Port Hueneme Water Agency receives FY 2023–24 audit, board agrees to 'receive and file' as staff readies RFP and CIP planning

The Port Hueneme Water Agency board unanimously voted to receive and file the agency's annual comprehensive financial report for the fiscal year ended June 30, 2024, and heard staff caution that cash reserves will need bolstering as the agency begins a planned capital improvement program.

Ashley Chaparro, the agency's interim finance director, told the board the audit, performed by Brown Armstrong in accordance with generally accepted accounting principles, contained an unmodified opinion: "The audit opinion shows that our financial statements fairly represent in all material respects the financial position of the agency as of fiscal year ending 06/30/2024," Chaparro said.

The audit shows PHWA recorded a net operating loss of about $472,000 for FY 2023'24, an amount Chaparro described as "approximately equal to our depreciation for the year." She said the agency's net position remains about $13 million, of which roughly $12 million relates to infrastructure and plant assets that depreciate annually.

Nut graf: The board's action formally accepts the audit but requires no immediate budgetary changes. Staff warned the board the agency's cash-on-hand has declined compared with prior years and that the agency will present a proposed budget and CIP (capital improvement plan) at the June meeting; the board must decide whether to increase reserves or adjust internal billing and timing when the CIP spending begins.

In her presentation, Chaparro outlined three primary drivers behind the FY 2024 results: the annual true-up calculation with member agencies (which in 2024 produced a receivable rather than the typical credit to members), certain higher water purchase charges and off-aqueduct fees, and increased operating costs including employee and pension-related expenses and the cost of the operational audit. "This did change. Typically, we're always giving a credit back to member agencies," Chaparro said, explaining the sign change on the billing-adjustment line in the ACFR.

She also flagged that insurance costs increased (about $17,000 year over year) and are expected to rise again, and that the agency's cash balance 'the checking account used for payroll and monthly payables'is lower than in prior years. Chaparro said PHWA collects a $50,000 annual CIP reserve from member agencies that has helped build a cushion, but cautioned that planned design and upfront contractor payments for larger projects could require more cash up front.

Chaparro told the board the agency has issued a request for proposals for audit services to comply with California State Controller guidance recommending auditor rotation roughly every six years; the current auditor has served the agency for more than 20 years. She said bids have not yet been received but staff is answering questions from prospective firms and hopes to present a recommended audit firm in a future meeting.

During the meeting board members asked clarifying questions about the cash-flow timing, the nature of off-aqueduct charges, and whether the annual $50,000 CIP reserve remains appropriate. Chaparro said staff will return with budget recommendations and potential changes to the reserve and billing timing when the FY 2025'26 budget is presented (staff identified the June 16 meeting as the planned date to present the proposed budget and CIP).

Votes at a glance: the board approved the agenda and the consent calendar (minutes; register of disbursements; monthly operational report) and unanimously voted to receive and file the FY 2023'24 ACFR. The receive-and-file motion passed unanimously with the recorded voice vote of the members present.

Ending: Staff will bring the proposed FY 2025'26 budget and CIP plan to a coming meeting and return with an audit-firm recommendation after the RFP process completes.