Audit: TN utility invests thousands in stock — without knowing it
By Chris Butler | Tennessee Watchdog
NASHVILLE — The First Utility District of Carter County had stock in a publicly traded company for several years despite the fact it was illegal for a government entity to do this.
Even more interesting, current utility officials say they had no knowledge of the situation.
The utility had stock valued at $15,187 with the Nebraska-based Principal Financial Group Inc., according to a newly released audit from Tennessee Comptroller Justin Wilson.
Apparently, nobody at the utility, which has eight employees, had any official way of knowing about the stock, according to the audit.
“This investment was not recorded on the general ledger or accounted for in any other manner on the records of the district,” the audit said.
STOCK: The smaller First Utility District of Carter County had stock in a publicly-traded company for 13 years without knowing it, a new audit says.
Utility manager Jon Nidiffer and auditor Mark Allen, of the Tullahoma-based Allen, McGee and Associates, both told Tennessee Watchdog Wednesday they didn’t know how the situation developed.
Nidiffer, who has managed the utility since 2010, called Tennessee Watchdog later in the day with more information.
“It turns out that before 2001 somebody took out an insurance policy on the employees at First Utility,” Nidiffer said.
“In 2001, the insurance company went out of business. The way it was explained to us is whenever they went out of business they never received any word from the utility about what to do with the insurance policy.”
That insurance policy was then rolled over into common stock, Nidiffer said.
The audit says the utility had 320 shares in the company, but Nidiffer told Tennessee Watchdog it was a little more than 50,000 shares.
Utility officials recently sold the stock and got $10,622 from it, Nidiffer said.
Auditors only discovered the utility’s investment in the stock through a dividend check they uncovered for this year’s audit. The same firm audited the utility last year without finding information about the stock investment, Allen said.
“I wouldn’t say this is common for a government entity, but I would say that this happens,” Allen told Tennessee Watchdog.
Principal Financial officials didn’t return Tennessee Watchdog’s requests for comment.
In his official response to the audit, utility managers cited the utility’s previous leadership as a possible source of the problem.
“The prior manager and bookkeeper did not maintain sufficient records and have been replaced several years ago after a special audit by the Comptroller’s office,” read the utility’s response.
The same audit said the former clerk allegedly altered records to reduce her personal utility bills.
Nidiffer said he didn’t know the outcome of that case.
He also declined to comment on what would have happened had the value of the stock plummeted.
Contact Christopher Butler at chris@tennesseewatchdog.org. or follow him and submit story ideas on his official Facebook page.
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