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HomeMy WebLinkAbout11 SEEA Agenda Item # 11 Public Utility District ACTION To: Board of Directors From: Bob Mescher Date: August 06, 2008 Subject: Authorize Implementation of an Audit Recommendation to Use Alternative Accounting Procedures Pertaining to the Stampede Energy Exchange Account (SEEA) 1. WHY THIS MATTER IS BEFORE THE BOARD Board authorization is required to establish a new bank account for the purpose of separating transactions related to the Stampede Energy Exchange Account. 2. HISTORY On May 10, 2007, the District executed a contract with Western Area Power Administration (WAPA) for the purchase of generation from the Stampede Power Plant (Contract). As part of the agreement, a special purpose entity described as, "Stampede Energy Exchange Account" (SEEA) was created specifically for the purpose of administering energy transactions of Stampede Energy received by the District and the City of Fallon as outlined in the agreement. It was also agreed that the District shall establish and maintain SEEA. Although the District is acting as the administrator of the account, SEEA is established and maintained solely for the Contract and it is WAPA who has the ultimate accountibility for this account. 3. NEW INFORMATION The District's external auditing firm, Virchow Krause, has advised the District that since SEEA was created from a contract and is not a separate legal entity, it is not a potential component unit of the District. Furthermore, they advised the District that the entity is autonomous and should stand-alone, apart from the District. The transactions, other than power purchased by the District and miscellaneous administrative service revenue, are not part of the District operations or its reporting entity. The District therefore needs to implement an alternative accounting procedure to record transactions pertaining to SEEA. 4. FISCAL IMPACT The transactions for SEEA, unrelated to the District's operations were not included in the 2008 budget and will not be reported in the District's financial statements. The additional cost associated with establishing and maintaining an alternate accounting structure to track SEEA transactions is estimated to be less than $500 annually. 5. RECOMMENDATION 1. Authorize the Treasurer to establish a separate bank account with US Bank for the purpose of separating SEEA transactions. The account will be named: "Truckee Donner Public Utility District SEEA" 2. Authorize the Treasurer to keep separate records of SEEA transactions that are not part of the District operations or its reporting entity, in compliance with the 2007 financial audit recommendation. Mary Cha an Michael D. Holley Administrative Services Manager General Manager Ten Terrace Court • P.O.Box 7398 Madison,WI 53707-7398 �/'�rch ��■ ��� Phone: 800.362.7301 . 608.249.6622 V 1i'Y Fax: 608.249.8532 &C0ffiWIiy_ www.virchowkrause.com TO: Mary Chapman FROM: Tom Unke CC: DATE: June 25, 2008 RE: Stampede Energy Exchange Agreement (SEEA) It is our understanding that SEEA was created as a special purpose entity specifically for the purpose of administering energy transactions of Stampede Energy received by the Truckee Donner Public Utility District and the City of Fallon as outlined in the SEEA Agreement. Excerpt from the contract for Energy Exchange Services with Truckee Donner Public Utility District and the City of Fallon.: STAMPEDE ENERGY EXCHANGE ACCOUNT: Truckee shall establish and maintain the SEEA, as provided in this Section. Using the value calculation as provided for in Section 10 above Exhibit A attached hereto, a credit entry will be made to the SEEA for the total dollar amount associated with the energy provided to TDF.Any payments made from the SEEA will be listed as a debit.An example of SEEA Monthly Transactions is provided in Exhibit B, attached hereto.At no time during the term of this Contract will a debit entry be made to the SEEA in excess of the then-existing credit balance of such account, unless otherwise agreed to in writing by the Parties." Although Truckee Donner Public Utility District is acting as the administrator of the account by establishing and maintaining it,the account is for the Stampede contract and it is Western Area Power Administration who has the ultimate accountability for this account as seen in section 11.1.4 of the contract. As SEEA was created out of a contract and is not a separate legal entity it is not a potential component unit of Truckee Donner. Furthermore,we feel that this entity that is autonomous and should stand-alone apart from Truckee Donner PUD. Also as previously noted the ultimate fiscal accountability lies with WAPA not the PUD Board. Therefore,these transactions, other than the power purchased by Truckee from Stampede Energy, are not part of the PUD operations or its' reporting entity. Feel free to contact me if you have any further questions regarding this matter.