The Desert Water Agency board of directors approved its annual audit Tuesday for fiscal year 2008-09.

The audit showed that the agency — which serves customers in Cathedral City and Palm Springs, among other areas — “made sound fiscal decisions,” according to an agency press release.

An agency document summarizing the independent audit's findings reported a surplus of $5.7 million in the general fund.

The general fund includes revenue and costs associated with acquiring water from the State Water Project and maintaining groundwater levels and quality.

It represents 48 percent of the agency's revenue.

“We cut expenses because of the economy and spent $7 million less this year than the previous year,” said Katie Ruark, agency public information associate.

The water agency's total assets increased by $19.6 million, according to the document.

But the operating fund, which consists of revenues and costs associated with delivering water to customers, continues to be in a deficit.

It showed a $1.4 million overall loss, which includes a $3.4 million loss in operating revenue because water sales were down. The operating fund makes up 51 percent of the agency's revenue.

The agency's bond fund also had a deficit of $1.3 million, the document showed. Ruark said bond interest rates were not favorable.

“The only revenue we get in the bond fund is interest on the bond reserve (and we) pay administrative costs for our bonds as well as an annual bond repayment,” she said.

The bond fund represents less than 1 percent of the agency's revenue.

In other news:

The state of California will borrow $97,000 from the Desert Water Agency as a result of the state Legislature's vote to borrow property tax funds from local governments to solve the 2009-10 state budget crisis, agency officials said.

The board authorized a call for bids to replace a hydropneumatic tank at the agency's water recycling facility.

The estimated cost is listed as $210,000 in an agency staff report. The project is part of a $6.1 million project toward the installation of an influent reservoir that will increase the storage capacity for treated water.

Work on the tank is expected to begin in February and last through July, according to a staff report.