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CMEEC will seek new bids for forensic audit firm after concerns raised over first choice

Norwich — The Connecticut Municipal Electric Energy Cooperative has agreed to rewrite a request for proposals for an audit firm to conduct the state-mandated five-year financial audit after concerns were raised when the cooperative selected the firm that conducts its annual audit to do the work.

A state law that took effect Oct. 1 mandated that CMEEC contract with a firm to conduct a five-year forensic audit of the cooperative’s finances in the wake of public controversy over lavish trips paid by CMEEC to the Kentucky Derby. CMEEC hosted the trips from 2013 to 2016 for dozens of CMEEC top staff and board members and their families, business associates and public officials from throughout Connecticut. The trips collectively cost $1.02 million, according to information provided by CMEEC.

Questions arose about the selection process for the forensic audit firm after CMEEC’s initial RFP yielded only one finalist, BlumShapiro, the firm that has conducted CMEEC’s regular annual audits. The CMEEC board voted to appoint BlumShapiro as the forensic audit firm at its Dec. 21 meeting.

CMEEC General Counsel Robin Kipnis said the CMEEC board on Thursday, in response to the work of state appointed Municipal Electric Consumer Advocate Bill Kowalski, decided in concept to develop a new request for proposals for a forensic audit firm.

“The board will be voting on this matter in the upcoming days,” Kipnis wrote in an email response to questions about the status of the RFP, concerns raised by Kowalski and a proposal by state Sen. Heather Somers, R-Groton, that the selection of a forensic audit firm be removed from CMEEC’s control.

Late Friday, CMEEC scheduled a special telephone conference board meeting for 4:30 p.m. Monday to vote to withdraw the appointment of the forensic auditing firm.

Kowalski said Friday that since mid-January, he has been meeting and exchanging emails with Kipnis over concerns about the forensic audit firm selection. He also consulted with “other parties both inside and outside of the utility arena” and with state Consumer Counsel Elin Katz and her staff on the issue. Kowalski said he has not seen a new RFP and could not comment on whether it would meet the goals of expanding the potential pool of respondents and removing the appearance of a potential conflict of interest.

“The fact that CMEEC is willing to rebid the RFP is great news for consumers,” Kowalski said in an email response to questions Friday. “It's an indication that the CMEEC Board is acting in a manner that supports ratepayer interests on this issue.”

In a letter to the General Assembly’s Energy and Technology Committee, Somers — a strong critic of CMEEC in the wake of the Kentucky Derby controversy — proposed that state law, Public Act 17-23, she helped craft be changed to authorize the Public Utilities Regulatory Authority to select the firm to conduct the forensic audit of CMEEC’s finances. CMEEC would then reimburse the state for the expense.

Somers wrote of CMEEC’s selection of its annual audit firm for the forensic audit: “The optics are not constructive and will undermine the audit’s findings.”

Kipnis said since the proposed legislation is not drafted, CMEEC could not comment on possible legislation based on Somers’ proposal.

State Sen. Paul Formica, R-East Lyme, co-chairman of the General Assembly’s Energy and Technology Committee, could not be reached to comment on the proposal Friday. The deadline passed last week for committees to raise bills during the current short legislative session, but bills or amendments to bills could be raised from the floor, Somers said.

According to the minutes of the Dec. 21 CMEEC board meeting, CMEEC Controller Mike Lane told the board that the initial audit RFP was sent to seven firms, five national firms and two local firms. Only the two local firms responded, and one of those withdrew, leaving only BlumShapiro.

The minutes stated that BlumShapiro assured CMEEC that there would be no conflict of interest because there is a separation of auditing staff between the firm’s financial statement audit work and the forensic audits.

But Kowalski questioned the appearance of a potential conflict of interest and suggested rebidding the RFP and rewriting it in a way to expand the potential pool of audit firm respondents.

“Alternatively,” Kowalski wrote to The Day in Friday’s email response, “having PURA issue the RFP and hire the audit firm through an amendment to PA 17-73 as proposed by Senator Somers, should also eliminate any concern with the forensic auditor selection process.”

c.bessette@theday.com

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