The Pagosa Area Water and Sanitation District (PAWSD) Board of Directors received and approved a clean audit for 2024 at a July 31 special meeting.
PAWSD auditor Ronnie Farmer, of Rfarmer LLC, opened discussion of the audit, explaining that the audit uncovered no evidence of financial errors or missing funds.
He stated that the PAWSD general fund, which receives PAWSD’s property tax revenues, experienced a $96,568 loss over 2024, although he noted that this loss included losses from depreciation and $500,000 in transfers of money to the district’s wastewater enterprise fund that were ordered by the board.
PAWSD chairman Gene Tautges asked if such transfers are limited by the Colorado Taxpayer’s Bill of Rights (TABOR).
Farmer replied that TABOR indicates that, if an enterprise fund receives more than 10 percent of its income from “non-service revenues,” it could lose its enterprise status under TABOR.
However, Farmer added that losing enterprise status would be difficult and might take an “almost act of Congress” to occur.
He indicated that the transfer into the wastewater fund exceeded this 10 percent limitation and that it could be argued that the wastewater fund was not an enterprise fund in 2024, although he commented that he believes this would not be a “right argument.”
Farmer stated that not being an enterprise fund would mean that wastewater rates could not be raised without taxpayer approval, although he added that PAWSD had an obligation to raise rates due to its loans for wastewater projects.
Noting that he is not an attorney, Farmer said, “I think that the debt covenants supersede what an interpretation of the 10 percent restriction … under TABOR is.”
He added that he does not believe that the district’s actions are problematic and the mandates for its wastewater projects and associated loans supersede a court interpretation of TABOR.
Farmer commented that the PAWSD general fund is a “really strong fund” with no financial issues.
He stated that the fund balance for a general fund should be no less than 30 percent of the fund’s expenditures.
Farmer indicated that the PAWSD general fund balance of $1,686,661 is about four times more than this 30 percent threshold when compared with the fund’s expenditures of approximately $1.4 million.
Farmer stated that PAWSD’s water enterprise fund had a $194,876 operating profit and the wastewater enterprise fund had a $388,461 loss, both including depreciation.
He noted that cash flows are only part of the picture when assessing the position of the enterprise funds, as both funds are being used to support construction projects at present and PAWSD has substantial loans for water and wastewater projects.
Farmer commented that, when looking at the income and cash-flow statements combined for the enterprise funds, both are “strong, viable funds,” although revenues will have to increase in the future to cover the district’s debt obligations.
He stated that the district also had to undergo a single audit due to receiving a sufficient amount of federal funds through its loans for the Snowball water treatment plant expansion project.
Farmer indicated that this audit uncovered no issues or errors for the district to correct in terms of compliance and internal controls.
He added that the audit needs to be submitted to the state of Colorado, which he stated he believed PAWSD Business Manager Aaron Burns had already done.
“Overall, things are good,” said Farmer, noting that the district has strong controls over its receipts from customers.
PAWSD board member Glenn Walsh asked Farmer if he would be willing to continue working with the district for another year even though Burns is leaving PAWSD.
Farmer stated that he was willing to do so and conveyed well wishes to Burns in his new position.
The PAWSD board then unanimously voted to accept the results of the audit.
josh@pagosasun.com
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