Audit Release: Energy Trust Administrative Costs are Generally Reasonable, but the Public Utility Commission Can Improve Oversight of These Costs


Report Highlights

The Oregon Public Utility Commission (PUC) has designed controls to ensure administrative and program support costs at Energy Trust of Oregon are reasonable. Energy Trust is a nonprofit organization and is not subject to state administrative cost requirements. However, PUC could strengthen its oversight of Energy Trust administrative costs by more clearly defining what constitutes reasonable costs, revising key performance metrics, and clarifying financial reporting requirements.

Background

Energy Trust is a nonprofit organization funded by a grant agreement with PUC to develop and administer energy efficiency and renewable energy programs in certain utility service territories in Oregon. The grant funding comes from three separate charges on bills of customers of electric and natural gas utilities regulated by PUC.

Purpose

The purpose of the audit was to determine whether Energy Trust administrative costs are reasonable and whether PUC has reasonable controls in place to oversee Energy Trust’s administrative costs.

Key Findings

  1. Energy Trust complies with PUC’s administrative cost control requirements. We found these controls to be reasonable, and Energy Trust has consistently spent below the established administrative cost cap of 8% of revenue per year. However, Energy Trust’s administrative costs increased from $1.6 million to $10.1 million between 2002 and 2017, as its annual revenues increased from $30.6 million to $194.2 million during the same period. Improved oversight could help PUC better ensure that Energy Trust makes reasonable administrative spending decisions.
  2. We determined Energy Trust’s administrative costs are generally reasonable. However, we identified a small percentage of questionable administrative costs that do not align with state agency standards or the grant guidelines that govern Energy Trust operations. PUC could improve its oversight by providing guidance for acceptable administrative costs.
  3. Increased clarity and detail in financial reporting would improve transparency and stakeholder oversight. PUC monitors Energy Trust’s administrative costs through an enforced spending cap and public budget and reporting processes. Revised reporting methodologies would increase the transparency of Energy Trust’s administrative costs and spending trends.

Recommendations

Our report includes recommendations to PUC regarding the clarity of its grant agreement with Energy Trust, revision of performance metrics, and reporting of administrative costs.

PUC generally agreed with our recommendations. The agency’s response can be found at the end of the report.

Read the full report here.

Featured New Audit Release

TED talks RePost: Why the secret to success is setting the right goals

In 2008, a Googler, Sundar Pichai, took on an objective which was to build the next generation client platform for the future of web applications — in other words, build the best browser. He was very thoughtful about how he chose his key results. How do you measure the best browser? It could be ad clicks or engagement. No. He said: numbers of users, because users are going to decide if Chrome is a great browser or not. So he had this one three-year-long objective: build the best browser. And then every year he stuck to the same key results, numbers of users, but he upped the ante. In the first year, his goal was 20 million users and he missed it. He got less than 10. Second year, he raised the bar to 50 million. He got to 37 million users. Somewhat better. In the third year, he upped the ante once more to a hundred million. He launched an aggressive marketing campaign, broader distribution, improved the technology, and kaboom! He got 111 million users.

Here’s why I like this story, not so much for the happy ending, but it shows someone carefully choosing the right objective and then sticking to it year after year after year. It’s a perfect story for a nerd like me.

Watch John Doerr break down the whats, the whys, and the hows of effective goal setting, and how it can be applied to both individual and organizational goals.

Like this TED talk? Watch more here!

 

 

Accountability and Media Featured

Audit Scotland ReBlog: The journey to become a Chartered Accountant (with Bonus sing-along opportunity)

My name is Graham Foster and I’m one of the in-house lecturing team with ICAS. Much of my early career involved auditing Scotland’s public services, giving me some early insights into the work of Audit Scotland. After moving into accountancy training, I’ve worked with many Audit Scotland trainees.

I joined the ICAS team in 2016 and deliver training across all three levels of the CA qualification. Let’s look at each of three levels in turn…

Read more about Graham’s journey here.

Accountability and Media Featured

Oregon Office of Economic Analysis ReBlog: Oregon Economic and Revenue Forecast, June 2018

The U.S. economy continues to perform well. Economic growth remains above potential and job gains are strong enough to pull down the unemployment rate even as more individuals are looking for a job. The business cycle is not yet waning and the near-term prospects for economic growth are good. The consensus of forecasters peg the probability of recession over the next year at just 15 percent.

However, longer-run forecasts remain relatively muted, in part due to the impact of an aging population and the temporary provisions in the federal fiscal stimulus. From today’s relatively strong cyclical vantage point, three real downside risks stand out. First is the Federal Reserve’s ability to engineer a soft landing. Second is the potential for deteriorating international relations and trade. Third is the recent run-up in energy prices which crimp household budgets in the near-term. To date, actual constraints on growth appear to be minimal, but bear watching in a mature expansion.

Josh Lehner breaks down Oregon’s economic forecast over the next two years. Read more here.

Featured Accountability and Media

IIA ReBlog: The Perils for Internal Audit of Donning a “Black Hat”

It’s easy to get typecast as wearing either a “white hat” or a “black hat” — as hero or enforcement villain. When an internal audit department is associated stro​​ngly with the type of investigations that result in terminations or even criminal prosecutions, it can be challenging for anyone in internal audit to be regarded as a true partner.

I don’t mean to imply that internal auditors should avoid participating in tough assignments, including investigations involving potential misconduct. Internal audit​​​ors can provide a unique and invaluable contribution. And, for smaller organizations, it may not be feasible to maintain separate internal audit and investigation teams. But one of the difficulties of taking on a “black hat” role is that changing roles may not be as easy as, well, changing your hat.

Richard Chambers discusses one of the challenges of being an internal auditor, and shares a few suggestions on how to balance the demands of the job with maintaining healthy and productive working relationships within an organization. Read more here.

Accountability and Media Featured

Harvard Business Review Repost: What it takes to think deeply about complex problems

The problems we’re facing often seem as complex as they do intractable. And as Albert Einstein is often quoted as saying, “We cannot solve our problems with the same level of thinking that created them.” So what does it take to increase the complexity of our thinking?

Tony Schwartz, president and CEO of The Energy Project, outlines the steps his team takes to tackle difficult and complex questions. As auditors, we are sometimes tasked with examining gnarly, high-stakes problems that have no apparent and straightforward solutions. This requires that we cultivate the kind of thinking that allows us to approach the problem from more than one angle.

Simple answers make us feel safer, especially in disruptive and tumultuous times. But rather than certainty, modern leaders need to consciously cultivate the capacity to see more ­— to deepen, widen, and lengthen their perspectives. Deepening depends on our willingness to challenge our blind spots, deeply held assumptions, and fixed beliefs. Widening means taking into account more perspectives ­— and stakeholders — in order to address any given problem from multiple vantage points. Lengthening requires focusing on not just the immediate consequences of a decision but also its likely impact over time.

Read more here.

Accountability and Media Featured

GAO Watchblog Reblog: Personal Information, Private Companies

The recent Congressional hearings on Facebook have highlighted the ways that companies collect and use personal information for marketing purposes.  So, what rights do you have to your own information?

The GAO outlined the lack of comprehensive legislation that addresses privacy in their 2013 report on the subject:

No overarching federal privacy law governs the collection and sale of personal information among private-sector companies, including information resellers. Instead, a variety of laws tailored to specific purposes, situations, or entities governs the use, sharing, and protection of personal information. For example, the Fair Credit Reporting Act limits the use and distribution of personal information collected or used to help determine eligibility for such things as credit or employment, but does not apply to information used for marketing. Other laws apply specifically to health care providers, financial institutions, videotape service providers, or to the online collection of information about children.

The current statutory framework for consumer privacy does not fully address new technologies–such as the tracking of online behavior or mobile devices–and the vastly increased marketplace for personal information, including the proliferation of information sharing among third parties. With regard to data used for marketing, no federal statute provides consumers the right to learn what information is held about them and who holds it.

These findings are still relevant today.

Read more here.

Accountability and Media Featured