Audit reveals improper NES purchases, credit card usePosted: Updated:
A state audit revealed millions of dollars of questionable spending at Nashville Electric Service.
The spending was on travel, gift certificates and other purchases, all at the expense of NES customers.
NES administrators are promising change after the audit.
From no-bid contracts to the purchase of a Babies R Us gift certificate on a company credit card, the audit lists numerous issues at NES.
Some of the people who committed the acts are still on the job tonight.
The audit left NES ratepayers surprised and pretty angry.
"That's highway robbery, that's what it is," said NES customer Janet Tucker.
"I want to spend it too," added customer Emma Pearman. "I want to have fun on Amazon."
The audit found several issues, many pertaining to purchases on NES credit cards.
The company's vice president/chief information officer was using the card and setting up multiple accounts on eBay and Amazon, and sold NES surplus items without his superiors' knowledge.
While he said other purchases were all for NES business, auditors said he couldn't show them any documentation and they actually had to call the Tennessee Bureau of Investigation for help getting information.
"This individual provided us with a lot of misinformation," said Jim Arnette with the Tennessee Comptroller's Office. "He was very uncooperative and we do know that he was co-mingling business accounts and personal accounts."
Tonight that CIO is still on the job and NES President/CEO Decosta Jenkins defended some of his actions.
"He felt that he was saving money," said Jenkins. "He circumvented policy, but he felt he was saving money. We didn't find any evidence of misappropriation."
In addition the audit found employees made personal purchases on NES credit cards, including alcohol, while traveling.
Auditors also uncovered $17 million of contracts that weren't bid out for cable, and it seemed to be tailored for one specific company.
NES said they have made changes, but that the cable they bought held up during the flood and ratepayers should look at that.
"We should have had it so that more than one bidder could bid it, and that's a mistake on my part, but the cable did work," said Jenkins.
The findings were turned over to the district attorney for review.
Late this afternoon, District Attorney Torry Johnson released this statement.
"There were indications of internal policies and procedures that were violated and poor documentation of spending. While some of the practices were questionable from a business perspective, none of that rose to the level of criminal activity."
As for disciplinary action, Jenkins declined to indicate what kind of punishment the CIO faced, but did say he was still on the job.
The audit said NES paid one manufacturer and its distributor more than $17 million in the last eight years for electric power cable that was not properly bid.
NES paid Kerite Company more than $13 million and its distributor, Utilicor, more than $4 million since 2005 for electric power cable, according to the state comptroller's office.
The audit also says a company credit card was improperly used by a utility company's vice president/chief information officer.
Reviewers found the vice president commingled personal and business accounts when making purchases on eBay and Amazon.
Many of these accounts were established in the name of NES. The vice president also established a PayPal Extras MasterCard in his name using an NES procurement card as collateral.
The same vice president admitted to selling surplus NES items on eBay without authorization or knowledge of his supervisor.
Other issues revealed in the audit include:
- A contractual arrangement with Gaylord Entertainment that allowed senior personnel and other employees from NES to attend events and play golf at Gaylord-owned properties free of charge in exchange for the lease of NES transformers. These "hospitality packages," which appeared to have no benefit to NES ratepayers, were valued at more than $70,000 during the last six years.
- NES employees made personal purchases on NES credit cards.
- A half-dozen NES employees received reimbursement for education or training programs based on altered documents.
Jenkins said at a news conference they are already taking actions to remedy these problems.
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