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HomeMy WebLinkAbout1942_VILLAGE OF EDINA_AUDIT REPORT0 0 AUDI1 REPORT For the Year. Raded Dacember 31, 1942 COUNTRY CLUB DISTRICT SERVICE COIPANY (A Corporation) Ifinneapolis, Minnesota 0 • 0 Country Club District Service Company TABLE OF CONTENTS PAGES 1 TO 6 - Letter of Transmittal and Comments PAGE 7 - Certificate EXHIBIT A - Balance Sheet; tie at December 31, 1942 EXHIBIT B - Analysis of Earned Surpluo, for the year ended December 31, 194? EXHIBIT C - Profit and Loss Statement, for the year. ended December 31, 1942 SCHEDULE C-1 - Operating Costs and Expenses, for the year envied December 31, 1942 SCHEDULE A -1 - Fixed Assets and Depreciation, for the year ended December 31, 191+2 SCHEDULE A -2 - Notes Payable and Accrued Interest Thereoh, as at December 31, 1942 AUSTIN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS ROANOKE BUILDING MINNEAPOLIS ALBERT B. AUSTIN, C.P.A. r I May 22, 1945 Mr. Oscar Gaarden, President Country Club District Service Company ULnneapoli.s 10, Minnesota Dear Sir: We have made an examination of the books and records of the COUNTRY CLUB DIS- TR1CT SERVICE: CONP0Y, a Minnesota Corporation,, MINNEAPOLIS, MINNESOTA, for the year ended December 31, 1942, and we are pleased to submit our report in the following com- ments and in the Exhibits and Schedules as listed in the preceding Table of Contents. HISTORICAL 0 A complete history of the company was set forth.in our report for the year ended December 31, 1940, and anyone interested may refer to that report. In continuation of the history, the suit which the company had filed in the District Court of Hennepin County against the Village of Edina "o service6 rendered in connection vi th the storm sewer system and the fire hyd:.arts, was decided by Judge EA A. Montgomery in fa:var of the company. 4 The village appealed the doci.sion to the &:preme Court of the State of Minne- sota, and in a decision written by Professor Persig and handed down and filed on January 2, 1943, the Supreme Court reversed part of the decision of the lower court. The award for fire protection service for the six years ending March 25, 1939, was reversed, and it seems the intention of the court that a portion of the water mains and storm sewers serving the lots in the Brown and Fairway sections of the Country 0,lub District were the property of the Village of Edina for the benefit of the lot owners, although com- pany and village do not seem to fully agree on the interpretation of this decision. As a result, values as stated in this report do not necessarily represent the true values of the properties of the company, and until such time as these values are definitely .'' agreed upon and segregated, we have not disturbed the values as they appear on the books of the company. FINANCIAL POSITION We are submitting as Exhibit A and supporting Schedules A-1 and A-2, the THE PUBLICATION OF ANY CONDENSATION OR MODIFICATION OF STATEMENTS HEREIN CONTAINED OR THE USE OF OUR CERTIFICATE DETACHED FROM ITS CONTEXT, OR THE USE OF OUR NAME IN CONNECTION WITH THE SALE OF SECURITIES OR OTHER PUBLICITY WILL NOT BE SANCTIONED UNLESS FIRST SUBMITTED FOR OUR APPROVAL. f • FA -2- Country Club District Service Company financial position of the company in detail as of .December 31, 1942, subject -however to the preceding comments under the caption "Historical.8 For your convenience, we are submitting in summarized form this Balancse Sheet in comparison with the one for December 3.1, 1941, together with increases and decreases as follows; ASSETS Fixed Assets Investments Current Assets Deferred Charges TOTAL ASSETS LIABILITIES . AND NET ]FORTH Fixed Liabilities Current Liabilities Net Worth DECEMBER 31, DECEMBER 31, INCREASE 1 9 4 2 1 9 4 1 !GCAEABE 177, 411.40 $ 1829141.68 $ 4..730-28 256.24 8,790.15 12,210.55 3,420.40 18.00 51.06 33.06 $ 186.475. ?9 1 194.403,29 J 71,927-50 24,428.49 26,468.07 21039.5€ 41.549.55 9,979.60 5,430.05 157,497.75 - 157.955.62 457.87 TOTAL LIABILITIES AND NET NORTH 1864&25 t 1942403129 I 7g9,2-17.22 Due to the conditions brought about., by the wee.• and the fact that construc- tion of new residences has coaxed, the a are no substantial, changes in the Balance Sheet of the company. The Surplus account, totalling X8,797.75, is classified as follows& Capital Surplus 1171,494.77 Contributions in Aid of Construction 14801.53 Earned Surplus 6.501.45 Total 138.797.75 For a full explanation'of the Capital Surplus, please refer to our report of December 31, 1940• Contributions- in Aid of Construction in the amount of $14001.53 represents money contributed to the company for the extension of service facilities that become the property of the company and therefore are included in its plant values. The Earned Surplus totalling $6,501.45 is set forth in detail in Exhibit B, which shows that it was decreased to the extent of $582.87, mostly as a result of operating losses for the year. OPERATIONS The Operations for the year ended December 31, 1942, are shown in detail -. Country Club District Service P2M2 n9 in Exhibit C and supporting Schedule C-1, and shows a net loss of $599.11 after ` providing for interest charges. In arriving at these figures, depreciation in the amount of $4,753.60 has been included. In order that you may have a better under - standing of the Operations for the year, we submit a condensed comparison for the current year and for the year ended December 34 19,41, together with increases and ., decreasaV in both amounts and percentages av followst YEAR ENTDED YEAR ENDED DECEMBER 31, 1942 MEMBER 31, 1941 • INCHEI1SEZ=UW5E TO TO.. % TO AMUNT SALES AMOUNT S,. ALES AMUNT SALES ' SALES x.18..239.71 100.00 20,805.71 100.00 2#567.o OPERATING COSTS AND EXPENSES: Mater Purchased for Resale $ 360.48 1.98 $ 342.77 1.65. 17.71 .33 Poser and Pumping 51,239.40 28.73 5094.94 25.93 155.54 2.80 Distribution Expense 40707.25 25.81 41732.34 22.74 2549 3.07 Accounting and Collection 3,555.34 19.49 2,8°'2°39 13.58 730.95 5.91 Administrative and General / �0 ?3.12 22.06 1, 974.76 9.49 2,048436 12`57 TOTAL OPERATING COSTS AND EXPENSES $ 17,885.59 .0 7 152269.20 73.39 $ 2,616.39 26_68 # 353.12 1.93 # 5,536.51 26.61 $ 5,183.39 24.68 Other Income - - 40.69 .20 A0.69 .20 • NET PROFIT BEFORE INTST AND INCOME TAXES 353.12 1.93 $ 5,577.20 26.$1 $ 5,224.08 24.88 INTEREST PAID 952.23. 5.22 1.077.80 5.18 125.57 .O6 $ 599•11 3.29 $ 4,499.40 21,63 6 5,098.51 24.92 PROVISION FOR INCOME TAXES - - - 1,136.27 5_46 1,136.27 5.46 • NET PROFIT TO aURPLUS`*- 3.29 0 3.363.13 16.17 (''. 19 It will be noted from the foregoing comparison that there was a substantial reduction in revenue during the year with an increase in operating costs before pro- vision for interest. No provision for income taxes eras set up for the year ended December 31, 1942• The net operating profit shows a decrease from the previous year of $50224.08. Country Club District Service Company COWRNTS ON BALANCE SHEET • FI-D ASSETS: We are showing the Fixed Assets in summarized form on the Balance Sheet, Exhibit A, and in still further detail in Schedule A- 1. The new expenditures during the year amounted to only $23.32. Depreciation to the extent of $4,753.60 has been taken into operating expenses. The Fixed Assets of the company have been pledged to the St. Paul Fire and Marine Insurance Company for a, loan in the -original amount of $20,000.00, with a present balance of $15,000.00, bearing interest at 5%. This loan is payable at the rate of $1,000.00 per year on November 1, with interest payable semi-annually up to November 1, 0 1951, and the balance of 46,000.00 is payable on November 1, 1952• The company has extended service into newly developed subdivisions, and agreements were reached with the promoters of these subdivisions.to furnish money for the extending of the grater mains without Merest.. The company repays these advances by returning to the subdividers one -half of the revenue received from the users of these mains until peid for, but in no event are repayments made for a period to exceed 10 years. The company now has advances for construction repayable out of revenue as of December 31, 1942, as follows: ADVANCED BY TH0BPF.B80S...INC: " Wooddale Section 4,284.65 Brucewood Addition 3000.69 Arden Avenue Extension 320.53 Portion of East Sunnyslope 1,323.19 ADVANCED BY WHITE INVESTMENT COMPANY: Hidden Valley 1,199-43 Total a 10A49.49 Of these advances, the one made by Thorpe Bros. for the Wooddals section with a present balance of $4,2$1+.65 is.repayable by diverting to Thorpe Bros. ones -half of the revenue received from the section up to Larch 31, 1948, and the amount remaining unpaid, if any, at that date becomes payable in full by the company to Thorpe Bros. The other advances are payable only by the diversion of 50% of the revenues from these subdivisions for the first 10 years, unless they are fully -5.. --- try Club District Service Coppanp paid up prior to that time, and any balances remaining at the end of 10 years becomes • a contribution to the company in aid of construction. In addition to the above amounts referred to, the company has received contributions in aid of construction for specific extensions which certain customers wanted. These contributions were outright gifts to the company in order to secure water service, and we have taken then in as part of the surplus. The extensions covered by these contributions become the property of the company and are included in their fixed assets, CURRENT ASSTS t The cash in bank in the amount of $40765,27 is deposited with the North- 40 western national Bank of fldinneapolis, and we have reconciled this.account and verified the balance by direct correspondence. We have also made a detailed check of all deposits and withdrawals from the bank and found them to be properly recorded and in order, The Accounts Receivable In the amount of,$3,216.97 have been classified on the Balance Sheet as to their nature. We have mate a detailed cheep of these 0 accounts and have reviewed the methodo used -to handle them and found them to be in good order. The Inventories amounting to $787.91 are classified on the Balance Sheet. We were not present when the inventories were taken, but we have examined the records of the company with regard to these inventories, and they appear to be proper. We noted that certain of the meters, were secondhand, but these secondhand meters are carried at a much reduced cost so that the values appeared to be conservative. FI %SD UABILITIESs The company negotiated a first mortgage loan on its operating properties 0 as of November 1, 1937, with the St. Paul mire and Marine Insurance Company in the total amount of $20,000.00 bearing interest at 5 %, which interest is payable on May 1 and November 1 of each year. The principal is payable $1,000.00 annually up to November 1, 1951, and the remaining *6,000.00 becomes due and payable on November 1, 1932• The present unpaid balance of this mortgage is x;15,000.00, and of this Country Club District Service ppaRany amount we have placed $1,000.00 among the current liabilities as it becomes due on November 1, 1943• The balance of Fixed Liabilities totalling 610,428.49 is made up i of advances for construction charges repayable out of revenues over a period of years as explained in a previous paragraph. CURMT LIABILITIESs The Accounts Payable are classified as foltowsr Refund of Construction Advances 1,039.58 To Officer 257.86 Total. Z 2 7. There were no trade accounts unpaid as of the and of the year. The refund of construction advances are the payments due out of revenues to subdividers for the period ending December 31, 19420 as explained in a previous paragraph. We have made an « analysis of this account and find it to be correct. The amount of $257.86 do to officer is owing to fir. Oscar Gaarden for engineering and other services rendered. 'We are abowing a list of accrued taxes in the amount of $1,487.21. These taxes are.el.l applicable to 1942, payable jn 19:3. The accrued interest payable is itemized in Schedule A--2, and notes payable to officers are also itemized on Schedule A-2, NET WORTH The particulars of Net Worth are. set, forth on the Balance Sheet, Exhibit A, • and the changes in earned surplus are set forth in Exhibit B. Net Worth is subject to revision to give effect to the Supreme Court decision as discussed elsewhere in this ' report. All of the capital stock outstanding is held by Mr. Oscar Gaarden. The r preferred stock provides for 6% annual cumulative dividends, and these dividends are z four years in arrears, which makes a total of $24.00 per share or $2,880.00 in all. The Surplus account has been classified on the Balance Sheet and totals $138,797.75. These classifications are explained in a previous paragraph. We found that the company keeps very accurate and complete records, so that full information on all of the activities is readily available. We wish to express our appreciation of the courtesies extended and the cooperation afforded us during the course of this engagement. Respectfully submitted, .- t� Certified Public Accountants 0 ALBERT B. AUSTIN, C. P.A. IV R -7- AUSTIN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS ROANOKE BUILDING MINNEAPOLIS CERTIFICATE We have made an examination of the Balance Sheet of the COUNTRY CLUB DISTRICT SERVICE COMPANY, MMEAPOLIS, MINNESOTA, as at December 31, 1942„ and of the Statement of Income and Surplus for the calend4r year ended December 31, 1942. In connection therewith, we have examined or tested accounting records of the company qnd other supporting evidence and obtained information and explan- ations from officers of the company, but we did not make a detailed audit of the transactions. In our opinion, based upon such ox mination and subject to the comments contained in this report, the accompWing Balance Sheet and related Statement of Income and Surplus fairly present, in accordance with accepted principles of accounting consistently maintained by the COUNTRY CLUB DISTRICT SERVICE COMPANY during the calendar year under review, its position at December 31, 1942, and the results of the operations for the year. e Respectfully submitted, Certified Public Accountants 40 May 21+, 1945 THE PUBLICATION OF ANY CONDENSATION OR MODIFICATION OF STATEMENTS HEREIN CONTAINED OR THE USE OF OUR CERTIFICATE DETACHED FROM ITS CONTE %T, OR THE USE OF OUR NAME IN CONNECTION WITH THE SALE OF SECURITIES OR OTHER PUBLICITY WILL NOT BE SANCTIONED UNLESS FIRST SUBMITTED FOR OUR APPROVAL, Country Club District Service. Company BALANCE SHEET As at December 31, 1942 RARMS FIXED ASSETS: Note A Schedule A -1 Land 3000..00 Wells, Building, , Tank, Distribution - System, Tools and Equipment $ 230,825.48 . Less: Accumulated Depreciation 5608 - 174.411.40 (Including $29,1(8.19 accrued at date of appraisal) TOTAL FIXED ASSETS (NET) .The above valuations were based on Independent Appraisal as of January 1.9 1937, plus subse- quent additions at cost. The above assets are pledged to secure a 5% First Mortgage originally $20,000.00, now $15,000.00 INVESTMENTS: 100.Shares Northern States Poorer Common CURRENT ASSETS: Cash in Banff . 4,785.27 Accounts Receivable - - Water �., $ `168.-19 Sewer - Construction Contributions ,- �` 1,93$.74{, Miscellaneous 676.8 ' 3, 216,97. Inventories -._. Meters . 44"' 71 Miscellaneous �� -- -_ � "�_� � � '198,20 - 787.91 TOTAL CURRENT ASSETS DEFERRED'CHARGESa Unexpired L Insurance $ 177,411.40 Exhibit A LIABILITIES AND NET WORTH FIXED LIABILITIES: 3% First Mortgage dated November 12, 19370, to St..,Paul Fire and Marine Insurance Company, due $1,000.00 annually - ®n November 1 of each year to November 1', 1951,,-and $6,000.00• on November 1, 1952• Secured by all operating Properties. Original amount $20-000.00, now.$ 15,000.00 Lqsa: Due within one year, shown in Current Liabilities 1,000.00 $ 14,000.00 Advances for Construction - Payable from Revenues -- Due March 1, 1948 Payable only to extent of 50% of revenues during 10 years after construction 256.24 TOTAL FIXED LIABILITIES 8,790.15 NOTE A - in a.nnesota Supreme Court decision handed down on January 2, 1943, ownership of the water mains and sewers serving the lots sold prior to October 11 1935, in the Brown and Fairway.sections of the Country Club District, were apparently found to.be the property of the. Village of Edina `, :ibr the benefit of the. lot owners- and-not-of the Company.. However, all additions and installations made since :the present ownership of the company, and included in their Capital Accounts, Are the property of .#he company. As a result of this.decision, the values es stated in this report do not necessarily represent the true values of the properties of the company, and until such time as these values -are definitely determined and segregated, we have not disturbed the values as they appear on the books of the company.. The decision did not make itself clear as to the compensation for services rendered to the village for fire protection service, and it may be possible that in the future definite understandings may be reached as to this compensation. TOTAL ASSETS 18.00 NOTE B - Accumulated dividends' on Preferred Stack to the extent of $24.00 per share or a total: of $2,880.00 as at December 31, 19,42 are unpaid. cURRENT LIABILITIES: Accounts-Payable Refund of Construction Advances To officer Accounts Receivable Credit Balances Abcruals - Taxes - ,Local - Capital Stock - Social Security Accrued Interest Payable- Schedule A -2 Notes Payable To Officer Schedule A -2 Current Maturity - First Mortgage Due November 1, 1943 (See above) TOTAL CURRENT LIABILITIES NET WOR_fH: 4 Capital Stock - Authorized 6% Cumulative Preferred, $100.00 Par-Value, Callable at Par C01mmon - No Par Value Outstanding - Preferred 'x.120 Shares (See Note B) 1, -Common - 200 Shares Surplus.:i Capital Surplus Contributions in Aid of Construction Earned :Surplus -Exhibit B TOTAL NET'RORTH TOTAL LIABILITIES AND NET'FORTH $ 4,284.65 6.143.84 10.428.49 1,039.58 6 $ 4297,44 9.90 $ 1, 383.61 56.25 42.35 $ 600.00 114$7,21 155.00 1.000.00 1.600:00: 30.000.00 S es $ 1:2,000.00 6.700.00 $ 18,700.00 $ 117,494077 14,801,53. 01.45 138,797.75 $ 2/+1428-49 4,549.55 157.497.5 186.475�79 . • elL W 40 Country Club District Service Company ANALYSIS OF DMED SURPLUS For the Year Ended December 31, 1942 BALANCs,J. Pte! AUDIT REPORT, DECEMBER 31, 1941 ADDITIONS: Adjustment of Federal Income Tex Accrual Exhibit B # 7,084.32 18.46 $ 7,102.78 DEDUCTIONE4 Not Operating Loss for year 599.11 Adjustment of Sewer Accounts Receivable ' -2.22 601,33 TOTAL EARNED SURPLUS, DECMER 310 1942, PER EXiiIBIT A 16,01.4 Exhibit C • Country Club District Service Company PROFIT AND LOSS STATEMENT w For the Year Ended December 34 1942 r OPERATING REVENUESs • Sales and Services to Customers $. 18,211.79 Riscellaneous Revenues (Net) 26.92 GRASS REVENUE 180238.71 OPE€OiTING WENSES : Water Purchased for Resale `6u.48 Power and Pumping 5,239,40 Distribution Expenee 4,707.25 Accounting and Collection 3,555.34 Administrative and Genera;, 4.023.12 R TOTAL.OPERATING COSTS AND EXPENSES 17.885.59 dL NET PROFIT BEFORE INTEREST 353.12 INTEREST CHARGES 952.23 NET LOSS TO SURPLUS, Exhibit B .� • • Country Club District,Service.Company OPERATING -COSTS AND EXPENSES For the Year Ended December 31, 1942 Schedule.0 -1 360.48 5,239.40,. 4,707.25 - 3,555.34- TOTAL ADMINISTRATIVE AND GENERAL 4.023.12 TOTAL OPEWING COSTS AND EXPENSES WATER PURCHASED FOR R&SALB' , � POTFR AND PUMPING: Power Purchased $ 2.." -000 Operating Labor Depreciation 1,045.15 .Local Taxes 1,38$.61 Supplies 'and Expense 145.90 Maintenance 51.09. TOTAL POWER. AND PUMPING DISTRIBUTION EXPENSES: Depreciation- , <" �" 3, 691. =63� Akintenance of Was, 159.36, ', Services on Consumers Premixes - 610:75 Operation of Distribution Lines 245.50.. - TOTAL DISTRIBUTION UPE0E... ACCOUNTING..AND COLLECTIONS . -Meter.Reading 225.00 Blling.and Accounting.. 21470000 "�1i6cell8neous _, 860.34 z TOTAL'ACCOUNTING AND COLLECTION ADMINISTRATIVE AND GENERALt Salaries. and. Wagde 1,760.20 Miscellaneous 457010 ✓ Insurance 33.06 Expenses of General Officers 9408 Legal Services Supplies and Expense 1,525.00 2.30 Federal,Capital Stock Tax Ill". ?5 Payroll Taxes 23.31: Depreciation on Office Equipment 16.82 Schedule.0 -1 360.48 5,239.40,. 4,707.25 - 3,555.34- TOTAL ADMINISTRATIVE AND GENERAL 4.023.12 TOTAL OPEWING COSTS AND EXPENSES i ! Schedule A-1 NOTE A - The above assets mortgaged to tho St, Paul Fire and urine Insurance Company to secure a loan bearing interest at 5%, in an original amount of x$20,000.00, now #15,000.00. NOTE B - The values as shown above are subject to amendments to give effect to the Supreme Court decision as referred to elsewhere in this report. Country Club District Service Company FIXED ASSETS AND DEPRECIATION Year Ended December 31, 1942 ASSETS DEPRECI A T 1 0 N DEPRECIATED BALANCE BALANCE BALANCE BALANCE VALUE 1,,-1- ADDITIONS DEDUCTIONS 12_31 -42 RATE 1-12 CURRENT DEDUCTIONS 12-31-42 12 -x-,42 WATER DIVISION:. . Land $ 3,000.00 - - - - 3,000.00 - - $ - - $ - - - - 3,000.00 Buildings 20088.35 - - - - 2,088.35 4% 469.64 83.53 - - 553.17 1035.18 well 2,578.27 - - - - 2078.27 1 2/39 257.83 42.97 - - 300.80 2,277.47 Well #2 1,950.00 - - - - 1050.00. 1 213% 146.25 32.50 - - 178.75 19,771.25 Elevated Tank and Piping 10,053.34 - - - - 10,053.34 4% 5,112.98 402.13 - - 5035.11 4038.23 Pumping Equipment 82709.28 - - - - 89709.28 5% 1,967.75 435.46 - - 2,403.21 6,306.07 Water Distribution System 121,170.34 12.32 - - 121.182.66 1 2/3% 20.480.67 2.019.58 - 22.500.25 98.682.41 TOTAL WATER DIVISION 349. 542, 8 S 12i.32- - 1149.561.90 J 28.435212 A,2AO16.17 1 , 6 31.451.29 1182110.61 SEAR DIVISION r Sanitary Sewer System 51022.79 - - - - 51022.79 2,% = 13,834.57 0 11,030.46 4 - - 14,865.03 36,657.76 Storm Sewer System 32.079.68 � 32.079.68 2% 9.174.90 641.59 = - 9.816.49 22,263.19 TOTAL SEM, DIVISION S 83.602. I 83.602.47 231k009.47 J 1 672.0 1 J 24,681.52 58.920.95 MISCELLANEOUS t Miscellaneous Tools and Equipment $ 485.61 485.61 10% 161.06 $ 48.56 $ 209.62 275.99 Office Furniture and Equipment 164.50 11.00 - - 175.50 10% 54.83 16.82 - 71.65 103.85 TOTAL MISCELLANEOUS 650.11 215.89 65.38 _ - � 282.27 � 379.84 TOTALS�23�3.s802.16 2 . 2 51, 660.48 A Ao752.60 TOTALS PER EXHIBIT A 5 233.825.48 56 177.411.40 NOTE A - The above assets mortgaged to tho St, Paul Fire and urine Insurance Company to secure a loan bearing interest at 5%, in an original amount of x$20,000.00, now #15,000.00. NOTE B - The values as shown above are subject to amendments to give effect to the Supreme Court decision as referred to elsewhere in this report. f Schedule.A -2 • s CountVy Club District Service Company NOTES PAYABLE AND ACCRUED INTEREST THEREON As at December 31, 19,42 w • DATED PAYER DUE FIXFJD LIABILITIES 3.1-1-37 St. Paul Fire and Marine Insurance Company 1.1-1-52 Payable annually at $1,000.00 on November 1, $6,000.00 payable on.Novem- ber 1, 1952 CURRENT LIABILITIES 12-31-41 Oscar Gaarden Ak i b, TOTAL PER EXHIBIT A.- Fixed Liabilities Current Liabilities U INTEREST ACCRUED TO RATE MUNT 12- -3142 5% 15,000.00 125.00 12 -31 -42 5% 600.00 30.00 15.600.00 140 000. 00� 1x600.00 1 .00