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Audit recommends Oklahoma Corporation Commission improvements to upgrade financial tracking

Justin Lankford, an Oklahoma Corporation Commission fuel specialist, conducts an inspection of the gas pumps at a Murphy USA fuel station in Oklahoma City, Okla. on Tuesday, Dec. 5, 2017. [Chris Landsberger/The Oklahoman archives]
Justin Lankford, an Oklahoma Corporation Commission fuel specialist, conducts an inspection of the gas pumps at a Murphy USA fuel station in Oklahoma City, Okla. on Tuesday, Dec. 5, 2017. [Chris Landsberger/The Oklahoman archives]

A performance audit of the Oklahoma Corporation Commission included many recommendations to improve processes.

The audit examined whether information systems used by the commission can appropriately tie millions of deposited dollars it collects through permit fees, fines, forfeitures and for other purposes to provided services.

The agency’s staff and its three elected commissioners regulate public utilities, oil and gas drilling, production and related environmental protections, safety aspects of rail crossings and pipeline systems and the environmental integrity of petroleum storage tank systems.

The commission also enforces operating authority and insurance requirements involving the intrastate transport of most commodities via trucks and involving passenger carriers, enforces regulations for underground injection of water, chemicals and certain oil and gas waste fluids and oversees remediation of soil and groundwater pollution caused by leaking petroleum storage tanks.

The audit, performed by State Auditor and Inspector Cindy Byrd’s office, evaluated information systems used by the agency’s Oil and Gas Conservation Division, its Transportation Division, its Petroleum Storage Tanks Division, its Public Utilities Division and its Administrative, Judicial and Legislative Services division.

Auditors found that not all of the commission’s divisions are using information systems that can reconcile provided services and associated receipts to financial deposit records.

Additionally, they found that systematic reviews needed to ensure the accuracy of financial calculations and data used to reconcile receipts to services aren’t being performed.

Finally, they noted the agency has no written procedures in place that require each agency division to reconcile provided services to revenue received and deposited.

The audit recommends the commission designate qualified staff in each division office to generate and reconcile financial reports to ensure the agency is collecting and depositing all of the funds that are due and for each division to review the information monthly to check its accuracy.

It also recommends systematic, routine reviews by information technology professional to evaluate the accuracy of the data maintained in the agency’s case management system.

The amounts of money involved are significant.

In 2018, the agency’s oil and gas conservation division collected about $14.9 million for 2,625 technical reviews it made on applications to drill, recomplete and re-enter wells, 11,676 reviews on spacing and related orders and 644 reviews on requests for other types of technical relief.

The agency’s petroleum storage tank division collected about $28.1 million for assessments, licenses and permits in 2018.

The agency’s transportation division in 2018 collected about $192 million for considering 8,133 motor carrier operating authority permits, 6,311 unified carrier registration applications, 19,284 International Registration Plan applications, 392 permits for deleterious substance transports and for 45,700 citations.

Its public utility division, while responsible for reviews and approvals of public utility funds, doesn’t actually collect (the dollars are collected by the agency’s finance department, part of its administrative, judicial and legislative services division). About $8.3 million was collected on the utility division’s behalf in 2018.

The administrative, judicial and legislative services division oversees a Mineral Owners Escrow Account, which holds mineral rights revenues collected as a result of forced pooling orders issued by the commission where the owners either can’t be identified or can’t be located (it held about $67.6 million at the end of the 2018 fiscal year),

It also includes the agency’s court clerk, its administrative law judges, attorneys, court reporters and administrative staff.

The finance department, part of that division, is responsible for executing all the agency’s financial transactions, and nearly 60% of those are manually performed where an employee processes cash or a check from the customer. Larger transactions are conducted using credit cards or electronic funds transfers.

The agency uses a case management system to account for revenue and to create financial reports.

But auditors noted it was never designed to be a comprehensive system for revenue receipting and tracking, and acknowledged the commission is in the midst of implementing new hardware and software systems to address that issue, among others.

Elected members of the commission received an update on that process in July from staff and a vendor working on the project.

The upgrades have been getting worked on by the agency for years and aim to both make it easier for regulated companies to conduct business with the commission and to make information about its regulatory activities more available to the public through its website.

Sarah Terry-Cobo, a spokeswoman for the agency, said the upgrade project is divided into four phases.

The first establishes a sole source of record for all Corporation Commission revenue transactions, and work to implement those upgrades is underway now with an expected completion date about six months away.

On Thursday, Commission Chairman Todd Hiett said he, other elected commissioners and the agency’s executive leadership team still needed to review its results in detail.

However, he noted the commission has auditors from Byrd’s office embedded in its operation and that those auditors regularly keep track of the agency’s functions to ensure appropriate checks and balances are maintained.

While he agreed this particular’s audit results could be construed as just information confirming what agency executives and elected commissioners already know about needed changes, he stressed they are still valuable because they enable the agency to remain focused on its tasks at hand.

“Audits are very important, whether you are discussing private companies or state agencies,” Hiett said.

“Having that independent review brings us plans for improvement, and I expect there will be many, many details included in the audit that will help” as the agency continues its system upgrades.

Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›