Audit of the People’s Counsel Agency Fund for Fiscal Years 1995 and 1996
April 30, 1998

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EXECUTIVE SUMMARY

PURPOSE

Pursuant to D.C. Code, Section 43-612 (a)(6) and Section 455 of Public Law 93-198 (the District of Columbia Self Government and Governmental Reorganization Act of 1973, as amended), the District of Columbia Auditor is required to review revenue deposited by Potomac Electric Power Company (PEPCO), Washington Gas, and Bell Atlantic-DC into the Office of the People's Counsel Agency Fund. The District of Columbia Auditor is also required to review disbursements from the Agency Fund.

CONCLUSION

The Auditor successfully reconciled a total of $2,163,552.93 in deposits to OPC's Agency Fund for fiscal years 1995 and 1996, and determined that a total of $1,857,125.20 was expended from the Agency Fund during the same period.

During fiscal year 1995, the OPC did not refund any revenue deposits to the utilities. During fiscal year 1996, the OPC refunded $57,938.37 to Bell Atlantic and $125,575.64 to PEPCO.

The Auditor found that OPC's fiscal year 1995 and 1996 annual financial reports to the Mayor and the Council of the District of Columbia contained discrepancies in Agency Fund deposits and expenditures. Also, OPC's voucher control sheet ledgers contained significant discrepancies for the same period. The Auditor has made seven recommendations which, if implemented, will lead to the restoration of OPC's fiscal year 1995 and 1996 accounting and related financial records and will strengthen the recordkeeping and accounting deficiencies noted in this report.

MAJOR FINDINGS

1. Misplaced fiscal year 1995 financial records contributed to delays in completing a thorough and timely audit of OPC's fiscal year 1995 Agency Fund financial activity.

2. Voucher numbering sequence indicated an internal control deficiency.

RECOMMENDATIONS

1. The chief financial officer for the Office of the People's Counsel, in conjunction with the People's Counsel, correct OPC's fiscal year 1995 annual financial report to accurately reflect total utility revenue deposits of $ 1,881,762.50, and reissue this report to the Mayor and Council of the District of Columbia.
2. The OPC's chief financial officer correct OPC's voucher control sheet ledger and its fiscal year 1995 annual financial report to reflect actual Agency Fund expenditures of $1,453,006.67.
3. The OPC's chief financial officer ensure that financial reporting is consistent and accurate throughout OPC's accounting records and financial reports.
4. The OPC's chief financial officer strengthen internal accounting controls to ensure that all vouchers are sequentially numbered.
5. The OPC's chief financial officer reconcile the voucher control sheet ledger with FMS AD-6 l 1 reports on a monthly basis.
6. For record keeping and accounting purposes, the chief financial officer, in conjunction with the People's Counsel, reconstruct fiscal year 1996 revenue deposits made to OPC's Agency Fund.
7. The OPC's chief financial officer correct OPC's fiscal year 1996 voucher control sheet ledger and fiscal year 1996 annual financial report to reflect actual Agency Fund expenditures of $404,118.53. The corrected fiscal year 1996 annual financial report should be reissued to the Mayor and the Council of the District of Columbia.

PURPOSE

Pursuant to D.C. Code, Section 43-612 (a)(6) and Section 455 of Public Law 93-198 (the District of Columbia Self Government and Governmental Reorganization Act of 1973, as amended), the District of Columbia Auditor is required to review revenue deposited by Potomac Electric Power Company (PEPCO), Washington Gas, and Bell Atlantic-DC into the Office of the People's Counsel Agency Fund. The District of Columbia Auditor is also required to review disbursements from the Agency Fund.

OBJECTIVES, SCOPE AND METHODOLOGY

The objectives of this audit were to:

1. verify the deposits to and the disbursements from the Office of the People's Counsel Agency Fund for fiscal years 1995 and 1996;
2. examine expenses charged against the Agency Fund to determine whether each expense voucher contained sufficient supporting documentation, and determine whether the expenses were reasonable and necessary as required by D.C. Code, Section 43-612;
3. determine whether expense vouchers were properly reviewed and approved by appropriate OPC officials before payment; and
4. determine the validity of refunds to the utilities that were disbursed from the Agency Fund.

The audit covered fiscal years 1995 and 1996. To accomplish the audit objectives, the Auditor reviewed utility deposits to the Agency Fund and reconciled the deposits to the following District Financial Management System (FMS) reports: the Summary Trial Balance report (FN020 report), which summarizes the results of transactions processed against the Agency Fund; and the Transaction by Line Detail report (AD611 report), which presents a line by line description of vouchers processed against the Agency Fund.

The Auditor also reconciled FMS reports of Agency Fund deposits to confirmation statements provided by PEPCO, Washington Gas, and Bell Atlantic-DC. The FMS reports listed all deposits made to, and expenditures and refunds disbursed from the Agency Fund during fiscal years 1995 and 1996.

The Auditor interviewed the associate People's Counsel, chief financial officer and budget analyst assigned to the Office of the People's Counsel by the District's Chief Financial Officer, and other knowledgeable OPC personnel. The Auditor also interviewed officials from Potomac Electric Power Company (PEPCO), Washington Gas, and Bell Atlantic-DC. The Auditor also conducted appropriate and necessary tests of the documentation to determine OPC's compliance with D.C. Code,, Section 43-612.

The audit was performed in accordance with generally accepted auditing standards for governmental agencies and included such tests of the accounting records as were deemed necessary under the circumstances.

BACKGROUND

The Office of the People's Counsel was established by "The Utility Regulatory Assessment Clarification Act of 1984." Pursuant to D.C. Code, Section 43-406, the Office of the People's Counsel was established as an independent agency of the District of Columbia Government.

According to D.C. Code, Section 43-406(a), the Office of the People's Counsel "shall be a party, as of right, in any investigation, valuation, revaluation, or proceeding of any nature by the Public Service Commission of or concerning any public utility operating in the District of Columbia."

Also pursuant to D.C. Code, Section 43-406(d), the People's Counsel:

"(1) Shall represent and appeal for the people of the District of Columbia at hearings of the Commission and in judicial proceedings in the District of Columbia courts when these proceedings and hearings involve the interests of users of the products of or services furnished by public utilities under the jurisdiction of the Commission;

(2) May represent and appeal for the people of the District of Columbia at proceedings before related federal regulatory agencies and commissions and federal courts when those proceedings involve the interests of users of the products of or services furnished by public utilities under the jurisdiction of the Commission;

(3) May represent and appear for petitioners appearing before the Commission for the purpose of complaining in matters of rates or services;

(4) May investigate independently, or within the context of formal proceedings before the Commission, the services given by, the rates charged by, and the valuation of the properties of the public utilities under the jurisdiction of the Commission; and

(5) May develop means to otherwise assure that the interests of the users of the products of or services furnished by public utilities under the jurisdiction of the Commission are adequately represented in the course of proceedings before the Commission, federal or District of Columbia courts, or federal regulatory agencies and commissions involving those interests, including public information dissemination, consultative services, and technical assistance."

Each utility is authorized to charge rates that will permit a fair rate of return (or profit) on capital in exchange for the right to conduct business in the District of Columbia. Utilities must apply to the Public Service Commission for a change in rates or regulatory treatment. The Public Service Commission sets utility rates and otherwise regulates utilities through a formal legal process in which the affected public utility, the Office of the People's Counsel, and other interested parties have an opportunity to present their case. As noted earlier, the People's Counsel is the only statutory party of right.

District of Columbia Code, Section 43-612(a)(1) established the Office of the People's Counsel Agency Fund as a fiduciary fund in the District of Columbia Treasury. The Agency Fund is accounted for on a fiscal year basis and is managed by the District's Chief Financial Officer who has delegated direct management responsibility for the Fund to a chief financial officer who is under the CFO's supervisory control. District of Columbia Code, Section 47-317.3, in relevant part, states the following duties of the Chief Financial Of ficer:

"(1) Supervising and assuming responsibility for financial transactions to ensure adequate control of revenues and resources, and to ensure that appropriations are not exceeded.

(2) Maintaining systems of accounting and internal control designed to provide

(A) full disclosure of the financial impact of the activities of the District government;

(B) adequate financial information needed by the District government for management employees;

(C) effective control over, and accountability for, all funds, property, and other assets of the District of Columbia; and

(D) reliable accounting results to serve as the basis for preparing and supporting agency budget requests and controlling the execution of the budget."

Statutory Framework of the People's Counsel Agency Fund

District of Columbia Code, Section 43-612(a)(1) requires the use of the People's Counsel Agency Fund exclusively "for the payment of its expenses arising from any investigation, valuation, revaluation, litigation, or proceeding of any nature conducted by the Commission of or concerning any public utility operating in the District of Columbia, and all expenses of any litigation, including appeals..." Section 43-612(a)(1) also states that: "expenses shall be deemed to include, but not be limited to, the cost of independent contractors, such as attorneys."

District of Columbia Code, Section 43-61 21 a)(1 ) states that funding for the People's Counsel Agency Fund: "shall be provided through a special franchise tax which shall be paid by each public utility being investigated, valued, revalued, or otherwise affected through a proceeding of the Commission. . . .’

District of Columbia Code, Section 43-61 2(a)(2) states, in relevant part, the following:

"(2) When any such investigation, valuation, revaluation, or other proceeding of any nature is begun by the Commission or the Office of the People's Counsel, either the Commission or the Office of the People's Counsel shall... determine from time to time the reasonable and necessary expenditures required to fully carry out their respective statutory responsibilities with regard to such investigation, valuation, revaluation, or other proceeding... Once the Office of the People's Counsel has determined its requirements, the Office shall submit its determination for review by the Commission...The Commission shall complete its review within 10 days (excluding Saturdays, Sundays, and holidays) of receipt of the Office's determination. After completing its review, the Commission shall either call upon the utilities for the prompt deposit of the special franchise tax deposit to the Office of the People's Counsel Agency Fund or inform the Office in writing of any specific failures of the Office to meet the Commission's enumerated standard of review... All such sums shall be deposited in the District of Columbia Treasury. Those sums... which are requested by the Commission on behalf of the Office shall be deposited in the Office of the People's Counsel Agency Fund, to be disbursed in the manner provided for by law for other expenditures of the government of the District of Columbia."

Finally, D.C. Code, Section 43-612(a)(2) states that after the final disposition of a proceeding, any excess funds deposited by a utility shall be refunded to the utility. In order to determine whether excess funds were deposited by a utility, financial records of the People's Counsel Agency Fund must adequately document all deposits, identify the formal case for which funds were deposited, and adequately document all expenditures charged against funds deposited for each formal case.

Office of the Chief Financial Officer Obtained Custody and Control of OPC's Fiscal Year 1995 and 1996 Financial Records

During fiscal years 1995 and 1996, as of July 1996, the financial activities of the OPC were managed by a controller and budget analyst under the direct supervisory control of the People's Counsel. At that time, all official accounting documents for the People's Counsel Agency Fund were under the custody and control of the People's Counsel. However, on July 17, 1996, the District's Chief Financial Officer issued Financial Management and Control Order No. 96-11, effective July 17, 1996, which stated, in relevant part, the following:

"...It is hereby ORDERED that for fiscal years ending September 30 1996 and September 30, 1997 and notwithstanding any other provision of law:

1. Authority and Functions:

(1) All District of Columbia executive branch, (including independent agencies) accounting, budget, and financial management personnel, and

(2) The heads and all personnel in the following offices shall be appointed by, serve at the pleasure of, and act under the direction and control of the DCCFO: .:...

Authority to Appoint:

(3) For fiscal years ending September 30, 1996 and September 30, 1997 and notwithstanding any other provision of law:

(a) All agency, Chief Financial Officers (CFO's), Controllers, the Heads and all other personnel listed in (A)(2)(a)-(f), above, together with all other District of Columbia executive branch, (including independent agencies) accounting, budget and financial management personnel shall be pointed [sic] by. serve at the pleasure of. and act under the direction of the DCCFO.. The DCCFO, in consultation with the City Administrator, will assume exclusive responsibility for promulgation of position descriptions and management of an ongoing recruitment programs [sic] for these positions."

As a result of the implementation of Financial Management and Control Order No. 96- 11, the OPC's controller and budget analyst were deployed to other agencies by the District's Chief Financial Officer (CFO). At the same time, the CFO assigned a new chief financial officer to perform accounting, budget, and financial management duties and responsibilities for the Office of the People's Counsel and the Public Service Commission. Further, the Office of the Chief Financial Officer assigned two of its staff members to the Office of the People's Counsel to assist in carrying out accounting and budget functions. The staff assigned to OPC by the CFO were paid salaries and benefits from OPC's budget, but reported to and were supervised by a chief financial officer under the direct supervision and control of the Chief Financial Of ficer.

Following the effective date of the Chief Financial Officer's order, representatives from the Office of the People's Counsel indicated that the period of transition began immediately and was marked by disorganization on the part of certain staff members of the Office of the Chief Financial Officer. Further, according to representatives of the Office of the People's Counsel, all OPC accounting and financial records were taken by the Chief Financial Officer's staff.

The Auditor's review indicated that an orderly transfer of OPC's accounting and financial records did not occur, and that the specific records transferred to the CFO's staff were not itemized and described in a written document prepared by either the People's Counsel or the staff of the Chief Financial Of ficer. As a result, the Chief Financial Officers staff obtained custody and control of all OPC financial documents, including expense vouchers, non-revenue cash receipt vouchers, balance sheet journals, and FMS reports without documenting the accounting records that it assumed responsibility for safeguarding. As a further result of these events, during the field work and analytical stages of the current audit, the staff of the Office of the People's Counsel and the current staff assigned to OPC by the Chief Financial Officer could not timely provide the Auditor with complete fiscal year 1995 and 1996 OPC Agency Fund accounting and related financial records. Subsequent to the issuance of this report, in draft, for agency review and comment, many records previously requested and unavailable were found and made available for the audit team's review.

Fiscal Year 1995 Audit of the People’s Counsel Agency Fund for Fiscal Year 1995

FINDINGS

Misplaced Fiscal Year 1995 Financial Records Contributed to Delays in Completing a Timely and Thorough Audit of OPC's Fiscal Year 1995 Agency Fund Financial Activity

The staff of OPC's chief financial officer could not timely provide the Auditor with non-revenue cash receipt vouchers (NRCR) with which the audit team could have immediately substantiated the receipt and deposit of approximately $1,881,762.50 received from PEPCO, Washington Gas, and Bell Atlantic- DC. In the absence of a complete audit trail, the Auditor could not properly reconcile the Agency Fund or resolve errors and inconsistencies in the Agency Fund's fiscal year 1995 accounting records. After the initial draft report was transmitted to OPC's chief financial officer and the People's Counsel for review and comment, non-revenue cash receipt vouchers were made available for the Auditor's analysis.

The Auditor reviewed available non-revenue cash receipt vouchers and compared them with dollar amounts stated on "Notices of Agency Fund Requirements" (NOAFR's) for fiscal year 1995, and also compared non-revenue cash receipt vouchers with dollar amounts listed on utility confirmation statements. The Auditor successfully reconciled amounts stated on NOAFR's to amounts stated on utility confirmation statements and amounts recorded in the District's Financial Management System. The Notices of Agency Fund Requirements, the utility confirmation statements, and the FMS confirmed that, during fiscal year 1995, $1,881,762.50 was received and should have been deposited into OPC's Agency Fund. However, only $1,869,138.50 was actually deposited into OPC's Agency Fund for fiscal year 1995, a discrepancy of $12,624.

The Auditor's review revealed that OPC erroneously reported a PEPCO deposit totaling $12,624 as a fiscal year 1996 deposit rather than a fiscal year 1995 deposit. The PEPCO check was dated September 29, 1995 and was requested by OPC on NOAFR No. 10697, dated September 20, 1995. OPC should have deposited the $12,624 into the Agency Fund as a fiscal year 1995 revenue deposit rather than a fiscal year 1996 revenue deposit.

In error, the Office of the People's Counsel reported total Agency Fund deposits of $1,837,514 in its required fiscal year 1995 annual report to the Mayor and the Council of the District of Columbia. However, actual fiscal year 1995 Agency Fund revenue deposits should have totaled $1,881,762.50, a discrepancy of $44,248.50.

Table I presents fiscal year 1995 revenue deposited by PEPCO, Washington Gas, and Bell Atlantic-DC based on the Auditor's reconciliation of utility confirmation statements, OPC's Notices of Agency Fund Requirements, and the District's Financial Management System.

TABLE I
Office of the People’s Counsel
Fiscal Year 1995 Agency Fund Revenue Deposits

Source: Office of the D.C. Auditor

Recommendation

The chief financial officer for the Office of the People's Counsel, in conjunction with the People's Counsel, correct OPC's fiscal year 1995 annual financial report to accurately reflect total utility revenue deposits of $1,881,762.50 and reissue this report to the Mayor and Council of the District of Columbia.

Fiscal Year 1995 Agency Fund Expenditures

During fiscal year 1995, approximately 276 expense vouchers totaling $1,411,626.33 were charged against OPC's Agency Fund. This amount differed significantly from OPC's voucher control sheet ledger which reported total Agency Fund expenditures of $1,484,291.55, and OPC's annual financial report which stated total Agency Fund expenditures of $1,440,881. Through reconciliation procedures, the Auditor determined that $ 1,453,006.67 was actually charged against OPC's Agency Fund for fiscal year 1995. Table II presents the differing fiscal year 1995 Agency Fund expense totals that appeared in OPC's voucher control sheet ledger, fiscal year 1995 annual financial report, and FMS AD-61 [report.

TABLE II
Office of the People's Counsel
Discrepancies in Reporting Agency Fund Expenses
For the Period October 1, 1994 through September 30, 1995

Source: Office of the People's Counsel

Voucher Numbering Sequence Indicated An Internal Control Deficiency

The exact number of expense vouchers processed for payment against the Agency Fund during fiscal year 1995 was not immediately apparent in that OPC's voucher control sheet ledger contained a voucher numbering sequence that changed several times during fiscal year 1995. Further, voucher numbers and amounts posted to the voucher control sheet ledger for fiscal year 1995 did not agree with voucher numbers and amounts posted as paid in related FMS AD-611 reports.

For example, voucher number vbs041 for $41,380.34 was posted to OPC's voucher control sheet ledger on May 16, 1995. However, this voucher was reported as paid in FMS eight months later in January 1996, and was charged against OPC's Agency Fund for fiscal year 1996 rather than fiscal year 1995. The $41,380.34 expense was incurred during fiscal year 1995 and should have been paid during fiscal year 1995.

Further, OPC's voucher control sheet ledger listed the following two expense vouchers that were not listed as paid in FMS AD-611 reports during fiscal year 1995: vbs057 for $19,477.66, and vbs103 for $14,050.00. Also, FMS AD-611 reports contained three expense vouchers (BSE-001, BSE-002, and BSE-003) totaling $5,967.57 which were charged against OPC's Agency Fund for fiscal year 1995. However, these expense vouchers were not listed on OPC's voucher control sheet ledger for fiscal year 1995.

Changes in the voucher numbering sequence and the failure to reconcile voucher control sheet ledger entries with monthly FMS AD-611 reports indicated a weakness in internal controls that affected the reliability of OPC's financial records. Vouchers should be sequentially numbered and any changes in the voucher numbering sequence should be adequately documented to facilitate accountability and tracking of vouchers created during the accounting period.

Recommendations

1. The OPC's chief financial officer correct OPC's voucher control sheet ledger and its fiscal year 1995 annual financial report to reflect actual Agency Fund expenditures of $1,453,006.67.
2. The OPC's chief financial officer ensure that financial reporting is consistent and accurate throughout OPC's accounting records and financial reports.
3. The OPC's chief financial officer strengthen internal accounting controls to ensure that all vouchers are sequentially numbered.

4. The OPC's chief financial officer reconcile the voucher control sheet ledger with FMS AD-611 reports on a monthly basis.

Fiscal Year 1995 Summary of Receipts and Expenditures

Table III provides a summary statement of all fiscal year 1995 OPC Agency Fund deposits, expenditures, and refunds based upon the Auditor's reconciliation.

TABLE III
Office of the People's Counsel
Statement of Receipts and Expenditures For
Fiscal Year Ending September 30, 1995

Source: Office of the D.C. Auditor

As of October 1, 1994, the Agency Fund's beginning balance was $651,415. Receipts of $1,881,762.50, less expenditures of $1,453,006.67, and no refunds to the utilities resulted in an ending Agency Fund balance of $1,080,170.83. The ending balance is a reserve balance to be used for authorized expenses pertaining to ongoing case activity.

Unexpended funds remaining after a formal case has been properly closed or terminated must be refunded to the appropriate utility. During fiscal year 1995, the Office of the People's Counsel did not close any formal cases, therefore, no refunds were made to PEPCO, Washington Gas, or Bell Atlantic-DC.

Fiscal Year 1996 Audit of the People’s Counsel Agency Fund for Fiscal Year 1996

FINDINGS

Fiscal Year l996 Agency Fund Revenue Deposits

Fiscal year 1996 FMS AD-611 reports listed utility revenue deposits to OPC's Agency Fund totaling $290,414.43. As noted earlier in this report, the $290,414.43 included a fiscal year 1995 PEPCO deposit of $12,624 that was not deposited with fiscal year 1995 Agency Fund revenue. Also, a fiscal year 1996 Washington Gas deposit of $4,000 for formal case 922 was erroneously deposited into the Agency Fund for fiscal year 1997. Therefore, based on the Auditor's reconciliation, OPC's fiscal year 1996 Agency Fund revenue deposits should have totaled $281,790.43.

The chief financial officer for OPC was unable to provide the Auditor with all source documents to substantiate the receipt and deposit of $281,790.43 to OPC's Agency Fund for fiscal year 1996. As noted earlier in this report, non-revenue cash receipt vouchers were used by OPC to record the deposit of revenue received from public utilities. The Auditor's review of OPC's fiscal year 1996 Agency Fund records revealed that four non-revenue cash receipt vouchers were missing from OPC's files. Also, two Notices of Agency Fund Requirements (NOAFRs), which were used to request funds from public utilities to cover estimated expenses, were also missing from OPC's files.

Table IV presents a total of $277,835 in fiscal year 1996 revenue deposited by PEPCO, Washington Gas, and Bell Atlantic-DC based on confirmation statements maintained by the utilities. The $277,835, however, is $3,955.43 less than the $281,790.43 that the Auditor determined, through reconciliation, should have been deposited to OPC's Agency Fund. The $3,955.43 difference was due to the utilities' accounting methodology which subtracted deposits made to the Agency Fund from refunds received from OPC, and listed the difference on the confirmation statement.

TABLE IV
Office of the People's Counsel
Fiscal Year 1996 Utility Revenue Deposits
Based on Confirmation Statements

Source: D.C. Auditor’s Office

Recommendation

For record keeping and accounting purposes, the chief financial officer, in conjunction with the People's Counsel, reconstruct fiscal year 1996 revenue deposits made to OPC's Agency Fund.

Fiscal Year 1996 Agency Fund Expenditures

During fiscal year 1996, approximately 116 expense vouchers totaling $445,498.87 were charged against OPC's Agency Fund. This amount differed from OPC's voucher control sheet ledger which reported total Agency Fund expenditures of $410,262.20, and OPC's fiscal year 1996 annual financial report which stated total Agency Fund expenditures of $458,413.16. Table V presents the differing fiscal year 1996 Agency Fund expenditure totals that were reported in OPC's voucher control sheet ledger, fiscal year 1996 annual financial report, and FMS AD-611 report.

TABLE V
Office of the People's Counsel Discrepancies
in Reporting Agency Fund Expenditure Totals
for the Period October 1, 1995 through September 30, 1996

Source: Office of the People's Counsel

Through reconciliation, the Auditor determined that $404,118.53 was actually charged to OPC's Agency Fund during fiscal year 1996. However, the Auditor observed several discrepancies between FMS data and data presented in OPC's voucher control sheet ledger. The discrepancies resulted from: (1) errors made in posting entries to the voucher control sheet ledger; and (2) the failure to reconcile voucher control sheet ledger entries to monthly FMS AD-611 reports. Monthly reconciliation would have revealed errors made in posting entries.

For example, according to FMS AD-611 reports, three vouchers (BSE-001, BSE -002, BSE- 003) totaling $5,967.57 on the voucher control sheet ledger for fiscal year 1996 were actually charged against OPC's Agency Fund for fiscal year 1995. A review of the invoices attached to the vouchers indicated that the services were performed during fiscal year 1995 and the invoices were received by OPC on September 29, 1995. The payment for these services should have been charged to the Agency Fund's fiscal year 1995 accounting period.

As noted earlier in this report, FMS AD-611 reports listed a $41,380.34 voucher (vbs041) charged against OPC's Agency Fund for fiscal year 1996 that was not entered on the voucher control sheet ledger. Also, a review of the invoices attached to the voucher revealed that the services were performed during fiscal year 1995, and the payment also should have been charged to the Agency Fund's fiscal year 1995 accounting period.

Further, voucher number BSE-106 was listed on the voucher control sheet ledger in the amount of $477, however, the FMS AD-611 report showed that the actual amount paid was $291 rather than $477.

Finally, the Auditor observed that OPC's fiscal year 1996 annual financial report submitted to the Mayor and the Council of the District of Columbia erroneously reported total fiscal year 1996 Agency Fund expenditures of $458,413. 16 which overstated actual Agency Fund expenditures by $54,294.63.

Recommendation

The OPC's chief financial officer correct OPC's fiscal year 1996 voucher control sheet ledger and fiscal year 1996 annual financial report to reflect actual Agency Fund expenditures of $404,118.53. The corrected fiscal year 1996 annual financial report should be reissued to the Mayor and the Council of the District of Columbia.

Fiscal Year 1996 Summary of Receipts and Expenditures

Table VI provides a summary statement of all fiscal year 1996 Agency Fund deposits, expenditures, and refunds based upon the Auditor's reconciliation.

TABLE VI
Office of the People's Counsel
Statement of Receipts and Expenditures:
Fiscal Year Ending September 30, 1996

Source: Office of the D.C. Auditor

As of October 1, 1995, the Agency Fund's beginning balance was $ 1,080,170.83. Receipts of$281,790.43, less expenditures of$404,118.53, end refunds to the utilities of$ 183,514.01 resulted in an ending Agency Fund balance of $774,328.72. The ending balance is a reserve balance to be used for authorized expenses pertaining to ongoing case activity. Unexpended funds remaining after a formal case has been properly closed or terminated must be refunded to the appropriate utility.

Due to the absence of complete, reliable financial documents for fiscal year 1996, the Auditor encountered difficulty in conclusively determining actual total Agency Fund revenue deposits. However, based on the reconciliation of available financial records, the Auditor determined that fiscal year 1996 Agency Fund revenue deposits totaled approximately $281,790.43.

The chief financial officer assigned to OPC and the staff of the People's Counsel could not provide the Auditor with any original source documents that supported refunds made to utilities during fiscal year 1996. Nevertheless, the Auditor determined that the Office of the People's Counsel refunded a total of $183,514.01 to utilities as follows: $57,938.37 to Bell Atlantic-DC and $125,575.64 to PEPCO.

CONCLUSION

The Auditor successfully reconciled a total of $2,163,552.93 in deposits to OPC's Agency Fund for fiscal years 1995 and 1996, and determined that a total of $1,857,125.20 was expended from the Agency Fund during the same period.

During fiscal year 1995, the OPC did not refund any revenue deposits to the utilities. During fiscal year 1996, the OPC refunded $57,938.37 to Bell Atlantic and $125,575.64 to PEPCO.

The Auditor found that OPC's fiscal year 1995 and 1996 annual financial reports to the Mayor and the Council of the District of Columbia contained discrepancies in Agency Fund deposits and expenditures. Also, OPC's voucher control sheet ledgers contained significant discrepancies for the same period. The Auditor has made seven recommendations which, if implemented, will lead to the restoration of OPC's fiscal year 1995 and 1996 accounting and related financial records and will strengthen the recordkeeping and accounting deficiencies noted in this report.

Respectfully submitted,
Deborah K. Nichols
Interim District of Columbia Auditor

Appendix I

OFFICE OF THE PEOPLE’S COUNSEL
Description of Formal Cases
Requiring Deposits to the OPC Agency Fund
During Fiscal Years 1995 and 1996

AGENCY COMMENTS

On March 16, 1998, the Office of the District of Columbia Auditor transmitted this report, in draft, for review and comment to the People's Counsel, the chief financial officer for the Office of the People's Counsel, and the Chief Financial Officer for the District of Columbia. The draft report was also transmitted for review and comment to Potomac Electric Power Company, Washington Gas Company, and Bell Atlantic-D.C.

On March 30, 1998, written comments were received from the People's Counsel, and on March 31, 1998 an exit conference was held to discuss the draft report. On April 16, 1998, the draft report was transmitted for further review and comment to the People's Counsel, the chief financial officer for the Office of the People's Counsel, and the Chief Financial Officer for the District of Columbia. On April 24, 1998, written comments were received from the People's Counsel. Where appropriate, changes were made to the draft report as a result of comments received from agency officials. The comments are appended, in their entirety, to the final report.

Office of the People’s Counsel
District of Columbia

1133 15th Street, N.W., Suite 500, Washington, D.C. 20005-2710
(202) 727-3071 FAX (202) 727-1014
(TTY/TDD) (202) 727-2876

April 24, 1998

Deborah K. Nichols
Interim District of Columbia Auditor
()Office of the District of Columbia Auditor
The Presidential Building
415 1 2th Street, N.W., Room 210
Washington, DC 20004

I)ear Ms. Nichols:

Thank you for the opportunity to submit this response to your revised "draft report" entitled "Audit of the Office of the People's Counsel Agency Fund for Fiscal Years 1 995 and 1996" dated April 16, 1998. In drafting our response the Office worked closely with the OCFO/OPC Chief Financial Officer, Charles Simpson.

First, we must say we appreciate the backdrop, which you have incorporated so there is a clearer understanding of the audits findings. As we discussed, it is important to view the audit in the context of the transitions from OPC's controller to an Office of the Chief Financial Officer's controller and ultimately, to our current chief financial officer. As you know steps have already been taken to address a number of issues identified in the audit.

Also we appreciate your incorporating many of the concerns we raised in our meeting with you on March 31 to discuss the initial draft of the audit report. This report provides a realistic view of the circumstances surrounding the audit. Moreover, the document's reorganization and conciseness reflect your efforts to work with OPC in an effective manner to achieve a mutually agreed upon accurate document.

The Office's few comments follow in chronological order.

Page 10

In the first sentence in the final paragraph, the Office would recommend deleting the word "erroneously." The remainder of the paragraph makes it very clear the subject deposit should have been reflected in FY 1995 deposits rather than FY 1996.

Page 22

In the first sentence in the first paragraph, the Office believes the word "delays" implies OPC's chief financial officer and staff deliberately failed to provide requested documentation on a timely basis. This was not the case. The Office would recommend the sentence read "Because of misfiled relevant accounting and related documents, the Auditor was hampered in the efficient completion of the audit and was precluded from conducting the audit in a standard fashion."

One general comment remains. We still believe all the recommendations should indicate that whatever actions need to be taken by the OCFO/OPC Chief Financial Officer should be done with the "concurrence and approval of the People's Counsel."

In conclusion, the Office appreciates that because of the transition to OCFO,, the audit found problems with record keeping and the retention of records. Ultimately. however. the Auditor was able to reconcile transactions. The OCFO/OPC chief financial officer has taken and is continuing to take steps to address these matters. The Auditor's draft recommendations are already being implemented, so the Office does not anticipate the problems identified in this audit or anticipate any other problems in its next biannual audit.

Again, we appreciate the spirit of cooperation you and your staff exhibited.. Your findings and recommendations reflect the circumstances beyond the Office's control leading to the difficulties encountered in the audit. We are of course available to discuss this matter.

Sincerely,

Elizabeth A. Noel
People's Counsel

1. See Appendix 1 for a brief description of each formal case number.

2. See Appendix 1 for a brief description of each formal case number.