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9/17/19 – For years, the citizens of Banning had demanded a forensic audit of the Banning Electric Utility – to no avail. Bowing to public pressure, a reluctant City council eventually approved the audit in 2017, the results of which are now made public (download audit here).

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THE GOOD NEWS : NO FRAUD DETECTED

In their findings, CPA Firm “Christy White” determined that there were no indications of fraud at the Banning Electric Utility. Cash collection procedures were found to be adequately secure and Bank deposits were matched against cash receipts.

No accounts received electricity without being billed, a welcome departure from past illegal practices, when the Riverside County Grand Jury discovered that the Banning Chamber of Commerce had received free electricity for years.

Along the same lines, Sun Lakes Country Club had received $220,000 worth of water without billing, a circumstance that former Mayor and Sun Lakes president George Moyer attempted to sweep under the rug.

Only because of the vigilance of councilman Don Peterson was the issue brought to light and Sun Lakes ended up settling the matter for 50 cents on the dollar ( $110,000).

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THE BAD NEWS : UTILITY OVER BILLED CITY BY MORE THAN $ 1.2 M

The audit did not find any over billing as it relates to individual customer accounts.

However, the audit finds that the City’s Public Works Department (i.e. General Fund) was over billed by $1,276,936 due to application of incorrect rate codes.

The over billing took place over two years, from May 2014 to May 2016, without ever being discovered.

So far the Electric Utility has not returned the money.

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HIGHER ELECTRIC RATES NEXT ?

The Electric Utility still has ample cash reserves, but is not allowed to tap into them largely due to the Utility’s bond covenant. Therefore, the Utility will likely be unable to refund the over billed amount to the City’s General fund without and increase in revenue.

Such an increase can only come from higher Electric Rates.

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CITY’S ACCOUNTANTS FAILED MISERABLY

There is every indication that the City’s accountants LSL, “Lance, Soll & Lunghard CPA and Advisors”, have failed at doing their job. How can over $1.2M be falsely billed and our accountants never discover it? How can you miss that much money and still sign off on Banning’s books?

There had been major question about this accounting firm in the past. In May of 2017, their representative is on video unable to answer even the simplest of questions about the Banning Electric Utility. To hear her shocking answers watch the video embedded in this 2017 article here.

Is it any wonder that LSL missed a $1.2M overcharge? No it isn’t – at least not for those who have seen the writing on the wall two years ago, at a time when a deceptive Debbie Franklin tried so hard to make everyone believe that Banning’s utility accounting was free of “material weaknesses”. Go figure !

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.OUTDATED SOFTWARE

The audit also points out that the City is operating their Electric Utility with outdated, antiquated software, which made the audit extremely burdensome and difficult, because it did not allow for data to be exported from the system.

 

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CONCLUSION

The discovery of a $1.2M billing discrepancy is no laughing matter – hopefully it will be taken very seriously. This finding alone serves as evidence that a forensic audit was indeed badly needed, despite what some council members were trying to make us believe at the time.

Hopefully the City will order forensic audits on a regular basis from hereon out. The roughly $30k price tag seems like cheap insurance given the million dollar discrepancy the audit discovered.

The result also shows that the City’s current accountants failed miserably at doing their job. After this debacle the City would be well advised to part ways with their current accounting firm.

In the meantime, $1.2M will have to be refunded by the Electric Utility, creating a shortfall that could lead to higher electric rates down the road. And as always, the ratepayers will be left holding the bag.

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