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REPORT DIGEST PRAIRIELAND
FINANCIAL
AUDIT For the Year Ended: June 30, 2008 COMPLIANCE
EXAMINATION For the Two Years Ended: June 30, 2008 Summary
of Findings: Total this audit 4 Total from last audit 6 Repeated from last
audit 4 Release Date: March 5, 2009
State of
Office of the
Auditor General WILLIAM G. HOLLAND AUDITOR GENERAL
To obtain a copy of the
Report contact: Office of the Auditor
General
(217) 782-6046 or TTY (888)
261-2887) This Report Digest and Full
Report are also available on the worldwide web at www.auditor.illinois.gov |
SYNOPSIS · Prairieland Energy, Inc. failed to identify and properly record certain accrual adjustments in accordance with generally accepted accounting principles. · Prairieland Energy, Inc. did not properly bill some of its electric service customers in accordance with its written service agreements. · Prairieland Energy, Inc. does not maintain an integrated accounting system for recording its sales and accounts receivable and some billings are not done timely. In addition, internal controls related to revenues, receivables, and cash handling procedures lack an adequate segregation of duties. {Financial Information is
summarized on the reverse page.} |
PRAIRIELAND ENERGY, INC.
FINANCIAL AUDIT
For the Year Ended June 30, 2008
COMPLIANCE EXAMINATION
For the Years Ended June 30, 2008
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FINANCIAL
OPERATIONS |
FY 2008 |
FY 2007 |
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OPERATING REVENUES Steam Sales............................................................... Chilled Water Sales.................................................... Hot Water Sales........................................................ Electricity Sales.......................................................... Total.................................................................... OPERATING EXPENSES Energy Costs............................................................. Facilities Rental.......................................................... Salaries Office Rent................................................................ Other......................................................................... Total.................................................................... NONOPERATING REVENUES (EXPENSES) Interest Income.......................................................... Interest Expense......................................................... Other......................................................................... Income Tax (Expense) Credit..................................... Total.................................................................... INCREASE (DECREASE) IN NET ASSETS................. NET ASSETS - Beginning of Year................................... NET ASSETS - End of Year........................................... |
$86,143 58,976 $8,161,477 $7,843,141 0 42,471 15,408 176,790 $8,077,810 $69,512 (64,250) (958) 0 $4,304 $87,971 $905,632 $993,603 |
$2,882,019 1,541,329 $9,956,136 $7,993,126 1,451,850 116,499 15,180 180,089 $9,756,744 $23,455 (16,217) (134) (28,614) ($21,510) $177,882 $727,750 $905,632 |
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SELECTED ACCOUNT BALANCES |
AT JUNE 30, 2008 |
AT JUNE 30, 2007 |
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Cash.............................................................................. Accounts Receivable...................................................... Customer Deposits......................................................... |
$1,397,647 $1,549,297 $2,002,340 |
$626,529 $2,105,601 $1,822,940 |
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CORPORATION
PRESIDENT |
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During Audit Period: Mr. Lyle Wachtel (thru 12/31/07), Vacant 12/31/07 thru 2/5/08, Mr. Walter Knorr – 2/6/08 thru current |
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FINDINGS,
CONCLUSIONS, AND RECOMMENDATIONS INADEQUATE OPERATION OF
ACCOUNTING CONTROLS Prairieland
Energy, Inc. maintained its accounting records during the year on the cash
basis and recorded accrual adjustments at the end of the year in order to
report financial results in accordance with accounting principles generally
accepted in the During our
testing, we identified the following adjustment which had not been previously
recorded by Prairieland:
·
We identified a liability
which had not been recorded in accounts payable. The $5,780 liability was found while
updating our search near audit completion. The vendor’s invoice was dated in
August 2008, but was for services performed in February thru April of 2008. A proposed entry was not recorded by
Prairieland. Failure to
properly identify liabilities and record transactions in accordance with
accounting principles generally accepted in the We
recommended that Prairieland improve its procedures and related controls for
identifying liabilities and recording transactions in accordance with
accounting principles generally accepted in the Prairieland
management accepted our recommendation and stated that the period of
subsequent disbursement testing will be extended in future years to ensure
liabilities are identified and recorded in accordance with generally accepted
accounting principles. NEED
TO IMPROVE BILLING PRACTICES
Prairieland
Energy, Inc. did not properly bill some of its electric service customers in
accordance with its written service agreements. As part of
our FY08 financial audit procedures, we sampled 14 residential customers and
11 commercial (non-University) electric service customer billings and noted
13 of the 14 residential customers were not billed in accordance with the
written service agreements. As part or
our compliance examination, we selected 25 revenue transactions and noted 11
of the 25 revenue transactions contained some sort of billing error. For eleven, eight included errors related
to failure to use appropriate graduated municipal tax rates. We also noted 5 other types of errors on
the billings that included inaccurate energy charges, standard charges left
off of invoices, or charges that were double billed due to split month
billing. Failure to
properly bill customers in accordance with written service agreements and
regulations is a violation of those agreements and regulations and may result
in liability to the customers and lost revenue to Prairieland. (Finding 2, Pages 11-12) We
recommended that Prairieland bill its customers in accordance with its
written service agreements and applicable regulations. Prairieland management
stated that they will develop and implement improved controls to ensure
billings are processed according to the signed service agreements. NEED
TO IMPROVE SYSTEM OF ACCOUNTING FOR SALES AND RELATED ACCOUNTS RECEIVABLE Prairieland
Energy, Inc. does not maintain an integrated accounting system for recording
its sales and accounts receivable and some billings are not done timely. In addition, Prairieland’s controls over
the revenue/receipt process includes less than ideal segregation of duties. Prairieland
maintains its accounting records on a cash basis during the year and records
accrual adjustments at the end of the year.
Prairieland uses an excel spreadsheet to track the monthly billing and
payments of non-University electricity customers and to record accounts
receivable at year end. Energy sales
were recorded during the year based on actual deposits reflected on the bank
statements and deposit details provided by Prairieland to its external
accountant, and not based on a detailed sales journal. Billings to a
commercial customer for steam and chilled water in In addition,
we noted that the internal controls related to revenues, receivables, and
cash handling procedures lack an adequate segregation of duties. One employee is: 1) printing and mailing the prepared
invoices; 2) recording the billings in the spreadsheet used to track
receivables; 3) receiving payments; 4) crediting payments to customers’
accounts, and 5) depositing the daily receipts. Also, the daily deposit is not kept in a
secured environment while awaiting deposit. (Finding 3, Pages 13-14) (This
finding was first reported in 2005)
We
recommended that Prairieland maintain its accounting records on the accrual
basis, records sales and accounts receivable when they are earned, and
implement a regular billing cycle for steam and chilled water customers in Prairieland management accepted the finding and recommendation and stated that they will continue to develop controls and processes to address the issues noted in the finding. (For previous Agency response, see Digest Footnote #1.) OTHER FINDING The other finding pertains to failure to implement a conflict of interest policy for its operations and failure to adopt a formal policy regarding the periodic evaluation of fraud risks is reportedly being given attention by Prairieland. AUDITORS’ OPINION Our auditors stated the Corporation’s June 30, 2008 financial statements are fairly presented in all material respects. ____________________________________ WILLIAM G. HOLLAND, Auditor General WGH:TLK:pp SPECIAL ASSISTANT AUDITORS Our special assistant auditors were Clifton Gunderson LLP. DIGEST FOOTNOTE
#1 Inadequate System of Accounting for Sales and Related
Accounts Receivable – (Previous Response) 2007:
“Accepted. Prairieland management has initiated a review of staffing,
processes and procedures. Sales and
accounts receivable software and procedures will be revised to provide
accurate and reliable reporting.” |