Updated 2:50 p.m.
Findings of an audit by the state Comptroller of the Treasury's office released Thursday allege that the Nashville Electric Service engaged in improper bidding of contracts, employees made personal purchases using a company credit card, and the utility nurtured a cozy relationship with Gaylord Entertainment.
The audit, which can be found here , found that NES “paid one manufacturer and its distributor more than $17 million over the last eight years for electric power cable that was not properly bid.”
NES president Decosta Jenkins told reporters at a press conference Thursday morning that the city’s electric utility had already begun responding to many of the problems cited in the audit. Policy changes cited by Jenkins included “revised and strengthened” policies with regards to bidding practices, a more restrictive travel reimbursement policy — which includes a prohibition on the purchase of alcohol — and a process under which hospitality items such as hotel rooms and event tickets are donated to charity.
In his report, Comptroller Justin P. Wilson said he “applaud[ed] NES officials for the corrective measures they have adopted in response to our findings.”
According to the audit, NES has maintained an exclusive arrangement with Kerite and Utilicor since 1998. NES, however, could only provide records for cable purchases dating back to the 2005 fiscal year.
Auditors from the comptroller's office found that NES specifications for electric power cable were “tailored to match” cable provided by Kerite.
Asked what ratepayers, who fund NES, should think about such a practice, Jenkins pointed to the success of the system during the 2010 flood, but acknowledged that some of the requirements and specifications for the cables were too restrictive.
Auditors found that NES entered into a contract with Gaylord Entertainment that allowed NES employees to attend events and play golf at Gaylord-owned properties for free in exchange for the lease of NES transformers.
The audit also found improper use of an NES credit card by the company’s vice president/chief information officer, stating that the vice president mixed personal and business accounts, many of which were established in the name of NES. The same vice president admitted to selling surplus NES items without authorization, according to the audit.
Jenkins told reporters that issues related to NES vice president and chief information officer, Vic Hatridge, had been handled internally. He declined to specify what disciplinary actions had been taken against Hatridge or others cited in the report.
Also, auditors found that six NES employees used altered documents to get reimbursement for education or training programs, according to the audit.
Jenkins said NES is “actively seeking restitution” for those claims of fraud by the employees and that those involved had been terminated.
In a statement released Thursday afternoon, Johnson said, “The audit outlines a number of weaknesses in the financial management of NES. There were indications of internal policies and procedures that were violated and poor documentation of spending. While some of the practices were questionable from a business perspective, none of that rose to the level of criminal activity.”
In May, the district attorney’s office requested the Tennessee Bureau of Investigation investigate NES purchasing practices, after auditors indicated to Johnson that they needed help obtaining records and conducting interviews of some NES employees. In that situation, the TBI could only have intervened at the request of the district attorney.
Jenkins told reporters Thursday morning that it was his understanding there would be no further action by the TBI or the district attorney.
“We’d love to have gotten a clean bill of health,” Jenkins said. “We didn’t. But my commitment to you is that we’ll just get better.”