Keeping the Lights On: Seattle City Light Receives Positive Financial Audit

An outside auditor has issued a positive opinion on Seattle City Light financial statements, the highest assurance that can be given. The audit results were announced yesterday afternoon by the office of Seattle City Councilmember Bruce Harrell, chair of the Council’s Energy, Technology and Civil Rights Committee.

"The auditors positive opinion of the financial statements is a testament to the competency and commitment of the employees and leadership of City Light," said Harrell. "Even while facing challenges like decreased wholesale revenue and reduction of spending to maintain financial stability, they maintained internal controls and processes to produce accurate financial statements."

At first glance, this news appears to be in sharp contrast to state auditor reports released in May 2011 that concluded the city exercised inadequate controls over its reduced-rate programs at Seattle Public Utilities (SPU) and City Light, which is intended to offer discounts to senior citizens and low-income customers. SPU and Seattle City Light pledged to address the potential oversight problem at that time.

Seattle City Light has been under increased audit scrutiny in recent years. In 2005, Seattle voters approved Tim Eyman-sponsored Initiative 900, which requires the state auditor to conduct performance audits of state and local government entities. This expanded the previous mandate under which the state auditor was limited to financial aucits. The state auditor released Seattle City Light performance audit findings and recommendations in March 2010.

In June of 2010, the Seattle City Council passed Resolution 31218, requiring the City Auditor to conduct periodic performance audits of City Light, and requesting that City Lights issue annual reports to the Energy, Technology and Civil Rights Committee to review and comment on recommendations made in the 2010 state audit report.

Michael H. Jerrett from Councilmember Harrell’s office clarified the audit structure for Seattlest. Performance audits, as required by I-900, are conducted by the state Auditor and the frequency is determined by the Auditor's office. The state Auditor also conducts annual compliance audits of Seattle City Light. The financial audit focuses on the accuracy of financial statements, and is conducted annually by an independent auditor, Baker Tilly Virchow Krause, LLP.

So, yesterday's news essentially says that Seattle City Light's accounting practices are sound, regardless of performance efficiency. The positive rating makes it easier for Seattle City Light to issue bonds to fund infrastructure improvements.