Report 99021 Summary - December 1999

California Public Utilities Commission:

Most of Its Transportation Regulation Costs Were Appropriate, But It Needs to Better Allocate Indirect Costs


The California Public Utilities Commission (commission) spent the fees it collected from transportation and railroad companies in fiscal year 1998-99 for authorized purposes. In addition, the commission's new accounting system accurately recorded direct and indirect costs and properly allocated indirect costs. However, total fiscal year 1998-99 expenditures recorded in the Public Utilities Commission Transportation Reimbursement Account (transportation fund) are overstated. This is because the commission used faulty criteria for reallocating building-related costs when it tried to correct a deficiency in its cost allocation plan. In addition, it inappropriately shifted into the transportation fund overhead costs that had originally been allocated to another fund. In total, the commission overstated expenditures by $348,000, which is 5 percent of the total reported transportation fund expenditures of $7.2 million for fiscal year 1998-99.

The commission's plan for allocating indirect costs in fiscal year 1999-2000 is reasonable, except for its methods of allocating building-related costs. This deficiency will result in an estimated $202,000 overallocation to the transportation fund in fiscal year 1999-2000.

In preparing to implement its new accounting system in fiscal year 1998-99, the commission made unsubstantiated adjustments to its cash accounts to make them match its bank statements. Taken together, these adjustments reduced the commission's recorded cash balances by $297,000. This difference could be the result of a bank error or an error at the commission. The cause of the cash shortage cannot be determined until the commission does further research.


To properly determine the costs of regulating transportation and railroad companies, the commission should take these steps:

  • Use a reasonable and consistent methodology for allocating indirect costs so that all funds pay an appropriate share of these costs.

  • Avoid making unwarranted reallocations of expenditures.
To support the adjustments it made to its cash accounts, the commission should research its cash transactions to substantiate purported errors and modify its records if necessary.


The commission agrees with the findings in this report and plans to implement the recommendations.