Transcript Slide 1

TVPPA Accounting & Finance Conference
Tena H. Porter - North Georgia EMC
Anthony Taylor – EPB
Mary Mealer – Tullahoma Utilities Board
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OIGs were established to create
“independent and objective units”
They exist in governmental units from the
Post Office to TVA
Inspector Generals (IG) to be appointed
“without regard to political affiliation” and
solely on the basis of integrity and
demonstrated ability….”
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TVA’s OIG was created by the TVA Board of
Directors in 1985
The TVA OIG became statutory under the
Inspector General Act Amendment of 1988
(IG Act)
The authority to appoint the TVA IG was
transferred to the President in 2000 by Public
Law No. 106-422
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Conducting audits, inspections and
investigations relating to TVA programs and
operations
Recommend corrective actions and report on
the progress made in implementing such
actions
Keep the TVA Board and Congress informed
about problems and deficiencies relating to
the administration of those programs and
operations
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OIG historically conducted contract
compliance audits for procurement contracts
In 2008, IG decided to extend the contract
compliance auditing function to include
revenue contracts
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Determine compliance with key contract
provisions, including:
 Proper reporting of electric sales by customer
class to facilitate proper revenue recognition and
billing by TVA
 Nondiscrimination in providing power to
members of the same rate class
 Use of revenues, including any surplus, for
approved purposes
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“5.(a) Cooperative agrees that the power
purchased hereunder shall be sold and
distributed to the ultimate consumer without
discrimination among consumers of the same
class, and that no discriminatory rate, rebate,
or other special concession will be made or
given to any consumer, directly or indirectly.”
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“6. Use of Revenue
a) Cooperative agrees to use the gross revenues
from electric operations for the following
purposes:
1. Current electric system operating expenses,
including salaries, wages, cost of materials and
supplies, taxes, power at wholesale, and insurance;
2. Current payments of interest on System
Indebtedness, and the payment of principal amounts,
including sinking fund payments, when due; and
3. From any remaining revenues, reasonable reserves for
renewals, replacements, and contingencies; and cash
working capital adequate to cover operating
expenses for a reasonable number of weeks.”
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Letter notification informing distributor of
the audit
Meet with the distributor management
regarding the objective of the audit and
information needs several weeks before
anticipated date of fieldwork.
In office review of data files
Fieldwork
Findings & Report
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Auditors perform as much analysis as possible
before coming to distributor offices
 Work with billing agency or distributor to receive
electronic billing information
 Distributors send available information to auditors
 Auditors run exception reports
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Fieldwork dates set
Distributor process interviews
Exception reports or questions
Exit conference to discuss findings
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SAS 70 and external audit results
Organization charts
Billing data for a two year period
Information on special customer
classifications, credits or other circumstances
Joint operations or investment in other lines
of business
Capital project plans/expenditures
List of disbursements
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Consider requiring a Confidentiality
Agreement to protect your data
“In connection with its audit of North Georgia Electric Membership
Corporation of Dalton, Georgia, a Rural Electric Cooperative
(“NGEMC”), the undersigned Office of Inspector General for the
Tennessee Valley Authority(“OIG”), understands that NGEMC has
disclosed or may disclose certain confidential information including
without limitation information relating to customer and employee
names, which to the extent previously or subsequently disclosed to
the OIG is hereinafter referred to as “Confidential Information”. This
confidential information specifically includes the electronic listing of
customers whose demand exceeded 1MW in any billing period during
FY2008 and FY2009; and an electronic listing of customers with
service address and rate class. - Continued next page
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Confidentiality Agreement Cont. –
“As consideration for access to said confidential information given by
NGEMC, OIG promises and agrees to disclose said confidential
information only to those individuals who are employees or agents of
OIG who have a legitimate need to know for purposes relating to OIG
audit number 2010-13025, Distributor Review of North Georgia
Electric Membership Corporation. Furthermore, OIG agrees to take
reasonable precautions to protect such confidential information from
unauthorized disclosure.”
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Agreement will require headquarters
signatures so request early in the process
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Data requests are monumental, get the help
of your billing agency
This is not a typical audit using statistical
sampling – all transactions are reviewed
Billing data requested will be 100% of all
consumer transactions for audit period (our
audit period July 2007 – June 2009)
SEDC built data files and transferred to OIG
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Report of customers with rate codes and/or
classification changes
Independent meter testing reports
Meter inventory listing showing all meters
and the related customer and location
Hard or electronic copy of minutes of Board
meetings
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Electronic version of all disbursement
registers (i.e. check registers, ACH listings,
wire transfer listings, AP register, Payroll
register, etc.) – all check registers including
Energy Services, Operating Accounts,
Membership, etc.
Listing of professional services companies
(CPA, legal firms, etc.)
Electronic copy of detailed trial balance for all
companies
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Capital spending plans with associated
documentation of senior mgmt/Board
approval
Information on delayed projects included in
above with a description of what caused the
delay
Listing of all bank accounts with names,
account numbers and descriptions
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Cash and Cash equivalent balances by
account for each month of the audit period
Organizational charts or listing of employees
including title, department and phone
number
Listing of differences between your Chart of
Accounts and the TVA Accountant’s
Reference Manual
Listing of customers putting power back on
grid
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Schedule 1 line items related to customer
class codes in billing system
Policies/Procedures for:
 Classification of customers, new customer setup
 Modification of customer classifications
 Meter testing, inventory and assignment
 Generation of Schedule 1
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What’s included in the consumer data file
request? EVERYTHING!
 Account #, name, rate class, physical address, billing address, account
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status
Meter #, multiplier, SIC Code
Revenue Month/Year
Usage, measured demand, metered demand, billed demand, KVA, KVAR,
Contract demand
Current read & previous read date, read period
Avg consumed
Turn on date/turn off date
Meter size, status, power factor
Service amount, sales tax, other tax, penalty, tax codes
Environmental adjustments, FCAs, total $ billed
Estimated, Seasonal, or Flat amount?
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Listing of all adjustments made during audit
period –
 Detailed adjustment records to support what/why
& how much was adjusted
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Listing of all residential accounts including –
 Account #, name, rate class, physical address and
billing address
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Reconciliation of Schedule 1 to one month of
the consumer data provided
 Expect to explain variances due to adjustments,
issues with their calculation assumptions, etc.
 Was Outdoor Lighting kWh included?
 Protected demands and related energy for 5MR or
other special program customers
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Residential accounts:
 Multiple residential accounts with the same name
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or address – how many are getting the hydro
credit?
Business/agency name on accounts
Group homes
Well pumps
Other misclassified accounts; primary usage
Non-discrimination of rates
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Other Electric Classifications
 Account classification not changed when demand
or usage amounts meet the criteria for the next
classification
 Not keeping the account at the correct
classification for the required time
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Contracts based on load and credits contracts
 Contracts for all customers > 1MW
 Contracts for all credits (EGC, SMC, etc)
 SIC Codes certifications
 Properly classified (load vs. contract)
 Contract demand in billing system matches
contract
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Correct calculation and application of large
load contracts
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Verification of rates in your billing systems –
screen shots showing rates, FCAs, and Board
action supporting any changes
Excess charges calculating correctly
Employee/Board home accounts
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Metering Issues
 Usage readings exceed threshold for requiring
demand meters, but no demand meter installed
 Lack of demand meters for customers with
contract demand
 Zero/repetitive usage
 Usage readings estimated for extended periods
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Proper use of Electric Revenue
 Unusual expenditures
 Expenditures to individuals
 Credit Card statements
 Policies/authorizations for expenditures (petty
cash, donations, annual meetings, etc.)
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Subsidiary businesses
 Do you have a Joint Use Study by TVA for any
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subsidiary businesses? This is required, but often
ignored.
If you have a study, has it been updated?
Are proper allocations being followed?
Are non-electric revenues and expenditures
account for separately?
This has been an area of in-depth investigation by
OIG
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Cash levels will be assessed
Target range is 5-8%
Consider timing of Loan Draws
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Customer classifications
Every co-op will see issues with this – accept it and
hope that it’s only minor
Fix them and move on
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Missing contracts
Metering issues
Issues with subsidiary businesses
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Exit interview will be conducted and you will
receive a draft of the draft report
What they find during the audit will be
documented in the report
Items corrected during the audit (or even
before) will still be reported
Recommendations based on the findings will
be given to both the co-op and TVA
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Draft report is issued to the distributor & TVA
Both have 30 days to provide written
comments including agreement or
disagreement with findings and completed or
planned action(s) on each recommendation,
including date completed or target date(s) for
completion
Final report is issued with distributor and
TVA comments attached
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Address your response to:
 Robert E. Martin, Assistant Inspector General,
Audits (OIG)
 Address each recommendation:
▪ List the recommendation,
▪ Actions taken or planned to be taken, and
▪ Date actions were completed or target completion date
 Signed by General Manager or appropriate
personnel
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Final report is posted on OIG website
Reports posted on 15th of the month
www.oig.tva.gov
Once the report is posted, it’s available to the
public
Potential for press attention
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Look at other distributor reports
 Currently 20 reports on OIG website
 Sign-up for email notifications
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Review consumer classifications
Check your contracts – they will receive 100%
attention, so why not fix it now
Update non-electric allocations
Talk to your billing agency
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Review your Records Retention Policy
 Am I keeping billing/adjustment records long
enough to cover this audit period?
 Assume that they will look at previous 2 fiscal
years – audit can last a long time, you may have
an open window of 4 years by the time it’s
finished
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Plan for how you’re going to field check
accounts for proper classification or where
else can I find this information?
Talk with your TVA Field Accountant
Examine your relationship with your external
auditor
Talk with your staff before the auditors arrive
Find ways to limit your exposure – who are
the contacts for the audit?
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Consider your attitude
What benefit can your co-op receive from this
process?
Create a friendly, professional atmosphere
 Give them what they ask for, but nothing more
 Respond in a timely manner or explain why you
can’t
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Keep in mind they will find something – we’re
not perfect
Time spent in your office will not be long, but
the audit will last several months
The audit process will not go away due to the
change to D&E billings – there will always be
the opportunity for compliance audits with
the power contract
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Contact information
 Tena Porter – North Georgia EMC
[email protected]
706 259-3394 ext. 1242
 Anthony Taylor – EPB, Chattanooga
[email protected]
423 648-1347
 Mary Mealer – Tullahoma Utilities Board
[email protected]
931 571-7139
 Rick Underwood – OIG (Chattanooga)
[email protected]
423 785-4824
Thank you to the OIG staff for providing portions of the
content for this presentation.