2021-COH - DWS Financial Statements and Supplementary Information With Independent Auditor's Report

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County of Hawaii Department of Water Supply (A component unit of the County of Hawaii, State of Hawaii) NOTES TO FINANCIAL STATEMENTS June 30, 2021 NOTE A - NATURE OF ACTIVITIES The Department of Water Supply, County of Hawaii (Department) is administered by the Water Board, which consists of nine members who serve staggered terms of five years in length. Board members are appointed by the Mayor of the County of Hawaii, State of Hawaii (County) and are confirmed by the County Council, as required by the County Charter. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (1) Financial Statement Presentation-The Department is a component unit of the County (primary government). The accompanying financial statements present only the financial position and activities of the Department and do not purport to, and do not present the financial position of the County, the changes in its financial position, or, where applicable, its cash flows. (2) Measurement Focus and Basis of Accounting - The Department's financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. (3) Cash and Cash Equivalents - For purposes of the statement of cash flows, the Department considers all highly liquid investments with a maturity of three months or less or money market funds with a weighted average maturity of three months or less when purchased to be cash equivalents. (4) Investments - Investments in time certificates of deposits are carried at cost, which approximates fair value. (5) Trade Receivables-Trade receivables are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Department's best estimate of the amount of probable credit losses in the Department's existing trade receivables. The Department determines the allowance based on historical write-off experience. The Department reviews its allowance for doubtful accounts monthly. Past-due balances over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. (6) Inventories of Materials and Supplies - Materials and supplies are stated at cost on an average cost basis. (7) Restricted Assets - Unspent bond proceeds that are restricted for purchases of water system improvements are recorded as restricted assets. 17