DOCUMENT RESURE 02484 - [A1792793] (Restricted) (Audit of Alaska Power Administration for Fiscal Years 1974 and 1975]. May 26, 1977. 4 pp. Report to Robert J. Cross, Administrator, Alaska Power Administration; by John P. Carroll, Regional Manager, Field Operations Div.: Regional Office (Seattle). Issue Area: Accounting and Financial Reporting (2800). Contact: Field Operations Div.; Regional Office (Seattle). Budget Function: Miscellaneous: Financial Management and Information Systems (1002). Authority: Water Resources Development Act of 1976 (P.L. 95-587). Financial statements including accounting records and procedures of the Alaska Power Administration (AliA) were reviewed for fiscal years 1974 and 1975. Findings/Conclusions: The financial procedures and controls were generally satisfactory, but some weaknesses ware f-ai- 4n internal and in accounting procedures. Internal control weaknesses control found in power billings, property purchases, and payroll. were The power-meter readings record was not initialed by the employee who recorded the readings. Procurement and receiving duties, performed by one person, could reasonably be separated. attendance cost codes were not recorded for all studies. Time and Adequate inventory control did not exist at the time of review for Snettishas and other APA property. Overhead costs for Snettisham and Eklutna projects were based on budgetary estimates and not actual charges, resulting in understated overhead charges in 1976 and prior years. Payroll cost codes were not always established on time. For calculating the Snettishas project's electric plant depreciation expense, composite life must be determined and adjustments made to a1976 depreciation expenses. Various material changes were required each project's financial statements. Recommendations: to Procurement and receiving duties should be separated so that another person can witness purchase orders and verify receipt items. A complete inventory of Snettisham project and General of Investigation property should be taken, and identification numbers should be affixed to all mcvable property; a decision should be made as to what is surplus or transferrable; and items costing less than $300 should be resoved from accounting records. APA should periodically review overhead charges allocated to power projects. (DJH) 'N iot Bke avaiAllabl to publil rsding 1S'I UNITED STALES GENERAL ACCOUNTING OFFICE REGIONAL OFFICE ROOM . 41IrlNfT AVANUS NORTH tATrLE, WAHINGrON 9W109 MAY 2f 1977 Hr. Robert J.. Cross, Administrator Alaska Power Administration P.O. Box 50 Juneau, Alaska 99802 Dear Mr. Cross: We have completed our review of the Alaska Power Administration (APA) Federal power program financial statements for the fiscal years ended June 30, 1975, and June 30, 1976. Our review included an examina- tion of the APA accounting records and procedures which served as a basis for evaluating the reasonableness and proprieLv of APA's Federal power program financial statements. We are pleased to report that financial procedures and controls were &gneraily satisfactory. Minor matters noted during our review were discussed and resolved with your staff and are not described in this letter. However, we would like to bring the following items to your attention. INTER4AL CONTROL IEAKNESSES Internal control weaknesses were found involving power billings, property purchases, and payroll. 1. The power meter reading record which is the source document for calculating power billings is not init4a.ed by the APA employee who records the readings. 2. In some cases, property procurement and receiving is performed by the same APA employee. Because of APA's small size, it is practical and reasonable to assign the primary responsibility for these functions to one individual. However, separatien of procurement and receiving duties should be accomplished by having another employee witness and approve purchase orders and verify that the items were received. 3. "Time and Attendance" reports in APA's Projects Developmen-t Division do not reflect the actual time spent on certain projects because cost codes were not assigned for all studies. This has resulted in incorrect costing of expenses to General Investigation studies which could become reimbursable if the project is subsequently authorized. These internal control weaknesses were discussed with APA officials and action in being taken to strengthen the controls. ACCOUNTING PROCEDURE WEAKNESSES 1. The Long Lake phabe of the Snettisham construction costs, including movable equipment and other personal property, were formally transferred to APA as of:October 31, 1975, and June 30, 1976. At the time of our review, adequate inventory control had not yet been established over the property. We alsb noted that improved inventory control was needed over other APA property, A complete inventory of Snettisham Project and General Investigation (GI) property should be taken. Property items should oe posted to property cards and location of the items should be posted to the property records. Property identification numbers should be affixed to all movable property. During the inventory of GI property, a determination should be made of items which could be excessed or transferred to the Eklutna or Snettisham Projects. Non-sensitive items with an acquisition cost of $3CO or less should be removed from the accountability records per Department of the Interior's regulations. APA officials said an inventory will be taken and accounting records will be updated. Action has been taken to remove non-sensitive items costing $300 or less from the accounting records. 2. Overhead costs for the Snettisham and Eklutna Projects were based on a predetermined amount used for budget purposes and were not based on i study of overhead charges. Based on our suggestion, APA performed a comprehensive overhead allocation study, which included rent, salaries, travel, and other overhead costs. The study disclosed that the overhead changes for the Eklutna Project were understated by $8,900 in 1976 and $30,700 for prior years. Also, the Snettisham Project was understated by $18,200 in 1976 'and $43,800 for prior years. The financial statements were adjusted to include these costs. We believe that APA should peiiodically review the overhead charges allocated to the power projects. 3. In our review of charges to individual GI studies, we noted that payroll cost codes had not always been established on a timely basis. For instance, the Bradley Lake Project which has been authorized since 1962 had no payroll cost code. This has resulted in understating the project costs. We also noted that general expenses were not being distributed to individual projects. 2 At the completion of our review, APA had taken action to establish project cost codes. APA officials told us that an adjustment will be made to include the estimated costs incurred to date for the Bradlcy Lake Project and that general expenses will be distributed to individual projects. 4. The Snettisham Project's depreciation expense for electric plant has been calculated using a 75 year life in accordance with .he APA accounting instructions for new projects. A composite life will have to be determined.'oo the basis of actual cost by feature and an adjustment made to the fiscal year 1976 depreciation expense. APA officials said the composite life for computing depreciation will be determined and an adjustment to the fiscal year 1976 expense will )e made. CHANGES REQUIRED TO THE FINANCIAL STATEMENTS In addition to the adjustment for overhead exp-nses referred to on page 2, the following material adjustments were ma.e. Snettisham Project The financial statements were adjusted to include the Snettisham electric plant inservice costs transferred by the Corps of Engineers to APA as of October 31, 1975 ($76,190,693), and June 30, 1976 ($3,245,572). These costs were reduced by $2,698,763 for the restoration costs for the Salisbury Ridge portion of the transmission line made nonreimbursable by the Water Resource Development Act oi 1976 (P.L. 95-587). Snettisham feasibility st ily costs ($274,158) were transferred from an inactive GI account to the electric plant inservice. I;terest during construction was computed ($113,740) on the feasibility c,-,sts and included iii electric plant inservice. The electric plant inservi,: was increased to reflect the net loss on Snettisham Project operations ($543,219) prior to formal acceptance of the project by APA on October 31, 1975, together with the associated interest during construction (IDC) of $47,569. The above adjustments resulted in an increase in the depreciation ($237,343) and interest ($1,489,412' expense accounts. Eklutna Proj ect Adjustments were made to correct the method of recording the Eklutna 1964 earthquake loss which was subsequently made non-reimbursable by legislation. Ten years of amortization charges ($1,042,473) were reversed. 3 Adjustments were made to the plant account resulting in a reduction of $1,237,293, Interest ($8,618) and depreciation ($9,674) expenses were increased. Interest during construction was not computed on construction costs incurred between 1962 and 1975. These costs increased Eklutna electric plant costs by $14,726. A Paie of power ($205,734) was recorded in fiscal year 1976, which should have been recorded in prior years. The necessary adjustment to current year and prior.years revenues was made. A copy of this letter is being sent to the Director, Office of Audit and Investigation, Department of the Interior. We wish to acknolwedge the courtesy and cooperation given our representatives during this review. Sincerely yours, John P. Carroll Regional Manager 4
Audit of Alaska Power Administration for Fiscal Years 1974 and 1975
Published by the Government Accountability Office on 1977-05-26.
Below is a raw (and likely hideous) rendition of the original report. (PDF)