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Audit Report: OAS-FS-13-13

August 12, 2013

Southwestern Federal Power System's Fiscal Year 2012 Financial Statement Audit

 We contracted with the independent public accounting firm of KPMG LLP (KPMG) to conduct the audit the Southwestern Federal Power System's (SWFPS) financial statements and reporting on applicable internal controls and compliance with laws and regulations.  KPMG concluded that the combined financial statements present fairly, in all material respects, the respective financial position of the SWFPS as of September 30, 2012 and 2011, and the results of its operations and its cash flow for the years then ended, in conformity with U.S. generally accepted accounting principles.

The audit identified an internal control deficiency over Accounting for Utility Plant in which depreciation for additions and betterments to existing plant in service was not recorded in accordance with accounting policies.  Additionally, an internal control deficiency over Accounting Policies and Procedures was identified in which appropriate procedures to properly accrue for accounts payable at year end were not in place.  U.S. Army Corps of Engineers management agreed with the findings and recommendations and agreed to take the necessary corrective actions by June 30, 2014.