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Home My WebLink AboutAlaska Energy Authority Single Audit Report (Final) 2021eidebailly.com 1 Single Audit Report June 30, 2021 Alaska Energy Authority (A Component Unit of the State of Alaska) Alaska Energy Authority (A Component Unit of the State of Alaska) Table of Contents June 30, 2021 Compliance Section Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ................................................................................................................................................................... 1 Independent Auditor's Report on Compliance for the Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 3 Schedule of Expenditures of Federal Awards ............................................................................................................ 6 Notes to Schedule of Expenditures of Federal Awards ............................................................................................. 7 Schedule of Findings and Questioned Costs .............................................................................................................. 8 What inspires you, inspires us. | eidebailly.com 877 W. Main St., Ste. 800 | Boise, ID 83702-5858 | T 208.344.7150 | F 208.344.7435 | EOE 1 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards To the Board of Directors Alaska Energy Authority Anchorage, Alaska We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business‐type activities and each major fund of Alaska Energy Authority, which comprise the statement of financial position as of June 30, 2021, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated October 29, 2021. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Alaska Energy Authority's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Alaska Energy Authority's internal control. Accordingly, we do not express an opinion on the effectiveness of Alaska Energy Authority's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify certain 2 deficiencies in internal control, described in the accompanying schedule of findings and responses or schedule of findings and questioned costs as item 2021‐001 that we consider to be a significant deficiency. Compliance and Other Matters As part of obtaining reasonable assurance about whether Alaska Energy Authority's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Alaska Energy Authority Response to Findings Alaska Energy Authority’s response to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. Alaska Energy Authority’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Boise, Idaho October 29, 2021 What inspires you, inspires us. | eidebailly.com 877 W. Main St., Ste. 800 | Boise, ID 83702-5858 | T 208.344.7150 | F 208.344.7435 | EOE 3 Independent Auditor's Report on Compliance for the Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance To the Board of Directors Alaska Energy Authority Anchorage, Alaska Report on Compliance for the Major Federal Program We have audited Alaska Energy Authority’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on Alaska Energy Authority’s major federal program for the year ended June 30, 2021. Alaska Energy Authority’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal program. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for Alaska Energy Authority’s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Alaska Energy Authority’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our qualified opinion on compliance for the major federal program. However, our audit does not provide a legal determination of Alaska Energy Authority’s compliance. 4 Basis for Qualified Opinion on the Major Federal Program As described in the accompanying schedule of findings and questioned costs, Alaska Energy Authority did not comply with requirements regarding CFDA 90.100 Denali Commission as described in finding number 2021‐002 for Reporting. Compliance with such requirements is necessary, in our opinion, for Alaska Energy Authority to comply with the requirements applicable to that program. Qualified Opinion In our opinion, except for the noncompliance described in the Basis for Qualified Opinion paragraph, Alaska Energy Authority’s complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs for the year ended June 30, 2021. Other Matters Alaska Energy Authority’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Alaska Energy Authority’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. Report on Internal Control over Compliance Management of Alaska Energy Authority is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Alaska Energy Authority’s internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Alaska Energy Authority’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We identified certain deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as item 2021‐002 that we consider to be a material weakness. 5 Alaska Energy Authority ’s response to the internal control over compliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. Alaska Energy Authority’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, business‐type activities and each major fund, of Alaska Industrial Energy Authority as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise Alaska Energy Authority’s basic financial statements. We issued our report thereon dated October 29, 2021, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. Boise, Idaho October 29, 2021 6 Alaska Energy Authority (A Component Unit of the State of Alaska) Schedule of Expenditures of Federal Awards Year Ended June 30, 2021 Federal Financial Assistance Listing/Federal Pass‐Through Amounts CFDA Entity Identifying Passed‐Through Federal Grantor/Pass‐Through Grantor/Program or Cluster Title Number Number Expenditures to Subrecipients Department of Agriculture Direct Award Wood Utilization Assistance 10.674 87,657$ ‐$ Total Department of Agriculture 87,657 ‐ Environmental Protection Agency Direct Award State Clean Diesel Grant Program 66.040 623,645 556,340 Department of Energy Direct Award State Energy Program 81.041 387,598 ‐ Energy Efficiency and Renewable Energy, Information Dissemination, Outreach, Training and Technical Analysis/Assistance 81.117 8,206 ‐ Passed through Washington State University Energy Efficiency and Renewable Energy, Information Dissemination, Outreach, Training and Technical Analysis/Assistance 81.117 16,754 ‐ Direct Award State Energy Program Special Projects 81.119 77,756 ‐ Electricity Delivery and Energy Reliability, Research, Development, and Analysis 81.122 122,871 122,871 Total Department of Energy 613,185 122,871 Denali Commission Program Direct Award Togiak‐Twin Hills Intertie 90.100 326,638 313,930 Tatitlek Bulk Fuel Upgrade 90.100 799,585 781,853 Clark's Point Rural Power System Upgrade Design 90.100 1,510 ‐ Chalkytsik Bulk Fuel Facility Design 90.100 122,094 112,532 START Communities Technical Assistance 90.100 15,455 3,701 Beaver Bulk Fuel Facility Design 90.100 118,556 110,175 Bulk Fuel Operator Training 90.100 227,755 ‐ Circuit Rider Program 90.100 262,636 ‐ Remote Power System Maintenance & Improvements 90.100 157,962 123,577 Miscellaneous Small Maintenance & Improvements 90.100 252,694 ‐ Port Heiden Remote Power System Upgrade 90.100 521 ‐ Power Plant Operator Training 90.100 111,362 ‐ Itinerant Utility Training 90.100 49,777 ‐ RPSU Maintenance & Improvement Program 90.100 128,584 54,496 RPSU Inventory & Assessment 90.100 220,839 ‐ Remote Power System Upgrade‐Akhiok, AK 90.100 769,481 711,139 Remote Power System Upgrade‐Venetie, AK 90.100 138,078 125,535 Barge Headers and Fill Lines 90.100 1,648,879 1,525,145 Bulk Fuel Storage Facility Upgrade‐Nunapitchuk, AK 90.100 1,055,320 1,040,421 BFO In‐Community Training Curriculum 90.100 38,815 ‐ Remote Power System Upgrade‐Napaskiak, AK 90.100 100,511 82,919 Remote Power System Upgrade‐Nikolai, AK 90.100 190,092 176,408 Remote Power System Upgrade‐Nelson Lagoon, AK 90.100 103,284 85,169 Remote Power System Upgrade‐Rampart, AK 90.100 14,585 79 Bulk Fuel Storage Upgrade‐Scammon Bay, AK 90.100 260,422 250,000 Village Energy Efficiency Program‐Statewide 90.100 63,746 63,746 Bulk Fuel Upgrade‐Ekwok, AK 90.100 7,351 ‐ Engineering Library 90.100 54,073 ‐ Craig High School Biomass Project 90.100 1,960 ‐ Port Heiden Phase I Electrical Distribution Upgrades 8,090 4,922 Total Denali Commission Program 7,250,655 5,565,747 Total Federal Financial Assistance 8,575,142$ 6,244,958$ 7 Alaska Energy Authority (A Component Unit of the State of Alaska) Notes to Schedule of Expenditures of Federal Awards Year Ended June 30, 2021 Note 1 ‐ Basis of Presentation The accompanying schedule of expenditures of federal awards (the schedule) includes the federal award activity of Alaska Energy Authority under programs of the federal government for the year ended June 30, 2021. The information in presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the schedule presents only a selected portion of the operations of Alaska Energy Authority, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Alaska Energy Authority. Note 2 ‐ Significant Accounting Policies Expenditures reported in the schedule are reported on the accrual basis of accounting, except for subrecipient expenditures which are recorded on the cash basis. When applicable, such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Note 3 ‐ Indirect Cost Rate Alaska Energy Authority has elected to use the 10% de minimis cost rate. 8 Alaska Energy Authority (A Component Unit of the State of Alaska) Schedule of Findings and Questioned Costs Year Ended June 30, 2021 Section 1 – Summary of Auditor’s Results Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting: Material weaknesses identified? None reported Significant deficiencies identified not considered to be material weaknesses? Yes Noncompliance material to financial statements noted? No Federal Awards Internal control over major programs: Material weaknesses identified? Yes Significant deficiencies identified not considered to be material weaknesses? None reported Type of auditor's report issued on compliance for major programs: Qualified Any audit findings disclosed that are required to be reported in accordance with Uniform Guidance 2 CFR 200.516: Yes Identification of major programs: Name of Federal Program or Cluster CFDA Number Denali Commission Program 90.100 Dollar threshold used to distinguish between Type A and type B programs: 750,000$ Auditee qualified as low‐risk auditee? Yes 9 Alaska Energy Authority (A Component Unit of the State of Alaska) Schedule of Findings and Questioned Costs Year Ended June 30, 2021 Section II – Financial Statement Findings 2021‐001 Significant Deficiency in Internal Control over Financial Statements Criteria: An internal control system includes processes to identify and report accounting transactions properly in the financial statements. Condition: An operating transfer in a prior period was recorded incorrectly and reported as a due to instead of an operating transfer. Cause: AEA’s internal control system did not include a review of transactions from a prior period to evaluate validity of transactions for financial reporting requirements. Effect: An operating transfer in a prior period had been recorded incorrectly as a due to funds managed by treasury. In the prior fiscal year, this transaction understated AEA’s net position for this fund. Recommendation: AEA should include processes for reviewing prior period accounts for proper reporting of operating transfers. Views of Responsible Officials: The Authority has reviewed finding 2021‐001 relating to the prior period adjustment made by management in FY21. While the Authority accepts the finding, we reject the premise that there is a significant deficiency in the internal control process. The need for a prior period adjustment was identified by management in the normal course of our annual review for financial reporting purposes. Reporting for the fund in question is a complex issue and, as such, requires an in‐depth review and coordination with other State agencies at year end. While the timeliness of the adjustment was less than optimal, management identified the adjustment, corrected, and brought to the attention of our auditors. For these reasons, management does not concur that there is a weakness in AEA’s internal control structure nor that it merits the level of significant deficiency. The Authority does not anticipate a repeat of this finding. 10 Alaska Energy Authority (A Component Unit of the State of Alaska) Schedule of Findings and Questioned Costs Year Ended June 30, 2021 Section III – Federal Award Findings and Questioned Costs 2021‐002 Denali Commission Program, CFDA 90.100 Reporting Material Noncompliance and Material Weakness in Internal Control over Compliance Grant Award Number: Various Criteria: The Federal Funding Accountability and Transparency Act (FFATA) requires organizations that receive direct federal funding to file a report for any subawards that obligate $30,000 or more in federal funds. Condition: During the period July 1, 2020 through June 30, 2021 no reports for subawards were filed that were $30,000 or more in federal funds. Cause: Management was not aware of the filing requirement. Effect: No FFATA reports were filed during the period July 1, 2020 through June 30, 2021. Questioned Costs: None Context/Sampling: Not applicable since no reports were submitted. Repeat Finding from Prior Year: No Recommendation: We recommend the Authority implement the process of identifying and reporting the subawards. Views of Responsible Officials: The Authority has reviewed finding 2021‐002 relating to the required reporting under 2 CFR 170 and Public Law 109‐282 Federal Funding Accountability and Transparency Act (FFATA). While we accept the finding, management does not agree that this finding is a material noncompliance and material weakness in internal controls. This reporting requirement is a recent discovery that is currently being corrected by staff. To prevent a reoccurrence of this issue, the Authority has begun coordination and the process of adding a FFATA review to our internal checklist for new awards to subrecipients. The Authority has started the process of submitting all required reports to the FSRS website. In addition, the Authority will provide training to relevant staff on the FFATA reporting requirements and add additional reviews to ensure reporting is completed timely and accurately. The Authority does not anticipate a repeat of this finding.