Their accounts now amount to $2,540,906.
“CUC has not implemented its formal policy for its use of private property in lieu of payment to CUC for utility usage,” according to the audit report of J. Scott Magliari & Company.
The 20 outstanding accounts were not disconnected, the report added.
While CUC is making rental payments for use of the property, customers are not paying for utility usage and there’s no formal contractual agreement exists between these customers and CUC, the report said.
No cost analysis study has been performed to determine the fair value of the property rental compared to the property owner’s utility consumption, it added.
The audit was included in the Office of Public Auditor’s executive summary concerning its report on CNMI agencies’ implementation of audit recommendations as of December 31, 2010.
Similar findings
According to the report, a formal policy was drafted in fiscal year 2007 and approved by CUC, but it was not implemented.
In the audit for fiscal years 1996 to 2009, similar findings about the lack of formal agreements with landowners for the use of land were reported.
In 2007, CUC adopted a policy requiring all agreements to be prepared prior to using private properties. CUC also established procedures for easement claims.
Because of the absence of policy, the delinquent accounts may be uncollectible, the report said.
“There could be inequalities in the amount paid for certain parcels of land depending on the value of utilities consumed,” the report added.
J. Scott Magliari & Company said CUC should consider conducting a cost-analysis to determine the fair value of the property rental against the property owner’s utility consumption.
CUC should also execute formal agreements with all landowners for the use of land and ensure compliance with established policies and procedures.
Depending on the agreed monthly rate, it may be necessary for CUC to make prior period adjustments to record rent expense and reduce the related outstanding receivables, the audit report said.
In its response, CUC said all disputed customer accounts involving easements have been referred to outside counsel.
CUC said it will proceed through an administrative hearing process, with litigation to follow if necessary.
“All legal attempts will be made to collect the amounts due. All affected customers have been notified to begin paying current charges of they will be subject to disconnection,” CUC said.
