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HomeMy WebLinkAboutAEA Audit in Accordance with OMB Circular A-133 Year ended June 30, 2012ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Audit in Accordance with OMB Circular A-133 Year ended June 30, 2012 (With Independent Auditors’ Report Thereoa) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Table of Contents Independent Auditors’ Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program, Internal Control over Compliance, and Supplementary Schedule of Expenditures of Federal Awards in Accordance with OMB Circular A-133 Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Acc ordance with Government Auditing Standards Page(s) 1-3 4 5 6-7 8-9 mana KPMG LLP Suite 600 701 West Eighth Avenue Anchorage, AK 99501 Independent Auditors’ Re port on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program, Internal Control over Compliance, and Supplementary Schedule of Expenditures of Federal Awards in accordance with OMB Circular A-133 The Board of Directors Alaska Energy Authority: Compliance We have audited the compliance of the Alaska Energy Authority (the Authority) with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Authority’s major federal programs for the year ended June 30, 2012. The Authority’s major federal programs are identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the Authority’s management. Our responsibility is to express an opinion on the Authority’s compliance based on our audit. 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 the 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 opinion. Our audit does not provide a legal determination of the Authority’s compliance with those requirements. In our opinion, the Authority complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2012. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements which are required to be reported in accordance with OMB Circular A-133 and with are described in the accompanying schedule of findings and scheduled costs as item 2012-1. Internal Control over Compliance Management of the Authority is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the Authority’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative. Rana 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 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 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. 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 deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, we identified a certain deficiency in internal control over compliance that we consider to be a significant deficiency as described in the accompanying schedule of finding and questioned costs as item 2012-1. A significant deficiency in internal control over compliance is a deficiency, or 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. Schedule of Expenditures of Federal Awards We have audited the financial statements of the major fund, and the aggregate remaining fund information of the Alaska Energy Authority (the Authority) as of and for the year ended June 30, 2012, and have issued our report thereon dated October 24, 2012 which contained an unqualified opinion on those financial statements. Our audit was conducted for the purpose of forming our opinion on the financial statements that collectively comprise the Authority's basic financial statements. We have not performed any procedures with respect to the audited financial statements subsequent to October 24, 2012. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 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 basic 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 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 expenditure of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. The Authority's response to the finding identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit the Authority's response and, accordingly, we express no opinion on it. N mane This report is intended solely for the information and use of the board of directors, management, federal awarding agencies, and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties. KPMc LIP October 24, 2012 ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Schedule of Expenditures of Federal Awards Year ended June 30, 2012 Catalog of federal domestic Federal grantor/pass-through grantor assistance Award Federal grantor program title number amount expenditures U.S. Department of Energy: Direct — Alaska Wind Energy 81.087 $ 2,723,000 40,738 Passed through Washington State University - Renewable Energy Research 81.087 65,000 17,781 2,788,000" 38519 Passed through Alaska Housing Finance Corporation ARRA - State Energy Program — Energy Conservation 81.041 3,732,000 2,849,957 State Energy Program — Energy Conservation 81.041 150,000 345,589 State Energy Program — Energy Solutions for Alaska 81.041 700,000 114,086 —4.582,000_ _3,309,632 Passed through Alaska Housing Finance Corporation - ARRA Energy Efficiency and Conservation Block Grant 81.128 7,730,100 3,164,593 Denali Commission Direct: Bulk Fuel Consolidation Upgrades 90.100 3,991,328 888 Bulk Fuel Consolidation and Power Generator Upgrades 90.100. 21,215,255 1,023,018 Alternative Energy Proposal Review and Project Management 90.100 3,090,000 337,328 Kwethluk Power System Upgrade 90.100 2,762,870 42,551 FY08 Project Administration 90.100 1,261,619 357,094 Pelican Hydro Upgrade 90.100 2,274,000 74,602 Repair and Replacement 90.100 225,000 41,082 Yakutat Power System Upgrade 90.100 495,000 490,461 Takotna Power System Upgrade 90.100 950,000 496,401 Ruby Power System Upgrade 90.100 2,671,825 684,157 Unalakleet Power System Upgrade 90.100 3,500,000 117,222 Tazimina Hydroelectric 90.100 1,273,543 111,804 Kipnuk Power System Upgrade 90.100 400,000 724 Fort Yukon Power System Upgrade 90.100 340,000 196,071 Akiak Power System Upgrade 90.100 250,000 128,757 Atmautluak Power System Upgrade 90.100 150,000 18,667 Central Power System Upgrade 90.100 150,000 90,010 Hoonah Power System Upgrade 90.100 3,330,000 2,929,224 Alakanuk Bulk Fuel Upgrade 90.100. 165,000 19,511 Igiugig Power System Upgrade 90.100. 1,350,000 200,228 Koliginek Bulk Fuel Construction 90.100. 1,100,000 130,657 Yakutat Power System Upgrade Construction 90.100. 3,205,514 2,742,237 Twin Hills Power System Upgrade 90.100. 150,000 7,078 Alakanuk Bulk Fuel Construction 90.100. 5,148,000 3,440,780 Akiak Power System Upgrade 90.100. 2,000,000 826,306 Rural Energy Conference 90.100. 40,000. 39,467 61,488,954 14,546,325 Passed through Alaska Native Tribal Health Consortium: McGrath Waste Heat Recovery Construction 90.100. 199,840 191,765 U.S. Department of Agriculture: Direct: Rural Development, Forestry and Communitites-Wood Energy Development 10.672 158,000 74,262 U.S. Department of Labor: Passed through State of Alaska Department of Labor — ARRA - Energy Sector Training 17.275 150,000 115,157 Total Federal Awards $__77,096,894 21,460,253 See accompanying independent auditors’ report. ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Schedule of Expenditures of Federal Awards Year ended June 30, 2012 (1) General The accompanying schedule of expenditures of federal awards presents the activity of all federal awards of the Alaska Energy Authority (Authority). The Authority’s reporting entity is defined in note 1 to the Authority’s financial statements. Federal awards received directly from federal agencies as well as federal awards passed through other government agencies are included on the schedule. (2) Basis of Accounting The accompanying schedule of expenditures of federal awards is presented using the accrual basis of accounting, which is described in note 2 to the Authority’s financial statements. (3) Subrecipients The Authority provided the following to subrecipients during the year ended June 30, 2012: U.S. Department of Energy: Alaska Wind Energy $ 40,738 Energy Efficiency Conservation Block Grant 2,591,635 State Energy Program - Energy Conservation 2,831,496 5,463,869 Denali Commission: Bulk Fuel Consolidation and Power Generator Upgrades 980,383 Alternative Energy Proposal Review and Project Management 340,156 Kwethluk Power System Upgrade 34,504 Pelican Hydro Upgrade 66,208 Yakutat Power System Upgrade 495,000 Takotna Power System Upgrade 391,084 Unalakleet Power System Upgrade 116,451 Tazimina Hydroelectric 87,601 Ruby Power System Upgrade 523,415 Hoonah Power System Upgrade 2,782,832 Alakanuk Bulk Fuel Upgrade 17,927 Igiugig Power System Upgrade 157,672 Koliginek Bulk Fuel Construction 130,657 Yakutat Power System Upgrade Construction 2,424,873 Rural Energy Conference 29,468 Alakanuk Bulk Fuel Construction 3,440,780 Akiak Power System Upgrade Construction 826,306 McGrath Waste Heat Recovery Construction 191,765 Total to subrecipients $ 18,500,951 ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Schedule of Findings and Questioned Costs Year ended June 30, 2012 Summary of Auditors’ Results Financial Statements: Type of auditors’ report issued Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified that are not considered to be material weakness(es)? Noncompliance material to financial statements noted? Federal Awards: Internal control over major programs: Material weakness(es) identified? Significant deficiency(ies) identified that are not considered to be material weakness(es)? Type of auditors’ report issued on compliance for major programs Any audit findings disclosed that are required to be reported in accordance with section 510(a) of OMB Circular A—133? Identification of major programs: CFDA Numbers 81.128 81.041 1275) Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee? Unqualified yes Xx no yes X none reported yes X no yes X no Xx yes none reported Unqualified X yes no Name of Federal Program or Cluster Energy Efficiency Conservation Block Grant State Energy Program Energy Sector Training S_643,808 xX yes no There were no findings relating to the financial statements reported in accordance with Government Auditing Standards. (Continued) (3) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Schedule of Findings and Questioned Costs Year ended June 30, 2012 Summary of Federal Awards Findings and Questioned Costs 2012-01 Suspension and Debarment — Finding and Significant Deficiency Program: Criteria: Condition: Cause: Effect: Questioned costs: Recommendation: Response: State Energy Program (CFDA 81.041) and Energy Efficiency and Conservation Block Grant Program (CFDA 81.128) Non-Federal entities are prohibited from contracting with or making sub-awards under covered transactions to parties that are suspended or debarred or whose principals are suspended or debarred. “Covered transactions” include those procurement contracts for goods and services that are expected to equal or exceed $25,000 or meet certain other specified criteria. All non-procurement transactions (i.e., sub-awards to sub-recipients), irrespective of award amount, are considered covered transactions. When a grant recipient enters into a covered transaction, it must verify that the entity is not suspended or debarred or otherwise excluded. This verification may be accomplished by checking the Excluded Parties List System (EPLS) maintained by the General Services Administration, collecting a certification from the entity, or adding a clause or condition to the covered transaction with that entity. We tested 12 covered transactions totaling $4,855,065, representing 75% of the program expenditures for these two major programs. For 10 of these items, the Authority was unable to evidence they verified the vendors and / or sub- recipients were not included on the EPLS, nor was there a clause or condition to the covered transaction in the related agreements. We compared these vendors and sub-recipients to the EPLS and found none of them were listed. The Authority’s procedures do not always ensure that documentation evidencing review of the EPLS is retained nor was there a clause or condition included in the agreement. Suspension and debarment is not always verified. None The Authority should modify their procedures to ensure that a search of the EPLS was completed, and such documentation is retained, prior to execution of vendor or grant agreements or to include a clause or condition to the covered transaction in all related agreements. The Authority agrees and has evaluated suspension and debarment verification procedures and has taken corrective action, including (1) implementing procedures where verification of the EPLS is being documented when issuing federally funded contracts or grants and (2) will include in federally funded proposals a vendor certification clause whereby the vendor self certifies eligibility to participate in receiving federal funds. aA KPMG LLP Suite 600 701 West Eighth Avenue Anchorage, AK 99501 Independent Auditors’ 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 The Board of Directors Alaska Energy Authority: We have audited the financial statements of the Alaska Energy Authority (the Authority) as of and for the year ended June 30, 2012, and have issued our report thereon dated October 24, 2012. We conducted our audit 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. Internal Control over Financial Reporting Management of the Authority is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the Authority’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Authority’s internal control over financial reporting. A deficiency in internal control over financial reporting 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 combination of deficiencies, in internal control over financial reporting, 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. Our consideration of internal control over financial reporting 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 financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Authority’s financial statements are free of 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 determination of financial statement amounts. 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. KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative. KEIM This report is intended solely for the information and use of the board of directors, management, federal awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties. KPMG LEP October 24, 2012