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Dunedin audit prompted by utility billing error uncovers $1.5 million undercharge

DUNEDIN — Four hours into Thursday's City Commission meeting, after the mayor was applauded for his service to the library and the public had left City Hall, City Manager Rob DiSpirito began his biweekly update.

It wasn't pretty. An internal audit launched in the aftermath of a $700,000 billing error had discovered a new slip-up. Like the previous error, it started in the commercial utility rate and endured over several years. One big difference: its $1.5 million price tag.

Since 2002, city businesses have been charged for only half of what they owed for water and sewer use, an inadvertent steal that deprived the city of $221,000 a year.

As a fraction of Dunedin's $12 million in average annual utility revenues, that's a loss of about 2 percent a year. But in the shadow of layoffs, frozen pay and a tough forecast for next year's budget, the city staff has repeatedly stressed the importance of each taxpayer penny.

"The financial impact to the Utility Fund is unmistakable," DiSpirito wrote in a memo to the city staff. "This latest commercial account revelation, as disturbing as it is, reaffirms our commitment to … rebuild public trust in our entire billing system."

Both errors, DiSpirito said, started in the software, where utility workers now off the city's payroll entered incorrect rates for determining bills.

Before 2002, commercial users within city limits were charged bimonthly for their use. But the City Commission that year approved an ordinance to change that charge to monthly.

Like the initial error, that modification was never accounted for, and over seven years neither the utility division, nor the finance department, nor an auditing firm on contract with the city discovered the loss.

What kept the error hidden, DiSpirito said, were increasing payments from city growth, an 8 percent utility rate bump in 2002 and the fact that residential users, who make up the majority of the city's revenue, were correctly charged.

But where the initial mistake was met with fury from the dais — Commissioner David Carson said he was "thoroughly disgusted" by the mistake — the latest development, though more than the double the loss, was met with a tempered response.

"The first time it was somewhat shock," Carson said. "This time you sit back and say, 'oh well, what are you gonna do?' "

Local business leaders and one of the city's auditing firms may wonder that as well.

As with the first error, city officials could still decide to seek back pay from commercial users for the lost revenue. City Attorney John Hubbard has said it is within the city's legal right to charge for, at most, the last four years of underpaid bills.

Cristini and Associates, the auditing firm that Dunedin has paid for years to review its books, is still under contract to review Fiscal Year 2009's operations. The city has not yet signed a contract to renew the firm for 2010's records. The city staff is looking into filing a claim under an "error of omission" clause in Dunedin's insurance.

The utility division director, whose desk it appears was the origin for both mistakes, retired in 2007, DiSpirito said. He said he'd rather not share her name because he didn't have "perfect knowledge who was sitting in the chair when the mistake was made."

"Obviously this is bad news. More bad news. And it's especially frustrating that it occurred far back enough in time that … current staff is having to clean up the mess," said Vice Mayor Julie Scales, who called the initial error "embarrassing."

Still, with audits ongoing and other errors possibly still hidden, she sounded an optimistic note.

"The mistake was found. That's a positive."

Drew Harwell can be reached at dharwell@sptimes.com or (727) 445-4170.

Dunedin audit prompted by utility billing error uncovers $1.5 million undercharge 10/02/09 [Last modified: Friday, October 2, 2009 9:33pm]
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