John Kilpatrick Turnpike, - Oklahoma Turnpike Authority CAFR Financial Section.pdf · PDF...
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John Kilpatrick Turnpike,near May interchange
Accountants and Business Advisors
Suite 1200 1 Leadership Square 211 N. Robinson Oklahoma City, OK 73102-7148 T 405.218.2800F 405.218.2801W www.grantthornton.com
Grant Thornton LLP US Member of Grant Thornton International
Report of Independent Certified Public Accountants
Members of the Oklahoma Turnpike Authority
We have audited the accompanying statement of net assets, and the related statements of revenues, expenses and changes in net assets and cash flows of the Oklahoma Turnpike Authority (the Authority), as of and for the years ended December 31, 2006 and 2005. These financial statements are the responsibility of the Authoritys management. Our responsibility is to express anopinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America as established by the American Institute of Certified Public Accountants and the standards applicable to financial audits containedin 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authoritys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andthe significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Authority, as of December 31, 2006 and 2005, and the changes in its net assets and cash flows, for the years then ended in conformity with accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated March 16, 2007 on our consideration of the Authoritys internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and other matters. The purpose of that report is to describe the scope of our testing of internal controlover financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with GovernmentAuditing Standards and should be considered in assessing the results of our audit.
The Managements Discussion and Analysis on pages 14 through 21 is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America and the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Authoritys basic financial statements. The accompanying supplementary information listed in the table of contents is presentedfor purposes of additional analysis and is not a required part of the basic financial statements. The supplemental financial schedules on pages 44 through 50 have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section on pages 3 through 12 and the supplementary statistical section on pages 53 through 92 have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.
Oklahoma City, Oklahoma March 16, 2007
Oklahoma Turnpike AuthorityManagements Discussion and Analysis
Years Ended December 31, 2006 and 2005
This section of the Oklahoma Turnpike Authoritys (OTA) annual financial report presents our discussion and analysis of the OTAs financial performance during the fiscal year that ended December 31, 2006. Please read it in conjunction with the transmittal letter in the introductory section of this report and the OTAs financial statements, which immediately follow this discussion and analysis.
n In August, the Authority issued through a negotiated sale, six separate series of Refunding Second Senior Revenue Bonds totaling $635.59 million. The Series 2006 Revenue Bonds consisted of the Series 2006A fixed rate bonds totaling $104.79 million and the five separate Series 2006B-F variable rate bonds totaling $530.8 million. The $530.8 million in variable rate bonds are being hedged with five interest rate swap agreements to convert the Authoritys variable interest rate exposure to a fixed rate exposure. Under the terms of the swap agreements, each month the Authority pays the swap providers a fixed rate of 3.859% and in turn receives a payment from the swap providers at a rate equal to the Bond Market Association Index. The bonds closed on August 24th and resulted in net present value savings of just over $40 million.
n Toll revenues generated approximately $194.5 million in 2006 and exceeded 2005 toll revenues by 1.7%. Toll transactions grew to roughly 135.1 million, a substantial 3.0% increase over 2005. Total operating expenses were approximately $64.8 million in 2006. The 8.2% increase in total operating expenses over 2005 is largely a result of legislatively mandated increases in personnel costs related to salary, health and retirement benefits. These personnel costs alone accounted for approximately 40% of the total $4.9 million increase in total operating expenses.
n Total capital assets, net of depreciation, were approximately $1,186.1 million as of December 31, 2006, representing a 3.7% increase when compared to total capital assets at December 31, 2005. The increase in capital assets is primarily related to the 39.0% increase in Construction work in progress, the completion of major rehabilitation projects and the culmination of the Final System Acceptance phase of the toll collection upgrade performed by TransCore.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of this annual report consists of three parts: managements discussion and analysis (this section), the basic financial statements with the notes to the financial statements and other supplementary information.
The financial statements provide both long-term and short-term information about the OTAs overall financial status. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of other supplementary information that further explains and supports the information in the financial statements.
The OTAs financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units on an accrual basis. Under this basis, revenues are recognized in the period in which they are earned, expenses are recognized in the period in which they are incurred and depreciation of assets is recognized in the Statements of Revenues, Expenses, and Changes in Net Assets. All assets and liabilities associated with the operation of the Authority are included in the Statements of Net Assets.
The Statements of Net Assets report the OTAs net assets and how they have changed. Net assets the difference between the OTAs assets and liabilities is one way to measure the OTAs financial health or position. The increase in OTAs net assets during 2006 is an indicator of its strong financial health.
FINANCIAL ANALYSIS OF THE OTA
The OTAs total net assets at December 31, 2006, were approximately $269.4 million, a substantial increase of 9.0% over December 31, 2005. (See Table A-1.) Total assets decreased 1.2% to $1,533.2 million, and total liabilities decreased 3.1% to $1,263.8 million. As of December 31, 2005, total net assets were approximately $247.2 million. Also, in 2005, total assets decreased 0.9% to $1,551.2 million, and total liabilities decreased 1.0% to $1,304.0 million when compared to December 31, 2004.
Table A-1Net Assets
(in millions of dollars)
2006 2005 2004
2006-2005Current assets: Cash and cash equivalents-unrestricted $ 22.3 $ 9.5 $ 20.8 134.7% Investments-unrestricted 123.6 140.9 136.8 (12.3%) Cash and Cash equivalents-restricted 61.6 71.6 70.1 (14.0%) Investments-restricted 36.8 82.3 121.7 (55.3%) Other current assets 4.4 4.5 5.8 (2.2%) Total current assets 248.7 308.8 355.2 (19.5%)
Noncurrent assets: Cash and cash equivalents-restricted .8 1.5 4.2 (46.7%) Investments-restricted 90.2 89.3 35.4