I JKLMNOPORSTU NONUTILITY PROPERTY AND RELATED ACCUMULATED 1-3 1-4 Q The Division of Audits, Office of Accounting and Finance from time to time performs special type audits or reviews in addition to its continuing regular program of field audits of public utilities, licensees, and natural gas pipeline companies conducted on a cyclical basis. The special audits are in the nature of informal investigations undertaken to meet the needs of the Commission or respond to inquiries from Congressional committees, members of the Congress and other persons or organizations. The purpose of this memorandum is to briefly describe the types of special audits or reviews undertaken within the past few years. 1. Fuel Adjustment Clauses The Division of Audits has recently undertaken a program of special field examinations relating to fuel adjustment clauses under wholesale rate schedules filed with the Commission by 14 public utilities. Procedures outlined in pertinent portions of staff audit program manuals are utilized in such audits along with supplementary procedures. The audits are expected to be completed at various dates within the next 2 or 3 months. The purpose of the audits is to inquire into whether costs passed on to wholesale customers: (1) have been computed in conformity with the method set forth in the rate filings, (2) include only eligible costs as specified in the classes referenced to particular provisions of the Commission's Uniform System of Accounts Prescribed for Public Utilities and Licensees, (3) are supported by the books and records of the utility, and (4) were prudently incurred. It is anticipated that the results of individual audits may be submitted in evidence in proceedings related to fuel adjustment clause filings before the · Commission. - 2 2. Advertising Inquiries are received from time to time relating to the classification of certain expenditures for advertising, especially advertising which appears to be of a political nature. Under the Commission's Uniform Systems of Accounts, expenditures for advertising and certain other expenditures for activities of a political nature are required to be classified to a nonoperating expense account rather than to utility operating expense accounts. During the past 2 years, the number of inquiries of this nature have increased substantially and special audit work has been performed in response thereto. Following are examples of instances of such audits or reviews undertaken by the staff. (a) Review in response to a request dated September 13, (b) (c) Staff initiated reviews in 1974 and 1975 relating to expenditures for advertising sponsored on a group basis through certain organizations. The organizations include: Electric Utilities Advertising Program (ECAP); American Gas Association; and the New York Gas Group. Staff initiated reviews in 1974 of expenditures for advertising by the American Electric Power System. (d) Audit initiated in April 1974 at the request of Congressman Michael J. Harrington relating to advertising and other expenditures by certain utilities in connection with the Maine Public Power Referendum. (e) Audit initiated in May 1974 at the request of Congressman Harrington relating to expenditures |