SACRAMENTO MUNICIPAL UTILITY DISTRICTLocal Government

Criteria: In accordance with the CAPP Program Notice No. 2021-01, SMUD was to provide financial assistance to active and inactive residential and commercial customer accounts reflecting delinquent balances incurred during the COVID-19 pandemic relief period covering March 4, 2020 through June 15, 2021. Such assistance was to be provided to customers based the following priority: (1) Active residential customers with past due balances and are at risk of disconnection due to nonpayment of balances incurred during the COVID-19 pandemic bill relief period; (2) Active residential customers with past due balances incurred during the COVID-19 pandemic bill relief period; (3) Inactive residential customers with past due balances incurred during COVID-19 pandemic bill relief period; then (4) Commercial customers with past due balances incurred during the COVID-19 pandemic bill relief period. SMUD made determinations based on actual arrearages and status at the time the relief funds were applied to customer accounts in the billing system. Condition/Context: During our testing, we selected a sample of 40 customer accounts whose electric utility bills were credited with CAPP funds and viewed supporting documentation. Of those 40 customer accounts, we noted the following circumstances: 1. One inactive customer account did not have service during the COVID relief period and should not have been eligible for a credit. 2. A city tax credit from August, 2021 was inappropriately classified as a payment when calculating the CAPP Credit amount, which resulted in an underpayment to four customers. 3. A customer made payment prior to the time the relief funds were applied by SMUD, which was not considered in the calculation for their credit resulting in an overapplication of their credit. 4. SMUD was unable to provide documentation supporting one of the credits applied. The sample was not statistically valid. Cause: SMUD did not have sufficient controls in place for review of each individual account credited by someone other than the individual who applied the credits to the accounts. Effect: Due to the lack of sufficient controls for reviewing customer accounts on an individual basis, the customers could be credited with an inaccurate amount. Questioned Cost: None Recommendation: We recommend that SMUD develop and implement controls to review the accuracy of the CAPP credits on an individual basis to identify any inconsistencies with the program. Management?s Response: The criteria and procedures for applying CAPP funding were established by the CSD through a series of program notices (changes and updates to the program), some of which were provided after SMUD had already begun processing the payments. CSD did not provide specific guidance on how to handle application/credits of local taxes, nor how to address payments made by customers between the initial application period and the application of payments to accounts; our intent was to apply the credits in a way that was in the spirit of what the program intended and to be as accurate as possible considering things change daily. We successfully issued credits to more than fifty-nine thousand accounts with limited guidance or strict guidelines to follow other than the priorities and the intent of the funds as described in the program notices. As one of the first utilities to apply for funds and to apply the funds to accounts, SMUD worked closely with CSD to ensure we were following the intent and procedures provided by CSD when available. Data on accounts, balance due, payments made, assistance received, installment plans created, PV settlement data, etc. changes daily; therefore, it is very likely that changes occurred between when we ran files to begin application of funds and when those funds were applied. Considering this is the first time this has ever been done with SMUD or any other utility we feel like this was a huge success; however, there were some lessons learned on things we would do differently. As such SMUD has already formed an internal team (subject matter experts and technical support) to develop and implement internal controls over compliance.