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)

                            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.
         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
 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
                              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


     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.


     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.

      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

     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.


     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.

Adjustments were made to the plant account resulting in a reduction
$1,237,293, Interest ($8,618) and depreciation ($9,674) expenses

     Interest during construction was not computed on construction
incurred between 1962 and 1975. These costs increased Eklutna
plant costs by $14,726.

     A Paie of power ($205,734) was recorded in fiscal year 1976,
should have been recorded in prior years. The necessary adjustment
current year and prior.years revenues was made.

     A copy of this letter is being sent to the Director, Office
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