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Published byLeslie Rich Modified over 9 years ago
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Utility Accounting and Auditing MRWA 34 th Annual Conference December 11, 2014
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Nick Henry, CPA Horton, McFarland & Veysey, LLC Ellsworth, ME 04605 207-667-5529nick@hmvcpas.com
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Presentation Outline PUC Accounting PUC Chart of Accounts Revenues Expenses Budgeting Do I Need An Audit? Audit Preparation Understanding Financial Statements Reserves
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Presentation Outline - Continued Depreciation Cash Accounts Receivable Frustrations Accounting System Governmental Auditing Standards Trustee Information Internal Control Fraud Rate Case Process
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PUC Accounting Not Cash Basis Not GAAP Not Rate Case Basis Setup Accounts in Accordance with PUC Rely on Auditors or Consultants to Convert to Other Basis Keep it Simple
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PUC Chart of Accounts PUC Report: ◦ AssetsPage F-1 ◦ LiabilitiesPage F-2 ◦ EquityPage F-2 ◦ RevenuesPages F-4 & W-3 ◦ ExpensesPages 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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Revenues Unmetered Sales Metered 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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Expenses 601Salaries and Wages 604 Benefits 615 Purchased Power 618 Chemicals 620 Materials and Supplies 63X Contractual Services 650Transportation 657Insurance – General 675Miscellaneous 403Depreciation 427Interest Expense
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Budgeting Helps with Planning ◦ Short-Term ◦ Long-Term Cash Basis Income Statement Operating Budget Capital Budget ◦ Funding Board Involvement Revenues Operating Expenses Debt Service Payments Reserve Account Allocations Capital Asset Purchases Surplus 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 Preparation Reconcile Bank Accounts Inventory Count Review Balance Sheet Account Ending Balances Compare Ending Balances to Prior Year Balances Compare Ending Balances to Budgeted Amounts
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Understanding Financial Statements Balance 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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Reserves Types: ◦ Contingency ◦ Standpipe ◦ Capital Asset Must Setup with PUC when Filing Rate Case Separate Bank Accounts
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Depreciation Non-Cash Expense Allowed Expense for Rates Significant / Infrequent Repairs Equipment Purchases Capital Asset Replacements Need to Fund
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Cash Key Target Cash Reserve Restricted Cash Designated Cash Unrestricted Cash Separate Bank Accounts
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Accounts Receivable What Customers Owe Liens & Shut Offs Needs to be Collected If AR is Increasing, Cash is Decreasing
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Frustrations PUC ◦ 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 System Computerized vs. Manual Need More Than Check Register Many Options For Software Billing System Accounting System Can Be Separate Systems Properly Setup Accounting System Affects Everyone
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Governmental Auditing Standards More Strict Cannot Rely Entirely on Auditors for Everything Independence Issues Understand Financial Statements Make Decisions with Financial Statements Understand Adjusting Entries Ask Auditor Questions
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Trustee Information Monthly Financial Reports ◦ Balance Sheet ◦ Income Statement Budget to Actual Comparisons Monthly Bills Paid (Warrants) Cash Account Reports Accounts Receivable Reports
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Internal Control Segregation of Duties Trustees Review Financial Reports Trustee or Superintendent Sign Checks Dual Signatures on Checks Warrants Invoices Approved Before Payment Accounting Manual Review Time Cards
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Fraud Lack of Internal Controls = Opportunity Trusting Employees Too Much Audit NOT Designed to Detect Fraud Audit Utilizes Samples Association of Certified Fraud Examiners (ACFE) Statistics Credit Cards / Gas Cards
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Rate Case Process Annually Assess Need for Rate Increase 35-A Section 6104 3 Month Process At Least Avoid Petition = Avoid Public Advocate Educate Customers Establish Reserves Utilize Depreciation Expense
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THANK YOU GOD BLESS QUESTIONS?
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