Draft Schedule of Audit Findings Grant County Public Utility District No. 2 January 1, 2003 through December 31, 2003 The District did not follow its own policy on collecting overdue accounts receivable payments. Background: VIB was the largest telecommunications provider on the District’s Zipp network, serving 1118 customers. As of January 31, 2003, VIB had an outstanding accounts receivable balance of $374,914.15. The average monthly bill for VIB was $32,000 a month and by April 1, 2003, the balance had grown to $405,541.90. The District then adjusted VIB’s account receivable balance by $178,397.54, reducing the balance due to $227,144.36. At this time, the District entered into a payment plan with VIB whereby VIB would pay off $196,406.61 of the balance at 2.5 percent interest over four years with a balloon payment of approximately $65,000 in February 2007. The payments are at $3,000 per month. VIB has remained current on these payments. However, as of September 2004, VIB was 90 days in arrears on payments for the building it sub-leases from the District. VIB made a payment of $9,625.63 in December 2004, which caught up the sub-lease payments. Donobi, another high volume service provider on the ZIPP network, purchased telecommunications provider PowerTelNet and assumed the $46,227.29 it owed to the District. The District allowed Donobi to pay off this balance on a short-term, no interest loan, which it did in December of 2003. However, it did not maintain regular payments on its monthly telecommunications account, and by January 2004, Donobi owed $127,285.76. In July 2004, Donobi was put on a payment plan and was to pay $79,507.99 at 7.25 percent interest with payments of $6,900 per month. Donobi has not been making payments in accordance with this payment plan nor has it been paying for current network usage. As a result, Donobi has until February 11, 2005, to make a payment of $211,481.39 or service will be shut off. Other telecommunications providers’ payment plans are: Big Dam: Plan began January 2004 on a balance of $5,896.64 at 4.2 percent interest with payments of $255.84 a month. Pipeline: Plan began April 2004 on a balance of $7,338.75 at 4.2 percent interest with payments of $318.28 a month. Pullman: Pan began August 2004 on a balance of $363.34 at 7.25 percent interest with payments of $75 a month. Description of the Condition: The District failed to begin collecting amounts due as required by District resolution. The policy was to take effect April 19, 2004 but staff failed to enforce it until September 2004. In addition, the payment plans are inconsistent in the amounts charged for interest, thus charging different rates to competing retail service providers in violation of state law (RCW 54.16.330). Cause of Condition: The telecommunications staff did not understand they were to begin using the collection policy as soon as it was adopted. Staff members stated they waited until September because they were waiting for the new telecommunication rate schedule. The staff failed to inform the Board of the payment plans and failed to get Board approval for the payment plans. The Telecommunication staff’s failure to provide the same rate structure to each retail service provider was a result of lack of knowledge of state law. Effect of Condition: The District did not receive all revenue due to it in a timely manner. Recommendation: We recommend the District adhere to its established collection policies and state law. District’s Response: Auditor’s Remarks: We appreciate the steps the District is taking to resolve this issue. We will review the condition during our next audit. Applicable Laws and Regulations: RCW 54.16.330 Telecommunications facilities--Construct, purchase, acquire, etc.--Purposes--Limitations--Eminent domain. From Resolution #7703 passed by the Board of Commissioners of Grant County PUD #2 on April 19, 2004: …#3 The District’s Manager and Interim Director of Telecommunications recommend that the District’s Commission adopt the attached Telecommunications Customer Service policies. Now therefore be it resolved by the Commission of Public Utility District #2 of Grant County Washington that the Telecommunications Customer Service Policies attached hereto are hereby adopted and shall become effective immediately… From Telecommunications Customer Service Policies (Rev. 4/19/04) 5.3 PAYMENT All monthly bills for services are due and payable when rendered and become delinquent after 20 days. 5.5 PAYMENT OPTIONS A Wholesale Customer may make payment to the District by cash, check, automatic checking and savings account withdrawal and other District approved electronic means.