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Audit of the Public Service Commission's Agency Fund for Fiscal Years 1995 and 1996
March 2, 1998

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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
THE PRESIDENTIAL BUILDING
415 12TH STREET, NW, ROOM 210
WASHINGTON, DC, 20004
TEL. 202-727-3600 FAX: 202-724-8814

DEBORAH K. NICHOLS
INTERIM DISTRICT OF COLUMBIA AUDITOR
007:98:DW:kl

AUDIT OF THE PUBLIC SERVICE COMMISSION'S AGENCY FUND FOR FISCAL YEARS 1995 AND 1996
March 2, 1998

EXECUTIVE SUMMARY

PURPOSE

Pursuant to D.C. Code, Section 43-612 (a)(6) and Public Law 93-198, Section 455, the District of Columbia Auditor is required to review revenue deposited by Potomac Electric Power Company (PEPCO), Washington Gas, and Bell Atlantic-DC into the Public Service Commission's (PSC) Agency Fund. The District of Columbia Auditor is also required to review expenditures from the Agency Fund.

CONCLUSION

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.

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PURPOSE

Pursuant to D.C. Code, Section 43-612 (a)(6) and Public Law 93-198, Section 455, the District of Columbia Auditor is required to review revenue deposited by Potomac Electric Power Company (PEPCO), Washington Gas, and Bell Atlantic-DC into the Public Service Commission's (PSC) Agency Fund. The District of Columbia Auditor is also required to review expenditures from the Agency Fund.

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OBJECTIVES, SCOPE. AND METHODOLOGY

The objectives of this audit were to:

  1. verify the deposits to and disbursements from the Agency Fund for fiscal years 1995 and 1996;
  2. examine expenses charged against the Agency Fund to determine whether each expense voucher contained sufficient supporting documentation and whether the expenses were reasonable and necessary as required by D.C. Code, Section 43-612;
  3. determine whether expense vouchers were properly reviewed and approved by appropriate PSC officials before payment; and
  4. determine the purpose for any refunds to the utilities that were processed against the Agency Fund.

The audit covered fiscal years 1995 and 1996. To accomplish the audit objectives, the Auditor reviewed utility deposits to the Agency Fund and reconciled the deposits to the following District Financial Management System (FMS) reports: the Summary Trial Balance report (FN020 report), which summarizes the results of transactions processed by PSC against the Agency Fund; and the Transaction by Line Detail report (AD611 report), which reflects a line by line description of vouchers processed by PSC against the Agency Fund.

The Auditor reconciled FMS reports of Agency Fund deposits to confirmation statements provided by PEPCO, Washington Gas, and Bell Atlantic-DC. The FMS reports reflected all deposits made to and refunds disbursed from the Agency Fund during fiscal years 1995 and 1996.

The Auditor interviewed the Public Service Commission's chairperson, legal counsel, executive director, chief financial officer, senior accounting and disbursing analyst, and other knowledgeable PSC personnel. The Auditor also interviewed officials from Bell Atlantic, Potomac Electric Power Company, and Washington Gas. The Auditor reviewed D.C. Code, Section 43-612 to determine PSC's compliance with this provision of the law.

The audit was performed in accordance with generally accepted auditing standards for governmental agencies and included such tests of the accounting records as were deemed necessary under the circumstances.

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BACKGROUND

The Public Service Commission was established by D.C. Law 5-153, "The Utility Regulatory Assessment Clarification Act of 1984." The mission of the Public Service Commission is to ensure that consumers of electricity, natural gas, and telephone service in the District of Columbia receive safe, reliable, and quality utility service at reasonable rates. The Public Service Commission has rate-making and other regulatory authority over electric, gas, and telephone companies within the District. The PSC is composed of three full-time commissioners who render decisions concerning rate and service changes proposed by Washington Gas, Potomac Electric Power Company, and Bell Atlantic-DC.

As an independent agency, the Public Service Commission adopted and published in the D.C. Register its own procurement regulations. In carrying out its mission, the Public Service Commission awards contracts for legal, accounting, economic, engineering, court reporting, courier, and advertising services. The costs for these services are fully reimbursed to PSC from revenue deposits made by PEPCO, Washington Gas, and Bell Atlantic-DC.

Each utility is authorized to charge rates that will permit the utility to earn a fair rate of return (or profit) on its capital in exchange for the right to conduct business in the District of Columbia. Utilities must apply to the Public Service Commission for changes in rates or regulatory treatment. The Public Service Commission sets utility rates and otherwise regulates utilities through a formal legal process in which the affected public utility, the Office of the People's Counsel, and other interested parties have an opportunity to present their case..

District of Columbia Code, Section 43 -61 2(a)( 1 ) established the Public Service Commission Agency Fund as a fiduciary fund in the District of Columbia Treasury. Section 43-612 (a) (2) requires any utility making application to the Public Service Commission for a rate increase or change in regulatory treatment to deposit sufficient dollars, as determined by the PSC, into the Agency Fund to cover PSC's reasonable and necessary expenses. Revenue deposits must be used exclusively for the payment of expenses arising from any investigation, valuation, revaluation, or proceeding conducted by the Commission, and all expenses of any litigation, including appeals arising from decisions, orders, or other actions of the Commission.

D.C. Code, Section 43-612(a)(7) requires the Commission to issue annual reports to the Mayor and the Council of the District of Columbia. The annual report must detail the name of each contractor hired, the qualifications of each contractor, a brief description of the work performed by each contractor, the number of persons employed by each contractor, the hourly rate charged by each person employed by the contractor, and the estimated value of each contract. Additionally, in prior audits of the PSC, the Auditor recommended, and the PSC implemented, a requirement that each vendor payment voucher charged against the Agency Fund contain the following statement which must be signed by the contractor:

In accordance with the financial reporting requirements of the Auditor of the District of Columbia, the attached exhibit includes the details of the work effort by employee and hourly rate, and provides documentation for all out-of-pocket and indirect cost expenses. Moreover, I do solemnly swear on this day that the statements contained herein are true and correct to the best of my knowledge and belief. I further swear that the services stated were actually performed over the number of hours (or parts thereof) indicated, and that the expenses for which reimbursement sought were actually incurred.

The Auditor also recommended that each voucher for payment include an affidavit signed by PSC's chief financial of ficer, or his designee, stating that each voucher had been independently examined, including supporting documentation, and that the voucher was appropriate for payment in the stated amount.

D.C. Code, Section 43-612(a)(2) states that any excess funds deposited by a utility for a case that has been closed shall be refunded to the utility. Financial records of the PSC must adequately reflect all refunds made to a utility and identify the formal cases for which revenue deposits were refunded.

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DEPOSITS TO AND EXPENDITURES FROM THE PUBLIC SERVICE COMMISSION AGENCY FUND

District of Columbia Code, Section 43-612(a)(2) permits the Public Service Commission to assess utilities for regulatory and litigation expenses associated with retaining independent technical and legal consultants to perform work required by proceedings before the PSC. The Public Service Commission orders the deposit of sufficient funds into the PSC Agency Fund to cover estimated expenses of investigations, valuations, reevaluations, or other proceedings of the Commission which involve a utility. Upon receipt of assessments from a utility, PSC issues contracts to consultants to perform work as stated in the contract. Consultants must submit monthly invoices to PSC for payment. Public Service Commission officials are required to review consultants' invoices and, if appropriate, prepare balance sheet vouchers to pay the consultants for services rendered. Payment vouchers for the Agency Fund are processed through the District's Financial Management System and are charged against a utility's deposit for the particular case requiring the consultant's work.

I. Fiscal Year 1995 Deposits

During fiscal year 1995, PEPCO, Washington Gas, and Bell Atlantic-DC deposited $1,391,000 to the PSC Agency Fund. The Public Service Commission did not make any refunds to the utilities during fiscal year 1995. Table I presents individual deposits made by each utility and the formal case numbers (proceedings) for which the deposits were ordered.1

TABLE I
Utility Revenue Deposits Made to The Public Service Commission Agency Fund During Fiscal Year 1995

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.

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II. Fiscal Year 1995 Expenditures

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.

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III. Summary of Receipts and Expenditures for Fiscal Year 1995

Table II provides a summary statement of all Agency Fund deposits, expenditures, and refunds for fiscal year 1995.

TABLE II
Public Service Commission Agency Fund Statement of Receipts and Expenditures For Fiscal Year Ending September 30, 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.

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IV. Fiscal Year 1996 Deposits

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

TABLE III
Utility Revenue Deposits Made To The Public Service Commission Agency Fund For Fiscal Year 1996

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.

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V. Fiscal Year 1996 Expenditures

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.

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VI. Summary of Receipts and Expenditures for Fiscal Year 1996

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.

TABLE IV
Public Service Commission Agency Fund Statement of Receipts and Expenditures For Fiscal Year Ending September 30, 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.

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STATUS OF AUDITOR'S PRIOR RECOMMENDATIONS

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.

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CONCLUSION

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

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APPENDIX I

Description of Formal Cases In Which Utilities Made Deposits to the Public Service Commission Agency Fund During Fiscal Years 1995 and 1996

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.

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APPENDIX II

Public Service Commission
Refunds issued to Utilities Pursuant to Commission
Order dated October 25, 1996
October 24, 1997

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

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AGENCY COMMENTS

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.

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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

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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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