Audit: Pedernales co-op needs better spending controls

Historically, district offices did their own purchasing without clearing it through Pedernales headquarters, a practice the auditors said led to waste and inconsistencies

Update, from PEC member Carlos Higgins, CarlosTX@sbcglobal.net : After reading the Smith, Patterson & Johnson audit report, two things catch my attention, apart from a grade of about a "D" or "C" at most that our Board and management team probably deserve for their inaction. 1) Members of this auditing firm apparently take their role seriously. In letting the chips fall in their review and comments, they appear to be independent and straightforward. They deserve a public "Thank you" on behalf of PEC Member/owners. 2) The report is addressed to only one Board member, the chair of the audit committee, plus copies to top managers. If I were a board member, I'd want a copy of something so significant as this to be mailed directly to me, at the same time it is mailed to anyone else.

Note: More cracks in PEC's management are being revealed in the media. We can credit recent revelations to the persistence of a few well informed individual members who are associated with a discussion group known as the "watchdogs." We have highlighted the work of Milton Hawkins, Bill Christensen and Merle Moden (Wimberley) in the RoundUp. There are several others. If you're interested in joining the discussion, go to this link: http://pec4u.org/mailman/listinfo/watchdogs/ or send an email with your comments to watchdogs@pec4u.org.

Members are raising many important questions about PEC's spending habits – for example, the desirability and purpose of our co-op's well padded cash community & charitable contributions program and PEC's very generous executive compensation packages.

We are especially concerned about current members of the board who are actively campaigning for two preselected board candidates. Whether the agenda is honest or hidden makes no difference. We know what the results can be from a stacked PEC Board of Directors. Pure and simple, members of the board should be prohibited, as a matter of policy, from campaigning for or endorsing anyone's candidacy for the board except their own.

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Read the whole story here: http://www.statesman.com/news/local/audit-pedernales-co-op-needs-better-spending-controls-700410.html

By Patrick George
AMERICAN-STATEMAN STAFF

Published: 10:24 p.m. Thursday, May 20, 2010

SAN MARCOS — An internal audit of the Pedernales Electric Cooperative's purchasing practices concludes that the Hill Country utility still needs to make major changes in the way it monitors how its money is spent.

The audit, done by Bridgepoint Consulting , examined the co-op's policies and procedures for purchasing equipment and vehicles, getting competitive bids for projects and paying its vendors. After looking at all purchases and payments between January and October 2009 , auditors found the co-op's controls over the spending process are not effective and fail to keep costs down.

But the co-op's Board of Directors said those deficiencies are holdovers from Pedernales' previous management and culture under former General Manager Bennie Fuelberg, who left in early 2008 , and that they commissioned the audit to fix these problems.

The criticism is a reminder of the spending issues that helped trigger a member lawsuit and a reform movement at Pedernales nearly three years ago.

"We're still dealing with the vestiges of the old Fuelberg era, where there were no standards of performance or operational checkpoints," board President Larry Landaker said .

The co-op purchases an array of items necessary to bring power to its 200,000 -plus members. "We are a buyer of many things, everything from paper and pens to transformers and poles," Landaker said.

The audit lists several areas dealing with spending that need "major" improvement . . .

pgeorge@statesman.com; 512-392-8750