PUD addressing audit comments

Wahkiakum PUD is making progress in its efforts to correct financial reporting deficiencies identified during a review by the state auditor’s office last year.

In the report issued last April, the auditors wrote: “The District’s internal controls over accounting and reporting are inadequate to ensure the financial statements are accurate and complete.” The report reviewed the PUD’s financial records from 2009 and 2010.

Specifically, the audit report mentioned that some accounts, including the plant materials and supplies account, lacked reconciliation processes to verify that information was complete and accurate, and that PUD staff responsible for financial reporting needed further training in Generally Accepted Accounting Principles (GAAP). Audits from 2008 and 2009 also recommended the PUD make changes to financial reporting procedures.

The 2012 audit report recommended the establishment of a “technical review process of the financial statements by a person knowledgeable of Generally Accepted Accounting Principles and reporting requirements to ensure accurate preparation and reporting of the District’s financial statements.”

On Tuesday, PUD commissioners Dennis Reid, Bob Jungers and Gene Healy heard a report from Teresa Johnson, the consultant that the PUD hired to work with PUD Auditor Erin Wilson.

Reporting on a recent meeting with Wilson, Johnson said “Erin’s made great strides in developing processes to reconcile the different reports back to financial statements. Everything looks really good. What she has now that she didn’t before is backup documentation. That’s what was missing before, and now, she’s been able to get those there.

“There are two areas that we reviewed. We know that the district needs to work on its safeguarding of assets below the capital asset threshold of $5000. The state wants you to develop a policy and to document it.

“The other area we looked at is that now that the supplies and materials inventory system is up and running, you need to make sure that you safeguard it appropriately.”

Healy asked if the PUD currently had a written inventory policy. No, not a written one, although there is a procedure in place, confirmed Wilson and PUD Manager Dave Tramblie.

Johnson suggested developing a written policy and doing regular physical inventories to check for variance.

“Obviously you have to do physical inventories annually in order to make sure that your financial statements are properly stated, but now that you have an inventory system in your software you need to periodically check that what’s been in and out matches what’s in the accounting software. Your purpose in doing that is to make sure you don’t have any inventory loss. It’s an asset that has high risk, like cash, because it can walk away,” she said.

Jungers asked “are we keeping a running inventory now?”

“We are, but when we did our recent annual inventory we had a fairly sizable adjustment on the electric side, “ said Wilson.

“We worked extremely hard to try to determine why we had that variance, “ said Tramblie. “Shane (Pfenniger, the line crew foreman) and I tore that work order book apart trying to make sure we hadn’t missed something. Not to point fingers in any direction, but most of the lack of accounting of material came from the lower yard, which isn’t as secure as it could be. Due to the total value of the variance ($12,000), perhaps we want to consider better protection of our inventory, like completely fencing the yard."

The PUD will conduct another inventory count in April.

Jungers asked Johnson “are you confident that our books could withstand an audit from the state at this point without a finding?"

“I am, yes,” responded Johnson. “Erin’s done a good job in bringing these last couple years to where they need to be. “

See the audit report at: http://www.sao.wa.gov/findings/1007475.pdf.