PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL AND ENVIRONMENTAL CONTROL FACILITIES FINANCING AUTHORITY
Financial Statements for the Years
Ended June 30, 1997 and 1996
and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority:
We have audited the accompanying balance sheets of Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority (the "Authority") as of June 30, 1997 and 1996, and the related statements of income and retained earnings and of cash flows for the years then ended. These financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority as of June 30, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
August 22, 1997
Stamp No.
affixed to original.
PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL |
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AND ENVIRONMENTAL CONTROL FACILITIES FINANCING AUTHORITY |
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BALANCE SHEETS |
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JUNE 30, 1997 AND 1996 |
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1997 |
1996 |
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ASSETS |
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Cash, interest-bearing demand deposits with |
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Government Development Bank for Puerto Rico |
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(Notes 2 and 4) |
$22,918,547 |
$21,764,891 |
Other assets |
123,393 |
231,815 |
TOTAL |
$23,041,940 |
$21,996,706 |
LIABILITIES AND RETAINED EARNINGS |
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Accrued liabilities and other (Note 2) |
$55,575 |
$103,670 |
Retained earnings (Note 4) |
22,986,365 |
21,893,036 |
TOTAL |
$23,041,940 |
$21,996,706 |
See notes to financial statements. |
PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL |
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AND ENVIRONMENTAL CONTROL FACILITIES FINANCING AUTHORITY |
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STATEMENTS OF INCOME AND RETAINED EARNINGS |
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YEARS ENDED JUNE 30, 1997 AND 1996 |
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1997 |
1996 |
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REVENUES |
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Placement fees (Note 4) |
$209,338 |
$1,073,500 |
Interest |
1,132,418 |
1,124,165 |
Other |
13,317 |
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Total revenues |
1,355,073 |
2,197,665 |
EXPENSES |
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Service fees (Note 2) |
104,669 |
536,750 |
Other |
157,075 |
134,133 |
Total expenses |
261,744 |
670,883 |
NET INCOME |
1,093,329 |
1,526,782 |
RETAINED EARNINGS, BEGINNING OF YEAR |
21,893,036 |
20,366,254 |
RETAINED EARNINGS, END OF YEAR |
$22,986,365 |
$21,893,036 |
See notes to financial statements. |
PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL |
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AND ENVIRONMENTAL CONTROL FACILITIES FINANCING AUTHORITY |
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STATEMENTS OF CASH FLOWS |
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YEARS ENDED JUNE 30, 1997 AND 1996 |
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1997 |
1996 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income |
$1,093,329 |
$1,526,782 |
Adjustments to reconcile net income to net cash |
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provided by operating activities: |
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Interest income |
(1,132,418) |
(1,124,165) |
Decrease (increase) in other assets |
108,422 |
(142,330) |
Increase (decrease) in accrued liabilities |
(48,095) |
58,680 |
Net cash provided by operating activities |
21,238 |
318,967 |
CASH FLOWS FROM INVESTING ACTIVITIES |
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Interest collected |
1,132,418 |
1,129,318 |
NET INCREASE IN CASH |
1,153,656 |
1,448,285 |
CASH, BEGINNING OF YEAR |
21,764,891 |
20,316,606 |
CASH, END OF YEAR |
$22,918,547 |
$21,764,891 |
See notes to financial statements. |
PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL AND
ENVIRONMENTAL CONTROL FACILITIES FINANCING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1997 AND 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority (the "Authority") is a component unit of the Commonwealth of Puerto Rico (the "Commonwealth"), created by Act No. 121 of the Legislature of the Commonwealth on June 27, 1977 (the "Act"), as amended. The Authority's financial statements are an integral part of the financial statements of the Commonwealth.
The Authority is authorized to issue revenue bonds and to lend the proceeds thereof to finance the acquisition, construction and equipping of industrial, tourist, educational, medical and environmental control facilities. The Authority charges a placement fee of 1% on the face value of the bonds issued to commercial and office building projects and of 1/2 of 1% on all other bonds. The Authority is exempt from taxation in Puerto Rico.
Significant Accounting Policies
The accounting and reporting policies of the Authority conform to generally accepted accounting principles as applicable to governmental entities.
Following is a description of the Authority's significant accounting policies:
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Bonds and Related Loans - Revenue bonds issued by the Authority are considered "no-commitment debt" (Note 3) and, therefore, neither these bonds nor the related loans granted by the Authority are presented in the accompanying financial statements.
Revenue and Expense Recognition - Placement fee income and related service fee expense are recognized upon the issuance of the bonds. Interest is recognized as income when earned. Expenses are recognized when incurred.
2. TRANSACTIONS WITH GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO
As of June 30, 1997, the bank balance (which equaled the book balance) reported as interest-bearing demand deposits with the Government Development Bank for Puerto Rico (the "Bank") was uninsured and uncollateralized.
The Bank provides certain management services to the Authority. The Bank charges a fee for the services provided to the Authority equal to 50% of the placement fee revenues received by the Authority on the bonds issued.
3. REVENUE BONDS
Since inception and up to June 30, 1997, the Authority has sold revenue bonds aggregating $3,831 million, $2,193 million of which were outstanding as of June 30, 1997. Of the revenue bonds sold, $266 million represent environmental control revenue bonds; $2,175 million, industrial and commercial revenue bonds; $637 million, tourism related revenue bonds; $495 million, hospital revenue bonds; and $258 million, educational and related revenue bonds. Pursuant to the loan agreements covering the issuance of these bonds, the proceeds from the sales were borrowed from the Authority by corporations and partnerships operating in Puerto Rico.
The revenue bonds are special and limited obligations of the Authority and, except to the extent payable from bond proceeds and investments thereof, will be payable solely from and secured by a pledge and assignment of the amounts payable under the loan agreements between the Authority and the borrowers. Furthermore, payment of the principal and interest on the revenue bonds is unconditionally guaranteed by the borrowers, their parent companies or letters of credit generally issued by major United States banks or United States branches of international banks.
The revenue bonds do not constitute a debt or a pledge of the good faith and credit of the Authority or the Commonwealth or any political subdivision thereof ("no-commitment debt", Note 1). The Bank and one of its component units have issued a letter of credit and four guarantees totaling approximately $249 million in connection with five tourism-related revenue bonds issued by the Authority.
In connection with the issuance of revenue bonds, the Authority enters into trust agreements, whereby the Authority assigns and pledges to the trustees, for the benefit of the holders of the revenue bonds, (1) all amounts receivable by the Authority in repayment of the amounts due under the loan agreements, (2) any rights, title and interest of the Authority in the proceeds derived from the sale of the revenue bonds and of any securities in which monies in any fund or account created by the trust agreements or loan agreements are invested and the proceeds derived therefrom, and (3) the Authority's right, title and interest in and to the loan agreements, subject to the Authority's retention of certain rights, including the right to collect monies payable to the Authority which are not received with respect to repayment of the loans.
4. SPECIAL PLACEMENT FEES
The Authority's charges a placement fee of 1% of the face value of bonds issued to commercial and office building projects. The proceeds thereof will be used to provide financing for infrastructure and environmental improvement projects. At June 30, 1997 and 1996, the Authority had NIL and, $610,347 respectively, available to provide financing for these projects.