2019 Semi-Annual Audit Report Commission Meeting Objectives 1. - - PowerPoint PPT Presentation

2019 Semi-Annual Audit Report Commission

Meeting Objectives

• 1. Status of the 2019 Audit Plan
• 2. Audit Plan Development
• 3. Review 2020 Audit Plan
• 4. Additional Discussion or Questions

11/ 12/ 19 GCPUD Int ernal Audit Depart ment 2

Status of 2019 Audit Plan

Reports issued in 2019

1.

Small and Attractive Asset Audit



Report issued

2.

Ghost Employee Audit



Report issued

3.

Design Build Contract Audit



Report issued

See summary of internal audit reports handout.

11/ 12/ 19 GCPUD Int ernal Audit Depart ment 3

Status of 2019 Audit Plan

Open Audits

1.

Net Metered System Load Audit



Field work



TBD

2.

Overtime & Upgrade Audit



Field work



December 2019

3.

2018 Voucher Audit



Not started



January 2020



Emphasis on PO’s and direct purchases

4.

P-Card Audit



Planning stages



December 2019

11/ 12/ 19 GCPUD Int ernal Audit Depart ment 4

Internal Audit Objectives

1.

Risk Based Audit Approach



Annual Audit Plan Development

• Risk Assessments (CXO’s, Legal, ERM, Sr Mng)
• Analytical Procedures



Performance of scheduled audits

2.

Ensure that Internal Audit Activities are



Consistent with Organizational Goals



Within the Risk Appetite and Risk Tolerance Set by the Board and District Management

3.

Evaluation of Internal Controls for Adequacy, Effectiveness, and Efficiencies

11/ 12/ 19 GCPUD Int ernal Audit Depart ment 5

2019 Audit Plan

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Proposed 2020 Audit Plan

• 1. Net Metered System Losses Audit - continued
• 2. Follow-up on External Safety Assessments
• 3. Crescent Bar Management Contract
• 4. Professional Services
• 5. Treasury Operations
• 6. Statutory Expenditure Review
• 7. Emerging Risk and Audit Requests
• 8. Follow-up: Monitor Audit Recommendations

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Questions? Comments? Concerns?

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Internal Audit Report

Summary of Engagements

Ghost Employee Audit • Report Publication Date: May 7, 2019

Ghost Employee Audit ‐ Executive Summary

November 12, 2019 We are pleased to present the summary of the Internal Audit Department’s report on Ghost Employee Audit. During this audit, we examined the District’s payroll policies, procedures, and practices to determine whether or not adequate controls were in place to prevent and detect fraud, waste, or abuse of District resources by creation of ghost employees. Under current District processes, the opportunity to create ghost employees exists. While no ghost employees were discovered in our review, the District does expose itself to this risk because of the following:  The HR/Payroll department does not have updated written procedures for processing payroll, which could prevent timely detection and correction of errors and fraudulent activity.  Five employees within the HR/Payroll Department have full system access rights which allows them to create new employee ID, activate the employee in the payroll system, change direct deposit information and enter payroll data.  The District does not have a standardized process to effectively assign employee access rights to different modules of the accounting system. As a result, employees inadvertently

• btain more system rights than what is required to effectively perform their job duties.

 The process to ensure that terminated employees are timely removed from the payroll system needs improvement. Based on these issues, we conclude that with development of stronger policies, procedures and internal controls, the HR/Payroll Department will be better positioned to ensure effective

• versight and monitoring.

Management’s response to our audit findings and recommendations, as well as target implementation dates, are included in the full report. We would like to thank the HR/Payroll and the Enterprise Technology departments, and their personnel for their cooperation and assistance during this audit. Dmitriy Turchik, CFE Manager of Internal Audit

Grant County PUD Design Build Contract Audit Review • Report Publication Date: May 7, 2019

Design Build Contract Audit Review - Executive Summary

November 12, 2019 We are pleased to present the summary of the Internal Audit Department’s report on Design Build Contract Audit Review. The purpose of this engagement was to independently assess the audit performed by a third-party consultant, Navigant, for reasonableness and completeness per the scope provided from the District and Vanir Construction Management to Navigant. Internal Audit believes that the Navigant audit contained the proper scope, critical pieces and information to determine that HDR and Wilson Construction payments were appropriate. Navigant did not obtain evidence to conclude whether HDR and Wilson Construction billings were reasonable, accurate, and adequately supported. This work was performed by Power Delivery

• personnel. By virtue of their testing and analysis, Power Delivery Staff are confident that

HDR/Wilson invoiced their labor costs correctly. Although discrepancies were noted in both Navigant and District reviews of labor and equipment, they are immaterial and de minimis. Audit recommends that emphasis be placed on accurate monitoring of labor and equipment in future design build contracts. The District did not have a formal process in place to confirm that material distributed from material yard were delivered to construction site and used in the project. About 20% of total contractor costs went to contractor purchased building materials. There is always risk of theft and fraud of material. There were, however, reasonable measures taken by the contractor to prevent loss of material from the material yard. In addition, Power Delivery Staff performed reasonableness test to validate the amount of material used in the project. To further mitigate the risk of material theft, we recommend the District consider implementing monitoring procedures to ensure that material leaving the material yard is delivered to the construction site and used in the project. This could be achieved by having an independent person monitoring material distribution or training District inspectors to monitor material usage during their onsite

• inspections. In addition, Power Delivery and Audit have recommended, for future contracts of

this type, material costs be segregated on invoices for improved transparency and verification. The District and the contractor developed a Guaranteed Maximum Price (GMP) that was approved by the Commission. Due to the nature of the Design Build contract, any cost underruns below the GMP represent savings to the District. The incentive payment reviewed appeared to be paid in the correct manner to both HDR and Wilson. This was also verified by an attorney specializing in Design Build contracts who was a party in crafting the District contract with HDR. Dmitriy Turchik, CFE Manager of Internal Audit

Small and Attractive Asset Audit • Report Publication Date: June 10, 2019

Small and Attractive Assets Audit ‐ Executive Summary

November 12, 2019 We are pleased to present the summary of the Internal Audit Department’s report on Small and Attractive Assets. During this audit, we examined District’s policies, procedures, and practices to determine whether or not adequate internal controls were in place to safeguard small and attractive assets. Our audit identified the following:  District employees do not have clear understanding of what is considered small and attractive asset, resulting in inconsistent implementation of the District policy.  The District does not have centralized oversight over small and attractive assets.  The District does not have a systematic process in place to ensure all purchases of small and attractive assets are added to the departmental asset list.  Eleven of 19 departmental procedures reviewed had ineffective segregation of duties.  Five of 19 departments did not perform annual inventory as required by the District

• policy. In addition, eight of 19 departments did not keep evidence that an annual audit

was performed.  Five departments had self‐identified missing assets prior to our audit but failed to immediately notify the Controller and the Auditor as required by the District policy. We issued the following recommendations to assist the District with management of risks identified during our audit and overall compliance with its own policy:  Make necessary changes to its small and attractive asset policy to provide clear and concise guidance to its employees.  Establish expectations regarding segregation of duties and related internal controls.  Provide additional training material to all employees that are involved with management

• f small and attractive assets.

 Develop centralized oversight over small and attractive asset program.  Enforce current District expectations regarding supervisory review of payments and adding purchases of small and attractive assets to the departmental asset listings. Management’s response to our audit findings and recommendations, as well as target implementation dates, are included in the full report. We would like to thank the District staff for their cooperation and assistance during this audit. Dmitriy Turchik, CFE Manager of Internal Audit

Q3 2019 BUDGET TO ACTUALS November 12, 2019

10/30/2019 1

Grant PUD | BUDGET TO ACTUALS Q3 2019

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• At the end of Q3 2019, O&M has spent only 59% of its annual budget target, while Labor has spent

right at 76% of its target. Year End Projections for both O&M and Labor are currently expected to be near their budgeted targets with O&M 1% under budget and Labor 2% over budget.

• As a comparison, at the end of 2018 Q3 the O&M spent was 64% of budget and Labor was

72% of budget.

• Capital is at 45% of total 2019 budget target as of 2019 Q3. Year End Projections for Capital spending

are currently expected to be 17% under the budget target.

• As a comparison, at the end of 2018 Q3, Capital spent was at 61% of its budget target.
• Year End Projection net direct charges (O&M, Labor, Capital) are forecast less than the 2019 budget

by $18.6M, which is due primarily to lower than planned Capital spending.

2019 DIRECTS YEAR-END PROJECTION OVERVIEW

Grant PUD | BUDGET TO ACTUALS Q3 2019

10/30/2019 3

2019 DIRECT O&M BY FUNCTIONAL AREA

• At end of Q3 2019, Direct O&M has spent 59% of its annual budget target. Year End Projection for

2019 Direct O&M spending is currently expected to be under budget.

• As a comparison, at the end of Q3 2018, Direct O&M spending was at 64% of the budget target.
• The Chief Customer Officer group: Rates& Pricing up $378k, Large Power Solutions up $374k.
• The Chief Operations Officer group: Power Production Eng. up $312k, Fish & Wildlife down $227k,

and several others up or down ~$100k.

• The Chief Financial Officer group: Acct. up $159k, FP&A up $183k, Internal Services down $748k.

Grant PUD | BUDGET TO ACTUALS Q3 2019

10/30/2019 4

2019 YEAR-END PROJECTION LABOR BY FUNCTIONAL AREA

• At the end of Q3 2019, the Year End Projection for FTR head count is below budget target and FTE

head count is above the budget target. Current FTR head count is 626.

• For comparison, FTR head count was 597 at the end of Q3 2018 and 592 at the close of 2018.
• FTE is a cumulative figure that reflects part‐time and seasonal employees.
• For comparison, the FTE utilization at close of 2018 was 19% over the 2018 budget.
• The Overtime Year End Projection is forecast to be 38% (~$2.1 Mill.) over budget. Overtime is both

event‐dependent and used to partially cover insufficient FTR.

• For comparison, at Year End 2018 Overtime was 31% or $1.35M over budget.

Grant PUD | BUDGET TO ACTUALS Q3 2019

10/30/2019 5

2019 DIRECT LABOR BY FUNCTIONAL AREA

• At end of Q3 2019, Direct Labor has spent 76% of its annual budget target. Year End Projection for

2019 Direct Labor spending is currently expected to be slightly over budget.

• For comparison, at the end of Q3 2018, Direct Labor spending was at 72% of the budget target.
• The Chief Customer Officer group: External Affairs up $78k.
• The Chief Operations Officer group: Power Production (PP) at PRD up $280k, Power Delivery (PD)
• Const. Maint. up $741k.
• The Chief Financial Officer group: FP&A down $250k, Internal Services down $611k, IT down $115k.

Grant PUD | BUDGET TO ACTUALS Q3 2019

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2019 YEAR-END DIRECT CAPITAL BY PROJECT

• The table shows projects with a $2M or larger budget. As of end of Q3 2019,

Direct Capital spending is at 45% of targeted budget. Direct Capital 2019 Year End Projection spending is forecast to be 17% under budget.

• At the end of Q3 2018, Capital spending was at 63% of budget.

Grant PUD | BUDGET TO ACTUALS Q3 2019

10/30/2019 7

2019 YEAR-END PROJECTION LOADED O&M & CAPITAL

• Direct O&M YEP is under

budget, but Loaded YEP is over budget

• Capital and Total

Expenditure YEP is under budget due to lower Direct Capital spending

Grant PUD | BUDGET TO ACTUALS Q3 2019

10/30/2019 8

Questions?

Construction and Maintenance Commission Update November 2019

WCOE 2019

Construction and Maintenance Overview

Departments Included:

• Electric Shop (20)
• Line Crews (51)
• Electronic Technicians (10)
• Meter/Relay Technicians and Groundmen (11)
• Fiber Installers (3)
• Maintenance Engineers (2)
• Project Specialist (2)
• Administrative Assistant (1)
• Supervisors (3)
• Senior Manager (1)

WCOE 10/2019

2

Major Achievements for Q3 2019

• Electric

Shop

• Line Crews
• Electronic

Technicians

• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

3

• Continue to support the construction and commissioning of Mountain View Substation
• Rebuilt Nelson Road LTC
• Addressing breaker issues on numerous Transmission and Distribution breakers
• Performed annual transformer oil sampling
• Replacing outdated substation battery banks
• Will continue to address remote operation functionality of transmission switches
• Support the Design Build project
• Perform all required maintenance associated with substations, field devices, fiber gateways and batteries

Challenges:

• Significant workload resulting in overtime

Major Achievements for Q3 2019

• Electric Shop
• Line Crews
• Electronic

Technicians

• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

4

• Respond to and repair of damaged infrastructure
• Installed infrastructure and new lines to support load growth
• Performed maintenance and supported maintenance activity associated with large customers and data

centers

• Crews are extremely busy responding to outages/events, performing maintenance and constructing

new services

• The primary cause of pole fires has been identified and aggressive plans to address these causes are in

development

• Contract crews (Dock Crews = Potelco) are completing many jobs. Underground boring jobs are

currently being addressed Challenges:

• Manpower -Workload is backlogged. Current lead time on new customer service construction is at

least 5 weeks, but can be as long as 28 weeks

• Lineman positions are still difficult to fill
• Potelco is struggling to find lineman to work on the District jobs

Major Achievements for 2019

• Electric Shop
• Line Crews
• Electronic

Technicians

• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

5

• Continue to support commissioning of SCADA
• Converting substation communication protocols to DNP
• Building out fiber hubs and huts
• Updating all of the substation communication firewalls
• Installing new cameras and security systems
• Deploying a new Generation Management System at the hydro projects (Ovation system

replacement)

• Support maintenance activities with other departments
• Perform all required maintenance associated with substations, field devices, fiber gateways and

batteries Challenges:

• Workload is requiring overtime to address critical issues
• Crews are working safely, but hastily to address backlog of tasks

Major Achievements for 2019

• Electric Shop
• Line Crews
• Electronic Technicians
• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

6

• Continue commissioning and testing of transformers and substations
• Factory acceptance testing at the transformer manufacturing facility
• Building out the Advanced Metering Infrastructure (AMI) is a major project. Substantial efforts are

still required for the deployment of meters and transporting meter data to various other systems such as the billing system

• Performing mandatory maintenance of relays
• Support the new Design Build project
• Actively participating in the development of new relay and protection designs
• Responding 24/7 to failed underground cables

Challenges:

• Workload is requiring overtime to address critical issues
• There is a heavy reliance on the few senior technicians to address certain tasks and train newer

team members

Major Achievements for 2019

• Electric Shop
• Line Crews
• Electronic Technicians
• Meter/Relay

Technicians

• Fiber

Installers

• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

7

• Focusing on fiber buildout
• Performing necessary maintenance of existing aerial and underground fiber plant. This includes

gateways on customer homes and businesses, backbone fiber between substations, offices, and the hydro plants

• Responding to fiber outages

Challenges:

• Workload is requiring overtime to address critical issues
• Some “Best Business Practice Maintenance” is not being performed due to manpower shortages
• Some communication outage durations, such as those associated with the recent wildfires, could

have been substantially reduced (upwards of 50% reduction) if additional manpower was available

• The District has a 10-day service agreement with fiber ISP’s to hook up new fiber customers within

10 days of application. Lack of manpower can jeopardize these commitments.

Major Achievements for 2019

• Electric Shop
• Line Crews
• Electronic Technicians
• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

8

Other major projects:

• Min/Max (Asset Management Program)
• C&M Computerized Maintenance Management System “CMMS” for the Electric Shops is live

as of August 1st

• Substation inspections and maintenance is being documented in MinMax daily
• The electronic asset data base is growing and is expected to be close to 60,000 assets with the

new Meter Exchange module coming online in Q1 2020

• Current active equipment 4,614 (assets inside the substation fence)
• Compliance monitoring and reporting
• Work is continuing to expand MinMax into the Line Department for maintenance - targeting

late Q1 2020

Major Achievements for 2019

• Electric Shop
• Line Crews
• Electronic Technicians
• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

9

Other major projects (cont):

• Aging equipment has led to significant replacement parts that needed to be purchased
• Contract work
• Large purchase items such as new transformer radiators for Seiler Substation
• Dock Crew Contract
• Tree Removal Contract
• Tree Trimming Contract

Major Achievements for 2019

• Electric Shop
• Line Crews
• Electronic Technicians
• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

10

Other major projects (cont):

• Meter Auditing
• Review of crew meter audits to determine billing issues stemming from damage, faulty wiring,

and bad meter multipliers

• Determined there to be an overall billing correction of $ 1,471,850.33, with new revenue of

$ 324,670.29

• Substation Rock
• Investigated alternatives for replacing loose substation rock but determined that replacement

will be the best option

• Labor for rock replacement is contingent on supplementary dock crew availability
• Powerline inspection
• Researching methods and best practices for transmission tower inspections using drones

equipped with HD and thermal imaging cameras. Have contacted several vendors about drone inspections, costs, license requirements, etc.

Major Achievements for 2019

• Electric Shop
• Line Crews
• Electronic Technicians
• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

11

Other major projects (cont):

• Improving efficiency and reliability while reducing costs by suggesting new products and methods
• Utilizing polymer insulators in place of porcelain insulators that will increase reliability, reduce

maintenance costs, reduce warehousing and inventory costs, and increase ergonomics for a safer work practice

• Utilizing fiberglass cross arms in place of wood crossarms that will increase reliability, reduce

maintenance costs, reduce warehousing and inventory costs, and increase ergonomics for a safer work practice

• Replacing or updating material to increase reliability, reduce costs, and streamline operations

Major Achievements for 2019

• Electric Shop
• Line Crews
• Electronic Technicians
• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

12

Other major projects (cont):

• Analyze maintenance practices and asset characteristics to determine the remaining life of

substation transformers. A draft report has been written with a final version to be completed by the end of 2019

• Performing failure analysis on various pieces of equipment to determine causes of failure,

mitigate contributing factors, and provide recommendations to prevent future failures

• Tracking assets requiring calibration to ensure calibrations are performed per manufacturer

recommendations

Major Achievements for 2019

• Electric Shop
• Line Crews
• Electronic Technicians
• Meter/Relay

Technicians

• Fiber Installers
• Maintenance

Engineers

• Project Specialist
• Administrative

Assistant

• Supervisors
• Senior Manager

WCOE 10/2019

13

• A new Electric Shop Supervisor, Nick Sickles, has transitioned from the Line Department and has

already been providing valuable leadership to the Electric Shop staff and operations

• Efficiency opportunities continue to be sought. The establishment of a Moses Lake based Electric

Shop crew and a Quincy based Line crew are examples

• ARCOS (automated callout system) - Currently testing ARCOS Workbench which allows for TR’s to

be assigned and completed on iPads. The system works great until it loses connection (dead spots). IT is assisting with solving this issue

• Collective Bargaining Agreement (CBA) -Working on numerous proposals in preparation for

contract negotiations. Proposals identify efficiencies that support response time, outage duration and items no longer utilized in the current CBA

• Continue our efforts to improve reliability, and reliability indices – SAIDI and ASAI, to provide the

best customer service possible

WCOE 10/2019

14

The C & M staff would like to thank the Commissioners and Executive Staff for their continued support.

2020 Legislative Session

November 12, 2019 Update

This update will cover

2020 WA Legislative Session

• State and federal broadband funding
• Hydro tax incentives
• Legislative schedule and state budget
• Clean Energy Transformation Act
• Other carbon related bills in 2020
• Federal gridlock

Rural Broadband Funding -

Grant Programs:

• Prioritizing project list - 3-5 projects per application
• Developing internal team, working to standardize the

application format & anticipate rulemaking.

• Federal grant programs - (usually require retail,

reverse auction type, apply to 10 x1 mbps; 8-9 months waiting time, red tape)

• 2018 – Farm Bill may have better risk / reward

Supplemental budget appropriation:

• Current funding is $23M ($6.M grants,

$17.M loans).

• Demonstrate a need for at least $80M +
• Identify funding mechanisms: e.g. 1/10 of

1% of sales tax on internet sales and consumer electronics.

• Problem: Budget shortfall

New State Broadband Director: Russ Elliott

• Meeting and tour to be scheduled

2020 WA Legislative Session

2020 State Capital and Operating Budget

Only $72M in state capital budget for all requests in 2020 $400M deficit currently projected in operating budget

2020 WA Legislative Session

Schedule: January 13, 2020 – March 11, 2020 (90 days)

• No. of bills introduced - 2019: 2371; 2018: 3951

How we decide what to focus on:

Identify, sort and assess Rely on subject matter experts

Ability to Influence Risk / Impact High Medium Medium Low

Hydro Sales Tax Parity Challenges:

• Likely defer start of program to

2021 due to impact on capital budget - ($4M - $3.5M/yr.)

• Slow developing support from

City of Seattle and IBEW / Union

• Hydro Tour
• Broad legislative engagement
• Changing attitudes - westside
• Industry engagement – Tacoma,

Snohomish, Mid-C

• Jobs

Changing Attitudes Toward Hydro

Low carbon Fuel Standards – Limit to Puget Sound

High priority for Tacoma - Seattle

Cap and Trade Legislation –

Bill is still in draft May get a hearing Risk of back lash from higher taxes 2020 elections

Other Carbon Legislation 2020

Clean Energy Transformation Act (CETA) Rulemaking

• Social Cost of Carbon - cost adder in conservation &

planning, Sec. 14

• Establishing a REC for hydro.
• Low income energy assistance, Sec. 12
• 4 Year & 10 year plans - 2022, Sec. 6, 14.
• Carbon Markets – anticipates a lot of work, multiple

parties and jurisdictions ahead of a 2022 rulemaking deadline; also covers a prohibition against double counting RECs, Sec. 13.

• Streamline EIA and CETA reporting / credit tracking,

Section 10

• Cost cap - consumer protection against costs increases

more than 2% per year, Sec. 6

• Energy transformation projects – credits for early action
• applies up to 2045, Section 4, 10
• Reliability impact, Sec. 8, 9 (not a rulemaking)
• Exception to labor standards for tax breaks,§18 &19.
• Various workgroups and WUTC rulemaking

2020 WA Legislative Session

2020 - Federal Government Activity

Impeachment Hyper partisanship Investigations Hearings on climate change, cyber security, renewables Elections in 2020 Not likely anything material will pass