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material departure from generally accepted accounting <br />principles. <br />Attorney Micale asked that Mr. Testone.explain their <br />,,assignment to the rate study. <br />Mr. Testone informed him that it was decided by their <br />client and the Utility Director that an independent <br />consultant should be hired. They, in fact, did play some <br />part in the selection process by interviewing a utility rate <br />expert from Price Waterhouse and also Mr. Olstein who was <br />with Cooper & Lybrand at the time. Their role in the rate <br />study was to assist in the preparation of calculations and <br />review certain data for submission to Mr. Olstein for his <br />review. <br />Attorney Micale then brought up Petitioner's Exhibit B, <br />the rate analysis submitted by Mr. Olstein, and noted that <br />in this Exhibit, Mr. Olstein presents cost of services which <br />he stated were obtained from management and from Testone, <br />Marshall & Discenza. He asked that Mr. Testone explain the <br />source of those amounts appearing on Schedules 2 and 3 of <br />this Exhibit and how they were computed. <br />Mr. Testone reported that Schedule 2 is a list of <br />projected operating expenses and all of these were developed <br />by management - their best judgment as to what they expect <br />these expenses would be for 1984. Mr. Testone stated that <br />his firm reviewed these figures for what they considered to <br />be reasonableness and submitted them to Mr. Olstein. They <br />did the same with Schedule 3 - General and Administrative <br />Expenses. It was felt that $10,000 was what could reason- <br />ably be included as salary - the previous $63,000 was for <br />two or three officers. <br />Attorney Micale asked if Mr. Testone would characterize <br />the cost of services presented on Schedules 2 and 3 as <br />constructed costs, and Mr. Testone confirmed that he would <br />M <br />JAN 18 1984 Now 55 onE863 <br />