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Audit: Public Utility Commission could strengthen oversight of Energy Trust costs

State auditors question some expenses of Oregon-funded energy non-profit organization.

State auditors found some questionable administrative costs — including $26,500 for a holiday party and "employee recognition expenses" — at a state-funded nonprofit that promotes renewable energy and energy efficiency.SALEM — State auditors found some questionable administrative costs — including $26,500 for a holiday party and "employee recognition expenses" — at a state-funded nonprofit that promotes renewable energy and energy efficiency.

By and large, though, they say that administrative costs at the Energy Trust of Oregon, a nonprofit that works to develop energy efficiency and renewable energy programs in certain areas of the state, are "well controlled and reasonable."

The Energy Trust is funded by fees and charges on energy consumers served by the following providers: PGE, Pacific Power, NW Natural, Cascade Natural Gas and Avista. It has a grant agreement with PUC, which is responsible for oversight of the nonprofit.

As the Energy Trust's revenues have climbed over the past several years, the organization has seen a steady increase in administrative costs.

In 2004, the trust's administrative costs were $3.5 million, about 6.9 percent of revenues. In 2017, administrative costs were $10.1 million, about 5.2 percent of revenues.

The Energy Trust is allowed to spend up to 8 percent of its revenues on administrative costs, which include outreach, salaries, human resources and information technology.

"Both entities have adequate controls in place to ensure that Energy Trust's administrative costs are reasonable," auditors wrote. "However, PUC can improve Energy Trust's cost reporting requirements for clarity and transparency, and provide better guidance on whether Energy Trust administrative costs for employee recognition and special events align with the intent of the grant agreement."

The trust is not a state agency, and so isn't required to follow state rules or guidelines, but auditors say more guidance could help "bring clarity" to the grant agreement between PUC and the Energy Trust.

Auditors said the PUC should consider adopting Department of Administrative Services rules on spending for employee recognition and special events. There's currently no policy limiting employee recognition spending at the nonprofit.

They also said that the actual costs should be reported — not just the costs as a percentage of revenue. While the Energy Trust regularly reports its spending as a percentage of revenue, auditors say that method doesn't "reflect actual costs, which masks the trend that administrative costs have risen almost every year."

Auditors also recommended that the PUC clarify financial reporting methods and make it easier to understand which costs are administrative, and consider breaking administrative costs into smaller, well-defined categories with guidance like cost caps or targets.

"This audit demonstrates that the Public Utility Commission has made progress in controlling Energy Trust administrative costs," Secretary of State Dennis Richardson said in a statement. "However, further improvements in transparency and accountability are needed to ensure that Oregon ratepayers receive the most cost-effective savings possible."

The Energy Trust generally agreed with auditors' recommendations in a response to the audit.