PORT TOWNSEND — Accounting complications after the Jefferson County Public Utility District’s purchase of Puget Sound Energy assets in 2013 led to several findings from the state Auditor’s Office.

The findings, the most serious of three audit levels, did not come as a surprise to PUD officials, who have been working to fix the problems before the audits were published this month.

Among the findings were that the district did not have adequate internal controls to safeguard public funds, ensure federal expenditures were reported on the schedule of expenditures of federal awards and ensure compliance with American Reinvestment and Recovery Act requirements.

The findings were announced after the state Auditor’s Office audited the PUD’s records from 2010 through 2014.

In 2008, voters gave the PUD the authority to take over providing electrical service in East Jefferson County.

In May 2010, PUD commissioners signed a letter of intent to buy PSE infrastructure for $103 million. PUD received a $115.7 million loan from the U.S. Department of Agriculture with an interest rate of 2.728 percent, locked in for 28 years.

“I agree with the auditor’s recommendations and I’m committed to implementing all of them,” said Barney Burke, vice president of the PUD board. “They did a thorough and fair job of looking at it.”

Among the recommendations was replacing outdated accounting software that wasn’t fit for the electrical utility.

That software was replaced in 2014, and PUD plans to hire a new chief financial officer in the coming month or two, Burke said.

The board is seeking a person with experience with electric utilities and the accounting software to replace the interim CFO, Tammy Esslinger-Lehman.

Auditors found that out of 80 tested PUD transactions between 2013 and 2015, 34 transactions totaling $440,361 did not have approval signatures.

Auditors also found that utility plant assets were overstated by $31,685,488 and accumulated depreciation was overstated by $29,771,410. Accounts receivable were understated by $2,144,582 and accounts payable were overstated by $1,729,606.

With the new software and more staff experienced with accounting, PUD Manager Jim Parker said results of an expected 2015 audit should be much better.

During the transition, he said his priority was to ensure customers had power.

“I would never have thought the biggest problem would be our accounting system,” he said. “I think we’ve done a remarkable job in taking over the electrical utility.”

Wayne King, PUD board member, said the district wasn’t prepared for the accounting after the PUD gained control of PSE’s assets April 1, 2013.

“The PUD was at a real disadvantage,” he said. “We went from 2,000 customers to 20,000 overnight.”

He said it was an astronomical project that for the most part has gone well.

“The findings were that we didn’t have the correct procedures in place,” he said.

A major accomplishment by the PUD is that it has not raised its rates since taking over PSE’s assets, King said.

The PUD is still paying off federal loans for the purchase, he said.

“We’re paying the debt without raising the rates,” he said. “Isn’t that an astronomical accomplishment?”

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Reporter Jesse Major can be reached at 360-385-2335, ext. 5550, or at jmajor@peninsuladailynews.com.