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  "documentTitle": "Essential Utilities, Inc. (WTRG)",
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  "authorName": "Spruce Point Capital Management",
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  "sourceTypeLabel": "Short seller",
  "presentationDate": "2023-03-08 00:00:00",
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      "text": "Approximately 93% of Peoples' customers reside in Pennsylvania which is why we believe investors should have grave concerns about the recent state audit exam. Given our findings of revenue anomalies reported by WTRG related to Peoples' revenue contribution, we find it alarming that the PUC audit report noted an absence of an accounting flowchart to access internal controls, and a lack of effective policies and procedures within the accounting and finance departments among other findings.",
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      "text": "Wide-ranging Issues Identified At Peoples Encompassing Accounting Systems, Internal Controls, Cost Allocations, Manual Processes And A Lack Of Formal Budgeting Policies Across A “Complex” Organization",
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      "text": "Capitalization Policy for Software; Classification of Capital Costs; Disposal of Fixed Assets; Acquiring and Developing Fixed Assets; Convenience Check Policy; Purchasing Card Policy; Quarterly Liability Procedure; Expenditure Control Policy; Stages of a Capital Project; Travel and Entertainment Policy",
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      "kind": "list",
      "text": "1. Cross-subsidization... 2. Incorrect cost distribution... 3. Improper entry of data... 4. Lack of internal controls...",
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      "text": "The issues called into question here demonstrate that the Peoples Companies' governance of cost allocations and affiliate transactions has weaknesses that do not comply with 66 Pa. C.S. § 2102 as well as the Settlement Agreement at Docket No. A-2013-2353649, and do not adhere to NARUC Guidelines or follow best practices for cost allocations. The lack of a robust governance process for cost allocations and affiliate transactions increases the risk of:",
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      "text": "The Peoples Companies do not have a flowchart to show the path of data throughout their accounting system. The absence of an accounting flow chart makes it difficult for an auditor to assess internal controls.",
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      "text": "The Peoples Companies do not have formal budgeting policies/manuals for consistency across a complex organization with several departments that work independently of one another. The accounting and finance departments for the Peoples Companies lack effective policies and procedures that ensure accountability, contain all the necessary elements and reviewed periodically to make updates.",
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      "text": "Source: PUC, Management and Operations Audit, Aqua and Peoples, April 2021",
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