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Dunedin utility department's collection errors look suspicious

The discovery of another collection error in the Dunedin utility department — this one worth $1.5 million — should deepen city officials' concerns about the financial management of city accounts and the quality of auditing the city has been receiving.

The first goof was revealed early last month. For six years, the city failed to charge commercial property owners the proper stormwater utility rate. The problem began in 2003, when the City Commission raised the stormwater utility fee $1.50, to $4.50. Someone in the utility department levied only a 15-cent increase on commercial customers.

In 2005, the city raised the rate again, to $6. But the utility department levied the increase on only residential properties. Commercial property owners didn't pay a penny more.

The lost revenue to the city utility fund totaled $700,000.

Last week another, even bigger, error was revealed. Since 2002, commercial property owners have been charged only half what they should have paid for water and sewer. That's because in 2002, the city switched to monthly billing, rather than once every two months. But the billing change never was implemented on commercial accounts. That error, over the seven years, cost the city $1.5 million.

The first error easily could be chalked up to unintentional human error — a misplaced decimal point, perhaps. But that assumption is not so easily made now.

Consider: Three errors were made — in 2002, 2003 and 2005. In all three cases, the errors spared commercial ratepayers, while the correct increase was levied consistently on residential property owners. The errors were in two different utilities: stormwater, and water and sewer. And the rate changes were approved in well-publicized public hearings. City staffers, especially those working in utility billing, should have been thoroughly familiar with the increases.

It is also curious that over the course of seven years, none of the billing errors was discovered by the budget director or the finance director or by the external auditor who has audited the city's accounts annually for years.

The people who worked for the city during the times the errors occurred no longer work there. They were part of a previous administration. It was the current staff under City Manager Rob DiSpirito that discovered the errors.

DiSpirito seems convinced the errors were just that — errors. For example, he said the $1.5 million problem began with an outdated algorithm in a formula used to calculate commercial rates.

DiSpirito also explains that it was easy to miss the shortfall in revenue because commercial properties account for only 32 percent of the customer base in Dunedin, the number of residential customers was growing and thereby growing the fund, and the residential rate increases were building the fund balance as well.

Perhaps carelessness is the sole reason for the series of errors that resulted in a nice savings for commercial property owners. However, city officials need to make sure of that.

The city also should avoid signing another contract with the same firm that has done its annual external audits for years. Even if it was impossible for the auditor to detect these particular errors, there is something to be said for letting fresh eyes examine the books and procedures every few years.

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Dunedin utility department's collection errors look suspicious 10/05/09 [Last modified: Monday, October 5, 2009 8:09pm]

    

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