HomeMy WebLinkAboutAuditor,Moss AdamsWWW.M055ADAMS.COM
MQS S ADAM S 1.1.E
PROPOSALFOR
Truckee Donner Public Utility
District
Prepared by:
Julie Desimone, Business Assurance Partner
Moss Adams LLP
3121 West March Lane, Suite 100
Stockton, CA 95219
(209) 955-6100
WWW.MOSSADAMS.COM
MOSS ADAMS 1.t.11
September 6, 2011
Board of Directors
Truckee Donner Public Utility District
11570 Donner Pass Road
Truckee, CA 96161
Dear Board:
We are pleased to present this proposal to Truckee Donner Public Utility District (the "District")
for annual audit services beginning with the fiscal year ending December 31, 2011. We understand
these audit services are to be done in conformity with generally accepted accounting principles.
We believe our qualifications in serving utility entities are among the best and we encourage you
to contact our existing clients to discuss our capabilities. Moss Adams offers the following to the
District:
Commitment to communication and on time delivery of audit report. We will meet with District
management prior to the start of the audit to determine the most effective communication method
for the District and are committed to maintaining a high level of communication throughout the audit
period.
Deep specialty in serving electric and water utilities. We have the depth of resources necessary
to serve the District with focused industry experts and firm -wide specialists at your disposal. Moss
Adams serves as independent auditor to many electric and water utilities of similar size to the
District including, municipal entities, public utility districts, cooperatives, joint powers agencies and
independent power producers. Our clients operations include distribution, generation and
transmission. We understand the accounting and operational issues facing the District.
A service team comprised of industry and governmental specialists. The members of our
Utility Services Group have a long-term commitment to the industry which shows in their
experiences, training and involvement with industry associations. Most of our industry group
members spend between 75% to 100% of their time serving utilities. These team members will
ensure a smooth transition from your previous audit firm and dedicate themselves to superior
service.
• National recognition. Moss Adams is a nationally recognized firm. We are the eleventh largest
accounting and consulting firm in the United States and the largest with headquarters in the West.
Moss Adams is registered with the Public Company Accounting and Oversight Board (PCAOB), and
is recognized as a leading service provider in the capital markets.
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Board of Directors
Truckee Donner Public Utility District
We hope this proposal expresses our enthusiasm and desire to provide services to Truckee Donner
Public Utility District. We are confident you will be pleased with our industry strength and
business insights. We welcome any questions you may have about this proposal and thank you
again for your consideration of Moss Adams.
Sincerely,
Julie Desimone, CPA
Business Assurance Partner
For Moss Adams LLP
julie.desimone0mossadams.com
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TABLE OF CONTENTS
ABOUT MOSS ADAMS
FIRM BACKGROUND
INDUSTRY -SPECIFIC CAPABILITIES
U21:11:4:12W I XTA
AUDIT SERVICES
APPROACH TO YOUR AUDIT
AUDIT TIMELINE
YOUR SERVICE TEAM
CLIENT REFERENCES
CLIENT REFERENCES
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ABOUT MOSS ADAMS
FIRM BACKGROUND
Moss Adams provides accounting, tax, and consulting
services to public and private middle -market
enterprises in many different industries. Founded in
1913 and headquartered in Seattle, Washington, Moss
Adams has 21 locations in Washington, Oregon,
California, Arizona, New Mexico, and Kansas.
Our assurance services include audits, accounting,
internal controls, business risk management, royalty
compliance, and employee benefit plans. Our tax
services include tax planning, federal, state and local tax
planning and compliance, international tax planning and
compliance, cost segregation, and research and development tax credits. We also provide
consulting and advisory services for mergers and acquisitions, corporate finance, valuations,
personal wealth management, business planning, litigation and forensic accounting, information
technology integration and reviews, and compensation.
We offer additional services such as investment banking and asset management by drawing upon
our two affiliate companies, Moss Adams Capital LLC and Moss Adams Wealth Advisors LLC.
Moss Adams is the 11th largest accounting and consulting firm in the United States, and the largest
headquartered in the West. Our staff of over 1,700 includes approximately 230 partners. Moss
Adams is also a founding member of Praxity, a global alliance of accounting firms. This alliance is
an association of independent firms in the major markets of North America, South America,
Europe, and Asia.
INDUSTRY -SPECIFIC CAPABILITIES
Utility Services Group
Our Utility Services Group is focused on the delivery of high -value audit, accounting, tax and
consulting services directed at the public power distribution, generation and transmission
markets. Our Firm has formed this Group so that our individual practitioner's time, experiences
and training are concentrated on electric utility clients and the industry. We have on -going
general audit services in California, Washington, Oregon, Idaho, Alaska, Hawaii, Arizona and New
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Mexico including public utility districts, municipal entities, cooperative organizations, mutual
corporations, joint powers entities and independent power producers. Our clients deal with many
of the same issues, risks, opportunities and constraints you do. We are experienced and familiar
with the terrain facing you and this makes us more effective auditors and business advisors.
This focus of resources and talent ensures you work with professionals knowledgeable about the
issues and conditions you face. We are genuinely excited about serving the electric industry and
have a long-term commitment to this area. The talented individuals supporting our Utility clients
have dedicated themselves and focused their career in this industry.
In addition to our core audit, accounting and tax services, we have evolved and expanded to serve
the particular needs of the energy industry with a broad array of consulting activities including
contracting, business feasibility and diversification, internal controls review, rates, forecasting and
many others. Through our Northwest Consulting Services Group we also offer information
technology consulting, performance audits, restructuring and workflow design, human resource
consulting and strategic planning. Northwest Consulting's experience includes cooperatives,
municipal entities, public utility districts, the BPA and regional utility planning associations.
Moss Adams is the founding anchor firm of Telergee, a national affiliation of regional accounting
firms that altogether serves over 200 electric and 600 telecom clients. The firms meet several
times a year to discuss industry specific developments. This affiliation benefits you because it
assures your auditor is expanding its breadth and depth of knowledge and professional resources
related to the industry.
Moss Adams is also an anchor sponsor of a national series of annual professional education
courses tailored to the electric and telecom industries. The event provides strong course content
and invaluable networking opportunities.
Experience Auditing Electric Utilities with Generation and Transmission Assets
Our Utility Services Group has specific experience with the following types of generation assets:
Hydroelectric, Natural Gas, Coal, Diesel, Nuclear, Bio-Fuel, Wind, Geothermal, Solar and Methane
production. Our experience includes tax credits and incentives, auditing, contracting, accounting,
construction audits and performance reviews for these generation assets. In terms of transmission
assets, our experience includes auditing, contracting, performance reviews and accounting.
Several of our clients have entered into joint power agencies and similar entities (like PNGC) in
order to meet their current and future load demands. Our experience in this area includes auditing,
contracting, accounting, entity type and formation, taxation and forecasting.
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Experience with Power Supply Contracts
Most of our clients have contracts with BPA (including Slice) and other counterparties. We are well
versed in the intricacies of power contracts including derivatives, guarantees, joint operations, cost
recognition, regulatory accounting, infrastructure design services and billing models. We are also
available to assist with the challenges that lay ahead with BPA's tiered -rate structure and
renewable portfolio requirements.
Experience Auditing Clients that Utilize Regulatory Accounting
Regulatory Accounting is used by most if not all our electric utility clients. Based on this, our
experience is extensive. We understand management and board positions surrounding this area of
accounting, the regulatory environment and how it applies to the rate making process and
patronage allocations.
Capital Markets
As a nationally recognized firm, we are accustomed to addressing issues pertaining to the capital
and bond market. We have extensive experience assisting our clients with tax-exempt and
municipal bond offerings, and with the audit and accounting issues related to tax-exempt debt.
Issues pertaining to tax-exempt debt have become increasingly complex in recent years and
include such items as arbitrage liability, debt defeasance and refundings, conduit debt disclosure
and reporting, interest rate swaps and other derivative instruments, testing of covenant
compliance and capitalized interest, just to name a few. We also have experience with CREB's and
Build America Bonds.
The professionals who will serve the District are intimately familiar with these issues and
continually receive technical updates and education on these complicated topics. Many of our
partners and senior managers are nationally recognized speakers, instructors, and practitioners in
this specific area.
Industry Lending Sources
We know the financial accounting, reporting and audit requirements specific to your industry from
various lending sources including Rural Utilities Service, National Rural Utilities Cooperative
Finance Corporation, CoBank, Federal Financing Bank and other development funding programs.
Our firm audits over 35 RUS borrowers and we meet the requirements under 1773.5 Qualifications
of CPA (Certification, Independence and Peer Review Requirement).
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Association Memberships
Below is a listing of our various affiliations associated with the electric utility industry: Our
involvement includes conference participation, training, presentations and writing articles.
• Northwest Public Power Association (NWPPA)
• American Public Power Association (APPA)
• National Rural Electric Cooperative Association (NRECA)
• Oregon Rural Electric Cooperative Association (ORECA)
• Washington Public Utility District Association (WPUDA)
• California Municipal Utility Association (CMUA)
• Telergee
These affiliations benefit you because it assures your auditor is expanding its breadth and depth of
knowledge and professional resources related to the industry.
A-133 Audit Experience
Moss Adams is one of the most experienced firms in the Western United States in conducting
audits in accordance with the Single Audit Act and Office of Management and Budget (OMB)
Circular A-133 (A-133 Audit). According to the U.S. Census Bureau's Single Audit Database, we
have performed over 1,200 A-133 Audits for clients since 1997; the second greatest number
among all firms in the West. The vast majority of these audits have been conducted by the 100-plus
members of our firm -wide Not-for-Profit/Government Group, which includes all of the members of
the audit team that would be serving you.
Smart Grid and other Grants and Contracts
We have significant experience auditing smart grid grants. Upon receiving federal dollars, our
approach is to review all grants to determine if an A-133 audit is necessary. We start with grant
documents, instructions from pass -through agencies, and existing regulatory guidance. Then we
talk to management, examine internal audits, and review current audit guides and practice aids
from national and state accounting bodies. When we need further information to determine
specific requirements, we communicate with our contacts at the Government Accountability Office
(GAO), the OMB, and appropriate grantor agencies (such as DOE).
PEER REVIEW
Moss Adams participates in a peer review program and is reviewed by another CPA firm every
three years. In our last review, the independent accounting firm of Clifton Gunderson LLP
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conducted a "full scope" peer review for the year ended April 30, 2008. The quality control review
included the review of engagements performed under Government Auditing Standards.
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AUDIT SERVICES
APPROACH TO YOUR AUDIT
Audits are necessary for many reasons including debt requirements, accountability to members,
support for counterparties and regulatory reporting. We believe it is important to provide greater
value from an audit than simply complying with a requirement. We treat the audit as an
opportunity to view your organization globally and believe it is important to understand your
business and the keys to your success.
Our approach to an audit takes into consideration our electric utility experience tempered by the
characteristics unique to your organization. We understand the unique elements of FERC/RUS
accounting, deferred debits and credits, work order construction for utility plant, how inventory
plays a very different role for a utility, exception -based billing, unique aspects of cooperative
equity, etc. We approach the process by assessing the high -risk areas and focusing the audit time
and effort there. These areas might include accounts receivable, utility plant, deferred
debits/credits, derivatives, debt and power supply. This risk -based audit approach focuses our
efforts on what is important to you and enables us to present you with meaningful suggestions.
Timeliness is everything and meeting your deadlines is our priority. It is our general policy that
audit partners perform their review while the audit is on -going which allows us to address any
issues with management prior to audit completion and prior to leaving the field.
Transition
You don't want to spend a lot of time educating brand new staff about your industry or reporting
standards. Our industry focus assures you won't have to. By their very nature, audits can be
disruptive to a company's day to day functions and primary business mission. Striking a balance
between completing a thorough audit and distracting your management and accounting teams
requires a thorough communication of expectations. In addition, we make every effort to use your
existing month/year end documentation so as to avoid having your staff create additional analysis.
The majority of our transition efforts will be directed toward gaining an understanding of your
accounting systems, your internal control environment, and your organization's strategic
direction. Through careful listening and learning, we can minimize the challenges of transition.
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Transition Step
Actions
Entrance Meetings
Conference with your finance department and other appropriate
groups to discuss risks, expectations, process, and timelines.
Planning Sessions
Discussions with key managers to discuss risks, expectations, the
audit process and timelines, and to share key strategic, financial, and
operational information.
Review Working Papers
Examination of your prior auditor's working papers to understand
their audit approach and the timing of their procedures and to assure
their procedures were adequate for our team to rely on the opening
balances in your financial statements.
Design Audit Approach
We devise an efficient and effective approach that addresses the
potential risks we discover during the transition.
The Keys to a Successful Auditor Transition
• Great planning, understanding roles and responsibilities. In our successful transitions, we meet
with the key members of our client's team. This "getting to know you" meeting lays the ground work
for our planning and is an effective way to make initial introductions. We use the information from
this meeting to begin our planning process.
• Open communication of expectations. This is the greatest success factor in transitioning, but lack
of it can also be the most significant impediment. At the beginning of our work, we will make
inquiries of various individuals regarding the expectations of us. In addition, we will take the
opportunity to communicate our expectations for a successful audit.
• Regular updates. We will meet with appropriate parties throughout the audit process (interim and
final fieldwork) to compare planned activities with actual accomplishments.
• Commitment from both parties to meet deadlines.
Planning
In accordance with Statement on Auditing Standards (SAS) we consider the following matters:
• The District's business/industry matters and accounting policies and procedures, including data
processing systems
• Timing of conduct and completion of audit and reporting submission deadlines
• Planned assessed levels of control risk, including design and implementation of internal controls
• Technology assessment
• Preliminary materiality judgments
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• Analysis of new accounting pronouncements and auditing standards that may impact the District
• An efficient audit approach and design of tailored audit programs
• Financial statement items or conditions likely to require additional analysis or expansion of audit
tests
• Nature of reports to be issued
Also, in accordance with SAS No. 99, our team will hold internal "brainstorming" meetings as well
as meetings with District personnel to discuss fraud risks.
Internal Control Assessment
The main objective of this phase of testing is to assess the adequacy of the District's internal
controls including financial, operational and general computer controls. As required, we obtain an
understanding of the design and implementation of the control environment; perform risk
assessment; and test control activities, information, communication and monitoring as
appropriate. The results of these tests enable us to determine the number and level of substantive
tests to use. This assessment includes:
• Obtain knowledge of the design and implementation of controls relevant to financial reporting and
compliance with laws and regulations that have direct and material effect on determination of
financial statement amounts.
• Obtain copies of system, policy and procedure documentation from various departments. We retain
these copies in our permanent working paper files and update them annually.
• Our tests of internal controls will be conducted in the most efficient manner possible and combined
into the work order/utility plant section as much as possible. For example, when testing additions to
utility plant, we will incorporate tests of the payroll, accounts payable, purchasing, overhead, and
capitalized interest systems.
• Our information technology audit specialists will evaluate general computer controls. General
computer controls provide assurance that data and programs that process the data are protected
from unauthorized modification and processed in accordance with management's intentions, and
that confidentiality is maintained.
Any significant matters relating to the internal control structure that are noted during the audit
will be communicated to management and will be included in our letter of recommendations that
will be provided to the Board and management at the completion of our audit.
Substantive Testing
The extent of substantive testing is dependent upon the results of our internal control assessment
and testing. This testing includes tests of balances and/or transactions, confirmations, etc. and
certain testing will be performed prior to year end to ensure we meet your delivery expectations.
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Sampling
We will select a sample of transactions in order to perform tests of your internal controls.
Sampling in other areas will be dependent on the results of control testing, evidence gained
through substantive analytical procedures and our ability to use automated tools to audit balances
and/or transactions.
Analytical Procedures
As required, analytical procedures are conducted during the planning and final phases of the audit.
In addition, we use analytical procedures in order to test several financial statement balances. In
particular, we use analytical procedures in testing revenue and certain costs. Evaluating your
revenue and costs by customer and kwh, is an efficient and effective means of obtaining audit
evidence and providing useful feedback to management.
How we establish materiality
• Conduct preliminary analysis of financial statements to make initial judgment of materiality.
• Consider the needs and expectations of the readers of the financial statements.
• For each balance presented in your financial statements, evaluate relative levels of inherent risk and
control risk, and assess the risk of material misstatement resulting from fraud or error.
How we design our audit procedures
For each balance presented in your financial statements, we evaluate the relative levels of inherent
risk and control risk, as well as make an assessment of the risk of material misstatement resulting
from fraud or error. We tailor our audit programs for each balance to obtain evidence from a
combination of (1) internal control testing, (2) analytical procedures, and (3) substantive testing.
The balance of evidence to be obtained from each of the three general types of procedures is
determined using an audit approach decision model taking into account the strength of your
system of internal controls.
Creating efficiency by utilizing technology
Our goal is to minimize the disruption to your staff while gaining as much insight into your
operations as possible. We use computerized auditing tools such as ACL which allow us to access
data and conduct audit tests on up to 100% of transactions, providing us with very efficient and
effective means of auditing critical information that affects your financial statements.
We also use audit software that allows us to link our working papers and analysis directly to your
trial balance, which allows us to automate working paper preparation and provides us the ability
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to analyze accounts in many different ways. This method creates less work for you, reduces the
margin for human error, and delivers timesaving benefits.
Moss Adams has internally developed the core of a paperless audit system. Our system is unique
from traditional systems as it incorporates an internal control and risk evaluation model.
Ongoing communication
At Moss Adams, we emphasize effective and ongoing communications. You will notice a superior
level of service which is based on your specific expectations rather than our own assumptions. To
save you valuable time, our team accepts responsibility for managing the lines of communications
between our organizations, from routine phone calls about immediate issues of concern to any
formal meetings you would like us to conduct. We believe this is central to a successful
relationship. We also propose periodic status meetings to be held throughout the engagement.
In addition, you require proactive communications about our engagement findings. We will notify
you about any emerging operational, accounting, compliance, and regulatory matters or concerns.
We understand you need insightful and timely information and you don't need, or want, any
surprises.
Board and audit committee presentation
Communication with the Board and management throughout the audit is vital to this process. It is
important we clearly understand your concerns and you understand why we examine certain
areas more than others. After the audit is complete, we will prepare a presentation for the Board
and Audit Committee highlighting past events, comparisons to industry benchmarks and
suggestions for the future. Throughout the year, we will meet periodically with management to
discuss current happenings, issues and concerns.
Management letter of recommendations
It is customary for our firm to produce a Management Letter of Recommendations in conjunction
with each engagement. The audit process gives us an opportunity to assess performance and
trends and spot emerging needs or opportunities. By reporting these conditions and opening them
up to discussion, the management letter can play an important role in establishing an agenda for
the remainder of the year.
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AUDIT TIMELINE
The following is the proposed schedule for the first year audit for the District.
Schedule
Auditor Transition
ProposedAudit
Schedule to meet with your prior auditor to review their working papers.
Late October 2011
Audit Planning
Meet with management for pre -audit planning, and to obtain an understanding of systems,
internal controls, and current year issues.
Late October 2011
Provide management with a detailed listing of items needed to perform the audit, including
the timing of when items are needed.
Late October 2011
Interim Fieldwork
Perform tests of internal controls.
November 2011
Audit Fieldwork
Send confirmations of cash, investment, and other accounts as deemed necessary.
December 31, 2011
Perform substantive audit fieldwork (one week)
March/April 2012
Wrap audit and complete review/preparation of financial statements
April 2012
Report Preparation
Present draft of financial statements, audit report, and management letter to senior
management.
TBD
Present draft of financial statements, audit report, and management letter to the board of
directors.
TBD
Board Communications
Present final audit report, financial statements, and management letter to the board of
directors.
By June 15th
Workpaper Retention
Moss Adams uses an electronic workpaper management system for our engagement file
preparation and storage requirements pursuant to our documentation retention and destruction
policy. In general, our workpaper retention policy is to keep current client engagement files,
including reports and management letters for seven years (or longer, if required by law or
regulation). Our working papers are the property of Moss Adams and constitute confidential
information. We may be asked, however, to make them available for review by regulatory agencies
pursuant to authority given to them by law or regulation. If requested and in our opinion a
response is required by law or regulation, access to such engagement related documentation will
be provided under the supervision of Moss Adams personnel. Furthermore, upon request, we may
be required to provide photocopies of selected engagement -related documentation to regulatory
agencies or other third parties. The regulatory agencies or third parties may intend, or decide, to
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distribute the copies or information contained therein to others, including other government
agencies.
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YOUR SERVICE TEAM
Your team will consist of individuals from our California Central Valley and Portland, Oregon
offices. We anticipate approximately 70% of the hours to come from the California Central Valley
offices, while the remainder will be served with utility members from Portland. We have selected
the following individuals to work with the District based on their experience serving irrigation
districts, electric utilities, and municipalities along with their dedication to providing superior
client service.
Julie Desimone, Business Assurance Partner and Chair of Utility
Service Group
Role: Engagement Partner/Reviewer
Office: Portland, Oregon
Julie Desimone is a business assurance partner and the chair of the Firm's
Utility Service Group. She has been working in public accounting and serving
utilities for over ten years and is responsible for numerous audit engagements. In addition to audit
services, Julie has performed many consulting projects and speaking engagements covering
technical and operational issues. Though Julie's home base is Portland, Oregon, approximately
50% of her business is located in California.
Some specific areas of her professional experience include: advanced utility accounting and
cooperative matters, technical auditing services including A-133, contracting issues and internal
control evaluation. Julie is a licensed certified public accountant and a member of the American
Institute of Certified Public Accountants and Washington Society of Certified Public Accountants.
During the last three years, Julie has completed in excess of the required continuing professional
education in Accounting and Auditing necessary to maintain her license.
Clients Julie continues to serve include: Imperial Irrigation District, Southern California Public
Power Authority, Northern California Power Agency, Transmission Agency of Northern California,
Alaska Power Company, Public Utility District No. 1 of Clark County, and Eugene Water and
Electric Board.
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Cheryl Eisenhour, Business Assurance Manager
Role: Engagement Manager
Office: California Central Valley
Cheryl Eisenhour is a business assurance manager with over eight years of
experience providing accounting and advisory services to nonprofit and
government industry clients. She will be an asset to the audit team as she
has spent the past three years auditing both the California State Senate and the California State
Assembly (combined as the California State Legislature). This provides a unique view into the
California government funding and budgeting process. Cheryl will be the fieldwork in -charge
responsible for planning, execution, and completion of the audit and deliverables. She will provide
daily supervision and oversight to our staff while they are onsite. Cheryl is a licensed certified
public accountant in the state of California and a member of the AICPA. She graduated from
University of California Santa Barbara with a Bachelor of Arts, Economics with an Accounting
Concentration.
Keith Simovic, Business Assurance Senior
Role: In -charge
Picture Not
Available Office: Portland, Oregon
Keith Simovic is a business assurance senior with more than four years of
experience in public accounting. Keith has assurance experience with a
broad client base, including Utility, Forest Products, Manufacturing and
Distribution, Healthcare and Not -for -Profit organizations, as well as a variety of experience in
other types of industry. Keith is a licensed certified public accountant in the state of Oregon. He
graduated with a Bachelor of Business Administration with a concentration in accounting from
Oregon State University.
Clients Keith continues to serve include: Transmission Agency of Northern California, Southern
California Public Power Authority, City of Idaho Falls, Eugene Water and Electric Board, Northern
Lights, Inc. and Power Resources Cooperative.
The remaining staff members will be from our California Central Valley offices.
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CLIENT REFERENCES
CLIENT REFERENCES
The final measure of an accounting firm's capability to deliver on its promises lies not in what is
said in its proposal but in the testimony of the companies it has served. The clients listed below
have received similar services as those proposed to the District. Several of these clients have also
received single (government) audit services. We encourage you to contact these references for
feedback about the quality of service we provide and level of satisfaction.
Client Name
Contact Name
Phone Number
City of Portland
Jane Kingston
(503) 823-4358
Clark County Public Utility
Rick Dyer
(360) 992-3384
District
Eugene Water & Electric Board
Cathly Bloom
(541) 484-2411
Imperial Irrigation District
Greg Broeking
(760) 339-9304
Lewis County Public Utility
Rich Bauer
(360) 748-9261
District
McMinnville Water & Light
Mark Carlton
(503) 435-3111
Northern California Power
Donna Stevener
(916) 781-4244
Agency
Pacific Northwest Generating
Cooperative/Power Resources
Jon Wissler
(503) 288-1234
Cooperative
Southern California Public
Vernon Oates
(626) 793-9364
Power Authority
Tacoma Public Utilities
Scott Cannaday
(253) 502-8512
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