audit of public utilities billing processes

0 | U n a n n o u n c e d A u d i t o f P e t t y C a s h a n d C h a n g e F u n d s F e b r u a r y 2 0 1 6

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Karen E. Rushing Clerk of the Circuit Court and County Comptroller Office of the Inspector General Sarasota County, Florida

Audit of Public Utilities Billing Processes September 2016

1 | A u d i t o f P u b l i c U t i l i t i e s B i l l i n g P r o c e s s e s S e p t e m b e r 2 0 1 6

Contents

Executive Summary 2 Background and Objectives 3 Opportunities for Improvement and Management Responses 8

Audit Services

David Beirau, CFE, CIG, CIGA Director of Internal Audit and Inspector General

Lead Auditor William Bousman, CFE, CIGA Internal Auditor/Investigator

Please address inquires regarding this report to David Beirau, by e‐mail at [email protected] or by telephone at (941) 861‐5280. This and other reports prepared by the Office of the Inspector General are available at www.SarasotaClerk.com/Comptroller Services/Internal Audit.


Opportunities for Executive Summary improvement

As part of the Annual Audit Plan, the Clerk of Circuit Court and County Comptroller’s Internal Audit Department and Office of the Inspector General conducted an independent audit of Public Utilities Billing Processes.

Sarasota County Public Utilities has approximately 87,000 water connections, 74,000 sewer connections, and 3,000 reuse connections, with revenues of roughly one hundred million dollars in Fiscal Year 2014.

Obtained an understanding of the processes for billing, opening new accounts, adjustments, delinquency, write‐offs, payment plan programs, billing estimates, consumption overrides, refunds, meter inventory, and interest paid on utility deposits.

Obtained and reviewed relevant County Resolutions, Ordinances, and policies and procedures.

Identified six (6) types of rates, fees, and charges that were not assessed in compliance with County Resolution No. 2013‐187, including one that resulted in an estimated $400,000 per year of unbilled charges.

Identified thirty‐two (32) instances of non‐compliance with County Resolution Nos. 2013‐187 and 90‐036, related to interest credits.

Identified eight (8) instances of non‐compliance with County Resolution No. 2010‐023 or departmental procedures related to adjustments.

Determined that no formal authority for issuing payment plans exists; however, at the time of the audit there were twenty‐one (21) active payment plan agreements.

Determined that the department does not require a written application for service in order to open an account, which is non‐compliant with County Resolution No. 89‐372.

Identified six (6) instances of non‐compliance with County Resolution 2013‐187 related to security deposits.

Identified lack of supervisory review related to consumption overrides.

Identified seventeen (17) meters that no longer function properly, and twelve (12) of these meters have not functioned properly since 2006.

Identified four (4) accounts previously written‐off that were classified incorrectly within the billing application.

Lack of a formal policy outlining the use of reverse payments.

Determined that a process and procedure needs to be created and implemented for terminating service to delinquent sewer‐only accounts.


Background and Objectives

The Clerk of the Circuit Court and County Comptroller’s Internal Audit Department and Office of the Inspector General has completed an audit of the Sarasota County Public Utilities billing processes. The audit was planned and conducted in conformance with the International Standards for the Professional Practice of Internal Auditing (Standards). Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The purpose of the audit was to review compliance with applicable county ordinances, and policies and procedures related to utility billing.

Background In December 1986, the County sponsored the Sarasota County Assembly for Wastewater Management, which was composed of over thirty experts. Members of this key assembly concluded that the existing fragmented system of wastewater treatment was inadequate. In April 1991, the Board of County Commissioners adopted Resolution No. 91‐101, which directed and authorized the formation of a Utilities Acquisition Negotiating Team (ANT) and adopted the Procedures Manual for Public Acquisition of Water and Utility Systems in Sarasota County, Florida as guidance for the Utilities ANT. In July 1993, the Board adopted the Franchise Acquisition, Consolidation, Implementation Plan – Wastewater Collection and Treatment Master Plan, prepared by the County Utilities. In November 1994 the Master Plan was amended by the Board to establish reuse as a third utility within the Sarasota County Utilities Department.

Between June 1988 and September 2015, Sarasota County acquired the following Utility Companies:

Utility Companies Acquired by Sarasota County Acquisition DateCurry Creek June 1988

Sorrento Utilities June 1988

Southeastern Utilities – Bent Tree Division November 1988

Plantation Utilities January 1991

Mike Clarke Development, Inc. November 1992

Southeast Utilities May 1993

Casey Key June 1993

Proctor Road February 1994

Southfield Utilities July 1994

Southern States Utilities ‐ Venice Gardens Utilities October 1994

Circlewoods Owners Association of Venice June 1995


Tamaron October 1995

Central County Utilities March 1996

Gulfview Utilities April 1996

Meadowood Utilities August 1996

Atlantic Utilities of Sarasota September 1996

The Trails (Nokomis Shopping Center) 1996

Country Manor Utilities August 1997

Southbay Utilities, Inc. April 1999

Vroom Utilities April 1999

Beneva Creek January 2000

Skandia, Heron Bay Condos July 2003

Siesta Key Utilities Authority June 2006

Beekman Place Utility Corp. December 2007

Dolomite/Aqua/Woodland Park and Kensington Park Utilities December 2013

Woodbridge Estates 2014

Upon the completion of each acquisition, newly acquired customers continued to receive the same services provided to them by their prior Utility Company. However, the billing rates, fees, and charges for services provided was based on rates in affect at the time of the acquisition per Sarasota County’s Resolution. Sarasota County Public Utilities has approximately 87,000 water connections, 74,000 sewer connections, and 3,000 reuse connections. Of the 87,000 meters in services, roughly 31,000 must be manually read and the remaining 56,000 are read by transmitting the data to a computer via a radio frequency from the street. Each meter is assigned to a specific billing cycle and route. There are twenty‐six billing cycles and 330 routes within the county, each route contains between 100 and 1300 meters. Meters are read monthly, based on their geographic location, by eleven meter readers. Readings taken during the day are uploaded nightly into the billing application, with the monthly bill generated the following day. The Board of County Commissioners (BCC) has adopted the following County Resolutions:

No. 89‐372, Adoption of Sarasota County Utilities Department Rules & Regulations,

No. 90‐036, Establishment of Minimum Interest Rate on Customer Deposits under “Sarasota County Water and Sewer Franchise Utility Rules & Regulations”,

No. 2010‐023, Adoption of Sarasota County Utilities Billing Adjustment Policy,

No. 2013‐187, Order Adopting and Ratifying Water, Wastewater, Reuse and Other Utility Rates, Fees and Charges for the Sarasota County Utilities System.

County Resolution No. 89‐372 adopted a set of rules and regulations applicable to the Public Utilities Department, which is necessary for proper administration, management, and operations of the department. This resolution enhances the ability of both the BCC and the department to regulate, operate, and provide efficient utility services to existing and future customers served by the County owned system.


County Resolution No. 90‐036 established that the Public Utilities Department is required to pay a minimum interest rate of five percent (5%) on customer’s security deposits. Security deposits are collected or billed upon application for service. Sarasota County reserves the right to add or increase a deposit due to meter tampering, discontinuance of service, history of late payments on existing or prior account(s) or non‐payment of account and may hold the deposit until the account is closed. County Resolution No. 2010‐023 adopted a uniform adjustment policy in order to establish guidelines for making adjustments to the utility bills of customers. The policy established customer eligibility, customer requirements, and adjustment procedures for water bills, sewer bills, undercharges, overcharges, late charges, miscellaneous charges, other adjustments, and unexplained one time only usage adjustments. County Resolution No. 2013‐187 adopted and ratified water, wastewater, reuse, and other utilities rates, fees, and charges. This Resolution contains six (6) exhibits, Exhibits A through F, which provides a detailed description of the rates, fees, and charges for customers using the water, wastewater, and reuse services. Below is a general summarization of what each Exhibit relates to:

Exhibit A – This exhibit defines the monthly billing charge, water, wastewater, reuse, septage receiving, fire safety (firelines), fire hydrant meters, security deposits, and miscellaneous rates, fees, and charges for the majority of customers. This exhibit excludes the Dolomite Service Area.

Exhibit B – This exhibit defines the capacity fees for water and wastewater customers.

Exhibit C – This exhibit defines the fees for building permits, utility construction permits and inspection fees.

Exhibit D – This exhibit defines the installment payment program, which assists new utility customers by providing financial assistance to allow payment‐over‐time for the cost of water and sewer capacity fees and line extension fees.

Exhibit E – This exhibit defines the fees for the backflow prevention assembly program. Water customers are required to have an annual backflow test performed by a licensed contractor. Customers may request that the County provide this service to them, in which case the customer would be billed monthly or annually.

Exhibit F – In December 2013 Sarasota County acquired Dolomite Utilities and maintained the Dolomite fee schedule for those customers. This exhibit defines the monthly billing charge, water, wastewater, and fire safety (firelines) rates fees, and charges for the customers within the Dolomite Service Area.


Objectives The objectives of this audit were to determine if the Public Utilities billing processes are operating efficiently and effectively and in compliance with relevant Accounting Policies and Procedures, as well as the following County Resolutions:

No. 89‐372, Adoption of Sarasota County Utilities Department Rules & Regulations,

No. 90‐036, Establishment of Minimum Interest Rate on Customer Deposits under “Sarasota County Water and Sewer Franchise Utility Rules & Regulations”,

No. 2010‐023, Adoption of Sarasota County Utilities Billing Adjustment Policy,

No. 2013‐187, Order Adopting and Ratifying Water, Wastewater, Reuse and Other Utility Rates, Fees and Charges for the Sarasota County Utilities System.

The scope of the audit included a review of customer accounts within the billing application, including utility billing statements, for the period of April 1, 2014 through May 15, 2015. To meet the objectives of the audit, the procedures performed included, but were not limited to, the following:

Inquiries of County personnel.

Walkthrough of the utility billing process.

Reviewed policies and procedures, and evaluated internal controls, related to: o Billing statements; o Opening new accounts; o Adjustments; o Delinquent accounts; o Account write offs; o Payment plans; o Billing estimates; o Consumption overrides; o Refunds; o Tracking meter inventory; and o Interest paid on deposits.

Examined the following items: o A random sample of 545 billing statements between the dates of April 1, 2014

through March 31, 2015; o A random sample of fifty (50) new accounts opened between the dates of April

1, 2014 through May 15, 2015; o A random sample of seventy‐five (75) adjustments within the billing application

between the dates of April 1, 2014 through March 31, 2015; o A random sample of 100 delinquent accounts between the dates of April 1, 2014

through March 31, 2015;


o A random sample of 100 accounts that had charges written‐off at the end of Fiscal Year 2014;

o All open payment plan accounts, twenty‐one (21) in total, within the billing application as of July 28, 2015;

o All billing estimates, 3,592 in total, within the billing application between the dates of April 1, 2014 through March 31, 2015;

o All consumption overrides, 274 in total, within the billing application between the dates of April 1, 2014 through March 31, 2015;

o A systematic random sample of fifty (50) credit balance refunds issued between the dates of April 1, 2014 through March 31, 2015;

o A systematic random sample of fifty (50) final bill refunds issued between the dates of April 1, 2014 through March 31, 2015;

o A random sample of thirty‐one (31) reverse payments that occurred 30 days or more after the original payment between the dates of April 1, 2014 through March 31, 2015; and

o A random sample of 100 active deposits within the billing application as of July 31, 2015.

Identified opportunities for improvement.


Opportunities for improvement and management responses

The audit disclosed certain policies, procedures, and/or practices that could be improved. The audit was neither designed nor intended to be a detailed study of every relevant system, procedure, or transaction. As a result of the audit, observations and recommendations identified below are related to Standards:

(Standard 2110) Communicating risk and control information to appropriate areas of the organization, and

(Standard 2130.A1) The effectiveness of controls related to operations and programs, reliability and integrity of financial and operational information, and compliance with laws, regulations, policies, procedures, and contracts.

Accordingly, the Opportunities for Improvement presented in this report may not be all‐inclusive of areas where improvement may be needed. There were eleven (11) Opportunities for Improvement identified as a result of the audit:

1. Non‐Compliance with County Resolution No. 2013‐187, Order Adopting and Ratifying Water, Wastewater, Reuse and Other Utility Rates, Fees and Charges for the Sarasota County Utilities System related to Fire Safety, Fire Hydrant meters, Unmetered Commercial Wastewater, and Septage Receiving

2. Non‐Compliance with County Resolution Nos. 2013‐187, Order Adopting and Ratifying Water, Wastewater, Reuse and Other Utility Rates, Fees and Charges for the Sarasota County Utilities System and 90‐036, Establishment of Minimum Interest Rate on Customer Deposits under “Sarasota County Water and Sewer Franchise Utility Rules & Regulations” regarding interest credits

3. Non‐Compliance with County Resolution No. 2010‐023, Adoption of Sarasota County Utilities Billing Adjustment Policy regarding allowable adjustments, supporting documentation, and authorization

4. Lack of authority to issue payment plan agreements to customers 5. Non‐Compliance with County Resolution 89‐372, Adoption of Sarasota County

Utilities Department Rules & Regulations regarding the application process 6. Security deposits waived without justification 7. Ability to manually override meter readings within the billing application 8. Outstanding work orders for meter replacements 9. Incorrect status for accounts previously written‐off 10. Reverse payments lack formal policy 11. Terminating service for delinquent sewer‐only accounts


1. Non‐Compliance with County Resolution No. 2013‐187, Order Adopting and Ratifying Water, Wastewater, Reuse and Other Utility Rates, Fees and Charges for the Sarasota County Utilities System related to Fire Safety, Fire Hydrant meters, Unmetered Commercial Wastewater, and Septage Receiving

Observation County Resolution No. 2013‐187, adopted and ratified the rates, fees, and charges for services provided by the Sarasota County Utilities system. The resolution identifies rates for two service areas: the existing service area prior to the acquisition of Dolomite Utilities, or “Non‐Dolomite Service Area” and the service area that was acquired from Dolomite Utilities in December 2013, or “Dolomite Service Area”. Between both service areas, there are a total of fifteen (15) types of rates, fees, and charges. From a total of 74,098 active accounts, a random sample was selected for each service provided for a total of 545 sampled accounts. The random sampled accounts are listed below: Non‐Dolomite Service Area (Exhibit A of County Resolution No. 2013‐187)

69 for Residential Water services,

43 for Commercial Water services,

51 for Irrigation services,

17 for Bulk Water services,

4 for Wholesale Water services,

101 for Residential Sewer services,

60 for Commercial Sewer services,

17 for Septage Receiving services,

48 for Reuse services,

Fire Safety. Dolomite Service Area (Exhibit F of County Resolution No. 2013‐187)

32 for Residential Water services,

45 for Commercial Water services,

32 for Residential Sewer services,

26 for Commercial Sewer services,

Fire Safety.


During the review of billing statements the auditor observed six (6) types of rates, fees, and charges that were not in compliance with County Resolution No. 2013‐187, identified and listed below: Fire Safety (Non‐Dolomite and Dolomite Service Areas) Fire Safety rates vary based on customer classification (e.g. Commercial, Residential, etc) and the corresponding rate class. All rate classes are to be billed a consumption charge, per 1,000 gallons, for water used. For the Non‐Dolomite Service Area, Commercial, Residential, and Private Fire Protection Only rate classes are to be billed a monthly Readiness‐to‐Serve Charge, with the charge based on the fireline size at the location. For the Dolomite Service Area, there is only one rate class, requiring a monthly Readiness‐to‐Serve Charge based on meter size. During review of the billing statements, it was noted that locations with firelines were not being billed due to the lack of monitoring firelines and fireline meter inventory. The Department subsequently went and inspected all commercial locations to document where firelines are located. Based on the results, as of September 2016, a total of 854 accounts have been identified as being required to be billed. This represents approximately $556,000 of unbilled charges annually. The Department began billing accounts in January 2016 and has continued to bill as the locations have been identified. Upon discussions within management and review of available past County Resolutions that were superseded by the current County Resolution No. 2013‐187, Fire Safety rates should have been billed to customers since at least 2007. Fire Hydrant Meters (Non‐Dolomite Service Area Only) Fire Hydrant Meter rates require a Security Deposit of $1,500 and an Installation and Disconnect fee totaling $100. This service is to be billed a consumption charge, per 1,000 gallons, for any water used and a monthly Readiness‐to‐Serve Charge. During review of the population of seventeen (17) Fire Hydrant Meter accounts, one (1) account did not have a deposit on file and the account was not charged an installation and disconnect fee. Unmetered Commercial Wastewater (Non‐Dolomite and Dolomite Service Areas) Unmetered Commercial Wastewater rates vary based on the Equivalent Dwelling Unit (EDU). County Ordinance 2011‐044, Uniform Water, Wastewater, and Reclaimed Water Systems Code, defines an EDU as "the utilization of capacity that represents the potential of creating a system demand equal to that of a single‐family residence". All Unmetered Commercial accounts are to be billed a rate that is "the sum of the base charge per equivalent dwelling unit plus a consumption charge of 6,000 gallons per month per equivalent dwelling unit". During review of fourteen (14) Unmetered Commercial Wastewater accounts, it was noted that the billing statements indicated that the accounts were being billed incorrectly. Three


(3) accounts were billed a consumption charge of 4,000 gallons, instead of the required 6,000 gallons, which resulted in the County under billing customers, and six (6) accounts did not clearly specify the EDU that was used to determine the rate, which could result in the County under or over billing customers. It appears that the billing application is not set up to accurately calculate these flat rate charges. Septage Receiving (Non‐Dolomite Service Area Only) Septage Receiving rates require a Security Deposit of $1,500 or three times the average monthly billing per account, whichever is greater, to be paid in advance. The deposit is refundable on the final bill. During review of the population of seventeen (17) Septage Receiving accounts, it was observed that fourteen (14) accounts did not have a deposit on file. Either the deposit was never collected, or the deposit was collected and refunded prior to the final bill. Recommendation To ensure compliance with County Resolution No. 2013‐187, the Public Utilities Department should develop policies and procedures to ensure all new accounts with firelines are billed for consumption and Readiness‐to‐Serve Charges, correct the flat rate codes within the billing application so that accounts are billed in accordance with the Resolution, and collect all required deposits and fees. Management Response Fire Safety Accounts Management concurs with the above recommendations. Procedures have been developed to ensure new fire safety systems are being captured and added to the billing system. These procedures will be finalized and documented no later than December 31, 2016. All accounts being billed are being corrected to reflect the 2013‐187 rate resolution to ensure billing accuracy and will be completed no later than December 31, 2016.

Fire Hydrant Meter Accounts The billing system software settings were not set to prevent refund of security deposits on fire hydrant meter accounts when on file for more than 12 months as was the case with other utility accounts. Billing software system settings have been corrected to prevent refund with a good payment history regardless of the time the security deposit is on file. A review of all fire hydrant meter accounts currently indicate all but the one referenced account have a security deposit on file, and all security deposits are in a “held” status. The account holder has been notified and the required security deposit has been billed. A report has been created, and will


be reviewed monthly by a Financial Specialist and approved by a supervisor/manager to ensure compliance with Resolution 2013‐187, as may be amended. This was completed on June 20, 2016. Unmetered Commercial Wastewater (Non‐Dolomite and Dolomite Service Areas) Utilities bills sewer‐only service or unconnected sewer service to 29 commercial accounts. Staff will review all sewer only accounts for billing accuracy and correct any accounts that are not billed in accordance with Resolution 2013‐187. This includes:

Review all accounts for billing discrepancies ‐ Complete,

Make changes to the billing system software codes to ensure proper monthly billing – In progress,

Create and review a monthly report of all commercial sewer only accounts to ensure all accounts are billed in compliance with Resolution 2013‐187, as may be amended – In progress.

This project commenced in April 2016 and will be completed by January 1, 2017. Septage Receiving Accounts Septage accounts were transferred to our billing system in 2004, prior to the adoption of any formal billing rates or policies on septage billing accounts. Septage billing rates and security deposits were incorporated into the Utilities Resolution in 2009. There was no requirement for current account holders to pay a security deposit at that time. Only 5 accounts have been created since 2009, all of which paid a security deposit; however, on one account the security deposit was not “held” to prevent refund with good payment history. That account has a zero balance and continues to have satisfactory payment history; however, the account holder has been notified and the required security deposit has been billed. A report has been created and is being reviewed monthly by a Financial Specialist and approved by a supervisor/manager for all septage accounts and security deposits on file to ensure those are held in compliance with Resolution 2013‐187, as may be amended. This project commenced in May 2016 and was completed on June 20, 2016.


2. Non‐Compliance with County Resolution Nos. 2013‐187, Order Adopting and Ratifying Water, Wastewater, Reuse and Other Utility Rates, Fees and Charges for the Sarasota County Utilities System and 90‐036, Establishment of Minimum Interest Rate on Customer Deposits under “Sarasota County Water and Sewer Franchise Utility Rules & Regulations” regarding interest credits

Observation County Resolution No. 2013‐187 states that "interest will be paid on an annual basis in January in the form of a credit on the utility bill after the deposit has been on file for twelve consecutive months. The interest rate shall be established by the Board." County Resolution No. 90‐036 establishes the interest rate and states that "each public utility which requires deposits to be made by its customers shall pay a minimum rate of interest of five percent (5.0%) on such deposits, such rate being the current pass book rate." The auditor selected a random sample of 100 accounts out of a population of 3,645 with a deposit on file. During review of the 100 sampled accounts, it was observed that nineteen (19) accounts were credited interest after the deposit was held for at least twenty‐four consecutive months, rather than the twelve consecutive months stated in County Resolution No. 2013‐187. Thirteen (13) accounts, with a deposit on file for more than twelve, but less than twenty‐four months, did not receive interest credit to their accounts. After discussion with management, it appears that these discrepancies were caused by inaccurate perimeters set within the billing application. Recommendation To ensure compliance with County Resolution Nos. 2013‐187 and 90‐036, review the current rules within the billing application and make necessary changes so that the billing application automatically credits the interest in accordance with County Resolution No. 2013‐187. Additionally, implement an annual review process to ensure that interest is accurately reflected on all customers’ bills with a deposit on file.


Management Response Management concurs with this recommendation. In 2013, per Rate Resolution 2013‐187, the security deposit rules changed to extend the hold on security deposits from 12 months to 24 months prior to refund. Software system settings where incorrectly changed to hold security deposits for 24 months and pay interest after 24 months. This was recently corrected in August 2015 to hold security deposits for 24 months and pay interest after 12 months in compliance with Resolution 2013‐187, as may be amended. In January 2017, upon the payment of annual interest of security deposits, Utilities will review security deposit interest paid at that time to ensure compliance with Resolution 2013‐187, as may be amended. At that time it will be determined if a private consultant should be utilized in the future for such review. A monthly report has been created indicating paid interest on security deposits. This will be reviewed by a Financial Specialist, with a supervisor/manager approval, to ensure compliance with Resolution 2013‐187, as may be amended.


3. Non‐Compliance with County Resolution No. 2010‐023, Adoption of Sarasota County Utilities Billing Adjustment Policy regarding allowable adjustments, supporting documentation, and authorization

Observation County Resolution No. 2010‐023 provides management with the ability to issue credit adjustments for water bills, sewer bills, under or over charges, late charges, miscellaneous charges, and one‐time unexplained usage charges. Although the requirements vary based on the type of adjustment, typically requests must be made within a year of the event, they must be in writing, and proof of the repair correcting the event must be documented. It also lists items that are prohibited from adjustments, which vary by service type. The auditor selected a random sample of seventy‐five (75) accounts out of a population of 6,098 with an adjustment on file. During review of the seventy‐five (75) sampled accounts, observations included six (6) adjustments not in compliance with County Resolution No. 2010‐023, one (1) adjustment lacking an internal adjustment form and management approval, and one (1) adjustment that did not go through the appropriate refund process. The six (6) adjustments found not in compliance with County Resolution No. 2010‐023 were due to either prohibited activity or did not comply with customer requirements. Additionally, the department is not following the Utility Billing Adjustment Procedures that are already in place. The procedures state that a daily system generated report of all proposed adjustments along with the supporting documentation shall be provided to the Customer Service Manager for review and approval by a Financial Specialist. Upon review and approval of the proposed adjustments, they are to be posted to the billing application by a different Financial Specialist. The auditor observed that the manager was reviewing daily system generated reports subsequent to being posted to the billing application. Recommendation To ensure compliance with County Resolution No. 2010‐023, proposed adjustments with supporting documentation should be reviewed and approved prior to posting to the accounts. Following the Utility Billing Adjustment Procedures already in place should reduce the need to make additional corrections in the event an error is identified. Management Response Management concurs with the recommendation. Procedures were changed to require Customer Service Manager approval on adjustments prior to daily posting of adjustments. A daily listing/posting checklist has been created to ensure all listings are done prior to posting. All documentation is included with the listing for approval.


4. Lack of authority to issue payment plan agreements to customers

Observation There is no County ordinance, resolution, or policy granting the department authority to issue payment plans to customers who become delinquent on their utility bills. However, the department has procedures in place for payment plans, which include requiring signed agreements from customers, repayment periods for up to six months, and processes to set up payment plans within the billing application. At the time of the audit, there were a total of twenty‐one (21) payment plan agreements in place with a repayment period of between seven (7) and twenty‐six (26) months. All payment plans are authorized by the Customer Service Representative II (CSR II), and once a payment plan is initiated, delinquent fees are not assessed. The payment plans are reviewed monthly by the CSR II, to ensure that timely payments are received, and in the event they are not, the account will become delinquent, and service may be disconnected if the account or the payment plan does not become current. The twenty‐one (21) payment plan agreements totaled $13,470.56 when initiated, and the individual payment plan agreements ranged between $300 and $1,800. Recommendation To address non‐compliance with County Resolution No. 2013‐187, which does not identify payment plans as an approved process, determine if the continued use of payment plans is a desired practice. If so, the department should modify the policy by way of amending the resolution. Management Response Management concurs with this recommendation. A Payment Plan Agreement policy will be formalized in the proposed revisions to the Utilities Billing Adjustment Policy, Resolution 2010‐023, as may be amended, to be presented to the Board of County Commissioners in November 2016.


5. Non‐Compliance with County Resolution 89‐372, Adoption of Sarasota County Utilities Department Rules & Regulations regarding the application process

Observation County Resolution No. 89‐372 states that the “Department shall require that application for service be made in writing and in accordance with the forms prescribed by the Department.” During review of new accounts opened between the dates of April 1, 2014 through May 15, 2015, it was noted that the department does not require a written application for service in order to open an account. The majority of requests for new and transferred accounts is received over the phone and is documented within the billing application. This process is not in compliance with the resolution. Recommendation To ensure compliance with County Resolution No. 89‐372, the Utilities department must require each account applicant to fill out and complete the necessary written application form prior to receiving services. Management Response Management concurs with this recommendation. Several years ago Utilities moved to an application for service over the phone as long as a customer agrees to a credit and/or identity check in compliance with the Federal Red Alert rule. As this required the applicant’s social security number the written application requirement was eliminated for security reasons. The provision for application for service will be added to Resolution 2013‐187, as may be amended, proposed for Board approval on November 6, 2016.


6. Security deposits waived without justification

Observation County Resolution No. 2013‐187, Section 9A, Security Deposit Fees, states that "Fees will be collected or billed upon application for service. Security deposits may be waived subject to applicant(s) satisfactory credit and verification of applicant(s) ownership of service location." During the opening of a new account, a credit check is performed and, if applicable, prior account history is reviewed to determine if the security deposit can be waived. The auditor selected a random sample of fifty (50) new accounts from the population of 15,036 that were opened between the dates of April 1, 2014 and May 15, 2015. During review of the fifty (50) sampled accounts, six (6) accounts did not indicate a credit check was performed to justify the waiver of the security deposit. Additionally, the verification of applicant’s ownership of the service location is not being performed. Recommendation To ensure compliance with County Resolution No. 2013‐187, implement a quality assurance process to review and make certain that credit checks and verification of applicant(s) ownership of service location is performed, reviewed, approved, and documented for each applicant. Management Response Management concurs with this recommendation. A daily report is generated of any utility account without a security deposit record or for which a security deposit was waived. This is reviewed by a supervisor to determine the valid security deposit status. Any non‐compliant waivers are corrected daily. Many customers contact our office to initiate service prior to property ownership/closing and therefore staff cannot determine property ownership at that time. Staff did not fully understand the change in Resolution 2013‐187 that the intent was that non‐owner customers could not get a security deposit waived under any circumstances without later providing proof of ownership. Also staff was not aware that prior payment history with Utilities did not qualify as “satisfactory credit” in order to waive the security deposit. Staff will be trained, and processes updated to be in compliance with the new policy once approved. A process will be created to confirm property ownership if required. Utilities is currently reviewing its security deposit policy for clarification, and anticipate the new resolution to be effective as of January 1, 2017.


7. Ability to manually override meter readings within the billing application

Observation Customer meter readings are uploaded nightly into the billing application and the resulting bills are generated the next day. County Resolution No. 89‐372, Section 4.40(4), states that “In the event of inability of Department to read a water meter due to destruction of the meter or interference with access to meter (fences, meter covered by shrubbery or debris, dog in yard, etc.), the customer will be billed for the monthly average consumption of the last three meter readings, but in no case less than the minimum monthly charge”. Although the resolution allows for the use of billing estimates, there are no guidelines addressing the repeated use of billing estimates. Utilities provided a report from the billing application that listed all billings that were based on estimates for the twelve month period covering April 1, 2014 through March 31, 2015. Of the 3,592 billings shown on the report, 1,021 represented 400 customers that were billed in this manner more than once in the twelve month period, with 121 occurrences in consecutive months. There were ten (10) customers that were billed based on estimates for all twelve months. We were advised that billers override consumption and/or enter meter readings into the billing application as needed to ensure that billings are timely, with limited oversight and monitoring. Recommendation Create and implement Standard Operating Procedures to define: (a) billing estimates, and (b) consumption overrides.

a) Procedures for billing estimates, at a minimum, should address items such as estimate guidelines, segregation of duties, monitoring of estimates, recording the reason for the estimates, and a documented review and approval process.

b) Procedures for consumption overrides, at a minimum, should address items such as override guidelines, segregation of duties, monitoring of consumption overrides, recording the reason for the overrides, and a documented review and approval process.

Management Response Management concurs with this recommendation. Utilities management is currently reviewing this billing process and creating Standard Operating Procedures and guidelines for, monitoring, tracking reasons, ensure segregation of duties, required documentation, and an approval process for consumption overrides and non‐software system estimates. The expected date of implementation is December 31, 2016.


8. Outstanding work orders for meter replacements

Observation Through the review of billing estimates and consumption overrides (see Opportunity for Improvement #7 – Ability to manually override meter readings within the billing application on page 19), the auditor identified twenty‐nine (29) accounts that were estimated for ten or more consecutive months between the dates of April 1, 2014 and March 31, 2015. The auditor was advised by management that the reason for at least seventeen (17) of these repeated estimates is that the meters are no longer functioning properly and need to be repaired or replaced. Twelve (12) of these meters have not functioned properly since June 2006, thus, all of the bills related to these meters and the County could be under or over billing. Recommendation To ensure efficient, accurate, and timely billing statements, identify and address all non‐functioning meters that need to be repaired or replaced. Implement a policy and procedure that outlines the required time frame in which a non‐functioning meter is to be repaired or replaced. Management Response Management concurs with this recommendation. An action plan has been developed and the non‐functioning meters are actively being replaced. To date, a total of eighteen (18) of the twenty‐nine (29) meters have been replaced. Ten (10) of those meters are from the group of twelve (12) listed above. The remaining two (2) from this group will be replaced before October 1, 2016. The remaining nine (9) meters will be replaced by December 2016. A departmental procedure will be created and documented for future non‐functioning meter issues.


9. Incorrect status for accounts previously written‐off

Observation When an account accrues monthly charges and payment is not remitted for the services provided, the billing application will track the delinquent status of the account, and after approximately sixty to ninety days service will be terminated at the location. The customer is allowed fourteen days to become current with their account, and if they fail to do this, the account will be sent to a collection agency. At this point, the account will be moved into a Collections status (denoted by a "C") within the billing application. Attempts are made for at least one year by the collection agency. The Accounting Policies and Procedures, Chapter 9.10 Uncollectible Accounts Receivable, requires that the Utilities department coordinate with the Office of Financial Management (OFM) to submit to the Board of County Commissioners (BCC) a resolution to write‐off any debts that are deemed uncollectible. Once the resolution is signed by the BCC and at the end of the fiscal year, all accounts approved to be written‐off will be moved into a written‐off status (denoted by a "W") within the billing application. Unless payment is remitted for the entire amount of the written‐off charges, an account in a "W" status must remain in a "W" status. The auditor selected a random sample of 100 accounts from a population of 973 accounts that had charges written‐off at the end of Fiscal Year 2014. The amount of balances written‐off was $213,126, and the amount of the balances written‐off for the random sample selected was $16,390. During review of the 100 sampled accounts, the auditor observed four (4) accounts, previously written‐off, listed in the billing application with a status other than "W", yet the old debt was not paid off. Recommendation To ensure accurate information in the billing application and make certain that accounts are only written‐off once, develop and implement a procedure to handle the maintenance of accounts that have been previously written‐off.


Management Response Management concurs with this recommendation. Each year utility accounts are moved to a Write‐off (“W”) status on 09/30 for the prior fiscal year after Board approval of uncollectable accounts receivables. This process writes off the utility billing system any amounts owed, changes the account status to a “W” and removes any open charges, therefore showing the account with a zero balance. Although written off, Utilities still pursues collections efforts though a private collection agency under contract, recording of liens, and performing lien searches for property sales. Upon collection of previously written off amounts the prior charges must be restored to the utility account to allow for payment of open charges. On occasion staff in error restored all charges previously written off although only a partial payment was received. Upon the payment being posted this left a balance on the account which was converted back to a “W” status. A monthly report is now being generated to track such occurrences and the software has been updated to allow partial restoration of charges which previously was not an option. Procedures have now been documented on how to restore charges and correct any charges restored in error prior to changing the account back to a “W” status on partial payments.


10. Reverse payments lack formal policy

Observation All refunds are to be reviewed by the Clerk Finance Department and if approved, checks are issued to each customer that is due a refund. During the course of the audit, the auditor was made aware of procedures used by the department that allows for refunding payments that were made by credit card or by electronic bank payment processes, whereby the full payment is reversed. The process does not allow for refunding partial payments. Not all reversed payments impact cash, but rather the balance of an account within the billing application. The auditor reviewed thirty‐one (31) of the 914 reversed transactions that occurred from April 1, 2014 through March 31, 2015, observing that nine (9) transactions appear to have circumvented the refund policy. It was determined that there is no formal policy regarding the reverse payments; however, there exists department operating procedures for processing reverse payments. Recommendation Create a policy for reverse payments and enhance the current operating procedures to address the following items:

1. Require that the reason for the reverse payment is documented, approved, and retained,

2. Outline who can perform reverse payments and under what circumstances, 3. Outline who can authorize reverse payments, and 4. Document the review and approval process prior to completing the reverse payment.

Management Response Management concurs with this recommendation. This process is being reviewed and a formal department policy will be created and implemented that includes that recommendations shown above. The expected date of implementation is December 31, 2016.


11. Terminating service for delinquent sewer‐only accounts

Observation For the majority of Utilities customers, each property will have a water meter installed on the property. The water meter tracks the water consumption at the property location and this consumption provides the basis for calculating the sewer consumption. However, if a property does not need water service, but needs sewer service, the owner may request to connect to the Sarasota County Utilities system for sewer‐only services. Sewer‐only accounts are billed a monthly flat rate based on their Equivalent Dwelling Unit. In the event that a sewer‐only customer does not pay their sewer bill and becomes delinquent, it then becomes difficult for the County to terminate service to the property. Currently, there is no policy, procedure, or process in place to terminate service to a sewer‐only account. As of July 20, 2015, there were a total of thirty (30) active delinquent sewer‐only accounts totaling $86,245.81 in past due services. Recommendation Create Standard Operating Procedures to define the process of terminating service for delinquent sewer‐only accounts. These procedures, at a minimum, should address items such as delinquency, the review and approval process, notification of service termination, and the service termination process. Management Response Management concurs with this recommendation. A new process has been implemented and procedures are currently being documented and updated. A team of both staff and management meet on a regular basis to review delinquent sewer only accounts requiring termination and discuss any issues and processes related those customers. Customers are being notified by certified mail and/or process service of the pending disconnection. All new sewer‐only connections are being required to install a sewer shut off valve in order to terminate service should the customer not pay the monthly bill.

The expected date of implementation is December 31, 2016.

audit of public utilities billing processes

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