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SEC Audit Report Suggests Good Stewardship

Article was added on Monday, November 22, 2010

KINGSTREE, SC - A recent audit report suggests that Santee Electric Cooperative, Inc., deserves recognition and praise for certain management practices that have resulted in positive financial results for members.  The court filing by Cam Lewis, who represents Santee's Board of Trustees, notes that the "audit recognizes that Santee has done a tremendous job in rate control, capital credits, and new building planning and construction."

The Board's court filing referred to an independent report regarding the cooperative's management and board practices. The Board hired an independent law firm specializing in cooperative governance to conduct a comprehensive internal audit with no limitations. To ensure objectivity, the law firm retained the right to withdraw if it did not receive complete cooperation.  Santee fully cooperated and the audit was completed.

According to the report, the Board has done a good job of keeping rates low. The report found that Santee's rates in 2009 were below the statewide average for electric cooperatives. It was approximately $45 below the average monthly rates of a South Carolina's investor-owned utility.

The report also validated the Board's decisions regarding capital credits, the practice of returning excess revenue to Santee's customers. While the cooperative's current practice has been challenged in recent litigation, the report found that it was within industry norms. "We certainly believe in our capital credits policy," said Floyd Keels, Santee's CEO. "I hope folks will read the report and understand that this is good news for our members."

Litigants also criticized Santee's decision to build a new main office, but the report found that Santee exercised good stewardship and approved the cooperative's analytical approach to architectural, engineering, and construction planning. The report noted that Santee's old building presented unknown potential liabilities due to asbestos, mold, lead paint, possible ground contaminants, a failing HVAC system, and a leaking roof. The audit stated that "[o]ur general impression is that the [new] building was designed for function and easy adaptability over time."

In terms of improvement, the report also recommends that Santee make modifications to its per diem and Trustee benefits policy. As the audit indicates, per diem and Trustee benefits are a common and fairly standard practice throughout the industry. "Santee's leadership has reacted favorably to the audit report and has initiated a plan to address the per diem and benefit issues raised within the report," said Keels.

Finally, the report offered strong praise for Santee's management. The independent investigators concluded that staff compensation is slightly below industry norms. The report lauded the performance of Santee's CEO, and even recommended that it would be in the best interest of the cooperative for him to receive a long term employment agreement. "This process has been very difficult on Mr. Keels because he is a product of the community and his reputation is important," said David Black, Santee Electric's Attorney. Keels acknowledged: "Over the years, a lot of local people have invested their time and expertise in me, and I appreciate their faith and trust knowing that we will resolve this matter."

Everyone involved with Santee's management has expressed hope for a negotiated resolution of pending litigation. "The other side has displayed a good faith willingness to solve problems, and we remain confident that we can talk it out," said Black.

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