As of Sept. 30, 2009, CUC also had 765 customers with disputed accounts that had an aggregate balance of $9,572,983.
“The collectability of these past due customer accounts are doubtful and may represent bad debts. Furthermore, fraud could be committed on these accounts and not be detected in a timely manner,” according to J. Scott Magliari & Company, which conducted the audit for the Office of the Public Auditor.
The report said pursuant to CUC electric service regulation, it may disconnect past due accounts 14 calendar days after the second disconnection notice, which is sent 45 days after the first disconnection notice.
The audit firm recommended that past due customer accounts should be investigated.
“Pursuant to…CUC’s Electric Service Regulation…CUC should adhere to its established policies and procedures for termination/disconnection of service. Furthermore, internal control monitoring should be performed to ensure that all accounts 90 days past due are timely disconnected, unless supported by promissory notes or formal customer dispute,” the report stated.
In a recent interview, CUC Executive Director Abe Malae said the billing disputes, mostly involving water, have accumulated over the past 10 years.
CUC has hired two experts who will concentrate in resolving these disputes, he said.
He admitted that CUC’s previous system allowed anybody to file a dispute.
Custodial risk
The audit report also noted that CUC’s bank deposits of $10,212,255 as of Sept. 30, 2010 and $9,538,178 as of 2009 were in excess of the Federal Deposit Insurance Corporation’s insurable limits.
“The amount of cash in this institution has high custodial risk,” the report stated.
It noted that pursuant to Title 4 Division 8 of the Commonwealth Code §8155, all funds received by CUC must be deposited into federally insured or fully collateralized accounts.
CUC’s total assets as of Sept. 30, 2010 were $130.9 million, a decrease of $547,000 or 4 percent compared to 2009 when it amounted to $131.5 million, a decrease of $12.5 million or 8.7 percent compared to the figure on Sept. 30, 2008.
The reports stated that “most significant was a decrease in capital assets of $2.6 million, the result of accumulated depreciation increasing $7.8 million and water plant capital assets increasing $5.1 million.”
Also noted were an increase in deferred fuel costs of $1.4 million, a decrease in account and other receivables of $1.5 million and a $1.2 million increase in inventory.
CUC’s total liabilities as of Sept. 30, 2010, were $58.2 million, an increase of $1.4 million from $56.8 million in 2009, which decreased by $172.1 million or 75.2 percent compared to the figure on Sept. 30, 2008.
There was an increase in retirement contributions payable of $1.1 million, an increase in long-term debt of $1.4 million, and a decrease in accounts payable of $1.9 million.
The total net operating revenues for fiscal year 2010 were $82.7 million, an $8 million or 10.7 percent increase from $74.6 million in 2009, which decreased by $29.6 million or 28.4 percent compared to the fiscal year 2008 amount.
There was an increase of $4.5 million in water revenues and this can be attributed to the water metering program underway at CUC, the report said.
Total operating expenses for fiscal year 2010 were $90.7 million, an increase of $1.1 million or 1.3 percent from $89.6 million in 2009, which decreased by $27.6 million or 23.5 percent when compared to the fiscal year 2008 amount.
There was also an increase of production fuel costs by $7.4 million, while other production costs, primarily related to independent power producer contracts, decreased by $4.3 million, the report said.
