Audit finds multiple violations at CUC

The Commonwealth Utilities Corp. has been found violating many of its own rules and regulations and other statutes, based on the fiscal year 2010 audit conducted by an independent auditor.

The 92-page audit report showed 16 findings, ranging from travel deficiencies and financial misstatements to disputed accounts.

Many of these multiple findings in the agency’s financial statement were cited in previous fiscal year audits but remain unresolved as of fiscal year 2010.

Pursuant to law, all funds received by CUC must be deposited into federally insured or fully collateralized account. The audit finds that CUC maintains an account with a non-insured bank and does not have an existing collateralization policy in place.

CUC, in its response to the audit, indicated that beginning February 2011 it will ensure that the identified account will be insured or collateralized. The audit showed that CUC bank deposits in the amount of $10.2 million and $9.5 million in fiscal years 2010 and 2009 were in excess of FDIC insurable limits.

Unreconciled cash accounts with bank balances were also noted in the audit, which CUC vowed to address by hiring an additional accountant to focus on the reconciliation of bank accounts.

The agency also failed to establish and implement internal control procedures to allocate interest earned to customer deposits—a violation of its enabling legislation. CUC agreed with this finding, saying it has not established a correction action plan to restore the restricted cash balance because of the agency’s financial state.

The report also showed that there are 20 long outstanding disputed accounts totaling $2.5 million that have not been disconnected by CUC. The utility agency countered that these delinquent customers are landowners on whose properties CUC has placed water wells, utility poles, pumps, and others installations. The auditor pointed out, however, that no contractual agreement exists between the parties regarding any setup for payment.

CUC, in its response, said all disputed customer accounts involving easements have been referred to outside legal counsel and will proceed through an administrative hearing process, with litigation to follow if necessary.

This same finding was indicated in audit reports for fiscal years 2006 through 2009 but remain unresolved.

Past due customer accounts should also be investigated by CUC, according to the audit, after it found 513 customer accounts whose total overdue balance was $963,850, none of which had disputes or promissory notes and have not been disconnected. CUC said all legal attempts will be made to collect these amounts and accounts will be disconnected if they fail to pay.

The same audit report showed unadjusted records in its inventory, uninvoiced receipts, and unreceived invoices.

CUC was also found not doing a physical count of its capital assets in over five years. The agency said this would soon be resolved because CUC’s comptroller and chief accountant, in coordination with division heads, will review the utility plant policies and procedures to develop a cycle physical inventory counting procedure.

The auditor also found untimely liquidation of travel advances. CUC vowed to review its travel policies and procedures and ensure that all travel will be in compliance with policies and procedures.

CUC was also found not complying with the reporting requirements for certain federal awards and grants.

The report also indicated unresolved questioned costs in previous audit reports amounting to $1.2 million.