2019 & 2020-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) MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2020 and 2019 The Department of Water Supply, County of Hawaii (Department) operates as a semiautonomous agency charged with the responsibility of operating and maintaining the County of Hawai`i's public water systems. The Department is a utility enterprise and presents its financial statements using the economic resources measurement focus and the accrual basis of accounting. This discussion and analysis is designed to assist the reader in focusing on the significant financial issues and activities and to identify any significant changes in financial position. Readers are encouraged to consider the information presented here in conjunction with the financial statements taken as a whole. Financial Statements The financial statements are designed to provide readers with a broad overview of the Department's finances in a manner similar to a private sector business. The statements of net position present information on all of the Department's assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the residual amount reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Department is improving or deteriorating. Net position increases when revenues exceed expenses. Increases in assets and deferred outflows of resources, without a corresponding increase in liabilities and deferred inflows of resources, result in increased net position, which indicate an improved financial position. In the case of the Department, assets plus deferred outflows of resources exceeded liabilities plus deferred inflows of resources by $217.3 million, at the close of the most recent fiscal year. This represents a decrease of $6.5 million, or 2.94% less than the previous year. At June 30, 2020, $236.0 million of the Department's net position was invested in capital assets (net of related debt), and ($18.6) million was unrestricted. The statements of revenues, expenses and changes in net position present information showing how the Department's net position changed during the fiscal year. All components of the changes in net position are reported as soon as the underlying event occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in the statements for some items that will result in cash flows in future fiscal periods. The statements of cash flows present changes in cash and cash equivalents (short-term investments with original maturities of three months or less from the date of acquisition), resulting from operating, investing, capital and related financing activities, and non -capital financing activities. Notes to Financial Statements The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the financial statements. Other Information In addition to the financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Department's participation in the Employees' Retirement System of the State of Hawaii (ERS) and the Employer -Union Health Benefits Trust Fund of the State of Hawaii (EUTF). 7