ST A T E O F L O U ISIA N A.3 q-5 7 L E G ISL A T IV E A U D IT O R

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1 ST A T E O F L O U ISIA N A.3 q-5 7 L E G ISL A T IV E A U D IT O R Departm entof Public Service State of Louisiana Baton Rouge,Louisiana Decem ber Finan cialan d C om plian ce A udit D ivision D anielg.k yle,p h.d.,c PA, C FE L egislative A uditor

2 LEG ISLATIVE A UDIT A DVISO RY CO UNCIL M EM BERS Senator Ronald C.Bean,C hairm an Representative Francis C.Thom pson,vice C hairm an Senator RobertJ.Barham SenatorW ilson E,Fields SenatorThom as A.G reene SenatorC raig F.R om ero Representative F.C harles M cm ains,jr Representative Edw in R.M urray Representative W arren J.Triche,Jr. Representative David V itter LEG ISLATIVE A U DITO R DanielG.Kyle,Ph.D.,C PA,C FE DIRECTO R O F FINA NCIA L A ND CO M PLIANC E A U DIT A lbert J.Robinson,Jr.,C PA This docum entis produced by the Legislative Auditor,State of Louisiana,Post O fice Box 94397, Baton Rouge, Louisiana in accordance w ith Louisiana Revised Statute 24:513. Fifty copies of this public docum entw ere produced atan approxim ate costof$ This m aterialwas produced in accordance w ith the standards forstate agencies established pursuantto R.S. 43:31. A copy ofthis docum entis available on the Legislative Auditor's W eb site atww w.la.state.la.us. In com pliance with the Am ericans W ith Disabilities Act, if you need specia assistance relative to this docum ent,orany docum ents ofthe Legislative Auditor please contactw ayne "Skip"irw in,directorofadm inistration,at225/

3 D EPA RTM ENT O F PU B LIC S ERV IC E STATE O F LO UISIA NA Baton Rouge,Louisiana SpecialPurpose FinancialStatem ents and IndependentAuditor's Reports As ofand forthe YearEnded June 30,1998 W ith Supplem entalinform ation Schedules Llnderthe provisions ofstate law,this reportis a public docum ent. A copy ofthis reporthas been subm itted to the G overnor,to the Attorney G eneral,and to other public oficials as required by state law. A copy ofthis reporthas been m ade available for public inspection at the Baton Rouge ofice of the Legislative Auditor. Decem ber

4 evidence supporting the am ounts and disclosures in the specialpurpose financialstatem ents. An auditalso includes assessinq the accountina orincioles used and sianificantestim ates m ade D EPA RTM ENT O F PUBLIC SERVICE STATE O F LO UISIA NA SpecialPurpose FinancialStatem ents and IndependentA uditors Reports As ofand forthe YearEnded June 30,1998 W ith Supplem entalinform ation Schedules ndependentauditor's Reporton the FinancialStatem ents SpecialPurpose FinancialStatem ents CO NTENTS Statem ent Page No 2 Balance Sheet(LegalBasis)-A lappropriated and Non.Appropriated Funds A 4 G enerala ppropriation Fund Statem entofrevenues,expenditures,and Changes in Fund Balance (LegalBasis) Statem entofrevenues,expenditures,and U nexpended A ppropriation -Budget C om parison ofc urrent-yeara ppropriation - Budget(LegalBasis)and Actual Notes to the FinancialStatem ents B 5 C 6 7 Supplem entalinform ation Schedules - N on-a ppropriated Funds: Schedule ofc hanges in Balance -Payro lc learing Fund Schedule ofnon-appropriated Revenues -MajorState Revenues and Incom e NotAvailable Report on C om pliance and on InternalC ontrolo ver FinancialReporting Based on an A uditofthe Financial Statem ents Perform ed in A ccordance W ith G overnm ent A uditing Standards Schedule 2 Exhibit Page No

5 DANIEl.G.KYI.E,PIID.,CPA,CFE I,EGISI.AI"IVE ALIDITOR OFFICE OF L E G ISLA TIV E A U D ITO R STA TE O F LOU ISIAN A BATON ROUGE,LOUISIAN A Decem ber NORTIITII[RI)S']'RH ~T PO S IO lqqcl~bo X Tt'LEPIIONIL (225) FACSIM II.li: (225)339-38?0 ndependenta uditor's Report on the FinancialStatem ents DEPA RTM ENT O F PUBLIC SERVIC E STATE O F t.o UISIA NA Baton Rouge,Louisiana W e have audited the accompanying specialpurpose (legalbasis)financialstatements ofthe D epartm entof Public Service,a departm entw ithin Louisiana state governm ent,as of and for the year ended June 30, 1998, as listed in the foregoing table of contents. These special purpose financialstatem ents are the responsibility ofm anagem entofthe Departm entofpublic Serv ice. O ur responsibility is to express an opinion on these special purpose financial statem ents based on ouraudit. W e conducted our audit in accordance w ith genera ly accepted auditing standards and the standards applicable to financialaudits contained in G overnm enta uditing Standards,issued by the Com ptre ler G eneralof the United States. Those standards require that we plan and perform the auditto obtain reasonable assurance aboutw hetherthe specialpurpose financial statem ents are free of m aterialm isstatem ent. A n audit includes exam ining,on a test basis, evidence supporting the am ounts and disclosures in the specialpurpose financialstatem ents. An auditalso includes assessing the accounting principles used and significantestim ates m ade by m anagem ent, as w e l as evaluating the overa l special purpose financial statem ent presentation. W e believe thatourauditprovides a reasonable basis forouropinion. A s described in note 1 to the financialstatem ents,the accom panying specialpurpose financial statem ents presentonly the funds ofthe Departm entofpublic Service. As such,they present the appropriated and non-appropriated activity ofthe departm entthatare part ofthe accounts and fund structure of the State of Louisiana. The G eneral A ppropriation Fund reflects appropriated activities of the departm ent that are part of the G eneralfund of the State of Louisiana. The non-appropriated funds are individualfunds of the State of Louisiana not subjectto budgetary control. Furthermore,the specialpurpose financialstatements have been prepared on a legalbasis ofaccounting,the purpose ofw hich is to reflectcom pliance w ith the annual appropriation act for the appropriated fund and the financial position of the nonappropriated funds. -i"hese principles differfrom genera ly accepted accounting principles as described in the notes to the financialstatem ents. A ccordingly,the accom panying special purpose financialstatem ents are not intended to and do not present financialposition and results ofoperations in conform ity w ith genera ly accepted accounting principles.

6 LEGISLATIVE AUDITOR DEPA RTM ENT O F PUBLIC SERVIC E STATE O F LO U tsia N A A uditreport,june 30,1998 In ouropinion,the specialpurpose financialstatem ents presentfairly,in a lm aterialrespects, the balances within the appropriated and non-appropriated funds ofthe Departm entofpublic Service atjune 30,1998,and the transactions ofthe G enerala ppropriation Fund forthe year then ended,on the basis ofaccounting described in note 1-B. In accordance w ith G overnm ent A uditing Standards, w e have also issued a report dated Decem ber4,1998,on ourconsideration ofthe Departm entof Public Service's internalcontrol over financial reporting and our tests of its com pliance w ith certain provisions of law s and regulations. O ur audit w as m ade for the purpose of form ing an opinion on the accom panying special purpose financialstatem ents of the Departm ent of Public Service taken as a w hole. The accom panying supplem entalinform ation schedules are presented forthe purpose ofadditional analysis and have been subjected to the proceduresapplied in the auditofthe specialpurpose financialstatem ents and,in ouropinion,are fairly stated in a lm aterialrespects in relation to the specialpurpose financialstatem ents taken as a w hole. In accordance w ith Louisiana Revised Statute 24:516,ourreportis intended forthe inform ation and use ofthe departm entand its m anagem entand should be used solely as intended by the foregoing slatute. By provisions ofstate law,this report is a public docum ent,and ithas been distributed to appropriate public officials. ly subm itted RT:W M B:RC L:ss Kyle,C PA,C FE Legislative A uditor

7 Statem enta DEPA RTM E;NT O F PUBLIC SERVIC E STA TE O F LO U ISIA NA A LL A PPRO PRIATED A N D NO N- A PPRO PRIATED FUNDS Balance Sheet(LegalBasis),June 30,1998 APPROPRIATED FUND - GENERAL APPROPRIATION NON-APPROPRIATED FUNDS MAJOR STATE REVENUES AND TOTAL INCOME NOT AGENCY PAYROLL (MEMORA NDUM AVAILABLE FUND CLEARING ONLY) ASSETS Cash (note 1-C) Accounts receivable Inventory ofm aterials and supplies(note 1-[)) $503, $89,771 $10, $679,114 49,029 26,618 TOTALASSETS $529,848 $138,800 $10,544 $754,76 LIABILITIES AND FUND EQUITY Liabilities: Accounts payable Payro lpayable Payroldeductions payable Accrued em ployee benefits Deposits due others Advance from state treasury (note 7) Due to otherfund -Utility and Carrier Inspection end Supervision Fund Otherliabilities "[otatliabilities Fund Equity -fund balance s: Reserved forinventory ofm aterials and supplies(note 1-O) Unreserved -undesignated (deficit)(note 8) TotalFund Equity $124, , (219,777) (193,159) $32, , , ,544 75, , NONE NONE NONE (193,159) TOTAL LIABILITIES AND FUND EQUITY $529,948 $138,800 $10,544 $75,569 $754,76t The accom panying notes are an ntegralpartofthis statem ent. 4

8 Statem entb DEPA RTM E'NT O F PUBLIC SERVICE STATE O F LO UISIANA G EN ERA L A PPR O PR IATIO N FU N D Statem entofrevenues,expenditures,and Changes in Fund Balance (LegalBasis) Forthe YearEnded June 30,1998 REVENUES EXPEN D ITU R ES Adm inistrative Utilities M otorcarriers Rates,econom ics,and auditing Totalexpenditures EXC ESS O F EXPENDITURES O VER REVENUES OTHER APPROPRIATED FINANCING SOURCES (Uses) Transfers in Transfers out Totalotherappropriated financing sources (uses) EXC ESS O F EXPENDITURES A ND O THER USES O VER R EVENUES A N D O THER SO URC ES FUND BALANCE (Deficit)AT BEGINNING OF YEAR NCR EASE IN RESERV E FO R INVENTO RY FUND BALANCE (Deficit)AT END OF YEAR NO NE (5,269,925) 5,607,319 (401,269) (63,875) (129,755) 471 ($193,159) The accom panying notes are an integralpartofthis statem ent 5

9 Statem entc DEPARTM ENT O F PUBLIC SERVIC E STATE O F LO U ISIA NA G ENERAL APPRO PRIATIO N FUND Statem entofrevenues,expenditures,and U nexpended A ppropriation -B udget C om parison ofc urrent-y eara ppropriation ~ Budget(LegalBasis)and Actual Forthe YearEnded June 30,1998 BUDG ET ACTUAL VARIANCE FAVO RABLE (UNFAVORABLE) REVEN UES Appropriated by legislature - otherfund sources: Utility and CarrierInspection and Supervision Fund M otorcarrierregulation Fund Supplem entalfee Fund Totalappropriated revenues $3,868,111 1,107, , $3,466,842 1,107, , ,050 ($401,269) EXPENDITURES Appropriated for: Adm inistration Utilities M otorcarriers Rates,econom ics,and auditing Totalappropriated expenditures UNEXPENDIED APPROPRIATION (Deficit)- C URRENT YEAR 1,644,370 1,243,904 1,056,666 1,662,379 5,607,319 NO NE 1,546,909 97,461 1,097, ,157 1,029,090 27,576 1,559, , , ,589 ($27,680) ($27,680) The accom panying notes are an integralpartofthis statem ent 6

10 DEPARTM ENT O F PUBLIC SERVIC E STATE O F LO UISIANA Notes to the FinancialStatem ents As ofand for the YearEnded June NTRO DUC'rlO N The Louisiana Departm ent of Public Service is a departm ent w ithin the State of Louisiana reporting entity. The departm entw as created in accordance w ith Title 36,Sections of the Louisiana Revised Statutes of1950,as a part ofthe executive branch ofgovernm ent. The Public Service C om m ission,consisting offive m em bers w ho are elected from single-m em ber districts,is the governing body of the departm ent. The m em bers are paid a yearly salary of $37,800 as setby Louisiana Revised Statute (R.S.)45:1162. The commission is charged with the adm inistration, control, and operation of the functions, program s, and afairs of the departmentas provided by law.the majorobjective ofthe commission is to regulate the rates and serv ice practices of the utility and transportation com panies located in the State of Louisiana. Its goalis to secure reasonable service forthe public atrates thatare fairboth to the consum ers and to the com panies. It also applies m odel standards and prom otes com pliance through forced registration and highw ay enforcem ent. The departm ent has approxim ately 106 fu l-tim e em ployees,w ith work locations varying from the m ain office in Baton R ouge to the various districtofices located throughoutthe state. SUM M ARY O F SIG NIFICA NT ACCO UNTING PO LIC IES The GovernmentalAccounting Standards Board (GASB) promulgates generaly accepted accounting principles and reporting standards for state and local governm ents. These principles are found in the Codification of G overnm entalaccounting and FinancialR eporting Standards,published by the G ASB. How ever,the accom panying financialstatem ents have been prepared on a legalbasis,w hich differs from genera ly accepted accounting principles as explained in the fo low ing notes. The State oflouisiana has been determ ined to be the reporting entity undergenera ly accepted accounting principles. The accom panying financial statem ents represent activity of a departm ent of state governm ent and,therefore,are a part of the fund and account group structure ofthe State oflouisiana and its generalpurpose financialstatem ents. A. FUND ACCO UNTING The departm ent uses fund accounting, along appropriation lines, to reflect its com pliance w ith provisions ofthe annualappropriation act and to reflectthe financial posilion ofits non-appropriated funds. This differs from the fund accounting ofgenera ly accepted accounting principles w here the intentis to m easure the financialposition and results ofoperations ofthe governm entalreporting entity as a whole. Therefore,the funds w ithin the accom panying financial statem ents have been divided between appropriated and non-appropriated funds and not by the conventionalfund types of genera ly accepted accounting principles.

11 DEPA RTM ENT O F PU BLIC SERVICE STATE O F I.O UISIANA Notes to the FinancialStatements (Continued) The funds do not include any noncurrent assets or liabilities. Noncurrent assets, generalfixed assets,and long-term liabilities are reflected in the State of Louisiana's generalpurpose financialstatem ents. The funds presented in the special purpose financial statem ents are described as fo low s: G ENERAL APPRO PRIATION FUND The G eneral Appropriation Fund accounts for a l appropriated revenues operating expenditures,and m inorcapitalacquisitions. NO N-A PPRO PRIATED FUNDS MajorState Revenues and Incom e NotAvailable The departmentcolects majorstate revenues thatare remitted to the state '~ as~ fordepositto s'~atutor~l~ ded~cated funds. In additior~,the departm ent co lects funds specifica ly identified by the Division of Adm inistration,state BudgetO fice,as incom e not available thatare rem itted to the state treasury. These am ounts are not available to the departm ent for expenditure and, therefore,are notincluded on Statem entb,butare detailed on Schedule 2. Agency Fund The agency fund is used to accountforassets held on behalfofoutside parties, including othergovernm ents. The agency fund accounts forfees co lected for otherstates underthe M otorc arriersingle State Registration Program. PayrollC learing Fund The Payro lc learing Fund accounts forpayro ldeductions and accrued benefits. B. BASIS O F ACCO UNTING The accounting and financialreporting treatm entapplied to a fund is determ ined by its m easurem entfocus. The funds in the accom panying financialstatem ents m easure the resources provided by the legislature to fund current-yearexpenditures and the use of those resources by the departm ent.this differs from genera ly accepted accounting

12 DEPA RTM I-NT O F PUBLIC SERVIC E STATE O F LO UISIANA Notes to the FinancialStatements(Continued) principles in w hich the m easurem ent focus w ould be to m easure the flow of current resource s. Basis of accounting refers to when revenues and expenditures are recognized and reported in the financialstatem ents,regardless ofthe m easurem entfocus applied. The accom panying financialstatem ents reflect revenues and expenditures in accordance w ith applicable statutory provisions and regulations of the D ivision of A dm inistration, O ffice of Statew ide Reporting and A ccounting Policy. These legalrequirem ents differ from genera ly accepted accounting principles as fo low s: Revenues are recognized to the extentthatthey have been appropriated and notnecessarily w hen m easurable and available. 2 Expenditures are recognized to the extentthatappropriation authority has been extended to the departm ent and not necessarily w hen the fund liability has been incurred. Under the foregoing legalprovisions,the departm ent uses the fo low ing practices in recognizing revenues and expenditures: Revenues Non-appropriated revenues are recognized in the am ounts earned,to the extent thatthey w ilbe co lected w ithin 45 days ofthe close ofthe fiscalyear. Expenditures Expenditures are genera ly recognized under the m odified accrual basis of accounting w hen the related fund liability is incurred,exceptthatobligations of em ployee vested annualand sick leave are recognized as expenditures w hen paid. Furtherm ore,any expenditure ofa long-term nature forw hich funds have not been appropriated during the current year are not recognized in the accom panying financialstatem ents. O therfinancing Sources Transfers are recognized in the yearthe departm entis authorized to receive or m ake the transfers.

13 DEPA RTM ENT O F PUBLIC SERVIC E STATE O F t.o UISIANA Notes to the FinancialStatements (Continuedl C. CASH Cash iscomposed ofthe folowing (book balances) U ndercontrolofthe departm ent: Petty cash (in bank) C ash in dem and account Cash on depositw ith the state treasury $6, , Total Understate law,these deposits m ust be secured by federaldeposit insurance orthe pledge ofsecurities ow ned by the fiscalagentbank.the m arketvalue ofthe pledged securities plus the federaldeposit insurance m ust at a ltim es equalthe am ount on depositwith the fiscalagentbank. The departmenthas depositbalances (colected bank balances)of$112,739 atjune 30,1998,forwhich the departmenthas control. These deposits are secured from risk by $108,665 offederaldepositinsurance (GASB Risk Category 1)and $4,074 ofpledged securities held by a custodialbank in the name ofthe fiscalagentbank (GASB Category 3.) Cash balances held and contro led by the state treasurerare secured from risk by the state treasurerthrough separate custodialagreem ents,and the risk disclosures required by genera ly accepted accounting principles are included w ithin the state's general purpose financialstatem ents. The fo low ing is a sum m ary ofcash in the state treasury: O perating account Payro lclearing $496, Total D. INVENTO RIES O F M ATERIALS AND SUPPLIES Inventories forthe G enerala ppropriation Fund are valued atcostand are recorded as expenditures althe tim e individualinventory item s are purchased. The departm entuses a perpetualinventory system and values its inventory using the first-in,first-out(fifo) valuation m ethod. Reported inventories are equa ly offsetby fund balance reserves that indicate they do not constitute available spendable resources even though they are com ponents ofnetcurrentassets. E. FIX ED A SSETS At June 30, 1998,the departm ent has stewardship responsibility for $1,287,420 in governm ental m ovable property, valued at historical cost at the tim e of acquisition. Donated fixed assets,w hich com prise less than t% oftotalassets,are valued attheir 10

14 DEPA RTM ENT O F PUBLIC SERVIC E STATE O F I.O UISIANA Notes to the FinancialStatements (Continued) fairm arketvalue on the date donated. accom panying specialpurpose financia property fo low s: The m ovable property is notreflected w ithin the statem ents. A sum m ary ofchanges in m ovable Balance July 1, 1997 Additions Deletions Balance June $1,148,947 $224,435 $85,962 The departm ent has com plied w ith R.S.39: ,the m ovable property statutes of the State oflouisiana. F. LO NG -TERM O B LIG ATIO NS The departm entis by statute nota low ed to incurbonded indebtedness and,therefore, no recognition w ithin the accom panying financialstatem ents is necessary. Furtherm ore, any long-term obligations of the departm ent arising from lease com m itm ents, judgments,compensated absences,orany othersource are not recognized in the accom panying specialpurpose financialstatem ents. G. ENC UM BRA NC E ACCO UNTING Encum brances representcom m itm ents relating to unperform ed contracts for goods or services. The departm entem ploys encum brance accounting during the yearto assure com pliance w ith the annualappropriation act. Encum brances are not included in the accom panying financialstatem ents because R.S.39:82 and the annualappropriation act do not a low the departm ent to charge encum brances against its current-year appropriation,the basis upon which the accom panying financialstatem ents have been prepared. The departm enthas no encum brances atjune 30,1998. H. BUDG ET PRACTIC ES The appropriation m ade for the general operations of the departm ent is an annual lapsing appropriation valid for one year and is recorded in the G enerala ppropriation Fund. Revenues and expenditures for budget purposes are recognized on the sam e basis ofaccounting as described in note l-b,exceptthattransfers in are recognized as revenues on Statem entc and accruals ofpayro latfiscalyear-end are notrecognized as expenditures on Statem entc. Revenues perstatem ent B are reconciled w ith the am ounts reflected on the budgetcom parison,statem entc,as fo low s: 11

15 D EPA RTM ENT O F PU B LIC SERV IC E STATE O F LO UISIA NA Notes to the FinancialStatement~ (Continued) A m ounts perstatem entb Transfers in Transfers out NO N E $5,607,319 (401,269) Amounts perstatementc $5,206,050 Expenditures perstatem entb are reconciled w ith the am ounts reflected on the budget com parison,statem entc,as fo low s: Am ounts perstatem entb Prior-yearpayro laccrual C urrent-yearpayro laccrua Am ounts perstatem entc $5,269, ,902 (192,097) $5,233,730 The departm entis prohibited by statute from overexpending the categories established in the generalappropriation act. Budget revisions are granted by the Joint Legislative Com m ittee on the Budget. Interim em ergency appropriations m ay be granted by the Interim Em ergency Board. The budgetinform ation included in the financialstatem ents consists ofthe originalappropriation of$5,607,319. Thenon-appropriatedfundsa~ notsu~e~ tobudgetary contro I. LEAV E B EN EFITS Em ployees earn and accum ulate annualand sick leave atvarious rates,depending on theiryears ofservice,w ithoutlim itation on the balance thatcan be accum ulated. Upon term ination,em ployees ortheir heirs are com pensated for up to 300 hours ofunused annualleave atthe em ployee's hourly rate ofpay,butare notcom pensated forunused sick leave. Upon retirem ent,unused annualleave in excess of300 hours plus unused sick leave are used to com pute retirem ent benefits. The liability for unused annual leaw : payable at June 30, 1998, com puted in accordance w ith the C odification of G overnm ental Accounting and Financial Reporting Standards Section C60.105, is estim ated to be $306,545 forthe G eneralappropriation Fund.The leave payable is not recorded in the accom panying specialpurpose financialstatem ents. Certain em ployees ofthe departm entare eligible to earn com pensatory tim e as defined by the Departm ent of State C ivilservice and the Fair Labor Standards Act. These em ployees can earn and accum ulate one hourorone and one-halfhours foreach hour of overtim e worked, depending on their position and rate of pay. G eneraly, the em ployees are a low ed to carry up to 360 hours ofaccrued com pensatory leave from one calendaryearto another. The liability foraccrued com pensatory leave atjune 30, 1998,com puted in accordance w ith G ASB Codification Section C60.105,is estim ated to 12

16 DEPA RTM ENT O F PUBLIC SERVIC E STATE O F LO UISIANA Notes to the FinancialStatements (Continued) be $836. Accumulated compensatory leave is not accrued (reflected) in the accom panying specialpurpose financialstatem ents. J. TO TA L C O LU M N O N BA LA NC E SH EET The totalcolumn on the balance sheetis captioned Memorandum Only (overview)to indicate thatitis presented only to facilitate financialanalysis. Data in this colum n does notpresentfinancialposition. Neitheris such data com parable to a consolidation. 2. PEN SIO N PLA N Substantia ly a lem ployees ofthe departm entare m em bers ofthe Louisiana State Em ployees Retirem ent System, a cost sharing, m ultiple-em ployer defined benefit pension plan adm inistered by a board oftrustees. Required disclosures forthe plan forfiscalyear are included in the Louisiana Com prehensive Annual Financial Report prepared by the Louisiana D ivision ofa dm inistration,post O fice Box 94095,Baton Rouge,Louisiana PO STR ETIR EM ENT H EA LTH CA R E A N D LIFE INSURA NC E BENEFITS The departm entprovides certain continuing health care and life insurance benefits forits retired em ployees. Substantia ly a lofthe departm ent's em ployees becom e eligible forthese benefits if they reach norm al retirem ent age w hile w orking for the departm ent. These benefits for retirees and sim ilarbenefits foractive em ployees are provided through an insurance com pany whose monthly premiums are paid jointly by the employee and the department. The departm ent's costs ofproviding retiree health care and life insurance benefits are recognized as expenditures w hen the m onthly prem ium s are paid. For the year ended June 30, 1998,the costs ofretiree benefits totaled $46,903. JUDG M ENTS,CLAIM S,AND SIM ILAR CO NTING ENCIES Obligations and losses arising from judgments,claims,and similarcontingencies are paid through the state's self-insurance fund orby G eneralfund appropriations and are notreflected in the accom panying specialpurpose financialstatem ents. The self-insurance fund is operated by the O fice of Risk M anagem ent,the state agency responsible forthe state's self-insurance program. 5. LEASE O BLIG ATIO NS The departm enthas an operating lease forofice space. The annualoperating lease paym ents are presented as fo low s: 13

17 DEPARTM EN T O F PUBLIC SERVIC E STATE O F I_O U ISIA NA Notes to the FinancialStatements (Continued) FiscalYear: Tota $399, , , , $1,377,548 The lease agreem ent has a non-appropriation exculpatory clause that a low s for lease cance lation ifthe Louisiana Legislature does not m ake an appropriation for its continuation during any future fiscalyears. Lease expenditures forfiscalyearended June 30,1998,totaled $408, C HANG ES IN A G ENCY FUNDS A sum m ary ofchanges in assets and liabilities fo low s Assets -cash Liabilities: Due to otherstates Due to others -refunds Balance at Balance at Beginning End ofyear Additions Deletions ofyear $10,327 $8,106 2,221 $767, $769,400 $764, $10,544 $10, TotalLiabilities $10,327 $769,617 $769,400 $10, A DVA NC E FRO M STATE TREASURY The departm ent has received an advance from the state treasury for im prestfund operations totaling $5,000. The advance,as reflected in the accom panying statem ents,represents a liability ofthe departm entand m ustbe repaid ifnotauthorized annua ly. 8. FUND D EFICIT The G eneralappropriation Fund had a deficitof$219,777 forthe yearended June 30,1998. The deficitis the resultofthe recognition ofaccrued salaries and related benefits as required by the O fice ofthe G overnor,division ofadm inistration,and the factthatrevenues to fund those accruals are appropriated in the subsequent year. The deficit w ilbe resolved by paying for salaries and related benefits from fiscalyear1999 funds appropriated to pay those obligations ofthe fiscalyear. The rem ainder ofthe deficit is due to expenditures for operating 14

18 DEPA RTM ENT O F PUBLIC SERVIC E STATE O F LO UISIANA Notes to the FinancialStatements (Concluded) services paid forw ith 1999 funds being charged to the 1998 fiscalyearw hen the expenditure w as incurred. 9. EXPENDITURES PA ID BY O THERS Certain professionalserv ice expenditures of the departm ent are paid by various com panies and/or cooperatives providing public serv ice or utilities in the state. The paym ent of these expenditures by these public utilities is authorized by R.S.45: The serv ices are provided to the departm entforthe purpose of assisting in evaluating and review ing m atters affecting serv ices and rates charged by public utilities to Louisiana consum ers and for representing the Public Service Commission in such cases,orthe judicialreview thereof. These expenditures incurred in the fiscalyearended June 30,1998,and w hich are notincluded in the accom panying financialstatem ents,are sum m arized as fo low s: Attorneys C onsultants C ourt reporters Total $2,517, , $3.300, DEFERRED CO M PENSATIO N PLAN C ertain em ployees of the D epartm ent of Public Service participate in the Louisiana Deferred C om pensation Plan adopted under the provisions of Internal Revenue C ode Section 457. C om plete disclosures relating to this statew ide plan are available in the financialstatem ents of the State oflouisiana. 15

19 DEPA RTM ENT O F PUBLIC SERVICE STATE O F LO UISIA NA S U PPLEM ENTA L IN FO R M ATIO N SC H ED U LES Forthe YearEnded June 30,1998 SC HEDULE O F NO N-A PPRO PRIATED REVENUES - M AJO R STATE REVENUES A ND INCO M E NO T AVA ILABLE Schedule 1reflects majorstate revenuesand income notavailabte colected by the department during the yearthatw ere notavailable to the departm entforexpenditure. SC HEDU LE O F C HANG ES IN BA LANCE C hanges in balance for the Non-Appropriated - Payro lc learing Fund for the year ended June 30,1998,are presented in Schedule 2. 16

20 Schedule 1 DEPA RTM I-'NT O F PUBLIC SERVIC E STATE O F LO U ISIA NA M AJO R STATE REV ENUES A ND INC O M E NO T AVA ILA B LE Schedule of Non-A ppropriated Revenues Forthe YearEnded June 30,4998 NO N-APPRO PRIATED REVENUE FUND SO URCE CASH RECEIPTS ACCO UNTS THRO UG H RECEIVABLE JUNE 30, JUNE 30, TO ~AL REVEN U E ncom e notavailable -m isce laneous Majorstate revenues M otorcarrierfees A nnualreport Com m on carriercertificate Contractcarrierperm it C itation Fines -ilegaloperations Late filing Lease filing Lobbyistregistration Nam e change Rate application -increase Rate application -decrease Rate application -utilities Rehearing application Reinstatem ent Stock transfer Sales non-state agency -m erchandise and com m odities Sales non-state agency -services Receipts -m isce laneous Subtotal-majorstate revenues Totalnon-appropriated revenues 6,086,637 3,580 10, ,551 26O 190 1, ,000 55O 90O 100 7O 5OO ,483 44,250 6,248,895 $47, $30 6,133,945 3,580 10,200 45O 14, , , ,764 1,000 45,250 49, $49,029 $6,297,954 17

21 Schedule 2 DEPA RTM ENT O F PUBLIC SERVIC E STATE O F LO UISIA NA NO N-A PPRO PR IATED -PAY RO LL C LEA R ING FU N D Schedule ofc hanges in Balance Forthe YearEnded June 30,1998 BA LANC E AT BEG INNING O F YEA R A D D ITIO N S Payro ldeduction deposits Tota DEDUCTIO NS Payro ldeduction disbursem ents BA LA NC E AT EN D O F Y EA R $67, (1,724,847) $75,569 18

22 OTHER REPO RT REQ UIRED BY G O VER N M EN T A UDITIN G S TA N DA R D S The fo low ing pages contain a report on com pliance and on internalcontrols over financial reporting as required by G overnm enta uditing Standards,issued by the Com ptro lerg eneralof the U nited States. This report is based solely on the audit of the financialstatem ents and includes,w here appropriate,any reportable conditions and/or m aterialw eaknesses in internal controlorcom pliance m atters thatw ould be m aterialto the presented financialstatem ents. I=A I"ilIJlI PL

23 DAN/I!L G.K YI,E,PH.D.,CPA,CFI IJiGISI,AI'IVI!AUI)II'OR OFFICE OF L E G ISLA TIV E A U D ITO R STA TE O F LOU ISIAN A BATON ROUGE,LOUISIAN A Decem ber N ORTIIT}l]RI)SI'REI!I' PO ST O FFICE I~OX 'IEI,I~I~IIONIQ (225) FACSIM ILE: (225) Reoorton C om pliance and on InternalC ontrolo ver FinancialReporting Based on an Auditofthe FinancialStatem ents Perform ed in Accordance W ith G overnm enta uditine Standards DEPA RTM ENT O F PUB LIC SERVICE STATE O F LO UISIANA Baton Rouge,Louisiana W e have audited the specialpurpose (legalbasis)financialstatements ofthe Departmentof Public Service,a departm entw ithin Louisiana state governm ent,as ofand forthe yearended June 30,1998,and have issued our report thereon dated Decem ber4,1998. W e conducted our audit in accordance w ith genera ly accepted auditing standards and the standards applicable to financial audits contained in G overnm ent Auditing Standards, issued by the C om ptro lerg eneralofthe U nited States. C om pliance A s part of obtaining reasonable assurance aboutw hetherthe Departm ent of Public Service's specialpurpose financialstatem ents are free of m aterialm isstatem ent,w e perform ed tests of its com pliance w ith certain provisions oflaw s and regulations,noncom pliance w ith w hich could have a direct and m aterial efect on the determ ination of financial statem ent am ounts. However,providing an opinion on compliance with these provisions wasnotan objective ofour audit,and,accordingly,w e do notexpress such an opinion. The results ofourtests disclosed no instances of noncom pliance that are required to be reported under G overnm entauditing Standards. nternalcontrolo verfinancialreporting In planning and perform ing ouraudit,w e considered the Departm entofpublic Service's internal control over financial reporting to determ ine our auditing procedures for the purpose of expressing our opinion on the special purpose financial statem ents and not to provide assurance on the internalcontrolover financialreporting. O ur consideration of the internal controloverfinancialreporting w ould notnecessarily disclose a lm atters in the internalcontrol overfinancialreporting thatm ightbe m aterialw eaknesses. A m aterialweakness is a condition in w hich the design oroperation ofone orm ore ofthe internalcontrolcom ponents does not reduce to a relatively low levelthe risk thatm isstatem ents in am ounts thatcould be m aterialin relation to the special purpose financial statem ents being audited m ay occur and not be detected w ithin a tim ely period by em ployees in the norm alcourse ofperform ing theirassigned functions. W e noted no m atters involving the internalcontroloverfinancialreporting and its operation thatw e considerto be m aterialw eaknesses. EXHIBIT A

24 LEGISLATIVE A UDITOR DEPA RTM ENT O F PUBLIC SERVIC E STATE O F LO U ISIA NA C om pliance and InternalC ontrolreport Decem ber4,1998 Page 2 This reportis intended forthe inform ation and use ofthe departm entand its m anagem ent. By provisions of state law, this report is a public docum ent, and it has been distributed to appropriate public officials. RT:W M B:RC L:ss Legislative A uditor EXHIBIT A