UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
INSPECTOR GENERAL
OFFICE OF
February 5, 2003
Memorandum
Subject:
Auditor's Report for the Nevada Clean Water State Revolving Fund
as of June 30, 2001
Audit Report No
From:
William M. Dayt
SRF Audit Man?
To:
Wayne Nastri
Regional Administrator
EPA, Region 9
San Francisco, CA
Attached is a copy of the subject audit we sent to the State of Nevada. The audit contains reports on the
financial statements, internal controls, and compliance requirements applicable to the Clean Water State
Revolving Fund (SRF) program in Nevada for the year ended June 30, 2001.
We issued an unqualified opinion on the financial statements. We qualified our opinion on the
compliance requirements applicable to the SRF program because the Nevada Clean Water State
Revolving Fund did not comply with certain compliance matters required by the Clean Water Act and
regulations. We also noted several matters involving the internal control system and operations that we
consider to be reportable conditions. In response to the draft audit report, management agreed with all of
our compliance and internal control issues, and are taking appropriate steps to correct the deficiencies.
In accordance with EPA directive 2750, the Action Official is required to take action on the findings and
recommendations in this report within 150 days.
The OIG has no objection to the release of this report to any member of the public upon request. The
report contains no confidential business or proprietary information.
If you have any questions or concerns regarding this matter, please feel free to contact me at (916) 498-
6590 or Ms. Jan Lister at (415) 947-4532.
Attachment

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A**	C
W
% P„0^
OIG
OFFICE OF INSPECTOR GENERAL
Catalyst for Improving the Environment
Audit Report
State of Nevada
Division of Environmental Protection
Water Pollution Control Revolving Fund
Financial Statements with
Independent Auditor's Report, June 30, 2001
Audit Report Number 2003-1-00060
Issued February 5, 2003
Windmill and Water Tank, Eastern Nevada

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Inspector General Division
Conducting the Audit:
Region Covered:
Program Office Involved:
State Offices:
Auditors Conducting Audit:
Western Audit Division
San Francisco, California
Region 9
Division of Environmental Protection
Bureau of Water Pollution Control
Nevada State Department of Conservation
and Natural Resources,
Division of Environment Protection,
Bureau of Water Pollution Control
Administrative Services Division
Janet Lister
Eileen Collins

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State of Nevada
Water Pollution Control Revolving Fund
Table of Contents
Independent Auditor's Report		1
Balance Sheet 		2
Statement of Revenues, Expenses and Changes in Retained Earnings Balance		3
Statement of Cash Flows		4
Notes to the Financial Statements 		5
Independent Auditor's Report on the Internal Control Structure Based on an
Audit of the Financial Statements Performed In Accordance with
Government Auditing Standards	 15
Independent Auditor's Report on Compliance with the Requirements Applicable to the Environmental
Protection Agency's State Revolving Fund Program in Accordance with
Government Auditing Standards 	 19
Supplemental Information
Schedule 1: Detail of Changes in Bonds Payable	 22
Schedule 2: Detail of Refunded Bonds	 23

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
INSPECTOR GENERAL
OFFICE OF
Independent Auditor's Report
To: Alan Biaggi, Administrator
Division of Environmental Protection
Department of Conservation and Natural Resources
State of Nevada
We have audited the accompanying balance sheet of the Nevada Division of Environmental Protection Water
Pollution Control Revolving Fund Program (the Program) as of June 30, 2001, and the related statements of
revenues, expenses and changes in retained earnings balance, and cash flows for the year then ended. These
financial statements are the responsibility of the Program's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America
and standards applicable to financial audits contained in 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 examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and 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.
The scope of our audit did not include an audit of the financial statements of the preceding year sufficient to enable
us to express, and we do not express, an opinion on the balance sheet of the Program as of June 30, 2000 or the
related statements of revenue, expenses and changes in retained earnings balance, and cash flows for the year then
ended, nor do we express an opinion on the consistency of application of accounting principles with the preceding
year.
In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the
financial position of the Nevada Division of Environmental Protection Water Pollution Control Revolving Fund
Program as of June 30, 2001 and the results of its operation and its cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States.
As discussed in Note 1, the financial statements referred to above are intended to present the financial position and
results of operations of the Nevada Division of Environmental Protection Water Pollution Control Revolving Fund
Program, a component fund of the State of Nevada. These statements are not intended to present the financial
position or results of operations for the State of Nevada or the Nevada Division of Environmental Protection, in
conformity with accounting principles generally accepted in the United States, of which the Water Pollution Control
Revolving Fund Program is a part.
In accordance with Government Auditing Standards, we have also issued a report, dated December 5, 2002, on our
consideration of the Nevada Division of Environmental Protection Water Pollution Control Revolving Fund Program's
internal control structure and a report dated December 5, 2002 on its compliance with laws and regulations. Those
reports are integral parts of an audit prepared in accordance with auditing standards generally accepted in the
United States of America and should be read in conjunction with the report in considering the results of our audit.
Office of the
ieneral
Office of the InspectouEeneral
Environmental Protection Agency
December 5, 2002

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NEVADA DIVISION OF ENVIRONMENTAL PROTECTION
Water Pollution Control Revolving Fund
Balance Sheet
As of June 30, 2001, with unaudited
comparative totals for June 30, 2000
Assets
Current Assets:
Cash and cash equivalents
Current receivables:
Loan interest
Investment interest
Due from other governments
Bond proceeds
Current portion of loans receivable
Total current receivables
Total current assets
Non-Current Assets:
Loans receivable, net of current portion
Unamortized cost of bond issuance
Total non-current assets
2001
$ 42,732,987
1,493,628
361,700
43,329
7,031
4.539.422
6.445.110
49,178,097
86,336,131
193.704
86.529.835
(Unaudited)
2000
Memorandum
Only
$ 15,611,653
1,207,422
231,702
79,040
0
3.549.713
5.067.877
20,679,530
79,109,133
50.773
79.159.906
Total assets
Liabilities and Equity
Current Liabilities:
Accrued bond interest payable
Construction costs payable
Accrued administrative costs payable
Current maturities of bonds payable
Total current liabilities
Non-Current Liabilities:
Bonds payable, net of current maturities
Arbitrage rebate
Total non-current liabilities
Total liabilities
Equity:
Contributed capital:
Environmental Protection Agency
Retained Earnings
Total equity
$ 135.707.932
557,117
0
51,991
1.745.000
2,354,108
48,625,830
99.800
48.725.630
51,079,738
69,070,035
15.558.159
84,628,194
$ 99.839.436
496,242
426,793
94,814
1.670.000
2,687,849
21,007,316
8.383
21.015.699
23,703,548
63,369,864
12.766.024
76,135,888
Total liabilities and equity
$ 135.707.932
$ 99.839.436
2

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NEVADA DIVISION OF ENVIRONMENTAL PROTECTION
Water Pollution Control Revolving Fund
Statement of Revenues, Expenses and Changes in Retained Earnings
For the year ended June 30, 2001 with unaudited
comparative totals for June 30, 2000
(Unaudited)
2000
Memorandum
Only
Revenues:
Loan interest
Investment earnings
Total revenues
2001
$ 3,246,160
1.162.885
4,409,045
$ 2,973,605
882.100
3,855,705
Expenses:
Bond interest
Amortization of bond issuance costs
Arbitrage rebate
Administrative costs:
Salaries and benefits
Operating costs
Indirect costs
Data processing
Travel
Training
Total expenses
Revenues over expenses
Retained Earnings, beginning of year
Retained Earnings, end of year
1,325,351
7,082
91,417
107,644
43,172
27,019
8,576
5,127
1.522
1.616.910
2.792.135
12.766.024
$ 15.558.159
1,242,755
5,345
8,383
183,226
32,963
40,493
352
4,892
	0
1.518.409
2.337.296
10.428.728
$ 12.766.024
The accompanying notes are an integral part of these financial statements.
3

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NEVADA DIVISION OF ENVIRONMENTAL PROTECTION
Water Pollution Control Revolving Fund
Combined Statement of Cash Flows
For the year ended June 30, 2001, with unaudited
comparative totals for June 30, 2000
Cash flows from operating activities:
Revenues over expenses and transfers
Adjustments to reconcile operating income to
net cash flow provided by operating activities:
Amortization
(Increase) decrease in current receivables
Increase (decrease) in current liabilities
Net cash provided by operating activities
Cash flows from capital and related financing activities:
Funds received from EPA
Proceeds from the sale of bonds
Refunding of bonds
Deferred amounts on refunding
Retirement of bonds payable
Net cash provided by capital and
related financing activities
Cash flows from non-capital and related financing activities:
Loan disbursements
Repayment of loans
Net cash used by non-capital
and related financing activities
2001
$ 2,792,135
20,558
387,523)
317.324)
2,107,846
5,700,171
41,774,992
(12,045,000)
( 529,967)
( 1.670.000')
33,230,196
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
( 12,028,053)
3.811.345
(8,216,708)
27,121,334
15.611.653
$ 42.732.987
(Unaudited)
2000
Memorandum
Only
$ 2,337,296
21,907
( 204,220)
495,171
2,650,154
4,772,771
1,321,129
0
0
( 1.655.000')
4,438,900
( 8,752,311)
3.769.466
(4,982,845)
2,106,209
13.505.444
$ 15.611.653
The accompanying notes are an integral part of these financial statements.
4

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NEVADA STATE DIVISION OF ENVIRONMENTAL PROTECTION
Clean Water State Revolving Fund
Notes to Financial Statements
1. Organization of the Fund
The Nevada Water Pollution Control Revolving Fund Program (the Program) was established
pursuant to Title VI of the Federal Water Quality Act of 1987, the Clean Water Act (CWA), and the
Nevada Revised Statutes 445A.060. The purpose of the State Revolving Fund (SRF) is to provide
low interest loans to local governments for constructing wastewater treatment facilities, and non-point
source projects. The loan repayment period is 20 years, and all repayments, including interest and
principal, must be credited to the SRF.
The Program was capitalized by a series of grants from the U.S. Environmental Protection Agency
(EPA) starting in 1989. State's are required to provide an additional 20 percent of the Federal
capitalization grant amount as matching funds in order to receive the grant from EPA. As of June
30, 2001, EPA awarded $82,783,100 in capitalization grants to the State, and the State is required to
provide $16,556,620 to the Program as its matching share. The state match is provided by state
bonds issued on behalf of the Program by the State Treasurer's Office.
The SRF Program is administered by the State of Nevada's Division of Environmental Protection
(NDEP) in the Bureau of Water Pollution Control. The Bureau has developed policies and
procedures for the loan program to meet the objectives of the State and Federal Acts and properly
manage and coordinate the Program. The Bureau determines the level of funding to be contributed
to the loan fund and used for loans. The Bureau's primary responsibilities for the SRF include
obtaining capitalization grants from EPA, soliciting potential interested parties for loans, negotiating
loan agreements with local communities, reviewing and approving payment requests from loan
recipients, monitoring the loan repayments, and conducting inspection and engineering reviews to
ensure compliance with all applicable laws, regulations, and program requirements.
The Bureau has numerous staff dedicated solely or in part to work on Program activities. The
allocated portion of salaries and benefits of employees for time spent working on Program activities,
as well as indirect costs based on direct costs, are charged to the Program. NDEP staff charge the
Program for time spent on SRF activities, and the Program reimburses NDEP for such costs in the
following month. The charges include the salaries and benefits of the employees, as well as indirect
costs allocated to the Program. Employees charging time to the Program are covered by the
benefits available to Nevada State Employees.
The Program financial statements, footnotes, and related schedules are presented for the U.S.
Environmental Protection Agency. The Program's account balances and activities are included in
Nevada's Comprehensive Annual Financial Report (CAFR) as part of the Municipal Bond Bank
special revenue fund, which uses the modified accrual basis of accounting. Because the Program is
blended into this special revenue fund, its assets, liabilities, equity and activities are not identifiable in
Nevada's CAFR. Also, because of the different reporting methods, there may be differences
between the amounts reported in these financial statements and Nevada's CAFR.
2. Summary of Significant Accounting Policies
Basis of Accounting
The Program's financial statements are presented as an enterprise fund using the accrual method of
accounting whereby revenues are recorded when earned and expenses are recorded when the
5

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NEVADA STATE DIVISION OF ENVIRONMENTAL PROTECTION
Clean Water State Revolving Fund
Notes to Financial Statements
2. Summary of Significant Accounting Policies (continued)
related liability is incurred. All assets and liabilities associated with the operations of the Program are
included in the balance sheet. An enterprise fund is used since the Program's operations are similar
to a financing institution where net income and capital maintenance are appropriate determinations of
accountability that provide information to the EPA to assist in evaluating whether the Program is
operating with the requirements of the CWA. In preparing the Program's financial statements,
Nevada follows the accounting pronouncements of the Governmental Accounting Standards Board
(GASB), as well as statements issued by the Financial Accounting Standards Board (FASB) before
November 30, 1989, unless FASB pronouncements conflict with or contradict GASB
pronouncements.
Cash and Cash Equivalents
The Nevada State Treasurer is an elected Constitutional Office and part of the Executive Branch of
State government. The Treasurer is responsible for the handling of all State cash as a fiscal agent
for the owning fund as discussed in Note 3. The Treasurer manages an investment pool where all
temporary surplus cash is invested. The investment pool has the same general characteristics as
demand deposit accounts. Invested funds are considered to be cash equivalents. Management of
the Program does not have control over the investment of excess cash, and the statement of cash
flows considers all funds deposited with the Treasurer to be cash and cash equivalents, regardless of
actual maturities of the underlying investments. Deposits with the Treasurer are accounted for on the
balance sheet as cash and cash equivalents. Investment interest earnings on these deposits are
received by the Program on a quarterly basis.
Loans Receivable
Nevada operates the Program as a direct loan program, whereby the majority of loans made to
waste water treatment facilities are funded by the Federal capitalization grant and/or match from
State funds. Additional loans can be made from revolving funds that have been repaid to the
Program, Program earnings and from leveraged funds. The Program's loans are evidenced by a
formal loan contract between the Division and the borrower. Loan funds are disbursed to borrowers
after they incur costs for the purposes of the loan, request reimbursement from the Program, and the
Program receives the Federal share from EPA. Interest rates are based on the Bond Buyer Municipal
Index and currently range from 3.125 to 4.0 percent and are calculated from the date that funds are
advanced. Interest is accrued and payable during the construction period. After the final loan
disbursement has been made, the loan and agreement amounts are adjusted for the actual amounts
disbursed. Full repayment must be received by the Program within 20 years of first disbursement.
No provision for doubtful accounts has been made as all loans are current, and management
believes that all loans will be repaid according to the loan terms.
Bonds Payable
The State issues water pollution control bonds to meet it's state match obligation. The State has also
issued additional leveraged bonds to accelerate financing certain projects beyond amounts made
available by the Federal capitalization grants. Bond discounts, premiums and costs of issuing the
bonds are amortized over the life of the bonds. All bonds are backed by the full faith and credit of the
State of Nevada, for which the Program is primarily responsible for repayment.
6

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NEVADA STATE DIVISION OF ENVIRONMENTAL PROTECTION
Clean Water State Revolving Fund
Notes to Financial Statements
2. Summary of Significant Accounting Policies (continued)
Contributed Capital
In accordance with generally accepted accounting principles (GAAP), funds received from the EPA
for the capitalization of the Program are recorded under equity as contributed capital. The State
match obligation is not recognized under contributed capital, as discussed above under Bonds
Payable. Nevada provides the state match obligation by issuance of general obligation bonds for
which the Program is primarily responsible for repayment. As such, it is recorded as a liability on the
balance sheet.
Reclassifications
Certain amounts in the 2000 unaudited financial statements have been reclassified to conform to the
presentation in the 2001 financial statements.
3. Cash and Cash Equivalents
All monies in the Program are deposited with the State Treasurer's Office and are considered to be
cash. The Treasurer is responsible for maintaining and investing the pooled cash balances in
accordance with Nevada State laws. The Treasurer is required to maintain a mix of investments in
order to allow funds to be withdrawn at any time to meet normal operating needs. The Program's
share of the investment income is based on the average daily balance for the period and is credited
to the Program quarterly. Details of the investments can be obtained from the State Treasurer's
Office.
All cash and investments are stated at cost, which approximates fair market value. Investments held
by the State Treasurer's Office are not categorized because they are not evidenced by securities that
exist in physical or book entry form.
4. Loans Receivable
The Program makes loans to qualified entities for projects that meet the eligibility requirements of the
Clean Water Act. Loans are financed by capitalization grants, state match, interest earnings,
revolving funds and leveraged funds. Interest rates on the loans are based on 62 1/2 percent of the
Bond Buyers Index rate and vary between 3.125 and 4.00 percent. Loan maturities are 20 years.
Semiannual payments are due on January 1st or July 1st. Interest during the construction period is
calculated from the date funds are advanced until the final loan closing. The loan contract requires
the communities to issue local bonds to secure the loan amount which the State has pledged as
collateral for bonds payable.
Carrying
Amount
Market
Value
Not subject to categorization:
Consolidated Cash Pool
$ 42.732.987 $ 42.732.987
7

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NEVADA STATE DIVISION OF ENVIRONMENTAL PROTECTION
Clean Water State Revolving Fund
Notes to Financial Statements
4. Loans Receivable (continued)
The Program has issued loans for constructing wastewater treatment facilities and for non-point
source projects. From inception of the program, two local agencies have had existing loans with
balances of $10,784,950 refinanced by the Program at lower interest rates. There are four loans
have been funded with approximately $39 million in leveraged funds. In addition, the Program has
issued one non-point source loan for $12 million.
Details of loans receivable as of June 30, 2001:
Authorized
Loan Amount	Principal Outstanding
Amounts Disbursed	Repaid Balance
Completed projects $ 91,537,820 $91,377,437	$ 20,521,157 $ 70,856,280
Projects in progress	52,750,000 20,019,273 	0 20,019,273
Totals $ 144.287.820 $111.396.710	$ 20.521.157 $ 90,875,553
Less amounts due within one year	4,539,422
Non-current loans receivable, June 30, 2001	$ 86,336,131
Loans mature at various intervals through January 1, 2021. The scheduled minimum principle
repayments on loans for completed projects in subsequent years are as follows
Year ending June 30:	Amount
2002	$ 4,539,422
2003	4,990,830
2004	5,262,362
2005	5,509,489
2006	5,719,472
Thereafter	64,853,978
$ 90.875.553
Loans to Major Local Agencies:
As of June 30, 2001, the Program made loans to six local agencies that had balances totaling $5
million or more, and with balances in the aggregate which exceeded $73 million. The outstanding
principal balances of these loans represent approximately 81 percent of the total loans receivable,
as follows:
8

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NEVADA STATE DIVISION OF ENVIRONMENTAL PROTECTION
Clean Water State Revolving Fund
Notes to Financial Statements
4. Loans Receivable (continued)
Loans to Major Local Agencies (continued):
Borrower
Original
Loan Outstanding
Amount	Balance
City of Henderson
City of Sparks
Carson City
Washoe County
City of Mesquite
City of Elko
Total loans to major agencies
$ 41,436,490 $ 30,443,527
15,014,488	12,484,562
10,620,000	9,677,084
36,759,520	8,657,151
7,880,000	6,249,296
7.500.000	5.784.464
119,210,498	73,296,084
Loans to all other agencies
25,077,322 17,579,469
Total loans receivable as of June30, 2001
$ 144.287.820 $90.875.553
5. Bonds Payable:
Bonds Payable - All Series (State Match, Leveraged and Refunded)
The State provides the required matching funds through state match bonds. As of June 30, 2001,
$12,315,000 in such bonds have been issued. As of June 30, 2001, $4,374,132 in state match bond
funds were available to match EPA funds. The State also issues bonds for financing projects that
exceed the amount of available funding, which are known as leveraged bonds. As of June 30, 2001,
$38,510,000 in leveraged bonds had been issued, and $ 28,148,071 was available for current and
future projects.
In May 2001, the State refinanced (called refunding) $3,170,000 of older state match bonds and
$8,875,000 of leveraged bonds to take advantage of lower interest rates. These bonds were
refunded in the 2001A1 series that were issued for $28,720,000. In accordance with generally
accepted accounting principles, deferred amounts of $529,967 due on refunding are deducted from
the outstanding balance of the 2001A1 bonds for financial statement presentation.
Details of bonds payable as of June 30, 2001 are as follows:
State Match Bonds:	Balance	Current	Long-Term
Series September 1,1991, General
Obligation Water Pollution Control
Revolving Fund Bonds, interest of 5.20%
to 6.10% due semiannually, principal due
annually to August 1,2001.	$ 150,000	$ 150,000	$ 0
Series September 1,1992, General
Obligation Water Pollution Control
Revolving Fund Bonds, interest of 3.0%
to 5.4% due semiannually, principal due
annually to August 1,2002.	590,000	300,000	290,000
9

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NEVADA STATE DIVISION OF ENVIRONMENTAL PROTECTION
Clean Water State Revolving Fund
Notes to Financial Statements
5. Bonds Payable (continued)
Series June 1,1994, General Obligation
Water Pollution Control Revolving Fund
Bonds, interest of 5.125% to 5.5% due
semiannually, principal due annually to
February 1, 2004.
705,000	240,000	465,000
Series September 1,1995A, General
Obligation Water Pollution Control
Revolving Fund Matching Bonds, interest
of 4.0% to 5.1 % due semiannually,
principal due annually to February 1,
2005.	380,000	100,000	280,000
Series May 1,1996A, General Obligation
Water Pollution Control Revolving Fund
Match Bonds, interest of 3.75% to 4.85%
due semiannually, principal due annually
to August 1, 2003.
335,000	110,000	225,000
Series July 1,1998D, General Obligation
Water Pollution Control Revolving Fund
Matching Bonds, interest of 4.25% to
4.875% due semiannually, principal due
annually to August 1, 2013.
2,895,000	190,000	2,705,000
Series September 1,1999C, General
Obligation Water Pollution Control
Revolving Fund Match Bonds, interest of
5.25% to 5.3% due semiannually,
principal due annually to August 1, 2012.	1,320,000	100,000	1,220,000
Series July 1, 2000C, General Obligation
Water Pollution Control Revolving Fund
Matching Bonds, interest of 5% to 5.25%
due semiannually, principal due annually
to August 1, 2011.	1,315,000	0	1,315,000
Series May 1, 2001B, General Obligation
(Limited Tax) Water Pollution Control
Revolving Fund Matching and Refunding
Bonds, interest of 4% to 4.7% due semi-
annually, principal due annually to August
1,2013.	4.625.000		0	4.625.000
Total State match bonds payable	12,315,000	1,190,000	11,125,000
10

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NEVADA STATE DIVISION OF ENVIRONMENTAL PROTECTION
Clean Water State Revolving Fund
Notes to Financial Statements
5. Bonds Payable (continued)
Series September 1,1995B, General
Obligation Water Pollution Control
Revolving Fund Leveraged Bonds,
interest of 4.2% to 7.0% due
semiannually, principal due annually to
February 1, 2005.
Series May 1,1996B, General Obligation
Water Pollution Control Revolving Fund
Leveraged Bonds, interest of 3.75% to
5.15% due semi-annually .principal due
annually to August 1, 2016.
Series May 1, 2001A-1, General
Obligation (Limited Tax) Water Pollution
Control Revolving Fund Leveraged and
Refunding Bonds, interest of 4% to 5%
due semi-annually, principal due annually
to August 1, 2019.
Series May 1, 2001A-2, General
Obligation (Limited Tax) Water Pollution
Control Revolving Fund Leveraged
Bonds, interest of 6% to 6.5% due
semiannually, principal due annually to
August 1, 2017.
Total Leveraged bonds payable
Total State match and leveraged bonds
payable
Bond premiums and discounts
Total bonds payable
1,700,000
1,070,000
395,000
160,000
1,305,000
910,000
28,190,033
28,190,033
37,980,033
50,295,033
75.797
555,000
1,745,000
	0
37,425,033
48,550.033
75.797
The debt service requirements to maturity, excluding unamortized premium and discounts, are as
follows:
Principle
Interest
Total
2002
2003
2004
2005
2006
Thereafter
Totals
$1,745,000
3,020,000
3,040,000
2,980,000
3,035,000
37.005.000
$ 2,019,000
2,395,000
2,253,000
2,108,000
1,958,000
12.106.000
3,764,000
5,415,000
5,293,000
5,088,000
4,993,000
49.111.000
$ 50.825.000 $22.839.000 $ 73.664.000
11

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NEVADA STATE DIVISION OF ENVIRONMENTAL PROTECTION
Clean Water State Revolving Fund
Notes to Financial Statements
6.	Arbitrage Rebate
In accordance with Internal Revenue Code Section 148(f) relating to arbitrage restrictions on tax-
exempt bonds, an arbitrage rebate payable in the amount of $99,800 has been recorded for the
Series 1999C state match bond issue and Series 2001 A-1 Leveraged and Refunding bond issue.
As of June 30, 2001, the portion of the rebate due for the 1999C bonds will be due by November 28,
2004, and the portion due for the 2001 A-1 bonds will be due July 23, 2006.
7.	Contributed Capital and Fund Balance
The Program is capitalized by EPA grants authorized by the Clean Water Act. All EPA funds drawn
for loans are recorded as contributed capital from EPA. The State of Nevada is responsible for
matching 20 percent of the EPA capitalization grants and this obligation is met by funds provided by
state match bonds which are repayable from loan interest repayments (discussed under Note 5). As
of June 30, 2001, EPA has awarded capitalization grants of $82,783,100 to the State, of which
$69,070,035 has been drawn for loans and administrative expenses.
The following summarizes the EPA capitalization grants awarded, amounts drawn on each grant as
of the balance sheet date, and balances available for future loans:
Total Draws	Total Draws Grant Funds
Grant	As of	2001	as of	Available,
Amount June 30. 2000	Draws June 30. 2001 June 30. 2001
1989
$ 4,577,200
$4,577,200
$ 0
$4,577,200
$ 0
1990
4,738,000
4,738,000
0
4,738,000
0
1991
10,074,800
10,074,800
0
10,074,800
0
1992
9,534,900
9,329,608
160,883
9,490,491
44,409
1993
9,431,000
9,116,633
0
9,116,633
314,367
1994
5,813,800
5,620,007
0
5,620,007
193,793
1995
6,007,800
5,807,540
0
5,807,540
200,260
1996
9,904,700
4,976,813
2,126,316
7,103,129
2,801,571
1997
2,990,500
0
0
0
2,990,500
1998
6,577,300
5,929,265
0
5,929,265
648,035
1999
6,577,900
3,199,998
3,158,639
6,358,637
219,263
2000
6.555.200
0
254.333
254.333
6.300.867
Totals
$82,783,100
$63,369,864
$5,700,171
$ 69.070.035
$ 13.713.065
8. Contingencies and Subsequent Events
Contingencies
The Program is exposed to various risks of loss related to torts, thefts of assets, errors or omissions,
injuries to state employees while performing Program business, or acts of God. The State maintains
insurance for all risks of loss which is included in the indirect costs allocated to the Program. There
have not been any claims against the Program since its inception in 1989 and no contingencies
came to our attention during our audit which require disclosure or accrual under Statement of
Financial Accounting Standards No. 5.
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NEVADA STATE DIVISION OF ENVIRONMENTAL PROTECTION
Clean Water State Revolving Fund
Notes to Financial Statements
8. Contingencies and Subsequent Events (continued)
Related Parties
There are no related party transactions with or related to amounts receivable from management of
the Nevada State Division of Environmental Protection Water Pollution Control Revolving Fund
Program.
Subsequent Events
Subsequent to June 30, 2001, several events occurred that have a direct and material effect on the
Program's operations and the financial position as of June 30, 2001. These events are as follows:
The U.S. EPA awarded the fiscal year 2001 capitalization grant to the State on September 11, 2001
for a total of $7,795,320, the federal component is $6,496,100 and the required state matching funds
is $1,299,220.
The Program also entered into 3 binding commitments totaling $15,130,000, between July 1, 2000
and November 30, 2002.
No other subsequent events following the fiscal year-end required disclosure in these financial
statements.
13

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Independent Auditor's Report on the
Internal Control Structure Based on an
Audit of the Financial Statements
Performed in Accordance with
Government Auditing Standards

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
OFFICE OF
INSPECTOR GENERAL
TO: Alan Biaggi, Administrator
Division Environmental Protection
Department of Conservation and Natural Resources
State of Nevada
We have audited the financial statements of Nevada Division of Environmental Protection Water Pollution
Control Revolving Fund Program (the Program) as of and for the year ended June 30, 2001, and have
issued our report thereon dated December 5, 2002.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and standards applicable to financial audits contained in 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 from material
misstatement.
The management of the Nevada Division of Environmental Protection Water Pollution Control Revolving
Fund Program is responsible for establishing and maintaining an internal control structure. In fulfilling its
responsibilities, estimates and judgements by management are required to assess the expected benefits
and related costs of internal control policies and procedures. The objectives of an internal control
structure are to provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that transactions are executed in
accordance with management's authorization and recorded properly to permit the preparation of financial
statements in accordance with generally accepted accounting principles. Because of inherent limitations
in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also,
projection of any evaluation of the structure to future periods is subject to the risk that procedures may
become inadequate because of changes in conditions or that the effectiveness of the design and
operation of policies and procedures may deteriorate.
In planning and performing our audit of the financial statements of the Nevada Division of Environmental
Protection Water Pollution Control Revolving Fund Program for the year ended June 30, 2001, we
obtained an understanding of the internal control structure. With respect to the internal control structure,
we obtained an understanding of the design of relevant policies and procedures and whether they have
been placed in operation, and we assessed control risk in order to determine our auditing procedures for
the purpose of expressing our opinion on the financial statements and not to provide an opinion on the
internal control structure. Accordingly, we do not express such an opinion.
Our consideration of the internal control over financial reporting would not necessarily disclose all matters
in the internal control over financial reporting that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A material weakness is a condition
in which the design or operation of one or more of the internal control components does not reduce to a
relatively low level the risk that misstatements in amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions. We noted the following matters involving the
internal control structure and its operations, as discussed in the following paragraphs, that we consider to
be reportable conditions, but we do not consider these to be material weaknesses as defined above.
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The control environment established by management does not ensure that management's assertions over
financial and accounting matters are being achieved. Specifically, we noted:
P The accounting function needs to be dedicated solely to this program.
The Nevada Division of Environmental Protection has not established a dedicated accounting
position to the SRF program. The accounting for the CWSRF is one of many responsibilities within
the Administrative Services Office. As a result, Nevada has not been able to provide basic financial
information, such as financial statements, trial balances, and loan information necessary to properly
manage the program. These matters are discussed in the more detail in the following section.
Trial balances and financial statements.
CWSRF's are required to establish fiscal controls to assure proper accounting for program
operations. Part of those controls include a trial balance, balance sheet, statement of revenues,
expenses and changes in retained earnings, a statement of cash flows and notes to the
financial statements. However, Nevada had not prepared a trial balance or financial statements
in preparation of our audit. The OIG has assisted the State in preparation of these statements
in the prior and current audit, however, we will be unable to do so in the future. New auditing
standards prohibits our providing these types of services in future years. For this reason, the
State must now ensure these statements are prepared for the CWSRF. In the event that it is
not corrected during the next year audited, we will be forced to disclaim an opinion on the fair
presentation of the financial statements.
Loan schedules.
The loan schedules maintained are not adequate to provide sufficient detail on loans
outstanding. There are numerous versions of loan summary schedules, some prepared by the
Financial Analyst, some by the State Treasurer, and some by the program office. Much of the
data available was based on the transaction level instead of the summary level by loan. Ideally,
the State could provide a summary sheet for all activity on the loan, including disbursements,
construction period interest and repayment activity. Full utilization of the project management
database should achieve this.
We commend Nevada for reclassifying the SRF programs as an enterprise fund. However, we
recommend that it take the next step in managing and accounting for this program and make the
accounting position dedicated to the SRF, and providing meaningful financial information in a timely
manner.
P Project management database not utilized.
We previously recommended Nevada implement a project and financial management database to
track loan and other SRF activity. In response to this recommendation, EPA assisted Nevada in
funding approximately $35,000 for the development of this software. At the time of our fieldwork,
neither the SRF program office nor the Administrative Services Office were utilizing the software to
maintain the loan database. While we understand that new software programs are time consuming
to learn and install, the program is proven in many states and provides a great deal of information
that management can, and should, use to operate the program. When the database is actively
utilized by both offices and periodically reconciled to the State's official accounting system, it can
assist in preparing financial statements and other required reporting.
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P Communication and cooperation between departments is lacking.
During the course of the audit we found that better communication is need between the various
program offices involved with management of the CWSRF. The Treasurer's Office maintain the
bond and loan information, while the Division maintains the other information. The CWSRF is a
combination of all these activities, and coordination and communication among the departments is
necessary and vital to properly record all activities.
Nevada of Nevada Response
The preceding matters have been discussed with the Nevada Division of Environmental Protection, and
provided the following comments:
l/l/e have reviewed the draft Independent Auditor's Report and feel it fairly presents NDEP's situation.
l/l/e have discussed these issues in great detail and have already made significant strides in
resolving some of them. The database has been debugged and is being utilized effectively and
should be able to provide the information for which it was designed. In fact, there is the possibility of
further enhancements that could extend the database's ability to provide financial information.
There is also the possibility that pending legislation may give us the dedicated position
discussed in your report. This would enable us to provide timely communication between
all components of the SRF program and needed financial information and planning
activities.
This report is intended for the information of management of the Nevada Division of Environmental
Protection Water Pollution Control Revolving Fund Program and the United States Environmental
Protection Agency. However, this report is a matter of public record and distribution is not limited.
(
Environmental Protection Agency
December 5, 2002
17

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Independent Auditor's Report
on Compliance with Requirements Applicable to the
Environmental Protection Agency's
State Revolving Fund Program
in Accordance with
Government Auditing Standards

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^mrr4%	UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C.
OFFICE OF
INSPECTOR GENERAL
PSOt*--
TO: Alan Biaggi, Administrator
Division of Environmental Protection
Department of Conservation and Natural Resources
State of Nevada
We have audited the financial statements of the Nevada Division of Environmental Protection Water
Pollution Control Revolving Fund Program (the Program) as of and for the year ended June 30, 2001, and
have issued our report thereon dated December 5, 2002.
We have also audited the Program's compliance with requirements governing the following:
•	Allowability for Specific Activities;
•	Allowable Costs/Cost Principles;
•	Cash Management;
•	State Matching;
•	Period of Availability of Funds and Binding Commitments;
•	Program Income;
•	Reporting;
•	Sub-recipient Monitoring, and;
•	Special tests and provisions;
The above compliance requirements are applicable to the Nevada Division of Environmental Protection
Water Pollution Control Revolving Fund Program for the year ended June 30, 2001. The management of
the Program is responsible for it's compliance with those requirements. Our responsibility is to express an
opinion on those requirements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America; the standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States; and U.S. Environmental Protection Agency, Clean Water
State Revolving Fund Audit Guide (June 1998). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether material noncompliance with the requirements of the
SRF program occurred. An audit includes examining, on a test basis, evidence about the Program's
compliance with those requirements. We believe that our audit provides a reasonable basis for our
opinion.
As part of obtaining reasonable assurance about whether the Nevada Division of Environmental
Protection Water Pollution Control Revolving Fund Program's financial statements are free of material
misstatement, we performed tests of its compliance with certain provisions of laws, regulations, and
grants, noncompliance with which could have a direct and material effect on the determination financial
statement amounts. The results of our tests disclosed no instances of noncompliance that we are
required to report under Government Auditing Standards.
In our opinion, the Nevada Division of Environmental Protection Water Pollution Control State Revolving
Fund Program complied, in all material respects, with the specific program requirements listed above for
the year ended June 30, 2001, except as discussed in the following section.
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EPA regulation 40 CFR 35.3130(c) requires that the state have the "legal, managerial, technical and
operational capabilities to administer the program" in order to receive a capitalization grant. In addition,
the State's financial management systems must provide accurate, current and complete disclosure of the
financial results of the program, as required by 40 CFR 31.20(b)(1). In our opinion, the State of Nevada
has not fully demonstrated these capabilities. The State needs to assure that it fully complies with these
regulations, and take corrective action to address the issues identified in the internal control and
compliance sections of this report.
As discussed in the Report on Internal Controls, several reportable conditions were identified during the
course of this audit which could also be considered compliance deficiencies. We identified the following
matters which, while related to internal controls discussed in the preceding section, also affect compliance
with certain provisions of laws, regulations, and grants. These items were: the need for dedicated
accounting services for this program; the failure to prepare trial balances or financial statements; the
project management database was not being fully utilized; numerous versions of loan summary schedules
and, the need for improved communication and information exchange.
This report is intended for the information of management of Nevada Division of Environmental Protection
Water Pollution Control Revolving Fund Program and the United States Environmental Protection Agency.
However, this report is a matter of public record and distribution is not limited.
Office of
Office of Inspector General
Environmental Protection Agency
December 5, 2002
20

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Supplemental Information

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Details of changes in bonds payable for the year ended June 30. 2001:
Schedule 1



Loan




July 1, 2000
New
Repayment
June 30, 2001

Balance
Issues
Retirements
Refund
Balance
State Match Bonds:





1991 Series
$ 925,000
-
( 175,000)
( 600,000)
$ 150,000
1992 Series
2,110,000
-
( 315,000)
( 1,205,000)
590,000
1994 Series
1,940,000
-
( 245,000)
( 990,000)
705,000
1995A Series
860,000
-
( 105,000)
( 375,000)
380,000
1996A Series
445,000
-
( 110,000)
-
335,000
1998D Series
3,090,000
-
( 195,000)
-
2,895,000
1999C Series
1,320,000
-
-
-
1,320,000
2000C Series
-
1,315,000
-
-
1,315,000
2001B Series
-
4,625,000
-
-
4,625,000





12,315,000
Leveraqed Bonds:





1995B Series
8,325,000
-
( 375,000)
( 6,250,000)
1,700,000
1996B Series
3,845,000
-
( 150,000)
( 2,625,000)
1,070,000
2001A2 Series
-
7,020,000
-
-
7,020,000
2001A1 Series
-
28,720,000
-
-
28,720,000





38,510,000
Gross Total
22,860,000
41,680,000
( 1,670,000)
(12,045,000)
50,825,000
Discount
( 194,957)
( 46,935)
17,956
_
( 223,936)
Premium
12,273
291,940
( 4,480)
-
299,733
Deferred Costs
0
( 545,554)
15,587
-
( 529,967)
Net Total
$ 22,677,316
$41,379,451
($ 1,640,937)
($ 12,045,000)
$ 50,370,830
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Detail of Refunded Bonds:
State Match Bonds:
Series September 1, 1991,
General Obligation (Limited Tax)
Water Pollution Control Revolving Fund
Matching Bonds
Refunded Amount
Schedule 2
Stated Maturity
Amount
August 1, 2002
August 1, 2003
August 1, 2004
August 1, 2005
August 1, 2006
150,000
125,000
125,000
100,000
100.000
600,000
Series September 1, 1992,
General Obligation (Limited Tax)
Water Pollution Control Revolving Fund
Matching Bonds
Refunded Amount
August 1,2003	275,000
August 1,2004	260,000
August 1,2005	245,000
August 1,2006	225,000
August 1, 2007	200.000
1,205,000
Series June 1, 1994
General Obligation (Limited Tax)
Water Pollution Control Revolving Fund
Matching Bonds
Refunded Amount
February 1, 2005	220,000
February 1, 2006	210,000
February 1, 2007	200,000
February 1, 2008	185,000
February 1, 2009	175.000
990,000
Series June 1, 1995A
General Obligation (Limited Tax)
Water Pollution Control Revolving Fund
Matching Bonds
Refunded Amount
February 1, 2006	85,000
February 1, 2007	80,000
February 1, 2008	75,000
February 1, 2009	70,000
February 1, 2010	65,000
375,000
Leveraged Bonds:
Series September 1, 1995B,
February 1, 2006
480,000
General Obligation (Limited Tax) Water
February 1, 2007
505,000
Pollution Control Revolving Fund
February 1, 2008
535,000
Leveraged Bonds
February 1, 2009
565,000

February 1, 2010
600,000

February 1, 2011
630,000

February 1, 2012
670,000

February 1, 2013
710,000

February 1, 2014
755,000

February 1, 2015
800.000
Refunded Amount

6,250,000
Series May 1, 1996B,
August 1, 2007
210,000
General Obligation (Limited Tax)
August 1, 2008
225,000
Water Pollution Control Revolving Fund
August 1, 2009
235,000
Leveraged Bonds
August 1, 2010
250,000

August 1, 2011
265,000

August 1, 2012
280,000

August 1, 2013
295,000

August 1, 2014
310,000

August 1, 2015
330,000

August 1, 2016
225.000
Refunded Amount

2.625.000
Total Amount of Advance Refund

$12,045,000
23

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Report Distribution
EPA, Region 9:
Regional Administrator
Director, Water Division
Chief, Norther California Office, Water Division
State Revolving Fund Coordinator
Audit Followup Coordinator
EPA, Headquarters:
Director, Grants Administration
Agency Followup Coordinator
Associate Administrator for Congressional
and Legislative Affairs
Associate Administrator for Communication, Education,
And Public Affairs
State Revolving Fund Audit Manager
State Revolving Fund Branch, Office of Wastewater Management
Other:
State of Nevada, State Department of Conservation
and Natural Resources, Division of Environmental Protection

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