Guam – The Guam Power Authority got a “clean”, unqualified opinion in the latest audit of its financial statements, but the independent auditors identified 3 “significant deficiencies” and they sent out a management letter which identified 11 additional “findings.”
The audit was conducted by Deloitte and Touche and released today [Thursday] by the Office of Public Accountability.
GPA AUDIT HIGHLIGHTS:
* The production cost of fuel increased by 18%, going from $244M in FY 2011 to $289M in 2012.
* GPA ended the year with a decrease in gross margin of $4M largely due to higher cost of fuel.
* The increase in production cost coupled with other operating and maintenance expense offset $46M in sales growth.
* GPA closed the 2012 Fiscal Year with a $2 million dollar decrease in net assets. That is more than double the 2011 Fiscal Year’s $1M decrease.
* GPA’s consumer base continues to see growth despite of the decline in kilowatt hours (KWH) sales of 64M KWH or 4% below prior year levels.
* In October 2012, the U.S. Department of Energy designated GPA as a high-risk recipient due to a two year delay with the implementation of the Smart Grid Project funded with American Recovery Reinvestment Act (ARRA) Grant.
* GPA’s delayed implementation was a result of issues of system wide change and organizational alignment.
3 “Major Deficiencies”:
1. Procurement- One significant deficiency pertained to the procurement of services on two major ARRA programs related to the GovGuam Buildings Retrofit totaling $8M from the Retrofit Government-Owned Street Lights of $2M.
GPA was noncompliant with procurement regulations for ARRA awards subgranted by the Guam Energy Office (GEO).
GPA utilized two existing vendors working on nonfederal projects rather than following competitive procurement practices.
Although GEO concurred with GPA’s procurement actions, documentation supporting such activities was not evident in GPA’s procurement files.
2. General Computer Controls – This is a prior year audit finding for GPA’s general computer controls system. GPA’s system allows user access rights that enable them to “delete and/or update” meter readings and billing information.
3. Equipment and Real Property Management – GPA has not performed the required comprehensive physical inventories of its property and equipment in FY 2012 or in the two prior years. Thus, the auditors were not able to assess the overall cumulative monetary value of this deficiency.
Management letter identifies 11 findings:
* Electricity Sales: reconciliations between the PayPal and merchant accounts are not being performed. Further, electricity accounts tested included errors related to reclassifications, undercharged late fees, and overcharges.
* Cancellation and Rebills: One of five customer accounts tested was subject to multiple cancellations due to improper termination of the account.
* Allowance for Doubtful Accounts: GPA has long outstanding balances from Department of Public Works and GWA totaling $390K and $216K, respectively. Both balances are in dispute.
* Utility Plant Account: One item under the general plant account was obsolete and no longer supported. However, this item was not fully depreciated in the plant asset ledger.
* Water and Sewer Billings: GPA paid GWA for water and sewer charges handled through the navy, but at an incorrect rate. As a result, GPA recorded a payable to GWA.
* Bid Deposits: Bid deposits totaling $111K remain outstanding. GPA does not have a policy for recognizing unclaimed bid deposits; therefore, the amount remains as a liability.
* Customer Deposits: These include improper credits, improper refunds to customer accounts and negative balances.
* Annual Leave: Monitoring of leave is still being completed through the use of manual records and Excel spreadsheets.
* A separate section in the management letter concerning three other matters involved GPA’s liquidated damages, and defective fuel auto gauges.