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HomeMy WebLinkAbout1946_VILLAGE OF EDINA_AUDIT REPORT0 0 n u AUDIT REPORT For the Year Ended December 31, 1946 COUNTRY CLUB DISTRICT SEER CE COMPANY (A Corporation) Minneapolis, Minnesota U, y 0 4 • Country Club District Service Company TABLE OF 0014TENTS PAGES 1 TO 7 -- Letter of Transmittal and Comments. PAGE 8 - Certificate. EXHIBIT A - Balance Sheet, As at December 31, 1946. EXHIBIT B - Analysis of Earried Surplus, For the Year Ended December 31, 1946. EXHIBIT C - Profit and Loss Statement, For the Year Ended December 31, 1946. SCHEDULE C-1 - Operating Costs and ftpenses, For the Year Ended December 31, 1946. SCHEDULE A -1 - Fixed Assets and ,accumulated Deprecia- tion, For the Year Ended December 31, 1946. AUSTIN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS ROANOKE BUILDING MINNEAPOLIS ALBERT B.AUSTIN,C.P.A. - June h, 1947• Mr. Oscar Gaarden, President, Country Club District Service Company, Minneapolis 10, Minnesota. Dear Sirs We have made an examination of the .books and records of .the COUNTRY CLUB DISTRICT SERVICE COIAPANY, a Minnesota Corporation, KMTWOLIS, MIN1NESOTA, for the year ended December'31, 1946, and we are pleased to submit our report in the following comments and in the Exhibits and Schedules as listed in the pre= ceding Table of Contents. HISTORICAL 1 771 A complete history og the'Compapy was`eet, forth in our report for the year ended December 310 191�c?, and subsecluent- data is included in our reports for the years ended December 31 19137, trough 1945 :none interested in the his- . tort' of the Company prior to the beginning of this year may refer to those re- ports. There has, been no change during the current year as to the status of the Company in regard to the question of ownership of'certain viater mains, 'and -storm and sanitary sewers, and until such time as there is .a complete clarification of the interpretation of the Courtte intention, the - values -as stated in this report do.not necessarily represent the true values of the properties -of the Company, and in view of the above, we have not disturbed the,values as they appear.on the books .of the Company. During the current gear, the Village of Edina,. in conformance with pro- visions of-the franchise, made an offer.to buy the water system-41. As provided in the franchise, a Committee of three Engineers, one selected-,.by the Company, one by the Village and the third by the other two Engineers, made an appraisal of the value of the water system. The Village then made an offer which disagreed 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. n u n u 2 Country Club District Service Company materially from the figures arrived at by the appraisers, and the Company filed a petition and complaint with the Hennepin County District Court disagreeing with the figures arrived at by the Village, and petitioning said Court to determine a fair valuation. No hearing has been held as yet on the above petition. Also during the.current year, the Village of Edina brought an action against the Company to effect a decrease im consumer.rates, This - action was countered by the Company, which did not concede the reduction -'and the.Company also asked for payment for fire protection which the.Village has always enjoyed but has never.paid for. No action has been taken as yet on this case. FINANCIAL POSITION We are submitting as Exhibit A and supporting Schedule A -1 the finan- cial position of the Company in detail-as of Decesber 31, 1946, subject however, to the preceding comments under =the caption. aHistoriaalW and further. comments in this report. For your convenience.,-we.are submitting in summarized form,''this balance sheet in comparison with the , one f ®r Peceriber 31, 1945, together with increases and decreases as follows: DECEMBER 31, DECEMBER 31, INCREASE ASSETS 1 9 4 6 1 9-4 5- - DECREASE Fixed Assets (Net) 6174,044.28 : $164,972.85 $-9,07.1.40 Current Assets 170466.32 14,956.80 2,509.52 Deferred Charges 61,20 18'.00 '43.0 TOTAL ASSNS X191,571.80 iln2947.68 11 `62 LIABILITIES AND" NET . WORTH -Fixed Liabilities 25,670." 6- 18,103.85 $ 7066,59 Current- 4abilities 4,032.27 4,005.81 .26.46 -Net Worth 161,869..09 157.838.02 4.031.07 TOTAL LIABILITIES AND NET WORTH 1 1 1.80 179.947.68 fill 412 The changes in the balance sheet arise primarily from the result of ad- ditional investments in the water division and additional income due to increased 0 11 s n - 3 - Country Club District Service Comoany consumer service. The surplus account, totalling $143,169.09, is classified as followss Capital Surplus $117,!.94.77 Contributions in Aid of Construction 16,922.79 Earned Surplus 8.751.53 TOTAL X14.31169.09 For a full explanation of the capital surplus, please refer to our re- port of December 31, 1940. Contributions in aid of construction, in the amount of $16,922.79 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 value. The earned surplus, totalling $8,751.53, is set forth in detail in Exhibit B, which shows an increase over the previous year in the amount of $1,884.81, all of which has resulted from net profit for the year. OPERATIOES The operations for the year ended December 31, 1946, are shown in de-- tail in Exhibit C and supporting Schedule C-1, and shows a net profit of $1,884.81 after providing for interest charges, depreciation and income taxes. In arriving at these figures, depreciation in the amount of #4,851.52 has been included. In order that you may have a better understanding of the operations for the year, we submit a condensed comparison for the current year and for the year ended December 31, 1945, together with increases and decreases in both amounts and percentages as followss :J 9 s -4- Country.Club District Service Company NET PROFIT TO SURPLUS 11884.81 7.$ 2kL.D 1.4Q L13_61.88 6. It will be noted from the foregoing - _comparison that there was an increase in revenue and a corresponding increas'e-in,opqratin� costs.over the previous years I:PM WTS ON- BALANCE SHERRY , FIXED ASSETS= We are showing the fixed assets in summarized form on the balance sheet Exhibit A, and in detail on Schedule A -1. New expenditures during the year amounted to:$13,922092, most of which were additions to.the water distribution system. Depreciation in the amount of $4051.52 has been taken into operating expenses. The fixed assets of the Company are 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 $11,000.00 bearing. interest at 5 %. The interest is payable on may 1 and November 1 of each year, and the principal is payable at the rate. of $1,000.00 per year on November l up to November 1, 1951, and the balance of $6,000.00 remaining at that time is- payable on November 1, 1952• Daring the past, the Company has extended service into newly developed YESAR ENDED DECE MER 31, 1946- DECMER- 312 1945 INCREASE - :DECREASE AMOUNT % TO SALES AMOUNT % TO SALES AMOUNT.% TO SALES. Sales 623,929.03 100.00% 09.036.27 100.00% $4,892.76 -o--% Operating Costs and Expenses:: Water Purchased for Resale 568.78 2.38 $ 335.84 - .1.76 $ 232.94 .62 Power and Pumping 6,797.43 28.40 5,662.85 29.75 1,134.58. 1.35 Distribution Expense 5,697.36 23.81 4964.04 26.07 733.32 2.26 Accounting and .Collection 3,956.56 16.53 3,331.66- 17.50 - 624.90 .97 Administrative and General 3.$52.97 16.10 3,833.29 20.15 19.68 4•95 Total Operating Costs and- Expenses $20.873.10 87.22 818,127,68 95.23. $2,745.42 8 Net Operating Profit 3,055.93 12.78 908.59 4.77 $2,147.34 8.01 Other Income .68 -- .-0 -- -0= -0- , 68 -0- $ 3,056.61 12.78 6 908.59 4.77 $2,148.02 8.01 Other Deductions 591.67 2.47 6141.66 3.37 49.99 .90 Net "Profit Before Provision for Income Taxes 8 2,464.94 10.31 266.93 1.40 $2,198.01 8.91 Income Taxes 580413 .2.43 -0- --0- 580.13 2. NET PROFIT TO SURPLUS 11884.81 7.$ 2kL.D 1.4Q L13_61.88 6. It will be noted from the foregoing - _comparison that there was an increase in revenue and a corresponding increas'e-in,opqratin� costs.over the previous years I:PM WTS ON- BALANCE SHERRY , FIXED ASSETS= We are showing the fixed assets in summarized form on the balance sheet Exhibit A, and in detail on Schedule A -1. New expenditures during the year amounted to:$13,922092, most of which were additions to.the water distribution system. Depreciation in the amount of $4051.52 has been taken into operating expenses. The fixed assets of the Company are 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 $11,000.00 bearing. interest at 5 %. The interest is payable on may 1 and November 1 of each year, and the principal is payable at the rate. of $1,000.00 per year on November l up to November 1, 1951, and the balance of $6,000.00 remaining at that time is- payable on November 1, 1952• Daring the past, the Company has extended service into newly developed 5- Country Club District Service Company- sub - divisions and agreements were made whereby the.promoters of these sub- divisions • furnished the money for the extending of-the water mains without interest. The Company agreed to repay these advances -by returning to, the sub- dividers, a portion of the revenue received from the users of these mains until paid for, but in no event were repayments to be made fora period to exceed fifteen years. The Com- pany now has advances for conetruction.repayable out of.revenue as at December 31, 1946, totalling $15,670.". Just prior to the end of the year, the Company made - an.agreement with the sub - dividers in which it agreed to liquidate the above bal- ance, and on January 27, 1947, the Company completed this transaction by a payment and received full release from the sub- dividers. In addition to the above amounts referred to, the Company has received. contributions in aid of construction -for specific extensions which certain cus- tomers wanted. These contributions vere outi -fight- ,gifts to the Company in order to secure water service and these have-been` taken -in as,,pamt.of the surplus. The ex- r tensions covered by these oontribut ons'ber.6me' the,property of the-Company and are included in their fixed assets. ' CURRENT ASSETSs The cash on hand and in banks is distributed as follows: Undeposited Cash 31.98 Northwestern National Bank of Minneapolis 51984.49. First Edina State Bank 8.247.36 TOTAL 1 26 ..8 We have made a detailed check of all deposits against recorded receipts and of all withdrawals from the bank and found them to be properly recorded and in order. We further reconciled the balances as shown by the books with those shorn by the bank statements and verified the bank balances by direct correspond- 46 once with the depository. The accounts receivable in the amount of'$2,122.0l, have been classified on the balance sheet as to their nature. We made a detailed check of these ac- counts and revievred the methods used to handle them and they appeared to be in 6 �- Country Club District Service Comuany I proper form.., We Aidl not verify the balances by direct correspondence with :the::; • customers. The inventories amounting.-to.$l,080.45'.are classified on the balance . sheet: We were not present when the inventories were taken but.we:examined.the records of the Company,xith regard to-these inventories and they appear to be:.._ proper, and the valuee'.appear.to be conservative. FIXED LIABILITIW - The Company negotiated its first mortgage.loan on its operating proper= ties,as of November 1, 1937,.with the St. Paul., -Fine and Marine Insurance Company. in the total amount of:- $20,000.00, bearing interest at 5% per annum, which in- terest is payable on'May 1 and November 1 of each year. The.principal is.payable $1,000.00.annually up to.November:l, 1954 and.the remaining $6,000.00.becomes.. due and payable on November-.1, 1952. The present unpaid balance of this mortgage 3:s $11,000.00 and-of this .amounts ire have .shoin1gt30Q:00 among the current lia- bilities as it becomes. due On.146vember-1' 1947. -The balance of-fixed liabilities - totalling 615 - .670.4.4 is made ctp -of ,advances for, construction which we have ex:- plained in.a previous paragraph. CURRENT LIABILITIESs. The current liabilities, consisting -of accounts payable <and accruals for interest and taxes'principally, are shown in detail on the balance sheet and we believe need no further explanation.. NET VORTHr The particulars of net worth are set forth on the balance sheet Exhibit A, and the changes in earnad'surplus are set forth in Exhibit B. Net worth-is subject to revision.to give effect -to the final- decisiona.as to.the ownership of. ` certain of the,properties as discussed elsewhere in this report, and in our pre- vious reports. All -of the capital -stock outstanding is held by-Mr. Oscar Gaarden. The preferred stock provides for,6%'annual cumulative dividends, and these divi- dends are eight years in arrears, which makes a total of.$48.00 per share or 49 L] - 7 - Country Club District Service Company 45,760.00 in all. The surplus account has been classified on the balance sheet and totals $113,169.09. These classifications are explained in a previous para- graph. 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, Certified Public Accountants L] P ALBERT B.AUSTIN,C.P.A. AUSTIN Sc COMPANY CERTIFIED PUBLIC ACCOUNTANTS ROANOKE BUILDING MINNEAPOLIS CERTIFICATE We have made an examination of the Balance Sheet of the COUNTRY CLUB DISTRICT SERVICE WMANY, MINNEAPOLIS.. MINNESOTA, as at December 31, 1946, and of the Statement of Income and Surplus for the calendar year ended December 31, 1946• In connection therewith, we have examined or tested accounting records of the Company, and other supporting evidence and obtained information and ex- planations from officers of the Company,, but we did not make a. detailed audit of the transactions. In our opinion, based upon such examination, and subject to the com- meats contained in this report, the accompanying 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 Decem- bar 31, 1946, and the results of the operations for the year. June 4, 1947. Respectfully submitted, Certified Public Accountants 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. Exhibit A Country Club District Service Company BALANCE SHEET. As at December 31, 1946 A.8SETS FIXED ASSETS: Note A - Schedule A -1 Land - -5,498:83 Wells, Building, Tank, Distribution System, Tools and Equipment 02449'095..55 Loses Accumulated Depreciation (Including $29,178.19 accrued at date of appraisal) - 75.550.10 168,545-45.-- 4 TOTAL FIXED ASSETS (NET) $174,044.28 The above valuations were based on independent appraisal as of January 1, 1937, plus subsequent additions at cost. The above assets are pledged to secure.a 5% First Mortgage' originally 620,000.00, now $11,000.00. CURRENT ASSETS: Cash on Hand and in Banks $ 140263.83 Accounts Receivable - water 45.87 Construction Contributions 19884.67 Miscellaneous � � -- -191 50 2,122004. Inventories - Meter 8I2.76' . Miscellaneous 267.69 1.080:45 TOTAL CURRENT ASSETS �_ ..17,466.32 DEFERRED CHARGES Unexpired Insurance 61.20 NOTE A - In a Minnesota Supreme Court decision handed down and filed on: January 21 1943, the Court held that the water - mains =and sewers serving the lots in the Brown and Fairway- sections of the Country Club District sold prior to October 1, 1935, Were the property of the Village of Edina for the benefit of the lot owners. However, the decision is not clear, and until such time as the values.are definitely_determined and segregated, we are not disturbing the values as they appear on the books of the Company, and the values as stated in this report do not- necessarily represent the.-true values of the.properties of the Company. However, any property installed prior to the present ownership not covered.by the decision and all additions and installations made subsequently are included - in the capital accounts end are the property of the Company. NOTE B - Accumulated dividends on Preferred Stock to the.extent of $48.00 per share or a total of $5,760.00 as at December - 31,.1946, are unpaid.. TOTAL ASSETS X191.,571.80 LIABILITIES.AKD NET WORTH FIXED LIABILITIES: 5% First Mortgage dated November 1, 1937 to the St. Paul Fire and Marine Insurance Company due $1,000.00 annually on 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 $11,000.00 Less: Due within one year, shown under Current Liabilities 1,000:00 $ 10,000.00 Advances for Construction Advanced by Sub - Dividers during past years,.,,; to have been repaid out of revenue. On January 27, 1947, this liability was.fully liquidated by settlement with the Sub - Dividers - (See Comments) Balance as at December'31, 1946 15.670.44" TOTAL FIXED LIABILITIES 251670.1,4 CURRENT LIABILITIES: Accounts Payable - Income Tax withheld on Wages 309.74 Miscellaneous 25.95 $ 335.69 Accounts Receivable - Credit Balances 7.45 Accruals - .Interest Payable 91.67 Real Estate and Personal Property Taxes 29010.72 Social Security Taxes 6.61 Federal Income Tax 501.02 Minnesota Income Tax 79.11 2,689.13 Dotes Payable - Current Maturity. - -First Mortgage due November 1, 1947'(See.above) 1,000:00 TOTAL CURRENT LIABILITIES 4,032.27 ' NET WORTHS Capital Stock - Authorized - 6% Cumulative Preferred, $100.00 Par Value, Callable :at -Par - 300 Shares ;' S 30,000.00 Common -- -No -Par Value .- 200 Shares :.i, -0- Outstanding '- Preferred - 120 Shares. (See Note.B), 12,000.00 Common - 200 Shares 6,700.00 18,700.00 Surplus - Capital Surplus $1170494.77 Contributions in Aid of Construction 161922.79 Earned Surplus - Exhibit B 8,751.53 143,169.09 TOTAL NET WORTH 161,869.09 TOTAL LIABILITIES AND NET WORTH 191,571.80 1: Country Club District Service Company ANALYSIS OF EARNED SURPLUS For the Year Ended December 31, 1946 .Exhibit B 41 BALANCE, PER AUDIT REPORT,-DECEMBER-31, 1945 $6,866.72 ADD& Net Profit for Year, after Provision for Intone Taxes 1,884.81 TOTAL EARNED SURPLUS, FXR MI UBIT A 8 "1 s Country Club District Service Company i PROFIT AND LOSS STATEMENT For the Year Ended December 31, 1946 OPERATING REVENUES: Sales and Services to Customers Miscellaneous Revenues (Net) GROSS REVENUES OPENING COSTS AND EXPENSES: - Schedule C-1 Water Purchased for Resale $ 568.78 Power and Pumping 6,797.43 Distribution Expenses 5,697.36 Accounting and Collection 3,956.56 Administrative and General 3.852.97 t TOTAL OPERATING COSTS AND EXPENSES NET OPERATING PROFIT OTHER. INCOME Interest Received OTHER DEDUCTIONS Interest Expense NET PROFIT (Before Provision for Income Taxes) Lesss T PROVISION FOR INCOME TAXES Federal Minnesota NET PROFIT TO SURPLUS - Exhibit B Provision for Depreciation Included in Above • Exhibit C $23,886.06 42.97 $23,929.03 20.874.10 $ 3,055.93 .68 $ 3,056.61 591.67 $ 2,464.94 $ 501.02 79.11 580.13 11,884.81 40951.52 S At Schedule C-1 Country Club District Service Company OPERATING COSTS AND EXPENSES For the Year Ended December 31, 1946 WATER PURCHASED FOR RESALE $ - 568.78 POWER AND PUMPING: Power Purchased $2,843.20 Operating Labor 698.50 Depreciation 1,047.83 Local Taxes 2,010.72 Supplies and Expense 162.33 Maintenance 3185 TOTAL POWER AND PUMPING 6,797,43 DISTRIBUTION EXPENSE: Depreciation $3,786,14 Maintenance of Mains 280.36 Service on Consumers Premises 11062.05 Operation of Distribution sines 568.81 TOTAL DISTRIBUTION EXPENSES 5,697.36 ACCOUNTING AND COLLECTION: Meter Reading $ 349.50 Billing and Accounting 2,760.00 Miscellaneous 847.06 TOTAL ACCOUNTING AND COLLECTION 3,956.56 ADMINISTRATIVE AND GENERAL: Salaries and Wages $23,,4",00 Office Supplies and Expense 19,29 Legal and Audit 156,,00--' Insurance 21.75 Miscellaneous 19148,90 Payroll Taxes 45.48 Depreciation on Office Equipment 17.55 TOTAL ADMINISTRATIVE AND GEIMUL 3,852. TOTAL OPERATING COSTS AND EXPENSES - To Exhibit C 1202872.10 Country Club District Service Company FIXED ASSETS AND ACCUMULATED DEPRECIATION For the -Year Ended December 31, -1946 A S S E T S BALANCE BALANCE 1-1-46 DEDUCTIONS 1212 - 31:466.6 RATE WATER DIVISIONa. -0- -0- -0- $ Land $ 3,000.00 $ 20498.83 -0- Buildings 2,109.40'. 85.17 -0- well ,# ..1 .2, 578.27 -0- 42.97 Well #- 2 1, 950.00 -0- . -0- Elevated Tank and Piping 10,053.34 -0- -0- Pumping Equipment 8,709:28 -0- -0- Water Distribution System 1220958.15 31,317.87 -0- Meters 49.44 -0- -' . -0- TOTAL. WATER DIVISION $151,407.88 13 0 qq.gj $ SEWER DIVISIONS 30,688.00 49.44 4% Sanitary Sewer System ` -:6- 51,522.79.. -0 -. $. -0- Storm Sewer System 32,079:68 '' ? -0- --0- TOTAL SEWER DIVISION, s$ 83,602.47 --0_ -0- MISCELLANSOUSs Tools and Equipment --485-.61 21.05 $ -0- Office Furniture and Equipment 175.50: -0- -0- TOTAL MISCELLANEOUS $ 661.11 S 21:0 -0- TOTALS $235,671.46 1 0222.92 -0- TOTALS, PER EXHIBIT A ACC.UM TL ATED, D.EPRECI-ATI'0N BALANCE BALANCE 1 -1 -46 - CURRENT DEbUCTIONS 12_3346 5,498.83 -0- -0- -0- $ -0- . $ -0- 2,194.57 4% 805.74 85.51 -0- 891:25 2,578.27 12/3 429.71 42.97 -0- 472.68 4950.00. 1 2/3$ 276.25. .32.50 -0- 308.75 10,053.34 4% 69721.50' .402.13 -0- 7,123.63 8,709.28 '- 5 %: 39709.59 435.46 -0- 4,145.05 3.34,276.02: 1 2/3% 28,575.89 2,112.11 -0- 30,688.00 49.44 4% 2.6 1.98 -0- 4.61 $1651 309.75 0 a 527e 11 112.66_ -0- WaQ3.L7 $ 51,522.79 $17,956.41 32,079.68 2% 11,741.26 J 83,602.47 2 6 7.67 $ 506.66 175.50 $249.594.38, NOTE A - The above assets mortgaged to the St. Paul Fire and Marine Insurance Company to secure a loan bearing 3nterest'at 5% in an original amount of $20,000.00; now, $31,000.00. NOTE B - The values as shown above -are subject to any amendments that may arise as a result of final determination of certain ownership and valuations, as discussed elsewhere in this report. 109 355:30. 124.30 472.6o 0. M8. L8 $lt030-46 .1.1`-2 All 672.0 $ 49.26-. 17.55 66.81 8 P1.22, 1� �o 3 °. 0' l L $18,986.87 12.382.85 1 .72 404.56 141.85 7 5 5 59. 10 Schedule' A 1. DEPRECIATED VALUE .- 5,498.83 1,303.32 2,105.59 1,641.25 2,929.71 4,564.23 103,588.02 44.83 ;.81210675.78 32,535.92 1%,696.83 A- 52.232.75 $ 102.10 33.65 1 135.75 $174,044.28: SO - r q ns 8 z