As a public entity, EAWSD must operate on what the New Mexico Department of Finance & Administration (NM DFA) calls a “modified accrual basis.” That means that revenues cannot be recorded (“recognized”) on the District’s books until they are received (i.e., on a cash basis). On the other hand, expenses must be recorded as soon as they are incurred, even if actual payment is made after the fact (accrual basis). This creates a stringent cash management requirement, requiring that expenses not exceed cash-on-hand.

The District must prepare a balanced budget for DFA approval prior to the beginning of each fiscal year, and it may not exceed that budget without prior DFA approval. A budget that proposes deficit spending is a violation of NM statute and will not be approved by DFA.

The District is owned by its taxpayer-electors and ratepayers. It does not operate for profit: Any revenue unexpended at the end of each fiscal year is retained by the District for the benefit of the ratepayers.

Oversight and compliance
EAWSD complies with financial controls established in the New Mexico Water & Sanitation District Act:

• Oversight of the District's budget is provided by the New Mexico Department of Finance and Administration
• District audits are governed by the rules and regulations of the New Mexico Office of the State Auditor.
• Procurement procedures comply with the group of NM Statutes under Chapter 13, Public Purchases and Property; known generally as the “State Procurement Code” and with additional regulations as published by the New Mexico State Purchasing Division as part of the NM Administrative Code.
• Vote of qualified electors is required for significant actions (e.g., incurring additional indebtedness as defined by the New Mexico State Constitution).

Financial status
The District’s initial indebtedness for purchase of the utility was $13.695 million. Interest on the Bonds issued to finance the purchase is paid at 6%. Approximately $986 thousand of the amount borrowed was spent on bond issuance costs, $508.5 thousand was set aside in a mandatory escrow account, which is the amount of the final revenue bond principal payment, and the balance of $1.304 million placed into an account whose funds were restricted for District capital projects (utility remediation and repair).

The District has an annual debt service requirement of approximately $1.25 million, consuming between 36% and 40% of total District revenues.

Other major components of the District’s annual budgets are shown on the Budget page.