The director of the California Public Utilities Commission was scolded by lawmakers today after conceding that his agency had committed errors in forecasting and other budget-related issues involving hundreds of millions of dollars.
A state Department of Finance audit found serious management, training and procedural problems in PUC accounting and forecasting procedures for special funds tied to programs ranging from low-income customer subsidies to telephone services for deaf and disabled individuals. The money stems from surcharges on Californians' gas, electric and telephone bills.
"I find it deeply troubling that an agency would have such dismal accounting of large amounts of public funds in apparent disregard of basic principles of good management," said Assemblyman Richard Bloom, a Santa Monica Democrat who chaired today's Assembly budget subcommittee meeting, which examined the audit findings and the PUC's response to them.
"Best practices in management and accounting are widely known and there can be no excuse for not employing those practices," he said. "Given the limited scope of the Finance audit, I fear that the issues we discuss today may only report on the tip of the iceberg. I hope I am wrong."
Paul Clanon, PUC executive director, focused much of his comments on a mea culpa.
"To cut to the chase, we don't contest those findings," Clanon said of the scathing audit. "It's my responsibility to take responsibility for the weaknesses, and to take responsibility for fixing them."
The audit found "widespread weaknesses within (PUC) budget operations which compromise its ability to prepare and present reliable and accurate budget information." Problems include fiscal management, monitoring, personnel and budget forecasting methodologies.
As one example of forecasting errors, auditors said the commission mistakenly told lawmakers and the Finance Department in June 2011 that $422 million existed that was not actually available in seven fee-supported funds.
Auditors discovered that some of the PUC's funds had revenue calculations that "were off by as much as $189 million and program expenditures that were off by as much as $212 million," Bloom said.
Clanon said that inaccurate forecasting gave the Legislature and governor an "incorrect picture" of special fund expenditures, but he added that no programs or ratepayers were harmed by those errors.
Bloom countered that inadequate forecasting can harm ratepayers by failing to identify trends that could be solved through small fee increases over a period of years rather than large increases at one time.
"To the extent that's a ratepayer harm, I think you're right," Clanon responded.
Without dissent, the Assembly budget subcommittee unanimously adopted a handful of staff recommendations, including proposals for a fiscal audit of the PUC, a copy of the commission's plan to correct deficiencies, and a request that commission officials return for further discussion April 24.
* Updated at 3:30 p.m. Wednesday to clarify and expand upon a quote by Assemblyman Richard Bloom, D-Santa Monica.PHOTO CREDIT: Assemblyman Richard Bloom, D-Santa Monica. Hector Amezcua / Sacramento Bee file, 2012.
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