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Executive Summary Purpose Objectives, Scope, and Methodology Background Deposits to and Expenditures from the Public Service Commission Agency Fund Status of Auditor's Prior Recommendations Conclusion Appendix I: Description of Formal Cases in Which Utilities Made Deposits to the Public Service Commission Agency Fund During Fiscal Years 1995 and 1996 Appendix II: Public Service Commission Refunds Issued to Utilities Pursuant to Commission Order Dated October 25, 1996 Agency Comments OFFICE OF THE DISTRICT OF COLUMBIA
AUDITOR DEBORAH K. NICHOLS AUDIT OF THE PUBLIC SERVICE COMMISSION'S AGENCY FUND FOR FISCAL YEARS 1995 AND 1996
|
Public Utility | Amount Deposited | Date Deposited | Case Numbers* |
Bell Atlantic-DC | $211,000 | 12/08/94 | 850 |
200,000 | 03/17/95 | 814 | |
200,000 | 04/03/95 | 814 | |
200,000 | 05/01/95 | 814 | |
7,500 | 12/08/94 | Complaint | |
TOTAL | $818,500 | ||
PEPCO | $250,000 | 12/08/94 | 939 |
$250,000 | 01/09/95 | 939 | |
TOTAL | $500,000 | ||
Washington Gas | $25,000 | 12/07/95 | 932 |
40,000 | 12/02/95 | 921 | |
7,500 | 12/27/94 | Complaint | |
TOTAL | $72,500 | ||
TOTAL DEPOSITS | $1,391,000 |
Source: Public Service Commission and Office of the E D.C. Auditor
*See Appendix I for brief description of each formal case.
All revenue deposits to PSC's Agency Fund for fiscal year 1995 were successfully reconciled to confirmation statements provided by PEPCO, Washington Gas, and Bell Atlantic-DC. Revenue deposits were also successfully reconciled to monthly Transaction by Line Detail -AD611 FMS- reports.
For fiscal year 1995, the Public Service Commission processed 171 expense vouchers totaling $1,039,016.94 against the Agency Fund. The Auditor successfully reconciled the dollar amount reflected on each of the 171 expense vouchers to monthly AD-611 FMS reports and to the Commission's Trust Fund Reconciliation Report (TFR). The Auditor determined that total Agency Fund expenses were accurately recorded in the District's Financial Management System for fiscal year 1995.
Approximately ninety-eight percent (98%) of the total expenses paid by PSC during fiscal year 1995 were for professional services of attorneys, economist and engineer consultants, and certified public accountants. Two percent (2%) of the expenses charged against the Agency Fund were for administrative costs which included copying, telephones, delivery services, and transportation. PSC's Agency Fund expenditures appeared to be reasonable and necessary expenses as required by D.C. Code, Section 43- 612.
Table II provides a summary statement of all Agency Fund deposits, expenditures, and refunds for fiscal year 1995.
Beginning Balance | $2,493,254 |
Plus Receipts | 1,391,000 |
Less Refunds to Utilities | -0- |
Expenditures | (1,039,017) |
Ending Balance | $2,845,237 |
As of October 1, 1994, the Agency Fund's beginning balance was $2,493,254. Receipts of $1,391,000, less expenditures of $1,039,017, and no refunds to the utilities, resulted in an ending balance of $2,845,237. The ending balance is a reserve balance to be used for authorized expenses pertaining to ongoing case activity.
Unexpended funds remaining after a formal case has been properly closed or terminated must be refunded to the appropriate utility. During fiscal year 1995, the Public Service Commission did not terminate or close any formal cases, therefore no refunds were made to PEPCO, Washington Gas, or Bell Atlantic-DC.
During fiscal year 1996, PEPCO, Washington Gas, and Bell Atlantic-DC deposited a total of $ 152,000 into the Agency Fund. Utility deposits of $ 152,000 for fiscal year 1996 represented a 90% drop from fiscal year 1995 deposits of $ 1,391,000. The amount of revenue requested from a utility during any fiscal year depends greatly on the complexity of formal cases brought before the PSC. Activity associated with specific formal cases may overlap fiscal years and there may not be a need for additional utility revenue deposits in the next year.
The Public Service Commission conducted formal hearings in two cases (929 and 939) during fiscal year 1996 which required revenue deposits of $47,000 from PEPCO. The PSC also requested revenue deposits of $ 105,000 from PEPCO and Washington Gas for expenses arising from past activity in formal cases 917, 922, and 944. Further, the Commission conducted three investigations and reviewed two consumer complaints which did not require additional revenue deposits from the utilities.
Table III presents individual deposits made by each utility and the formal case numbers for which the deposits were ordered by the PSC.2
Public Utility | Amount Deposited | Date Deposited | Case Numbers |
PEPCO | $35,000 | 10/30/95 | 944 |
25,000 | 10/30/95 | 939 | |
22,000 | 10/30/95 | 929 | |
20,000 | 10/30/95 | 914 | |
TOTAL | $102,000 | ||
Washington Gas | $50,000 | 11/13/95 | 922 |
TOTAL | $50,000 | ||
TOTAL DEPOSITS | $152,000 |
Source: Office of the D.C. Auditor
*See Appendix I for Brief descriptions of each formal case.
All deposits to PSC's Agency Fund for fiscal year 1996 were successfully reconciled to confirmation statements provided by PEPCO, Washington Gas, and Bell Atlantic-DC. Revenue deposits were also successfully reconciled to monthly Transaction by Line Detail - AD611 FMS reports.
For fiscal year 1996, the Public Service Commission processed 63 expense vouchers and one journal entry totaling $465,301.14 against the Agency Fund. The Auditor successfully reconciled the dollar amount reflected on the 63 expense vouchers and the journal entry to monthly AD-611 FMS reports and to the Public Service Commission's Trust Fund Reconciliation Report. The Auditor determined that total fiscal year 1996 Agency Fund expenses were reported accurately in the District's Financial Management System.
Consistent with fiscal year 1995, approximately ninety-eight percent (98%) of the total expenses paid for fiscal year 1996 were for professional services of attorneys, economists and engineer consultants, and certified public accountants. Two percent (2%) of the expenses charged against the Agency Fund were for administrative costs which included copying, telephones, delivery services, and transportation. PSC's Agency Fund expenditures appeared to involve reasonable and necessary expenses as required by D.C. Code, Section 43-612.
Table IV provides a summary statement of all utility revenue deposits, expenditures, and refunds to the utilities from the PSC Agency Fund for fiscal year 1996.
Beginning Balance | $2,845,237 |
Plus Receipts | 152,000 |
Less Refunds to Utilities | -0- |
Expenditures | (465,301) |
Ending Balance | $2,531,936 |
As of October 1, 1995, the Agency Fund's beginning balance was $2,845,237. Receipts of $152,000 minus expenditures of $465,301, and no refunds to the utilities, resulted in an ending balance of $2,531,936. The ending balance is a reserve balance to be used for authorized expenses pertaining to ongoing case activity. Unexpended funds remaining after a formal case has been properly closed or terminated must be refunded to the appropriate utility.
The Auditor's report of the Public Service Commission for fiscal year 1994 entitled, "Review of the Public Service Commission Agency Fund for Fiscal Year 1994," dated October 30, 1995, included the recommendations noted below. During our current examination of the PSC for fiscal years 1995 and 1996, we verified that PSC officials had implemented the following recommendations:
Prior Recommendation:
The Public Service Commission must adhere to its procurement regulations, as published in the D.C. Register, in purchasing and contracting for all goods, supplies, services, or equipment.
The Auditor observed during the review of a sample of contracts awarded by the PSC that contracts were awarded in accordance with the Commission's procurement regulations. Our examination included, but was not limited to, a review of request for proposals (RFP) issued by PSC, contractor proposals submitted in response to RFP's, overall ratings of contractor proposals, findings and determinations, and actual contract awards.
Prior Recommendation:
The Public Service Commission must refrain from transferring unexpended formal case balances from one balance sheet account to another.
During the review of formal case files for fiscal years 1995 and 1996, the Auditor did not observe the transfer of any unexpended revenue deposits from one formal case to another.
Prior Recommendation:
The Public Service Commission should adhere to long-standing, consistently preferred accounting practices for government agencies in properly accounting for its Agency Fund.
This recommendation was made based on one instance in fiscal year 1994 in which the Commission transferred the unexpended case balance from one formal case to another. The Auditor did not observe any such transfers in fiscal years 1995 and 1996.
Prior Recommendation:
The Public Service Commission should develop a payment voucher review and approval system that indicates the signature and date of review and approval by authorized management officials.
The Auditor's review of Agency Fund expense vouchers for fiscal year 1994 revealed that a third of the payment vouchers from our sample appeared to have been reviewed and approved for payment by an administrative assistant. The PSC has complied with the Auditor's prior recommendation. During the current review of Agency Fund expense vouchers for fiscal years 1995 and 1996, we observed that each expense voucher contained an "approval slip" with the names and initials of senior level PSC officials indicating their review and approval of contractors' invoices and supporting documentation. Further, each expense voucher contained a certification sheet signed by PSC's chief financial officer stating that the expense voucher had been independently examined and was appropriate for payment.
Prior Recommendation:
The Public Service Commission close inactive balance sheet accounts and return unexpended funds to the proper utilities.
The PSC's comment to this recommendation, which is contained in the Auditor's fiscal year 1994 report, was that it would review each formal case and determine which of the recommended formal cases should be closed versus those formal cases that may have future activity and, therefore, may result in additional expenses charged to the Commission. At that time, PSC anticipated that the review process would take approximately 45 days. The Auditor observed that PSC's review process took longer than 45 days and the Commission did not close any cases during fiscal years 1995 or 1996. However, the Auditor observed that the PSC closed 23 formal cases and returned $812,648.01 in unexpended funds to the three utilities in November 1996. Appendix II presents information pertaining to each utility receiving a refund in November 1996.
The Auditor's review of deposits made by PEPCO, Washington Gas, and Bell Atlantic-DC to the Public Service Commission Agency Fund for fiscal years 1995 and 1996 indicated that revenue totaling $ 1,543,000 was properly deposited into PSC's Agency Fund and recorded in the District's Financial Management System FMS The Auditor observed that revenue deposited by the public utilities for fiscal year 1996 totaled $152,000. Fiscal year 1996 revenue deposits of $ 152,000 represented a 90% drop in revenue when compared with fiscal year 1995 revenue deposits totaling $ 1,391,000. This 90% decline in utility revenue deposits was attributed to the low number of formal cases brought before the Public Service Commission during fiscal year 1996, and the continuation of ongoing formal cases from one fiscal year to the next for which revenue had already been deposited.
The Auditor concluded that the Public Service Commission's financial statements for fiscal years 1995 and 1996 provided reasonable assurance that utility revenue deposits and Agency Fund expenditures were properly reported and recorded in the District's Financial Management System. Fiscal year 1995 and 1996 combined Agency Fund expenditures totaling $1,504,318 also appeared to be reasonable and necessary as required by D.C. Code, Section 43-612.
Respectfully,
Deborah K. Nichols,
Interim District of Columbia Auditor
Formal Case Number | Description |
I. BELL ATLANTIC | |
850 | Investigation of return on equity, rate of return, and C&P rates. |
814II | Investigation into the impact of the AT&T divestiture and decisions of the Federal Communication Commission concerning C&P rates. |
II. PEPCO | |
917 | PEPCO application for approval of third lease cost plan. |
929 | Application of PEPCO to increase retail rates for sale of electric energy. |
939 | Application to increase retail rates for sale of electric energy. |
Complaint | Consumer complaint involving PEPCO. |
944 | Investigation of Subsidiary Activities of PEPCO. |
III. WASHINGTON GAS | |
921 | Application for rate schedule change. |
Complaint | Consumer complaint involving Washington Gas. |
922 | Application for Washington Gas to increase existing rates and charges for gas services. |
932 | Investigation into the calculation and application of the D.C. gross receipts tax on public utility services. |
Number | Utility | Voucher Date | Amount | Check Number |
1 | Bell Atlantic-DC | 11-13-96 | $2,000.00 | DACU64174956 |
2 | Washington Gas | 11-13-96 | 12,246.80 | DACU64190849 |
3 | PEPCO | 11-13-96 | 31,491.77 | DACU64190840 |
4 | Washington Gas | 11-13-96 | 8.923.61 | DACU64190848 |
5 | PEPCO | 11-13-96 | 464,248.70 | DACU64190839 |
6 | Bell Atlantic-DC | 11-13-96 | 169,332.06 | DACU64190831 |
7 | PEPCO | 11-13-96 | 404.53 | DACU64174988 |
8 | Bell Atlantic-DC | 11-13-96 | 228.98 | DACU64174955 |
9 | Washington Gas | 11-13-96 | 129.75 | DACU64175009 |
10 | PEPCO | 11-13-96 | 14,636.48 | DACU64190838 |
11 | Bell Atlantic-DC | 11-13-96 | 5,236.35 | DACU64190830 |
12 | Washington Gas | 11-13-96 | 8.926.48 | DACU64190847 |
13 | PEPCO | 11-13-96 | 11,773.72 | DACU64190837 |
14 | PEPCO | 11-13-96 | 46,753.90 | DACU64190836 |
15 | PEPCO | 11-13-96 | 3,431.67 | DACU64190835 |
16 | Washington Gas | 11-13-96 | 4,992.19 | DACU64190846 |
17 | Washington Gas | 11-13-96 | 2,486.94 | DACU64175008 |
18 | PEPCO | 11-13-96 | 7,078.21 | DACU64190834 |
19 | Washington Gas | 11-13-96 | 1,822.46 | DACU64175007 |
20 | Washington Gas | 11-13-96 | 7,127.41 | DACU64190845 |
21 | Bell Atlantic-DC | 11-13-96 | 2,515.81 | DACU64190829 |
22 | PEPCO | 11-13-96 | 3,165.12 | DACU64190833 |
23 | PEPCO | 11-13-96 | 3,704.07 | DACU64190832 |
Grand Total | $812,648.01 |
On January 16, 1998, the Office of the District of Columbia Auditor transmitted this report, in draft, for review and comment to the Chairperson of the Public Service Commission, the Chief Financial Officer, for the Public Service Commission, and the Chief Financial Officer for the District of Columbia. This report was also transmitted for review and comment to Potomac Electric Power Company, Washington Gas Company, and Bell Atlantic-D.C.
On February 3, 1998, written comments were received from the Chairperson of the Public Service Commission. On February 26, 1998, additional comments were received from the Chairperson of the Public Service Commission. Where appropriate, changes were made to the draft report to reflect the comments. The comments are appended, in their entirety, to the Auditor's final report.
Public Service Commission of the District of Columbia
717 14TH STREET. N.W.
WASHINGTON. D.C. 20005
(202) 626-5100
February 3, 1998
VIA HAND DELIVERY
Deborah K. Nichols
Interim District of Columbia Auditor
Office of the District of Columbia Auditor
The Presidential Building
415 12th Street, N.W., Room 210
Washington, D.C. 20004
Dear Ms. Nichols:
Thank you for providing us with a copy of your Office's draft "Audit of the Public Service Commission's Agency Fund for Fiscal Years 1995 and 1996." We appreciate the opportunity to review the draft and provide you with our comments on it. In general, we believe the draft Audit correctly reflects the financial state of affairs at the Commission during the fiscal years in question. However, there are a few matters that are of concern to us, as follows:
1. Manual Postings to Voucher Control Sheet Ledger
The draft Audit, at pages 6 and 10, concludes that in the Commission's annual reports to the Mayor and the Council, we understated our expenses in FY 1995 by $920.68 and overstated expenses in FY 1996 by $2,000.43. These findings are based on your staff's comparison of the annual reports and the Commission's voucher control sheet ledger maintained by our Chief Financial Officer (CFO). Based on that comparison, the draft Audit suggests that manual posting of accounting entries to the ledger report may have caused the above cited discrepancies.
Please be advised, however, that the voucher control sheet ledger is simply an internal accounting mechanism used by the CFO to manually track vouchers until such time as they are entered into the Financial Management System FMS Entries in the ledger are preliminary in nature; they reflect only amounts that are expected to be expended, rather than actual or ultimate expenditures. For example, the ledger might reflect an expected voucher payment of $50.000 for legal services based on cost estimates, when payment for those services may actually be more or less than the amount originally estimated. Thus, even if the voucher control sheet ledger were automated, the entries would still be based on estimates and subject to change.
More importantly, I would like to point out that the Commission's primary means of accounting for its funds is through the Trust Fund Reconciliation Report (TFR), a fully automated reporting system used by the Commission to reconcile our transactions with FMS Unfortunately, due to an oversight by a member of our CFO's staff,: the auditor was provided the voucher control sheet ledger, rather than the TFR. Consequently, your staff concluded that we made errors in our reports to the Mayor and Council. However, our CFO advises that a review of the figures in the TFR would show that no errors were made, with the exception of a $0.61 understatement for FY 1996. We are presently undertaking an investigation to determine how and why that discrepancy occurred. Based on these circumstances, we would request that you reconsider or amend your Audit findings. Our TFR records are, of course, available to you and your staff for this purpose.
2. Status of Auditor's Prior Report Recommendations
At page 12 of the draft Audit, your staff begins its review of whether the Commission has complied with prior recommendations made by your Office.. We have one minor concern with item 3, relating to whether we have adhered to "consistently preferred accounting practices." Although your staff has concluded that we did follow proper procedures in FY 1995 and 1996, it is the use of the phrase "unusual transactions" that is troubling. We do not believe this is standard parlance in the field of accounting and we fear that it will leave the impression that unusual accounting practices are a continuing problem for us; that is, that such unusual practices exist but were simply not observed during the period covered by the Audit.
3. Staff Voucher Approvals
On page 13 of the draft Audit report, your staff concludes that 1/3 of our payment vouchers were approved by an administrative assistant. This is not an accurate finding. The vouchers examined by your staff were, in fact, signed by several parties specifically, the administrative assistant in question, our Deputy Executive Director (her supervisor), and our Executive Director. In addition, the Chairperson's signature appears on each voucher. As a consequence, we believe this Audit finding is erroneous and should be corrected.
4. Timeliness of Case Closings
On page 13 of the dread Audit report, your staff states that the Commission did not close any cases in FY I 1995 and FY 1996. While this is technically correct, we are concerned that the draft makes it appear to have taken us more than two years to implement your recommendations. The FY 1994 Audit was issued on October 20, 1 1995 and refunds were fully accomplished 13 months later.
Although the Commission originally believed it could effectuate case closings in 45 days, as noted in the draft, in actuality it took us much longer to conduct a thorough review of our extensive dockets to determine which cases were actually appropriate for closure. We recognize that this may be a minor matter, but inasmuch as we have faced many questions from the Council as regards this particular recommendation, we would appreciate any consideration you could give to rephrasing this portion of the report.
Thank you in advance for your attention to our concerns. We appreciate the two day extension you gave us to file this response, and regret having had to seek it. In explanation, our CFO was preoccupied during this past week with requests from the District's budget office regarding finalization of our FY 1999 budget submissions. We would like the opportunity to attend a review conference regarding the draft Audit, but understand if time constraints within your Office prevent such.
If you have any questions, or would like to discuss this matter further, please do not hesitate to contact me at (202) 626-51 10.
Sincerely
Marlene L. Johnson, Esq.
Chairperson
cc: Commissioner Agnes M. Alexander
Commissioner Edward M. Meyers
Public Service Commission of the District of Columbia
717 14TH STREET N.W.
WASHINGTON. D.C. 20005
(202) 626-5100
February 26, 1998
VIA HAND DELIVERY
Ms. Deborah K. Nichols
Interim District of Columbia Auditor
Office of the District of Columbia Auditor
The Presidential Building
415 12th Street, N.W., Room 210
Washington, D.C. 20004
Dear Ms. Nichols:
Thank you for the opportunity to review and comment on the draft Audit report for our Commission for FY95 and 96. We are very pleased with the draft and appreciate the efforts of your staff to learn about our Commission and to comment fairly and accurately on the state of our fiscal affairs.
If you have any questions or require further information, please do not hesitate to contact us.
Sincerely,
Marlene L. Johnson Esq.
Chairperson
cc: Commissioner Agnes M. Alexander
Commissioner Edward M. Meyers
Charles Simpson, PSC CFO
1. Appendix I lists the utility and the formal case numbers, along with a brief description of each case brought before the Public Service Commission during fiscal years 1995 and 1996.
2. Appendix I lists the utility and the formal case numbers, along with a brief description of each case brought before the Public Service Commission during fiscal years 1995 and 1996.
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