PERC drops Andersen

June 1, 2002 By    

The fallout from the largest bankruptcy in American history has touched the propane industry. The Propane Education & Research Council has notified the once-prestigious national accounting firm Arthur Andersen that its contract will not be renewed at the end of 2002.

Once the Cadillac of its profession, Arthur Andersen has been hemmorraging since public disclosure of its involvement in helping Enron executives sell more than $1 billion worth of shares in their own company while some $600 million in debt was hidden off the books. These executives also may have sold knowing that Enron had overstated its profits year after year. Arthur Andersen officials subsequently acknowledged that it routinely destroyed Enron records.

The accounting firm has been under contract with the PERC since the council’s formation in 1997. The original, three-year contract was let at an annual rate of $165,000. Services provided include development, maintenance and analysis of an assessment remitter database; all general accounting functions, including preparation of tax returns; grantee and rebatee audits; remitter audits; recordkeeping and management of retirement and insurance benefits programs; payroll (via subcontractor); cooperation with independent auditor of PERC’s financial statement; and consultation on financial services management (interim investment of grant and rebate funds).

The contract was renewed for $190,000 in December 1999 for three years and expires this December.

PERC President Roy Willis says the decision to sever its contract went beyond a desire to distance the council from the pungent aroma of a scandal so morally outrageous that it could eventually lead to the accounting firm’s demise. Although hired following a competitive bidding process, Willis acknowledged that the council wanted Arthur Andersen’s national prominence and clout during PERC’s formative years. That’s no longer needed, he says.

Willis has been authorized to add a staff position – director of finance and administration – that most likely will be filled by a certified public accountant. The council also will re-bid its financial and accounting services. That process, which could result in duties being split by several firms, could save the council money.

Not to mention the embarassment of being shackled to a public relations disaster so reprehensible that it likely will never be cleansed.

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