Enforcement 
How Audits are Conducted
FERC staff develops an annual audit plan that identifies the audit topic, overall objectives, and the method of selecting each audit. FERC staff selects possible audit candidates using a variety of methods:
- Considering information from a monitoring activity,
- Analysis of information from internally developed screens,
- Obtaining input from program offices and agency officials, and
- Mandates from the Commission.
The majority of the audits conducted by FERC over the past four years were of companies selected without any knowledge or allegation of any specific wrongdoing. The goal is to evaluate whether a jurisdictional company is in compliance with the applicable rules and regulations and, where compliance is deficient, to recommend corrective actions and suggest preventive measures to avoid problems in the future. FERC’s approach is proactive, and the audits usually will focus on compliance areas of material interest such as the Open Access Transmission Tariff or the Market-Based Rate Authority requirements.
When a company for audit is selected, they receive a public commencement letter to the company, describing the purpose and scope of the audit and its authority. Then, using several techniques such as:
- Observations,
- Inquiry,
- Site visits,
- Interviews,
- Testing, and
- Information from publicly available records.
Staff collects sufficient data to reach findings and conclusions, which may result in staff reporting audit findings and making specific recommendations.
Once the staff has completed its audit fieldwork, it provides the company with a draft audit report and discusses any preliminary findings with the company to ensure that staff’s audit report is fair, accurate, complete, and objective. Depending on the circumstances, this may be an iterative process, as FERC staff and the company work through the relevant information to a common understanding of the extent to which the company’s compliance may be deficient.
The company then has the opportunity to comment on the draft audit findings and recommendations as well as the facts in the audit report. Through either a Commission order or delegated authority, the Commission will issue a final audit report with the Commission’s findings and the company’s response. If the audited company disputes any of the findings, it may follow the procedures set forth in the Commission’s regulations (Order No. 675 
).
One purpose of the audit process is to ensure and increase compliance with the Commission’s rules, regulations, and statutory requirements. Thus, evidence received during an audit that indicates that a violation may have occurred may be shared with FERC’s investigation staff for a further review of the facts involved. Depending on the nature of the matter, it may be resolved through the audit, or it may become the subject of a separate investigation.
