utility accounting and auditing mrwa 34 th annual conference december 11, 2014
TRANSCRIPT
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Utility Accounting and Auditing
MRWA 34th Annual ConferenceDecember 11, 2014
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Presentation OutlinePUC AccountingPUC Chart of AccountsRevenuesExpensesBudgetingDo I Need An Audit?Audit PreparationUnderstanding Financial StatementsReserves
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Presentation Outline - Continued
DepreciationCashAccounts ReceivableFrustrationsAccounting SystemGovernmental Auditing StandardsTrustee InformationInternal ControlFraudRate Case Process
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PUC AccountingNot Cash BasisNot GAAPNot Rate Case BasisSetup Accounts in Accordance with
PUCRely on Auditors or Consultants to
Convert to Other BasisKeep it Simple
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PUC Chart of AccountsPUC Report:◦Assets Page F-1◦ Liabilities Page F-2◦Equity Page F-2◦Revenues Pages F-4 & W-3◦Expenses Pages F-4 & W-2
Benefits of Properly Setup Chart of Accounts:◦Audit◦PUC Annual Report◦PUC Financial Issues / Requests◦Rate Case Filings
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RevenuesUnmetered SalesMetered Sales◦ Residential◦ Commercial◦ Industrial◦ Public Authority
Fire Protection Charges◦ Public Fire Protection◦ Private Fire Protection
Other◦ Sales For Resale◦ Jobbing◦ Interest
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Expenses601 Salaries and Wages604 Benefits615 Purchased Power618 Chemicals620 Materials and Supplies63X Contractual Services650 Transportation657 Insurance – General675 Miscellaneous403 Depreciation427 Interest Expense
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Budgeting
Helps with Planning◦Short-Term◦ Long-Term
Cash BasisIncome StatementOperating BudgetCapital Budget◦ Funding
Board Involvement
RevenuesOperating ExpensesDebt Service
PaymentsReserve Account
AllocationsCapital Asset
PurchasesSurplus Funds
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Do I Need An Audit?Statute 35-A Section 505◦Revenues Under $50,000
Test Year for Rates Only
◦Revenues Between $50,000 - $250,000 Annual Review Required Test Year for Rates At Least Once Every Five Years
Required By MMBB and USDA Agreements
Insurance Providers May Require
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Audit PreparationReconcile Bank AccountsInventory CountReview Balance Sheet Account
Ending BalancesCompare Ending Balances to Prior
Year BalancesCompare Ending Balances to
Budgeted Amounts
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Understanding Financial StatementsBalance Sheet (Statement of Net Position)◦Cash◦ Accounts Receivable
Income Statement (Statement of Revenues, Expenses and Changes in Fund Net Position)◦Revenues◦ Expenses◦Net Income
Statement of Cash Flows◦Net Increase (Decrease) in Cash
Ratios
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ReservesTypes:◦Contingency◦Standpipe◦Capital Asset
Must Setup with PUC when Filing Rate Case
Separate Bank Accounts
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DepreciationNon-Cash ExpenseAllowed Expense for RatesSignificant / Infrequent RepairsEquipment PurchasesCapital Asset ReplacementsNeed to Fund
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CashKeyTarget Cash ReserveRestricted CashDesignated CashUnrestricted CashSeparate Bank Accounts
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Accounts ReceivableWhat Customers Owe Liens & Shut OffsNeeds to be CollectedIf AR is Increasing, Cash is
Decreasing
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FrustrationsPUC◦Revenues◦Relying on Auditors Too Much
Auditors◦Not Making Adjusting Entries◦Cash Accounts Not Reconciling◦ Inconsistent Postings◦Posting Everything to Miscellaneous Expense◦Lack of Checks and Balances ◦Not Understanding Internal Controls
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Accounting SystemComputerized vs. Manual Need More Than Check RegisterMany Options For SoftwareBilling SystemAccounting SystemCan Be Separate SystemsProperly Setup Accounting System
Affects Everyone
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Governmental Auditing Standards
More Strict Cannot Rely Entirely on Auditors for
EverythingIndependence IssuesUnderstand Financial StatementsMake Decisions with Financial
StatementsUnderstand Adjusting EntriesAsk Auditor Questions
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Trustee InformationMonthly Financial Reports◦Balance Sheet◦Income Statement
Budget to Actual ComparisonsMonthly Bills Paid (Warrants)Cash Account ReportsAccounts Receivable Reports
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Internal ControlSegregation of DutiesTrustees Review Financial ReportsTrustee or Superintendent Sign
ChecksDual Signatures on Checks WarrantsInvoices Approved Before PaymentAccounting ManualReview Time Cards
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FraudLack of Internal Controls = OpportunityTrusting Employees Too Much Audit NOT Designed to Detect FraudAudit Utilizes SamplesAssociation of Certified Fraud
Examiners (ACFE) StatisticsCredit Cards / Gas Cards
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Rate Case ProcessAnnually Assess Need for Rate
Increase35-A Section 61043 Month Process At LeastAvoid Petition = Avoid Public AdvocateEducate CustomersEstablish ReservesUtilize Depreciation Expense
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THANK YOU
GOD BLESS
QUESTIONS?