The Nail In The Coffin?

Gary posted a comment on the last blog.
That comment was an article from the Oregonian.
It dealt with what is going on in the Bell, California, corruption case.
This reporter brought to light the lack of oversight our State has, which could give the very opportunity for what happened in Bell, to happen anywhere in our State.
One statement this reporter made hit me in the head like a ton of bricks.
That statement was;
"Yet an absence of internal accounting controls and practices should be immediately apparent to auditors and send up a red flag".
Our very auditor has raised that red flag for years now.
That red flag has been a need for a departmental wide work order, purchase order and inventory control system.
To make it clear this blog subject is not saying or pointing a finger at anyone of pocketing city funds as happened in Bell.
But this blog subject will expose a problem we have.

Gary the timing of your comment could be no more perfect.
You see Gary I sent out a question to council around one month ago.
Knowing that the city could not raise the rates due to the initiative petition that the voters approved I informed council of the law.
That was that a municipal utility must do and have completed a rate study and have the rates set by January 1st of each year.
I then reminded them that since an officer of the utility has not been stated in the charter as required that council is that officer.
I then asked if this rate study would be coming before council will all information to determine and set the rates be in the council packets.
I got a reply from the city saying "thank you Cody for bringing this to our attention".

Now some of you might be saying what does the rate study have to do with the rest?
A little history.
I myself working in the utility field knew the importance of a work order, purchase order and inventory control system.
I have been requesting the city to enact these business tools for years.
I even ran on that platform when I ran for a council position 4 years ago.

This very summer a heated meeting between our city administrator, the head of our electrical department, a city council member and myself took place.
In this meeting I pointed out to all attending that there is no way that this city could tell me exactly what it cost to run our utilities because they do not use what our auditor has been asking for years for.
Therefore there is no way they could set the rates.
I was informed by our city light director that he kept work orders.
Now I do not know what this system is and he offered to show me but a work order system is two fold.
The first is known as a project and the second the worker.
In the project this describes the project and separate line items account for materials used, equipment used and the time spent on the project by each worker on that project and a description of the work preformed.
The worker portion is a daily log the worker maintains. It accounts for project work and refers to the assigned project number if a worker is not on a project and for example is doing warehouse work that worker describes that work and enters the time spent.
The work order system works hand in hand with the purchase order and inventory control system.

Now in the utility field on completion of every project the work order was turned in to the department head.
At the end of every week the daily logs for the week was turned into the department head.
The department head would review the orders ensure that the times matched the order and the workers log.
The department head would evaluate the time the project took.
If the manager thought that to much time was spent he would find out why and note the reason.
The problem could be a worker is not properly trained and training is needed or the worker was just taking to much time.
Or the problem may be with the project and a situation arises which could be a problem in the future and this problem would be documented and future problems known in advance.
The department head would then attach the purchase orders and document the inventory used on the project.
Then it would go to the bookkeeper.
For internal projects or meetings which did not have a work order and was found in the employee work log the department head would generate a work order and go through the same process as above.

The purchase order system is self explanatory.
They are two fold themselves.
Project or inventory.
They are an accounting of parts and supplies which need to be purchased for an individual project or inventory stock.
Every purchase has a project or inventory number.

The inventory control system is also self explanatory.
X project required x out of inventory.
Or in the warehouse is a inventory log. So x worker documents that x worker took out x to restock vehicle x.

Now all equipment and company owned tools has a number assigned to it.
In the heated meeting mentioned above I brought forth another issue.
Taking the bucket truck for example it goes out on a project.
That project is for work required to repair an electrical outage.
It is noted on the work order.
No big deal as that depreciation is due to the use it was purchased for from the electrical fund.
But hold on what if that bucket truck is needed to go out on a job for the cable TV or the internet. Or maybe the port wants to borrow it again.
Then it becomes a big deal.
That vehicle was bought for the municiple electrical department.
It was bought from the earnings of the municiple electrical department.
It was not purchased form the earnings of the cable TV, the internet or the port.
None of these other enterprises or the port pays for the maintenance or needs of that vehicle.
All of this comes from the municiple electric departments funds.
That purchase was factored into our rates for our electricity.
Every hour of depreciation is factored into our electrical rates.
So where are the intergovernmental agreements that set the rate of return for any other city enterprise business or other governmental agency which pays for the use of this vehicle to cover the depreciation that occurs the moment it is started and used for purposes other than the high voltage electrical it was purchased for?
So why does what we have to pay for our electric have to support these other non electrical uses of that vehicle which do not pay any depriciation or usage costs?

Then we must also factor in that I have made the city aware that under the law a municipal utility cannot charge a distribution fee.
For those not of the utility world a distribution fee is  a fee charged to a utility for the privilege to connect to its distribution or transmission system.
Better know as a right of way charge.

So why did I ask for a rate study?
I did so as over the past 6 months, I have made this city aware that, any other use of municipal electrical utility funds for other uses is against the law.
I have also made this city aware that, the 5% gross revenue distribution fees, from all of our utilities, for the use of our right of way, is also a violation of the law.
For those whom do not understand why, the state has a law saying a city may not charge a right of way fee to itself, I will explain.
Simply because you cannot tax yourself.
In a nutshell we the people own these utilities and we own the right of way.
When our city government passed that resolution, what that did was created a tax upon the people.
A tax for something we already own.
That is why the law says a city may not do it.

Now council is also fully aware that they have some real problems.
Factor that in with the fact, I have also made them aware of, being, the only determining factors for setting the rates for municipal electric is the anticipated cost to operate and maintain that specific utility and to keep that specific reserve fund healthy.

So now the very council whom passed this 5% right of way has until January 1st to bring out the books.
Then they have to separate the municipal electrical department from all other utilities.
Determine what was spent this year for that specific utility.
Disclose what was spent from this specific utilities funds for other purposes.
Disclose the cost to purchase the electricity.
Break it down to a kilowatt hour.
Determine vehicle and tool depreciation.
Determine inventory needs for the next year.
Determine if the reserve is healthy or needs a rate hike to keep it healthy.
Then determine that rate.

Now they are damned if they do or damned if they don't.
How do you think this is going to work out for them?
The nail in the coffin?
Thanks again Gary as you gave me a fine lead in to this.

Cody