutchinson
738,110
1,729,073
Total Operating Expenses
36,303,837
41,108,861
Operating Income (Loss)
1,839,726
1,099,192
NONOPERATING REVENUES (EXPENSES)
Interest Income
31,956
29,721
Merchandise and Contract Work, Net
6,765
72,993
Miscellaneous Income
158,282
40,643
Gain (Loss) on Disposal of Assets
45,259
Bond Service Fees
(450)
Bond Premium
185,608
185,608
Amortization of Development Study
(262,972)
(525,943)
Interest Expense - Customer Deposits
(96)
(434)
Interest Expense - Bonds
(857,029)
(904,080)
Total Nonoperating Revenues (Expenses)
(737,486)
(1,056,683)
Change in Net Position
1,102,240
42,509
NET POSITION, BEGINNING OF YEAR, AS ORIGINALLY STATED
65,994,236
66,268,287
PRIOR PERIOD ADJUSTMENT
(3,646,363)
(316,560)
NET POSITION, BEGINNING OF YEAR, AS RESTATED
62,347,873
65,951,727
NET POSITION, END OF YEAR
$ 63,450,113
$ 65,994,236
See Accompanying Notes to the Financial Statements
11
11
HUTCHINSON UTILITIES COMMISSION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers $ 37,257,602 $ 40,685,736
Payments Received from Other Sources 1,831,428 1,846,416
Payments to Suppliers (27,252,393) (32,952,743)
Payments to Employees (4,285,411) (4,791,200)
Net Cash Provided (Used) by Operating Activities 7,551,226 4,788,209
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Other Noncapital Income 165,047 113,636
Other Noncapital Expenses (96) (434)
Net Cash Provided (Used) by Noncapital Financing Activities 164,951 113,202
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Additions to Utility Plant (817,844) (1,308,164)
Principal Payments on Long -Term Debt (1,225,000) (1,175,000)
Bond Service Fees (450)
Proceeds from Sale of Assets 45,259
Interest Paid on Long -Term Debt (861,112) (907,989)
Net Cash Provided (Used) by Capital and Related Financing Activities (2,903,956) (3,346,344)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Income 31,956 29,720
Net Increase (Decrease) in Cash and Cash Equivalents 4,844,177 1,584,787
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 10,363,986 8,779,199
CASH AND CASH EQUIVALENTS, END OF YEAR
RECONCILIATION OF CASH AND CASH EQUIVALENTS
Current Assets - Cash and Investments
Restricted Assets - Cash and Investments
Total Cash and Cash Equivalents
See Accompanying Notes to the Financial Statements
12
$ 15,208,163 $ 10,363,986
$ 12,640,223 $ 7,786,171
2,567,940 2,577,815
$ 15,208,163 $ 10,363,986
HUTCHINSON UTILITIES COMMISSION
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
RECONCILIATION OF OPERATING INCOME (LOSS) TO CASH FLOWS FROM
OPERATING ACTIVITIES
Operating Income (Loss)
Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by
Operating Activities
Depreciation
Pension Related Adjustments
(Increase) Decrease in Assets
Accounts Receivable
Inventory
Sales Tax Receivable
Prepaid Items
Increase (Decrease) in Liabilities
Accounts Payable
Due to Other Governments
Customer Deposits
Salaries Payable
Compensated Absences
Net Cash Provided (Used) by Operating Activities
See Accompanying Notes to the Financial Statements
13
2015 2014
$ 1,839,725 $ 1,099,192
3,824,434 3,747,573
64,658
791,933
255,475
16,841
(67,730)
116,424
33,746
15,121
5,411
399,856
(1,034,489)
430,125
1,010,916
37,110
34,878
3,508
(230,455)
11,491
(66,309)
$ 7,551,226 $ 4,788,208
J
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. REPORTING ENTITY
Hutchinson Utilities Commission, a fund of the City of Hutchinson, Minnesota, is governed by five members
who are appointed by the Council of the City of Hutchinson, Minnesota. The accompanying financial
statements present only the Hutchinson Utilities Commission fund and are not intended to present fairly the
financial position of the City of Hutchinson, Minnesota.
The financial statements present the Commission and its component units. The Commission includes all
funds, organizations, institutions, agencies, departments and offices that are not legally separate from
such. Component units are legally separate entities for which the Commission is financially accountable,
or for which the exclusion of the component unit would render the financial statements of the Commission
misleading.
The criteria used to determine if the Commission is financially accountable for a component unit includes
whether or not 1) the Commission appoints the voting majority of the potential component unit's governing
body and is able to impose its will on the potential component unit or is in a relationship of financial benefit
or burden with the potential component unit, or 2) the potential component unit is fiscally dependent on and
there is a potential for the potential component unit to provide specific financial benefits to, or impose
specific financial burdens on, the Commission.
As a result of applying the component unit definition criteria above, the Commission does not have any
component units.
B. FUND ACCOUNTING
The operations of the Commission are recorded as a proprietary fund. The proprietary fund is used to
account for operations (a) that are financed and operated in a manner similar to private business
enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of
providing goods or services to the general public on a continuing basis be financed or recovered primarily
through user charges; or (b) where the governing body has decided that periodic determination of revenues
earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy,
management control, accountability or other purposes.
C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION
The financial statements include the operations of the City of Hutchinson Municipal Utilities. The Electric
and Natural Gas divisions are treated as a single enterprise fund of the City of Hutchinson, Minnesota. The
Utilities are governed by the Hutchinson Utilities Commission, which is appointed by the City Council. No
other operations are controlled by the Hutchinson Utilities Commission. The accounts of the Commission
are organized on the basis of fund accounting. The operation of the fund is accounted for with a separate
set of self -balancing accounts that comprise its assets, liabilities, net position, revenues, and expenses.
Government resources are allocated to and accounted for in the individual fund based upon the purposes
for which they are to be spent and the means by which spending activities are controlled.
Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in
the financial statements. Basis of accounting relates to the timing of the measurements made, regardless
of the measurement focus applied.
14
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
C. MEASUREMENT FOCUS. BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION
(Cont'd)
The proprietary fund is accounted for using the accrual basis of accounting and economic resources
measurement focus. Revenues are recognized when earned, and expenses are recognized when
incurred. Revenue from electricity and gas sales is reflected in the accounts only at the time such revenue
is actually billed to customers. Accordingly, no recognition is given in the accounts for revenue from sales
between established cycle billing dates.
The proprietary fund distinguishes operating revenues and expenses from nonoperating items. Operating
revenues and expenses generally result from providing services and producing and delivering goods in
connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the
enterprise funds are charges to customers for sales and services. Operating expenses for enterprise
funds include the cost of sales and services, administrative expenses, and depreciation of capital assets.
All revenues and expenses not meeting this definition are reported as nonoperating revenues and
expenses.
It is generally the Commission's policy to use restricted resources first, then unrestricted resources as they
are needed when an expense is incurred for purposes for which both restricted and unrestricted net
position is available.
D. DEPOSITS AND INVESTMENTS
The Commission's cash and cash equivalents are considered to be cash on hand, deposits and highly
liquid debt instruments purchased with original maturities of three months or less from the date of ,
acquisition.
The Commission may invest in the following types of investments as authorized by Minn. Stat. §§118A.04
and 118A.05:
(1) securities which are direct obligations or are guaranteed or insured issues of the United States, its
agencies, its instrumentalities, or organizations created by an act of Congress, except mortgage-
backed securities defined as "high risk" by Minn. Stat. §118A.04, subd. 6;
(2) mutual funds through shares of registered investment companies provided the mutual fund receives
certain ratings depending on its investments;
(3) general obligations of the State of Minnesota and its municipalities, and in certain state agency and
local obligations of Minnesota and other states provided such obligations have certain specified bond
ratings by a national bond rating service;
(4) time deposits that are fully insured by the Federal Deposit Insurance Corporation or bankers '
acceptances of United States bank;
(5) commercial paper issued by United States corporations or their Canadian subsidiaries that is rated in
the highest quality category by at least two nationally recognized rating agencies and matures in 270
days or less; and
15
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
D. DEPOSITS AND INVESTMENTS (Cont'd)
(6) with certain restrictions, in repurchase agreements, securities lending agreements, joint powers
investment trusts, and guaranteed investment contracts.
Cash and investments were comprised of a deposit account and a money market account.
The Commission has an investment policy in place that addresses interest rate risk, credit risk,
concentration of credit risk and custodial risk as follows:
Custodial Credit Risk - Deposits: For deposits, this is the risk that in the event of bank failure, the
Commission's deposits may not be returned to it. Minnesota Statutes requires that all Commission
deposits be protected by insurance, surety bond, or collateral. The market value of collateral pledged must
equal 110 percent. The Commission's investment policy states the collateralization level will be 110% of
the market value of principal and accrued interest. When the pledged collateral consists of notes secured
by first mortgages, the collateral level will be 140% of the market value of principal and accrued interest.
Interest Rate Risk: This is the risk that market values of securities in a portfolio would decrease due to
changes in market interest rates. The Commission's investment policy states the Commission should
manage their interest rates based on safety, liquidity and the overall rate of return on the investment. The
portfolio should contain both short-term and long-term investments to meet anticipated cash flow
requirements. Extended maturities may be utilized to take advantage of higher yields; however, no
investment shall be made with a term of more than ten years.
Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. State law limits investments in commercial paper and corporate bonds to the top two ratings
issued by nationally recognized statistical rating organizations. The Commission's investment policy states
it will comply with Minnesota Statutes Chapter 118A.
Concentration of Credit Risk: This is the risk of loss attributed to the magnitude of an investment in a
single issuer. Investments should be diversified to avoid incurring unreasonable risk inherent in over
investing in specific instruments, individual financial institutions or maturities. The Commission's
investment policy states the Commission will attempt to diversify its investments according to type and
maturity.
Custodial Credit Risk - Investments: For an investment, this is the risk that in the event of the failure of the
counterparty, the Commission will not be able to recover the value of its investments or collateral securities
that are in the possession of an outside party. The Commission's investment policy states when
investments purchased by the Commission are held in safekeeping by a broker/dealer, they must provide
asset protection of $500,000 through the Securities Investor Protection Corporations (SIPC) and at least
another $2,000,000 Supplemental Insurance Protection, provided by the broker dealer.
E. RECEIVABLES AND OPERATING REVENUES AND EXPENSES
An allowance for doubtful accounts is recorded based on historical electric and natural gas revenues,
historical loss levels, and an analysis of the collectability of individual accounts.
16
NOTE 1
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
E. RECEIVABLES AND OPERATING REVENUES AND EXPENSES (Cont'd)
Meters are read throughout the month and revenues are recognized when utility services are billed to
customers. Hutchinson Utilities Commission did not accrue revenues for services provided but not billed at
the end of the year.
Monthly billings from the wholesale power and natural gas suppliers, which are for power and natural gas
costs to the last day of the month, are reflected in the accounts.
F. INVENTORY
Inventories of materials and supplies are recorded at average cost, which does not exceed market.
G. PREPAID ITEMS
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as
prepaid items in the financial statements.
H. CAPITAL ASSETS
Capital assets, both tangible and intangible, are recorded at cost. The cost of additions to capital assets
includes contracted work, direct labor, and materials. Repairs, replacement, and the renewal of items
determined to be less than units of property are charged to maintenance.
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest
incurred during the construction phase of capital assets is included as part of the capitalized value of the
assets constructed. During the current period, the Commission did not have any capitalized interest.
Depreciation of capital assets is computed using the straight-line method over the estimated service lives
of the various assets as follows:
Buildings
35-60 years
Transmission plant (electric)
20-35 years
Distribution plant (electric)
20-35 years
Building improvement
15-30 years
Transmission plant (gas)
10-45 years
Distribution plant (gas)
10-45 years
Generation plant
10-30 years
General plant
5-10 years
Vehicles
5-10 years
Office equipment
3-5 years
Computer equipment
3-5 years
The Commission does not possess any material amounts of intangible assets.
17
t
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
I. DEFERRED OUTFLOWS OF RESOURCES
In addition to assets, the statement of financial position will sometimes report a separate section for
deferred outflows of resources. Deferred outflows of resources represents a consumption of net position
that applies to a future reporting period. During that future period, it will be recognized as an outflow of
resources (expense). The Commission has one item that qualifies for reporting in this category on the
financial statements which is related to pensions.
J. COMPENSATED ABSENCES
The liability for compensated absences reported in the financial statements consists of unpaid,
accumulated vacation and sick leave balances. The liability has been calculated using the vesting method,
in which leave amounts for both employees who currently are eligible to receive termination payments and
other employees who are expected to become eligible in the future to receive such payments upon
termination are included. Compensated absences are accrued when incurred in the financial statements.
The Statement of Net Position reports both current and noncurrent portions of compensated absences
using full accrual accounting. The current portion consists of an amount based on a trend analysis of
current usage of vacation and vested sick leave. The noncurrent portion consists of the remaining amount
of vacation and total vested sick leave.
Both union and nonunion employees can accrue a maximum of 200 hours per year of vacation pay, with a
maximum carryover of 200 hours. Vacation pay is 100% payable at severance of employment. A
maximum of 720 hours can be accrued for sick leave. After accumulation of 720 hours, a payback of one-
third of the amount over 720 hours will be made annually. Upon retirement or death before retirement, a
payback of one-third of the amount over 240 hours will be made.
K. PENSIONS
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of
resources related to pensions, and pension expense, information about the fiduciary net position of the
Public Employees Retirement Association (PERA) and additions to/deductions from PERA's fiduciary net
position have been determined on the same basis as they are reported by PERA. For this purpose, plan
contributions are recognized as of employer payroll paid dates and benefit payments and refunds are
recognized when due and payable in accordance with the benefit terms. Investments are reported at fair
value.
L. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
Employees of the Commission pay premiums based on a negotiated schedule. Since the insurance rate is
not based on age, the Commission has an implicit rate subsidy factor in postemployment health care
expenses. Additionally, Minnesota Statutes require the Commission to allow retired employees to stay on
the health care plan with the retiree responsible to pay the entire premium for continuation coverage. The
Commission's bargaining agreement and personnel policy do not provide for any contributions upon
employee retirement. Any liability for other postemployment benefits is considered immaterial and not
recognized in the financial statements.
18
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
M. LONG-TERM OBLIGATIONS
Long-term debt and other long-term obligations are reported as liabilities in the financial statements. Bond
discounts, and bond premiums are amortized over the terms of the related bond issues.
N. DEFERRED INFLOWS OF RESOURCES
In addition to liabilities, the statement of financial position will sometimes report a separate section for
deferred inflows of resources. Deferred inflows of resources represents an acquisition of net position that
applies to a future reporting period. During that future period, it will be recognized as an inflow of resources
(revenue). The Commission has one item that qualify for reporting in this category on the financial
statements which is related to pensions.
O. NET POSITION
Net position represents the difference between assets plus deferred outflows of resources and liabilities
plus deferred inflows of resources in the financial statements. Net investment in capital assets consists of
capital assets, net of accumulated depreciation, reduced by the outstanding balance of any long-term debt
used to build or acquire the capital assets. Net position is reported as restricted in financial statements
when there are limitations on its use through external restrictions imposed by creditors, grantors or laws or
regulations of other governments. Unrestricted net position consists of all other net position that does not
meet the definition of restricted or net investment in capital assets.
P. BUDGETS AND BUDGETARY ACCOUNTING
The General Manager is responsible for preparing and submitting an annual budget. Budgets are adopted
on a basis consistent with accounting principles generally accepted in the United States of America.
Q. USE OF ESTIMATES
The preparation of the financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
R. PRIOR YEAR INFORMATION
The basic financial statements include certain prior -year partial comparative information in total but not at
the level of detail required for a presentation in conformity with accounting principles generally accepted in
the United States of America. Accordingly, such information should be read in conjunction with the
government's financial statements for the year ended December 31, 2014, from which the partial
information was derived.
19
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 2. DEPOSITS AND INVESTMENTS
A. DEPOSITS
In accordance with applicable Minnesota Statutes, Hutchinson Utilities Commission maintains deposits at
depository banks authorized by the Commission.
Custodial Credit Risk - Deposits: The Commission's bank balances were not exposed to custodial credit
risk because they were fully insured through the Federal Deposit Insurance Corporation as well as
collateralized with securities held by the pledging financial institution's trust department or agent and in the
Commission's name.
Deposits in Bank $ 15,207,313
Petty Cash 850
Total Deposits $ 15.208,163
Deposits and investments are presented in the basic financial statements as follows:
Current Assets
Cash and Investments $ 12,640,223
Noncurrent Assets
Restricted Assets
Cash and Investments 2,567,940
Total Deposits and Investments $ 15.208.163
NOTE 3. DEPOSITS AND INVESTMENTS - RESTRICTED
a
Restricted cash and investments are designated by bond covenants for specific purposes. Restricted cash
consisted of the following:
2015 2014
Public Utility Revenue Bond Sinking Fund - 2003
Funds designated under bond resolution which require monthly
deposits of amounts necessary to meet annual principal and interest
payments. $ 379,246 $ 389,121
i
Reserve Accounts
Funds required to be held in amount equal to the maximum amount of
principal and interest to become due on the bonds during the year. 2,188,694 2,188,694
Total Cash and Investments - Restricted $ 2,567.940 $ 2,577,815
20
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 3. DEPOSITS AND INVESTMENTS - RESTRICTED (Cont'd)
The following items have been designated by the Commission for the following purposes:
2015 2014
Rate Stabilization - Electric $ 284,529 $ 779,388
Rate Stabilization - Gas 569,004 426,706
Payment in Lieu of Taxes 1,305,256 939,000
Catastrophic 500,000 500,000
Expansion and Development Reserve Account
Funds designated for the expansion
and development of the utility
1,376,000
1,105,000
$
4.034.789
$ 3.750.094
The above Commission designated amounts are included in the Current Assets -Cash and Investments
total.
NOTE 4. CAPITAL ASSETS
Capital asset activity for the year ended December 31,
2015, was as follows:
Beginning
Ending
Balance
Increase
Decrease
Balance
Capital Assets, Not Being
Depreciated
Land
$ 559,527
$ $
$ 559,527
Easements
4,030,760
4,030,760
Total Capital Assets,
Not Being Depreciated
4,590,287
0
0
4,590,287
Capital Assets, Being Depreciated
Structures and Improvements
112,091,269
668,663
112,759,932
Equipment
16,051,655
149,181
16,200,836
Software
549,235
549,235
Total Capital Assets,
Being Depreciated
128,692,159
817,844
0
129,510,003
Less Accumulated Depreciation for
Structures and Improvements
47,523,150
3,338,021
50,861,171
Equipment
8,922,902
484,321
9,407,223
Software
473,179
2,092
475,271
Total Accumulated
Depreciation
56,919,231
3,824,434
0
60,743,665
Total Capital Assets, Being
Depreciated, Net
71,772,928
(3,006,590)
0
68,766,338
Net Capital Assets
$ 76,363,215
$ (3,006,590) $
0
$ 73,356,625
21
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 5. INVENTORY
Inventory consists of the following:
2015
2014
Electric Division
Fuel Oil and Lubricants
$ 98,533 $
106,881
Plant Systems Material
2,456
8,584
Engine Parts
442,461
419,810
Distribution Materials
424,970
416,362
Transformers
136,784
154,181
Total Electric Division
1,105,204
1,105,818
Natural Gas Division
Fittings
105,919
122,146
Transmission Line Gas
303,570
303,570
Total Natural Gas Division
409,489
425,716
Total Inventory
NOTE 6. LONG-TERM DEBT
A. COMPONENTS OF LONG-TERM DEBT
Interest
Rates
Public Utility Revenue Bonds,
Series 2003B
Public Utility Revenue Refunding
Bonds, Series 2012A
Bond Premium
Compensated Absences
Net Pension Liability
3.90-4.50%
Final
Maturity
12/01/2021
4.00-5.00% 12/01/2026
$ 1.514.693 $ 1.531.534
Balance Outstanding
2015 2014
$ 715,000 $ 840,000
17, 575, 000 18, 675, 000
2,026,224 2,211,833
446,823 435,332
3,700,319
Total Long -Term Debt $ 24.463.366 $ 22.162.165
On March 31, 2003, the Hutchinson Utilities Commission issued Public Utility Revenue Bonds, Series
2003B for $31,725,000. $3,340,000 of the issue was used for the refunding of the Temporary Public Utility
Revenue Bonds of 2001, and $28,385,000 was used for the natural gas pipeline project.
On July 19, 2012, Hutchinson Utilities Commission issued Public Utility Revenue Refunding Bonds, Series
2012A for $20,720,000, with an interest rate of 4.00% to 5.00%. The Commission issued the bonds to
advance refund a portion of the 2013 through 2025 maturities of the Public Utility Revenue Bonds, Series
2003B. The Commission completed the refunding to reduce its debt service payment over the next 14
years by $1,638,277. This results in an economic gain (difference between the present values of the debt
service payments on the old and new debt) of $1,245,620.
22
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 6. LONG-TERM DEBT (Cont'd)
B. MINIMUM DEBT PAYMENTS
Annual debt service requirements to maturity for bonded debt is as follows:
C. CHANGES IN LONG-TERM LIABILITIES
Beginning
Revenue Refunding
Year Ending
Revenue Bonds, Series 2003B
Bonds, Series 2012A
December 31
Principal
Interest
Principal Interest
2016
$ 125,000
$ 30,612
$ 1,160, 000 $ 781,500
2017
125,000
25,488
1,220,000 735,100
2018
125,000
20,238
1,295,000 674,100
2019
125,000
14,925
1,370,000 609,350
2020
125,000
9,550
1,455,000 540,850 ,
2021-2025
90,000
4,050
8,995,000 1,718,050
2026
Compensated
2,080,000 104,000
$ 715.000
$ 104.863
$ 17.575.000 $ 5.162.950
C. CHANGES IN LONG-TERM LIABILITIES
23
Beginning
Ending
Due Within
Balance
Additions
Reductions
Balance
One Year
Revenue Bonds $
840,000
$
$ (125,000)
$ 715,000
$ 125,000
Revenue Refunding
Bonds
18,675,000
(1,100,000)
17,575,000
1,160,000
Bond Premium
2,211,832
(185,608)
2,026,224
185,608
Compensated
Absences
435,332
322,064
(310,573)
446,823
17,802
Net Pension Liability *
6,142,154
(2,441,835)
3,700,319
$
22,162,164
$ 6.464.218
$ (4,163.016)
$ 24,463.366
$ 1,488,410
* - Additions include change in accounting principal of
$3,809,672. See Note 13 for additional
information.
23
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 6. LONG-TERM DEBT (Cont'd)
D. PLEDGED REVENUES
Future revenue pledged for the payment of long-term debt is as follows:
Bond Issue/ Percent
Use of Proceeds/ of Total Term of
Type Debt Service Pledge
Revenue Bonds,
Series 2003B
Electric
Utility Charges 100% 2003-2021
Revenue Refunding
Bonds,
Series 2012A
Natural Gas
Utility Charges 100% 2012-2026
NOTE 7. RISK MANAGEMENT
Remaining
Principal
and Interest
$ 819,863 $
22,737,950
Principal Pledged
and Interest Revenue
Paid Received
160,612 $ 26,505,059
1,925,500 9,923,500
The Commission purchases commercial insurance coverage through the League of Minnesota Cities
Insurance Trust (LMCIT), which is a public entity risk pool currently operating as a common risk management
and insurance program, with cities in the state. The Commission pays an annual premium to the LMCIT for its
insurance coverage. The LMCIT is self-sustaining through commercial companies for excess claims. The
Commission is covered through the pool for any claims incurred but unreported, but retains risk for the
deductible portion of its insurance policies. The amount of these deductibles is considered immaterial to the
financial statements.
There were no significant reductions in insurance from the previous year or settlements in excess of insurance
coverage for any of the past three fiscal years.
The Commission's workers' compensation insurance policy is retrospectively rated. With this type of policy,
final premiums are determined after loss experience is known. The amount of premium adjustment for 2015
is estimated to be immaterial based on workers' compensation rates and salaries for the year.
There are no other claims liabilities reported in the funds based on the requirements of accounting standards,
which requires that a liability for claims be reported if information prior to the issuance of the financial
statements indicates it is probable that a liability has been incurred at the date of the financial statements and
the amount of the loss can be reasonably estimated.
24
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 8. DEFINED BENEFIT PENSION PLANS - STATEWIDE
At December 31, 2015, the Commission adopted Governmental Accounting Standards Board (GASB)
Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension
Transition for Contributions Made Subsequent to the Measurement Date. This implementation allows the
Commission to report its proportionate share of collective net pension liability, deferred inflows of resources
and deferred outflows of resources, and pension expense and to reflect an actuarially determined liability for
the present value of projected future benefits for retired and active employees less the pension plan's fiduciary
net position on the financial statements.
A. PLAN DESCRIPTION
The Commission participates in the following cost-sharing multiple -employer defined benefit pension plan
administered by the Public Employees Retirement Association (PERA). PERA's defined benefit pension
plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356.
PERA's defined benefit pension plans are tax qualified plans under Section 401(a) of the Internal Revenue
Code.
All full-time and certain part-time employees of the Commission are covered by the General Employees
Retirement Fund (GERF). GERF members belong to either the Coordinated Plan or the Basic Plan.
Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic
Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan.
B. BENEFITS PROVIDED
PERA provides retirement, disability and death benefits. Benefit provisions are established by state statute
and can only be modified by the state legislature.
Benefit increases are provided to benefit recipients each January. Increases are related to the funding
ratio of the plan. Members in plans that are at least 90% funded for two consecutive years are given 2.5%
increases. Members in plans that have not exceeded 90% funded, or have fallen below 80%, are given 1 %
increases.
The benefit provisions stated in the following paragraphs are current provisions and apply to active plan
participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are
bound by the provisions in effect at the time they last terminated their public service.
Benefits are based on a member's highest average salary for any five successive years of allowable
service, age and years of credit at termination of service. Two methods are used to compute benefits for
PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step -rate
benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity
accrual rate for a Basic Plan member is 2.2% of average salary for each of the first ten years of service
and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2% of
average salary for each of the first ten years and 1.7% for each remaining year. Under Method 2, the
annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated Plan
members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when
age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1,
1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. Disability
benefits are available for vested members, and are based upon years of service and average high -five
salary.
25
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 8. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd)
C. CONTRIBUTIONS
Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution
rates can only be modified by the state legislature.
Basic Plan members and Coordinated Plan members were required to contribute 9.10% and 6.50%,
respectively, of their annual covered salary in calendar year 2015. The Commission was required to
contribute 11.78% of pay for Basic Plan members and 7.50% for Coordinated Plan members in calendar
year 2015. The Commission's contributions to the GERF for the year ended December 31, 2015, were
$327,065. The Commission's contributions were equal to the required contributions for each year as set by
state statute.
D. PENSION COSTS
At December 31, 2015, the Commission reported a liability of $3,700,319 for its proportionate share of the
GERF's net pension liability. The net pension liability was measured as of June 30, 2015, and the total
pension liability used to calculate the net pension liability was determined by an actuarial valuation as of
that date. The Commission's proportion of the net pension liability was based on the Commission's
contributions received by PERA during the measurement period for employer payroll paid dates from July
1, 2014 through June 30, 2015, relative to the total employer contributions received from all of PERA's
participating employers. At June 30, 2015, the Commission's proportion was .0714%.
For the year ended December 31, 2015, the Commission recognized pension expense of $379,329 for its
proportionate share of GERF's pension expense.
At December 31, 2015, the Commission reported its proportionate share of GERF's deferred outflows of
resources and deferred inflows of resources from the following sources:
26
Deferred
Outflows of
Deferred Inflows
Resources
of Resources
Differences between expected and actual
economic experience
$
$ 186,559
Differences between projected and actual
investment earnings
350,292
Changes in proportion and differences between
contributions made and Commission's
proportionate share of contributions
341,743
Contributions paid to PERA subsequent to
measurement date
167,308
Totals
$ 517,600
$ 528,302
26
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 8. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd)
D. PENSION COSTS (Cont'd)
$167,308 reported as deferred outflows of resources related to pensions resulting from Commission
contributions to GERF subsequent to the measurement date will be recognized as a reduction of the net
pension liability in the year ended December 31, 2016. Other amounts reported as deferred outflows and
inflows of resources related to GERF pensions will be recognized in pension expense as follows:
Year ended June 30,
2016
2017
2018
2019
2020
Thereafter
E. ACTUARIAL ASSUMPTIONS
Pension Expense Amount
$ (88,528)
(88,528)
(88,527)
87,573
The total pension liability in the June 30, 2015 actuarial valuation was determined using the entry age
normal actuarial cost method and the following actuarial assumptions:
Inflation 2.75% per year
Active Member Payroll Growth 3.50% per year
Investment Rate of Return 7.90%
Salary increases were based on a service -related table. Mortality rates for active members, retirees,
survivors and disabilitants were based on RP -2000 tables for males or females, as appropriate, with slight
adjustments. Benefit increases for retirees are assumed to be 1 % effective every January 1 through 2026
and 2.5% thereafter.
Actuarial assumptions used in the June 30, 2015, valuations were based on the results of actuarial
experience studies. The experience study in the GERF was for the period July 1, 2004, through June 30,
2008, with an update of economic assumptions in 2014. Experience studies have not been prepared for I PERA's other plans, but assumptions are reviewed annually.
The following changes in actuarial assumptions occurred in 2015:
The long-term expected rate of return on pension plan investments is 7.9%. The State Board of
Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of the
long-term expected rates of return on a regular basis using a building-block method in which best -estimate
ranges of expected future rates of return are developed for each major asset class. These ranges are
combined to produce an expected long-term rate of return by weighting the expected future rates of return
by the target asset allocation percentages. The target allocation and best estimates of arithmetic real rates
of return for each major asset class are summarized in the following table:
27
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 8. DEFINED BENEFIT PENSION PLANS - STATEWIDE (Cont'd)
E. ACTUARIAL ASSUMPTIONS (Cont'd)
Asset Class
Domestic Stocks
International Stocks
Bonds
Alternative Assets
Cash
F. DISCOUNT RATE
Target Allocation
45%
15%
18%
20%
2%
Long -Term Expected
Real Rate of Return
5.50%
6.00%
1.45%
6.40%
0.50%
The discount rate used to measure the total pension liability was 7.9%. The projection of cash flows used
to determine the discount rate assumed that employee and employer contributions will be made at a rate
specified in statute. Based on that assumption, each of the pension plan's fiduciary net position was
projected to be available to make all projected future benefit payments of current active and inactive
employees. Therefore, the long-term expected rate of return on pension plan investments was applied to
all periods of projected benefit payments to determine the total pension liability.
G. PENSION LIABILITY SENSITIVITY
The following presents the Commission's proportionate share of the net pension liability for all plans it
participates in, calculated using the discount rate disclosed in the preceding paragraph, as well as what the
Commission's proportionate share of the net pension liability would be if it were calculated using a discount
rate 1 percentage point lower or 1 percentage point higher than the current discount rate:
1 % Decrease 1 % Increase
in Discount Discount in Discount
Rate (6.9%) Rate (7.9%) Rate (8.9%)
Commission's proportionate share of the
GERF net pension liability $ 5,818,216 $ 3,700,319 $ 1,951,261
H. PENSION PLAN FIDUCIARY NET POSITION
Detailed information about each pension plan's fiduciary net position is available in a separately -issued
PERA financial report that includes financial statements and required supplementary information. That
report may be obtained on the Internet at www.mnpera.org; by writing to PERA at 60 Empire Drive #200,
St. Paul, Minnesota, 55103-2088; or by calling (651) 296-7460 or 1-800-652-9026.
NOTE 9. DEFERRED COMPENSATION PLAN
The Commission offers its employees a deferred compensation plan created in accordance with Internal
Revenue Code Section 457. The plan, available to all Commission employees, permits them to defer a portion
of their salary into future years. Participation in the plan is optional. The deferred compensation is not
available to employees until termination, retirement, death or unforeseeable emergency.
Investments are managed by the plan's trustee under one of four investment options, or a combination thereof.
The choice of the investment option(s) is made by the participants.
28
HUTCHINSON UTILITIES COMMISSION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2015
NOTE 10. COMMITMENTS
The Commission is committed to purchase 25 MW of its power requirements from Missouri River Energy
Services pursuant to the Power Sale Agreement dated April 28, 2010. This contract is effective through
January 1, 2046.
NOTE 11. MAJOR CUSTOMERS
For the years ended December 31, 2015 and 2014, the Electric Division derived approximately 51 % and 50%
respectively, of utility revenue from the top five major customers.
For the years ended December 31, 2015 and 2014, the Natural Gas Division derived approximately 37% and
46% respectively, of its utility revenue from the top five major customers.
NOTE 12. NET POSITION
Net Investment in Capital Assets
Net Capital Assets
Revenue Bonds Payable
Restricted
Cash and Investments Designated by Bond Covenants for Specific
Purposes
Bond Premium (Unamortized)
NOTE 13. PRIOR PERIOD ADJUSTMENT
2015
$ 73,356,625
(18,290,000)
2014
$ 76,363,215
(19,515,000)
$ 55.066.625 $ 56.848.215
$ 2,567,940 $ 2,577,815
(2,026,224) (2,211,832)
$ 541.716 $ 365.983
The beginning net position has been decreased to reflect a change in accounting principle. As mentioned in
Note 8, the Commission implemented GASB 68 and GASB 71 which records the Commission's proportionate
share of collective net pension liability, deferred inflows of resources and deferred outflows of resources, and
pension expense on the Commission's government -wide financial statements. Beginning business -type
activities net position has been restated from $65,994,236 to $62,347,873 (a decrease of $3,646,363). Prior
year partial comparative information does not reflect this change in accounting principle because the cost-
sharing multiple -employer defined benefit pension plans in which the Commission participates have not made
this information available.
The beginning net position has been adjusted to reflect a correction of error for unrecorded amounts due to
other governments. Beginning net position for business -type activities for the year ended 2014 has been
restated from $66,268,287 to $65,951,727 (a decrease of $316,560).
29
REQUIRED SUPPLEMENTARY INFORMATION
30
HUTCHINSON UTILITIES COMMISSION
SCHEDULES OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
AND
EMPLOYER CONTRIBUTIONS
DECEMBER 31, 2015
Schedule of Proportionate Share of the Net Pension Liability
I
Employer's
Proportionate
Share of the
Employer's
Net Pension
Plan Fiduciary
Employer's
Proportionate Employer's
Liability (Asset)
Net Position
Proportion
Share of the Covered-
as a Percentage of
as a Percentage
Actuarial
of the Net
Net Pension Employee
its Covered-
of the Total
Valuation
Pension
Liability (Asset) Payroll
Employee Payroll
Pension
Date
Liability (Asset)
(a) (b)
(a/b)
Liability
Pensions
PERA -GERF
6/30/2015
0.0714%
$ 3,700,319 $ 4,241,304
87.2%
78.2%
Schedule of Employer Contributions
Contributions
Contributions
in Relation
as a Percentage
Statutorily
to the Statutorily Contribution
Covered-
of Covered-
Required
Required Deficiency
Employee
Employee
Year Ended
Contribution
Contribution (Excess)
Payroll
Payroll
December 31,
(a)
(b) (a-b)
(d)
(b/d)
Pensions
PERA - GERF
2015
$ 327,065
$ 327,065 $
$ 4,360,868
7.50%
The City implemented GASB Statement No. 68 for fiscal year ended December 31, 2015. Information for prior
years is not available.
30
SUPPLEMENTARY INFORMATION
HUTCHINSON UTILITIES COMMISSION
COMBINING STATEMENT OF NET POSITION
DECEMBER 31, 2015
ASSETS AND DEFERRED OUTFLOWS OF RESOURCES
Assets
Current Assets
Cash and Investments
Accounts Receivable (Net of Allowance for Doubtful Accounts of
$31,984 and $17,222, Respectively)
Inventory
Sales Tax Receivable
Prepaid Items
Total Current Assets
Noncurrent Assets
Restricted Assets
Cash and Investments
Capital Assets
Assets Not Being Depreciated
Other Capital Assets, Net of Depreciation
Net Capital Assets
Total Noncurrent Assets
Total Assets
Deferred Outflows of Resources
Related to Pensions
Total Assets and Deferred Outflows of Resources
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION
Liabilities
Current Liabilities
Current Portion of Long -Term Debt
Bonds Payable
Bond Premium
Accrued Vacation
Accounts Payable
Due to Other Governments
Customer Deposits
Accrued Expenses
Interest
Salaries Payable
Total Current Liabilities
Long -Term Liabilities
Noncurrent Portion of Long -Term Debt
Bonds Payable
Bond Premium
Accrued Vacation
Accrued Severance
Net Pension Liability
Total Long -Term Liabilities
Total Liabilities
Deferred Inflows of Resources
Related to Pensions
Net Position
Net Investment in Capital Assets
Restricted
Unrestricted
Total Net Position
Total Liabilities, Deferred Inflows of Resources and Net Position
31
Natural
Electric Gas
Division Division Total
$ 6,148,711 $
6,491,512 $
12,640,223
1,766,414
1,357,129
3,123,543
1,105,204
409,489
1,514,693
128,359
1,334,380
128,359
758
253
1,011
9,149,446
8,258,383
17,407,829
22,079
2,545,861
2,567,940
690,368
3,899,919
4,590,287
41,378,082
27,388,256
68,766,338
42,068,450
31,288,175
73,356,625
42,090,529
33,834,036
75,924,565
51,239,975
42,092,419
93,332,394
388,200
129,400
517,600
$ 51,628,175 $
42,221,819 $
93,849,994
$ 125,000 $
1,160,000 $
1,285,000
185,608
185,608
13,432
4,369
17,801
1,659,295
1,334,380
2,993,675
902,446
855,155
1,757,601
310,898
167,407
478,305
2,551
65,125
67,676
85,355
25,602
110,957
3,098,977
3,797,646
6,896,623
590,000
16,415,000
17,005,000
1,840,616
1,840,616
255,215
83,033
338,248
66,869
23,904
90,773
2,775,239
925,080
3,700,319
3,687,323
19,287,633
22,974,956
6,786,300
23,085,279
29,871,579
396,226
132,076
528,302
41,353,450
13,713,175
55,066,625
22,079
519,637
541,716
3,070,120
4,771,652
7,841,772
44,445,649
19,004,464
63,450,113
$ 51,628,175 $
42,221,819 $
93,849,994
HUTCHINSON UTILITIES COMMISSION
COMBINING SCHEDULE OF REVENUES AND EXPENSES
YEAR ENDED DECEMBER 31, 2015
OPERATING REVENUES
Electric Energy Sales
Natural Gas Sales
Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Production
Operations
Maintenance
Purchased Power/Gas
Other Power Supply
Transmission
Operations
Maintenance
Distribution
Operations
Maintenance
Customer Accounts Expense
Sales Expense
Administrative and General
Depreciation
Contribution to City of Hutchinson
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
Interest Income
Merchandise and Contract Work, Net
Miscellaneous Income
Bond Premium
Amortization of Development Study
Interest Expense - Customer Deposits
Interest Expense - Bonds
Total Nonoperating Revenues (Expenses)
Change in Net Position
32
2,602,581
2015
2,602,581
Electric
Natural Gas
464,183
Division
Division
Total
$ 26,505,059
$
$ 26,505,059
1,930,093
9,923,500
9,923,500
297,007
1,417,997
1,715,004
26,802,066
11,341,497
38,143,563
2,602,581
2,602,581
464,183
464,183
14,706,630
5,988,821
20,695,451
361,553
361,553
1,930,093
115,115
2,045,208
23,231
4,337
27,568
630,698
423,390
1,054,088
263,445
215,554
478,999
229,470
187,748
417,218
220,969
73,656
294,625
2,389,037
910,782
3,299,819
2,816,301
1,008,133
3,824,434
531,130
206,980
738,110
27,169,321
9,134,516
36,303,837
(367,255)
2,206,981
1,839,726
15,978
15,978
31,956
(49,243)
56,008
6,765
129,966
28,316
158,282
185,608
185,608
(262,972)
(262,972)
(96)
(96)
(35,196)
(821,833)
(857,029)
(201,467)
(536,019)
(737,486)
$ (568,722) $ 1,670,962 $ 1,102,240
C
HUTCHINSON UTILITIES COMMISSION
STATEMENT OF NET POSITION
ELECTRIC DIVISION
DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS AS OF DECEMBER
31, 2014
i
2015
2014
ASSETS AND DEFERRED OUTFLOWS OF RESOURCES
Assets
Current Assets
Cash and Investments
$
6,148,711
$
3,576,533
Accounts Receivable (Net of Allowance for Doubtful Accounts of
$31,984 and $39,318, Respectively)
1,766,414
2,012,193
Inventory
1,105,204
1,105,818
Sales Tax Receivable
128,359
244,783
Prepaid Items
758
Total Current Assets
9,149,446
6,939,327
Noncurrent Assets
Restricted Assets
Cash and Investments
22,079
22,288
Other Assets
MRES Agreement
262,972
Capital Assets
Assets Not Being Depreciated
690,368
690,368
Other Capital Assets, Net of Depreciation
41,378,082
43,660,856
Net Capital Assets
42,068,450
44,351,224
Total Noncurrent Assets
42,090,529
44,636,484
Total Assets
51,239,975
51,575,811
Deferred Outflows of Resources
Related to Pensions
388,200
Total Assets and Deferred Outflows of Resources
$
51,628,175
$
51,575,811
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION
Liabilities
Current Liabilities
Current Portion of Long -Term Debt
Bonds Payable
$
125,000
$
125,000
Accrued Vacation
13,432
13,332
Accounts Payable
1,659,295
1,500,081
Due to Other Governments
902,446
786,557
Customer Deposits
310,898
286,777
Accrued Expenses
Interest
2,551
2,967
Salaries Payable
85,355
85,152
Total Current Liabilities
3,098,977
2,799,866
Long -Term Liabilities
Noncurrent Portion of Long -Term Debt
Bonds Payable
590,000
715,000
Accrued Vacation
255,215
253,313
Accrued Severance
66,869
58,489
Net Pension Liability
2,775,239
Total Long -Term Liabilities
3,687,323
1,026,802
Total Liabilities
6,786,300
3,826,668
Deferred Inflows of Resources
Related to Pensions
396,226
Net Position
Net Investment in Capital Assets
41,353,450
43,511,224
Restricted
22,079
22,288
Unrestricted
3,070,120
4,215,631
Total Net Position
44,445,649
47,749,143
Total Liabilities, Deferred Inflows of Resources and Net Position
$
51,628,175
$
51,575,811
33
HUTCHINSON UTILITIES COMMISSION
DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
BUDGET AND ACTUAL - ELECTRIC
DIVISION
YEAR ENDED DECEMBER 31,
2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER
31, 2014
'
2015
2014
Over (Under)
Budget
Actual
Budget
Actual
OPERATING REVENUES
Utility Revenues
Residential
$ 5,051,735
$ 5,080,964
$ 29,229 $
5,162,073
General Service
8,869,482
8,763,091
(106,391)
8,787,907
Industrial
10,502,648
11,399,155
896,507
11,001,396
Street Lighting
146,739
146,931
192
139,532
Resale
994,000
1,114,918
120,918
678,293
Total Utility Revenues
25,564,604
26,505,059
940,455
25,769,201
Other Operating Revenues
Penalties/Fees
270,200
285,738
15,538
292,778
Security Lights
10,000
11,269
1,269
11,301
Pole Rental
16
Total Other Operating Revenues 280,200
297,007
16,807
304,095
Total Operating Revenues
25,844,804
26,802,066
957,262
26,073,296
OPERATING EXPENSES
Production
Operations
Supervision and Engineering
985,531
934,560
(50,971)
935,505
Other Employee Benefits
72,000
111,270
39,270
102,390
Fuels
30,100
26,226
(3,874)
33,828
Station
99,600
136,379
36,779
117,305
Gas for Generation
1,123,092
722,821
(400,271)
1,184,423
Transportation
641,833
641,833
700,000
Waste Disposal
18,000
29,492
11,492
29,196
Total Operations
2,970,156
2,602,581
(367,575)
3,102,647
Maintenance
Structures
5,000
3,184
(1,816)
6,165
Generating Units
305,538
339,876
34,338
375,626
Other Equipment
148,000
121,123
(26,877)
118,081
Total Maintenance
458,538
464,183
5,645
499,872
Total Production
3,428,694
3,066,764
(361,930)
3,602,519 '
Power Costs
Purchased Power
14,862,607
14,706,630
(155,977)
13,850,238
34
35
HUTCHINSON UTILITIES COMMISSION
DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
BUDGET AND ACTUAL - ELECTRIC
DIVISION
YEAR ENDED DECEMBER 31,
2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
2015
2014
Over (Under)
Budget
Actual
Budget
Actual
OPERATING EXPENSES (Cont'd)
Other Power Supply
Supervision and General Salaries
$ 447,794
$ 319,855
$ (127,939) $
291,971
Training
2,500
(2,500)
Professional Services
36,600
41,698
5,098
45,762
Total Other Power Supply
486,894
361,553
(125,341)
337,733
Transmission
+ Operations
Transmission
1,535,000
1,785,988
250,988
1,512,071
Station
100
144,105
144,005
144,106
Total Operations
1,535,100
1,930,093
394,993
1,656,177
Maintenance
Plant and Equipment
31,019
23,231
(7,788)
28,361
Total Transmission
1,566,119
1,953,324
387,205
1,684,538
Distribution
Operations
Supervision and Engineering
569,823
339,667
(230,156)
335,085
Line
65,481
61,641
(3,840)
64,471
Meter
25,044
68,177
43,133
71,393
Territory Service Agreement
25,000
29,068
4,068
25,928
Other
60,000
132,145
72,145
109,666
Total Operations
745,348
630,698
(114,650)
606,543
Maintenance
Station Equipment
12,253
10,086
(2,167)
16,327
Underground Lines
133,281
100,165
(33,116)
123,852
Lines Transformers
13,197
10,571
(2,626)
12,207
Street Lighting
68,451
90,272
21,821
53,582
Other Equipment
41,756
52,351
10,595
50,586
Total Maintenance
268,938
263,445
(5,493)
256,554
Total Distribution
1,014,286
894,143
(120,143)
863,097
Customer Accounts Expense
Meter Reading
21,108
23,258
2,150
17,153
Collection
145,034
141,788
(3,246)
107,302
Other Employee Benefits
6,050
9,818
3,768
7,574
Uncollectible Accounts
8,250
4,658
(3,592)
10,875
Customer Services
45,251
49,517
4,266
47,286
Meetings and Training
3,850
431
(3,419)
448
Total Customer Accounts Expense 229,543
229,470
(73)
190,638
35
HUTCHINSON UTILITIES COMMISSION
DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
BUDGET AND ACTUAL - ELECTRIC DIVISION
YEAR ENDED DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
2015 2014
Over (Under)
Budget Actual Budget Actual
OPERATING EXPENSES (Cont'd)
Sales Expense
Salaries
$ 57,814
$ 49,768
$ (8,046)
$ 51,733
Conservation
394,521
171,201
(223,320)
292,913
Total Sales Expense
452,335
220,969
(231,366)
344,646
Administrative and General
Supervision and General Salaries
455,177
455,790
613
467,125
Office Supplies
222,300
248,368
26,068
254,183
Outside Services Employed
112,931
106,060
(6,871)
109,766
Property Insurance
96,250
88,869
(7,381)
91,736
Medical Insurance
717,784
719,849
2,065
677,763
Other Employee Benefits
636,526
635,730
(796)
588,648
Regulatory
27,500
23,322
(4,178)
24,305
Commissioners Salaries
14,517
14,517
14,517
Travel
9,900
3,709
(6,191)
8,054
Miscellaneous
72,875
46,315
(26,560)
64,920
Maintenance of General Plant
43,872
46,508
2,636
63,751
Total Administrative and General
2,409,632
2,389,037
(20,595)
2,364,768
Depreciation
2,700,000
2,816,301
116,301
2,744,769
Contribution to City of Hutchinson
Payment in Lieu of Taxes
384,391
384,391
1,123, 897
Roadway Lighting
146,739
146,739
Total Contribution to City of Hutchinson
531,130
531,130
0
1,123,897
Total Operating Expenses
27,681,240
27,169,321
(511,919)
27,106,843
Operating Income (Loss)
(1,836,436)
(367,255)
1,469,181
(1,033,547)
36
t
HUTCHINSON UTILITIES COMMISSION
DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
BUDGET AND ACTUAL - ELECTRIC DIVISION
YEAR ENDED DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
2015
2014
Over (Under)
Budget Actual
Budget
Actual
NONOPERATING REVENUES (EXPENSES)
Interest Income
$ 32,500 $ 15,978
$ (16,522)
$ 14,861
Merchandise and Contract Work, Net
(49,243)
(49,243)
41,724
Miscellaneous Income
129,966
129,966
35,408
Gain (Loss) on Disposal of Assets
23,159
Bond Service Fees
(2,400)
2,400
(450)
Amortization of Development Study
(262,972) (262,972)
(525,943)
Interest Expense - Bonds
(36,612) (35,196)
1,416
(40,081)
Total Nonoperating Revenues (Expenses)
(269,484) (201,467)
68,017
(451,322)
Change in Net Position
$ (2,105,920) (568,722)
$ 1,537,198
(1,484,869)
NET POSITION, BEGINNING OF YEAR,
AS ORIGINALLY STATED
47,749,143
49,483,473
PRIOR PERIOD ADJUSTMENT
(2,734,772)
(249,461)
NET POSITION, BEGINNING OF YEAR,
AS RESTATED
45,014,371
49,234,012
NET POSITION, END OF YEAR
$ 44,445,649
$ 47,749,143
37
HUTCHINSON UTILITIES COMMISSION
STATEMENT OF NET POSITION
NATURAL GAS DIVISION
DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS AS OF DECEMBER 31, 2014
2015
2014
ASSETS AND DEFERRED OUTFLOWS OF RESOURCES
Assets
Current Assets
Cash and Investments
$
6,491,512
$
4,209,638
Accounts Receivable (Net of Allowance for Doubtful Accounts of
$17,222 and $21,171, Respectively)
1,357,129
1,903,283
Inventory
409,489
425,716
Prepaid Items
253
16,132
Total Current Assets
8,258,383
6,554,769
Noncurrent Assets
Restricted Assets
Cash and Investments
2,545,861
2,555,527
Capital Assets
Assets Not Being Depreciated
3,899,919
3,899,919
Other Capital Assets, Net of Depreciation
27,388,256
28,112,072
Net Capital Assets
31,288,175
32,011,991
Total Noncurrent Assets
33,834,036
34,567,518
Total Assets
42,092,419
41,122,287
Deferred Outflows of Resources
Related to Pensions
129,400
Total Assets and Deferred Outflows of Resources
$
42,221,819
$
41,122,287
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION
Liabilities
Current Liabilities
Current Portion of Long -Term Debt
Bonds Payable
$
1,160,000
$
1,100,000
Bond Premium
185,608
185,608
Accrued Vacation
4,369
4,303
Accounts Payable
1,334,380
1,093,738
Due to Other Governments
855,155
540,919
Customer Deposits
167,407
154,418
Accrued Expenses
Interest
65,125
68,792
Salaries Payable
25,602
22,297
Total Current Liabilities
3,797,646
3,170,075
Long -Term Liabilities
Noncurrent Portion of Long -Term Debt
Bonds Payable
16,415,000
17,575,000
Bond Premium
1,840,616
2,026,225
Accrued Vacation
83,033
81,749
Accrued Severance
23,904
24,145
Net Pension Liability
925,080
Total Long -Term Liabilities
19,287,633
19,707,119
Total Liabilities
23,085,279
22,877,194
Deferred Inflows of Resources
Related to Pensions
132,076
Net Position
Net Investment in Capital Assets
13,713,175
13,336,991
Restricted
519,637
343,695
Unrestricted
4,771,652
4,564,407
Total Net Position
19,004,464
18,245,093
Total Liabilities, Deferred Inflows of Resources and Net Position
$
42,221,819
$
41,122,287
38
t
HUTCHINSON UTILITIES COMMISSION
DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
BUDGET AND ACTUAL - NATURAL GAS DIVISION
YEAR ENDED DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
i
2015 2014
Over (Under)
Budget Actual Budget Actual
OPERATING REVENUES
Utility Revenues
Residential
Commercial
Industrial
Total Utility Revenues
Other Operating Revenues
Gas Transportation Contract - New Ulm
Transportation - Electric Division
Total Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Purchased Natural Gas
Transmission
Operations
Supervision and Engineering
Other
Total Operations
$ 4,258,334
$ 3,731,066
$ (527,268)
$ 4,706,388
3,722,294
2,748,161
(974,133)
3,853,504
4,034,279
3,444,273
(590,006)
6,066,290
12,014,907
9,923,500
(2,091,407)
14,626,182
725,100
776,164
51,064
808,575
641,833
641,833
119,452
700,000
1,366,933
1,417,997
51,064
1,508,575
13,381,840
11,341,497
(2,040,343)
16,134,757
7,580,424
5,988,821
(1,591,603)
10,460,268
60,710
52,510
(8,200)
54,723
65,000
62,605
(2,395)
52,261
125,710
115,115
(10,595)
106,984
Maintenance
166,270
156,591
(9,679)
99,918
Supervision and Engineering
1,518
3,996
2,478
2,492
Other
16,500
341
(16,159)
21,043
Total Maintenance
18,018
4,337
(13,681)
23,535
Total Transmission
143,728
119,452
(24,276)
130,519
Distribution
Operations
Supervision and Engineering
154,975
181,772
26,797
174,481
Other Employee Benefits
115,000
125,150
10,150
120,998
Mains and Services
85,799
78,595
(7,204)
92,313
Meters
759
9,497
8,738
2,921
Other
39,650
28,376
(11,274)
47,386
Total Operations
396,183
423,390
27,207
438,099
Maintenance
Mains and Services
166,270
156,591
(9,679)
99,918
Meters
13,807
9,322
(4,485)
22,554
Other Equipment
169,240
49,641
(119,599)
53,973
Total Maintenance
349,317
215,554
(133,763)
176,445
Total Distribution
745,500
638,944
(106,556)
614,544
.W
HUTCHINSON UTILITIES COMMISSION
DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
BUDGET AND ACTUAL - NATURAL GAS DIVISION
YEAR ENDED DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
OPERATING EXPENSES (Cont'd)
Customer Accounts Expense
Meter Reading
Collection
Other Employee Benefits
Uncollectible Accounts
Customer Services
Meetings and Training
Total Customer Accounts Expense
Sales Expense
Salaries
Conservation
Total Sales Expense
Administrative and General
Supervision and General Salaries
Office Supplies
Outside Services Employed
Property Insurance
Medical Insurance
Other Employee Benefits
Regulatory
Commissioners Salaries
Travel
Miscellaneous
Maintenance of General Plant
Total Administrative and General
Depreciation
Contribution to City of Hutchinson
Payment in Lieu of Taxes
Total Operating Expenses
Operating Income (Loss)
K11W
2014
Over (Under)
Budget Actual Budget Actual
$ 17,270
$ 19,029
$ 1,759
$ 14,034
118,664
116,008
(2,656)
87,792
4,950
8,033
3,083
6,197
6,750
3,811
(2,939)
8,898
37,024
40,514
3,490
38,689
3,150
353
(2,797)
366
187,808
187,748
(60)
155,976
19,271
16,589
(2,682)
17,245
131,507
57,067
(74,440)
97,638
150,778
73,656
(77,122)
114,883
151,726
151,930
204
155,708
74,100
82,789
8,689
84,728
37,644
35,353
(2,291)
36,589
78,750
72,711
(6,039)
75,057
239,262
239,950
688
225,921
212,175
211,910
(265)
196,216
22,500
19,082
(3,418)
19,886
11,877
11,877
11,877
8,100
3,035
(5,065)
6,590
59,625
44,093
(15,532)
53,116
35,895
38,052
2,157
52,160
931,654
910,782
(20,872)
917,848
1,056,000
1,008,133
(47,867)
1,002,804
206,980
206,980
605,176
11,002,872
9,134,516
(1,868,356)
14,002,018
2,378,968
2,206,981
(171,987)
2,132,739
40
HUTCHINSON UTILITIES COMMISSION
DETAILED SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
BUDGET AND ACTUAL - NATURAL GAS DIVISION
YEAR ENDED DECEMBER 31, 2015
WITH PARTIAL COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
2015 2014
Over (Under)
Budget Actual Budget Actual
NONOPERATING REVENUES (EXPENSES)
Interest Income
Merchandise and Contract Work, Net
Miscellaneous Income
Gain (Loss) on Disposal of Assets
Bond Premium
Interest Expense - Customer Deposits
Interest Expense - Bonds
Total Nonoperating Revenues (Expenses)
Change in Net Position
NET POSITION, BEGINNING OF YEAR,
AS ORIGINALLY STATED
PRIOR PERIOD ADJUSTMENT
NET POSITION, BEGINNING OF YEAR,
AS RESTATED
NET POSITION, END OF YEAR
$ 32,500 $
15,978 $
(16,522)
$ 14,860
27,000
56,008
29,008
31,269
28,316
28,316
5,235
22,100
185,608
185,608
185,608
(1,000)
(96)
904
(434)
(825,500)
(821,833)
3,667
(863,999)
(581,392)
(536,019)
45,373
(605,361)
$ 1,797,576 1,670,962 $ (126,614) 1,527,378
41
18,245,093 16,784,814
(911,591) (67,099)
17,333,502
$ 19,004,464
16,717,715
$ 18,245,093
COMPLIANCE SECTION
CJL)S
CERTIREO PUBLIC ACCOUNTANTS
& CONSULTANTS
INDEPENDENT AUDITOR'S REPORT ON MINNESOTA LEGAL COMPLIANCE
Members of the Hutchinson Utilities Commission
Hutchinson, Minnesota
We have audited, in accordance with auditing standards generally accepted in the United States of America, and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General
of the United States the financial statements of Hutchinson Utilities Commission, a fund of the City of Hutchinson,
Minnesota, as of and for the year ended December 31, 2015, and the related notes to the financial statements, and have
issued our report thereon dated March 30, 2016.
The Minnesota Legal Compliance Audit Guide for Political Subdivisions, promulgated by the State Auditor pursuant to
Minn. Stat. § 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and
investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and tax
increment financing. Our audit considered all of the listed categories, except that we did not test for compliance in tax
increment financing because Hutchinson Utilities Commission does not have any tax increment financing.
In connection with our audit, nothing came to our attention that caused us to believe that the Commission failed to comply
with the provisions of the Minnesota Legal Compliance Audit Guide for Political Subdivisions. However, our audit was not
directed primarily toward obtaining knowledge of such noncompliance. Accordingly, had we performed additional
procedures, other matters may have come to our attention regarding the Commission's noncompliance with the above
referenced provisions.
The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and
not to provide an opinion on compliance. Accordingly, this communication is not suitable for any other purpose.
Conuaa�, . ; , PULP
CONWAY, DEUTH & SCHMIESING, PLLP
Certified Public Accountants
Litchfield, Minnesota
March 30, 2016
42
Members: American Institute of Certified Public Accountants, Minnesota Society of Certified Public Accountants
Willmar Office
331 Third St SW, Ste 2
PO Box 570
Willmar, MN 56201
P (320) 235-3311
T (888) 388-1040
Benson Office
Morris Office
1209 Pacific Ave, Ste 3
401 Atlantic Ave
Benson, MN 56215
Morris, MN 56267
P (320) 843-2302
P (320) 589-2602
www.cdscpa.com
Litchfield Office
820 Sibley Ave N
Litchfield, MN 55355
P (320) 693-7975
St. Cloud-Sartell Office
Ste 110
2351 Connecticut Ave
Sartell, MN 56377
P (320) 252-7565
T (800) 862-1337
CJL)S
CERnRED PUBLIC ACCOUNTANTS
& CONSULTANTS
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN
AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
Members of the Hutchinson Utilities Commission
Hutchinson, Minnesota
We have audited in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General
of the United States, the financial statements of Hutchinson Utilities Commission, a fund of the City of Hutchinson,
Minnesota, as of and for the year ended December 31, 2015, and the related notes to the financial statements, which
collectively comprise the Commission's basic financial statements, and have issued our report thereon dated March 30,
2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Commission's internal control over
financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the
purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of the Commission's internal control. Accordingly, we do not express an opinion on the effectiveness of the
Commission's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements
on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that
there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or
detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in
internal control that is less severe than a material weakness, yet important enough to merit attention by those charged
with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was
not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies.
Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be
material weaknesses. However, material weaknesses may exist that have not been identified.
43
Members: American Institute of Certified Public Accountants, Minnesota Society of Certified Public Accountants
Willmar Office
Benson Office
Morris Office
Litchfield Office
St. Cloud-Sartett Office
331 Third St SW, Ste 2
1209 Pacific Ave, Ste 3
401 Atlantic Ave
820 Sibley Ave N
Ste 110
PO Box 570
Benson, MN 56215
Morris, MN 56267
Litchfield, MN 55355
2351 Connecticut Ave
Willmar, MN 56201
P (320) 843-2302
P (320) 589-2602
P (320) 693-7975
Sartell, MN 56377
P (320) 235-3311
P (320) 252-7565
T (888) 388-1040
www.cdscpa.com
T (800) 862-1337
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Hutchinson Utilities Commission's financial statements are free
from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts,
and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial
statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our
audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of
noncompliance or other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result
of that testing, and not to provide an opinion on the effectiveness of the Commission's internal control or on compliance.
This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering
the Commission's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
", UU-0L i &11A�tl PW
CONWAY, DEUTH & SCHMIESING, PLLP
Certified Public Accountants
Litchfield, Minnesota
March 30, 2016
44
11
Exempt
HEALTH/DENTAL INSURANCE
HUC provides an opportunity for employees to participate in a group health (HSA)/dental insurance
program. Employees are eligible for coverage the first of the month following hire date. Contact the
Qste.,,er, HR MaRageF human resources / pavroll for information regarding benefits and participation
levels.
Contact the Custerne- HR ""-,Rager human resources / pavroll for information about continuation of
health/dental insurance coverage after leaving.
For those employees who participate in the high deductible family plan, HUC will
contribute $4,000 annually into the HSA and for those employees participating in the high deductible
single plan, HUC will contribute will receive $2,000 annually into the HSA. Contributions are made in
bi-weekly installments.
Based on Internal Revenue Service rules, an employee must be an eligible individual to qualify for an
HSA including generally having no other health coverage that is not a high deductible health plan.
Veterans of the United States armed forces who receive medical benefits from the Veterans
Administration (VA) or employees who are enrolled in TRICARE, which is health insurance available to
active duty and retired service and reserve members and their dependents, are therefore not eligible to
qualify for an HSA, but i3 are eligible fe+ to participate in the high deductible health plan.
A veteran who receives medical benefits from the Veterans Administration (VA) or employees who are
enrolled in TRICARE who participate in the high deductible family plan, but who is are not eligible to
qualify for an HSA, shall receive $4,000 annually in two equal installments in lieu of said monies being
deposited in an HSA.
A veteran who receives medical benefits from the Veterans Administration (VA) or employees who are
enrolled in TRICARE who participates in the high deductible single plan, but who is are not eligible to
qualify for an HSA, shall receive $2,000 annually in two equal installments in lieu of said monies being
deposited in an HSA.
Non -Exempt
HEALTH/DENTAL INSURANCE
HUC provides an opportunity for employees to participate in a group (HSA)/dental insurance program.
Employees are eligible for coverage the first of the month following hire date. Contact the GusterneFLHO
MaeageF human resources / pavroll for information regarding benefits and participation levels.
Contact the Cusrt^meer/uQ MaRag^F human resources / pavroll for information about continuation of
health/dental insurance coverage after leaving.
See Union Contract.
Exempt
LIFE INSURANCE
HUC provides group term life insurance with accidental death and dismemberment for all full-time
employees. HUC also offers voluntary term life insurance for all full-time employees. Information on life
insurance is available through the Custeme- HR nn-.,,-geF human resources / pavroll.
Non -Exempt
LIFE INSURANCE
group term life insurance with accidental death and dismemberment for all full-time
UC also offers voluntary term life insurance for all full-time employees. Information on life
/ailable through the Custe- e.r/HR MaRa,or human resources / pavroll.
Exempt
DISABILITY INSURANCE
HUC pays the entire premium of a long-term disability insurance policy for all employees. Information
on disability insurance is available through the Gustemer/HR MaRageF human resources / payroll.
Non -Exempt
DISABILITY INSURANCE
HUC pays the entire premium of a long-term disability insurance policy for all employees. Information
on disability insurance is available through the C s*emer HR na-,R-geF human resources / oavroll.
Meter Testing
HUC will test all meters periodically for accuracy and mechanical condition. All electric meters
must be accurate to within 2%, plus or minus, at full and light load. Upon request of the
customer, HUC will test the accuracy of an electric meter. If the meter is found to be registering
more than 2% fast, there will be no testing charge to the customer. If the meter is found to be
accurate within the 2% limit, a $40 trip charge will be billed to the customer. HUC has the right
to place special meters on the premises of a customer for the purpose of testing all or part of the
customer's load at no expense to the customer.
225 Michigan Street SE
�( Hutchinson Hutchinson, MN (-1905 Uli�lUtilities320-587-47461 Fax 320-587-4721
www. hutchinsonutilities. com
•htmt Commission
Putting All of Our Energy into Serving You
For information: Tobias Scllicr, APPA, 202467-2927
Dave Hunstad, Hutchinson Utilities Commission, 320-234-0508
HUTCHINSON UTILITIES COMMISSION RECEIVES RECOGNITION
FOR EXCEPTIONAL SYSTEM RELIABILITY IN 2015
WASHINGTON, D.C. — March 3, 2016 — Hutchinson Utilities Commission has received national
recognition for achieving exceptional electric reliability in 2015. The recognition comes from the
American Public Power Association (APPA) --a trade group in Washington, D.C., that represents more
than 2,000 not-for-profit, cornmunityowned electric utilities such as Hutchinson Utilities Commission.
"11iis honor recognizes utilities that are statistically thriving when it comes to reliability," said APPA
Senior Vice President, Engineering Services Michael Hyland.
APPA took Hutchinson Utilities Commission's reliability data compiled through its eReliability Tracker
Service and compared it to the top quartile of system outage duration from national reliability data
collected by the Energy Information Administration an independent agency that collects, analyzes and
disseminates national energy data.
"We work hard to keep the lights on day in and day out," said Dave Hunstad, Electric Manager at
Hutchinson Utilities Commission. "It's nice to sec that hard work pay off with this kind of recognition"
For more information on Hutchinson Utilities Commission and its commitment to reliability, visit
www.hutchinsonutilities.com.
American
- Public Power
� Association
CERTIFICATE OF
EXCELLENCE IN RELIABILITY
This is to acknowledge that
Hutchinson Utilities Commis-
sion
March 3, 2016
Date
has achieved excellence in reliability by
significantly outperforming the electric
industry national average as reported by the
Energy Information Administration.
eReliabilffy ker
0
1j�al 12
Mic ael J. Hyland U
Se io Vice President,
Engineering Services