Audit of Stormwater Management Utility

Transcription

1 Audit of Stormwater Management Utility City Council Presentation Tuesday, October 3, 2017 Lyndon S. Remias, City Auditor Gretchen Hudome, Deputy City Auditor Tim Bell, Senior Auditor Tony Gonzalez, Senior Auditor

2 Purpose City Council, by resolution adopted on April 18, 2017, requested an audit of the City's stormwater management utility. "Utility" means the enterprise fund created to operate, maintain, and improve the City's stormwater management system. This audit addresses the accounting for revenues collected by the utility and the use of the revenue for the general welfare, health, and safety of the City and its residents. 2

3 Scope and Objectives Scope Revenues and expenditures of the Stormwater Management Utility enterprise fund and stormwater-related capital projects for the period of July 1, 2016 through June 30, 2017 and multi-year analytics. Audit Objectives To ensure proper and appropriate assessment, accounting, and completeness of the City s stormwater management utility revenue. To ensure City s stormwater revenues are expended only for stormwater purposes and controls are in place for proper accounting for stormwater expenditures. To ensure the City s stormwater capital improvement program (CIP) revenues and expenditures are properly accounted for and appropriately managed. 3

4 Methodology To accomplish our objectives, we performed the following: Obtained and reviewed pertinent laws, regulations, policies, processes, and procedures regarding stormwater management through inquiry and examination of documents and data. Met with appropriate staff to discuss the City s stormwater management and capital improvement programs. Assessed whether design of the City s policies and processes are adequate to ensure compliance and reduce the risk of noncompliance and loss to an acceptable level. Performed analysis and tests of data designed to identify trends and highrisk criteria. Selected samples of stormwater revenues, expenditures, and capital improvement projects for review based on the results of our analysis. Traced our samples to documentation supporting compliance. Investigated anomalies/irregularities. 4

5 Background Stormwater management is the handling and/or managing of excess rainfall (runoff) in a manner that controls flooding and limits water quality degradation. An effective Stormwater Management Program addresses flood control, water quality and regulatory compliance, and infrastructure management including operations and maintenance. The City s Stormwater Management Utility was established by City Council ordinance in 1993 to provide for the general welfare, health, and safety of the City and its residents. The City s stormwater management goals include: o Promoting effective storm water drainage from developed areas to minimize flooding o Maintaining and protecting the City's long-term investment in its network of storm drains and related infrastructure o Improving the quality of the storm water discharged into the City's waterways o Informing and educating residents on storm water issues 5

6 Stormwater Management Utility Fees In accordance with City Code section , the City charges stormwater fees for each developed residential and nonresidential parcel. The party responsible for payment may be the owner, property manager, or the tenant. Effective July 1, 2017, the ERU rate increased from 43.3 cents per day to 45.8 cents per day. The stormwater fee is billed monthly as part of the City s combined services (water, sewer, stormwater and waste management) bill. The City switched from a bi-monthly to a monthly billing cycle on July 1, Public Utilities assumed full stormwater customer service and account management responsibilities from Public Works on July 1, Prior to FY17, Public Utilities was responsible for billing and customer service. Public Works was responsible for account management. 6

7 Stormwater Management Utility Fee Revenue Fee Revenue $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Fiscal Year Assessed Fees Collected Fees Daily Fee Daily Fee 7

8 Stormwater Management Utility The maintenance and repair of the current stormwater infrastructure system is accounted for in the Stormwater Management Utility Fund, and financed by stormwater utility fees The City s stormwater infrastructure includes: 1,200 miles of pipe 790 lakes and ponds 44 miles of canals 564 miles of ditches 38 dams and spillways 59,000 manholes and basins 15 pump stations Oceanfront Boardwalk and Seawall In FY17, there were 15,474 work orders completed for maintenance and repairs to the stormwater infrastructure throughout the City. 8

9 Legend FY18 Completed Work Order FY17 Completed Work Order Open Work Orders 9

10 Stormwater Management Utility 10

11 Stormwater Management Utility The Public Works Engineering Division oversees development and management of stormwater capital improvement projects, stormwater strategic planning, and the MS4 stormwater permit. The Public Works Operations and Maintenance Division does the actual hands-on maintenance of maintaining, cleaning, and repairing the various stormwater components. Each year, the fund transfers a budgeted amount for building and/or replacing additional stormwater infrastructure to sustain flood control functions, protect water quality, and maximize lifespan of the infrastructure to the Stormwater Capital Projects Fund. In FY17, maintaining the current stormwater system accounted for approximately $28,779,053 of $37,869,053 expended for stormwater while $9,090,000 was transferred to stormwater CIP projects. NOTE: FY17 Expenditure Amounts based on InSITE data extracts and reports as of August 6, 2017, prior to year-end closeout. 11

12 Stormwater Capital Improvement Program Stormwater infrastructure is the foundation that enables the City to manage stormwater runoff to control flooding and erosion and maintain water quality for its citizens and the environment. The acquisition, construction, expansion, rehabilitation, and upgrade of infrastructure are accomplished through CIP projects. Stormwater related capital project funding and expenditures are administered and accounted for separately through the Stormwater Capital Projects Fund. 12

13 Legend Operations and Maintenance Projects Water Quality Projects Flood Control Projects 13

14 Audit Results 1. Stormwater Revenue 2. Stormwater Expenditures 3. Stormwater CIP 14

15 Results: Stormwater Revenue At the time of our review, there were 131,164 active stormwater accounts. Active Stormwater Accounts by Service Type and ERUs Residential (RSTM) 49% Commercial (CSTM) 39% Service Type Number of Accounts ERUs Commercial (CSTM) 4,693 96,488.4 Government (GSTM) Multifamily (MSTM) 3,322 30,700.3 Multifamily (MSTM) 12% Government (GSTM) 0% Residential (RSTM) 123, ,112.3 Total 131, ,

16 Results: Stormwater Revenue We performed analysis and tests of data designed to determine the completeness and accuracy of the stormwater account data maintained within the Banner CIS system. We identified the following issues related to completeness and accuracy: Exception Type # Inactive Accounts without Corresponding Active Accounts 139 Possible Service Misclassification 37 Accounts with Active Service, Not Billed 13 Residential and Commercial Accounts Billed where ERU is less than 1 32 Accounts with Active Service, Not Billed in Last 90 Days 5 Accounts where Impervious Area and/or ERUs are Blank (See NOTE) 7 Erroneous GPINs 5 Inactive Accounts with Active Service 1 NOTE: Impervious area is used in the calculation of the stormwater rate 16

17 Results: Stormwater Revenue There were seven (7) accounts where the ERUs and/or the impervious surface area fields were blank. The impervious surface area is necessary for fee determination. These accounts were initiated in June 2017 using the newly implemented mobile dispatch capabilities, which allows field personnel to complete and close service orders in the work order system. Field results are automatically uploaded to Banner CIS. Public Utilities is currently working with the vendor to fix the problem and has implemented a manual workaround to ensure all required fields are populated until the issue is corrected. The accounts identified during our audit have been updated. For these seven accounts no revenue was lost. 17

18 Results: Stormwater Revenue We compared the Geographical Parcel Identification Numbers (GPIN) of active stormwater accounts to the City s Land Book data maintained by the Real Estate Assessor s Office to ensure completeness. We identified 2,051 parcels as high-risk with regard to not being charged stormwater fees based on our comparison of the GPINs of active stormwater accounts to the Land Book data. There were 37 parcels where the REA property type = commercial and the stormwater service type = residential. We selected a random sample of 100 of these high-risk parcels for further review. We determined that the stormwater fees for 90 (90%) of the parcels were exempt, currently being billed to a master account, or an account linked to an incorrect GPIN. Additional research and/or field verifications were requested for the remaining

19 Results: Stormwater Revenue We determined the FY17 total fees assessed and recorded to be reasonable given the total ERUs recorded. We recalculated the last billed stormwater amount for each active account in our extract to ensure accurate calculation and reasonableness. There were no exceptions. We traced properties with final plumbing and/or building permits issued in May 2017 to active stormwater accounts to ensure new accounts, when needed, were activated in a timely manner. There were no exceptions. Based on Public Utilities research and field verifications completed through September 22 nd, we have identified 21 additional ERUs amounting to $3,511 in annual billings. 19

20 Recommendations In order to ensure the accuracy and completeness of stormwater account information, management should: Review accounts identified as high-risk and exceptions noted to ensure account information is correct and stormwater fees are properly assessed. Implement a process to ensure changes to GPINs, including but not limited to splits and mergers, are promptly identified and recorded. 20

21 Audit Results 1. Stormwater Revenue 2. Stormwater Operating Expenditures 3. Stormwater CIP 21

22 Results: Stormwater Operating Expenditures The operating expenditures for the Stormwater Management Utility are those generated and accounted for by the various Stormwater budget units, while conducting stormwater-related activities including street sweeping; ditch maintenance; pipe cleaning; inspections of various stormwater infrastructure; pipe cave-in repairs; design, planning, and management of stormwater projects; and compliance with mandated stormwater regulations. Generally speaking, operating expenditures are the costs associated with those activities that maintain the current existing stormwater infrastructure. These expenditures are supported by the utility fees. 22

23 Results: Stormwater Operating Expenditures Per City Code, Chapter 32.5, Stormwater Management Utility, all revenues collected shall be used exclusively to provide services and facilities related to the stormwater management system. The revenues shall be used for the following: Acquisition of real or personal property, and interest therein necessary to construct, operate and maintain stormwater control facilities; The cost of administration of such programs, to include the establishment of reasonable operating and capital reserves to meet unanticipated or emergency requirements of the utility; Engineering and design, debt retirement, construction costs for new facilities and enlargement or improvement of existing facilities; Facility maintenance; Monitoring of stormwater control devices; and Pollution control and abatement, consistent with state and federal regulations for water pollution control and abatement. 23

24 Results: Stormwater Operating Expenditures Stormwater Management Utility Expenditures 24

25 Results: Stormwater Operating Expenditures FY17 Accomplishments Pipes and Catch Basins Cave Ins Ditches Pump Stations BMPs Spills Street Sweeping Dredging 660 linear feet of pipe installed 814 orders initiated 42.4 miles maintained 287 maintenance work orders completed 778 inspections of Citymaintained 60 cleaned up 13,512 miles of streets swept 11,935 cubic yards of Top 50 lakes dredged 1,451,831 linear feet of pipe maintained 753 orders completed 18.5 miles inspected 656 inspections of privately owned/maint ained 23,286 cubic yards of debris removed 203 catch basins repaired 32,316 cubic yards of material removed 25

26 Results: Stormwater Operating Expenditures FY17 Stormwater Management Utility Expenditures by Category Category FY17 Total % Salaries $9,984,942 26% * 1 Fringe Benefits 3,199,237 8% Contractual Services 6,835,076 18% * Internal Services 1,501,770 4% Other Charges 316,003 1% * Supplies 675,811 2% * Capital Outlay 1,718,918 5% Site Acquisition/Improvements 23,191 0% * Debt Service 1,507,031 4% Transfers to Other Funds 12,107,073 32% Total $ 37,869, % SOURCE: InSITE data extract of FY17 expenditures as of August 6, *Higher risk category * 1 Expenditures for Contracted Manpower deemed to be higher risk 26

27 Results: Stormwater Operating Expenditures We reviewed the stormwater expenditures to ensure City s stormwater revenues are expended only for stormwater purposes and controls are in place for proper accounting for stormwater expenditures. We identified trends and changes between FYs expenditure data to determine causes. We performed analysis of FY17 stormwater expenditures. Expenditure categories classified as high-risk were sampled for deeper review to determine if internal controls over expenditures were reasonably adequate to ensure compliance with the following criteria: Proper authorization; Payment amount and payee agreed with support documentation; Paid from original invoice; Charged to correct fiscal year; Charged to proper budget unit and account; Adherence to contract (if applicable) and the City s purchasing policy; Trace to workorder (if applicable). Review workorder for proper authorization and confirm activity is allowable use of stormwater funds. Adherence to City Code 32.5 criteria for stormwater expenditures. We identified no issues except as noted. 27

28 Results: Stormwater Operating Expenditures Contracted street sweeping In April 2016, the City awarded DeAngelo Brothers, LLC (DBi) the contract to sweep all of the City s residential streets (3,600 lane miles) with the goal of sweeping each street at least six (6) times a year on a bi-monthly basis. We reviewed all invoices and supporting documentation for contracted street sweeping. Supporting documentation included all areas swept by the contractor during the period of the invoice and was verified and confirmed by the contract management inspector. Contractor was compliant with contract terms and we noted no exceptions. 28

29 Results: Stormwater Operating Expenditures Transfers to Other Funds Include both recurring (budgeted) and one-time transfers for various purposes, such as: Reimbursement of Stormwater s share of direct costs incurred by other departments Transfer of funding to support Stormwater CIP Reimbursement of indirect costs based on annual cost allocation plan Transferred To FY17 Total Purpose Public Utilities/Water and Sewer Fund (Billing System) Parks and Recreation/ Landscape Services Information Technology/IT Core Services Planning Department/Stormwat er Regulations Public Works/Building Maintenance/Direct Costs General Fund/Indirect Costs Stormwater Capital Projects Fund Stormwater Capital Projects Fund Total Transfers $12,107,073 $911,134 Annual transfer of Stormwater Management Utility s portion of the costs incurred by Public Utilities for billing, customer service and account management (includes positions and system costs). $52,790 Annual transfer provides landscaping services on Stormwater s behalf of various locations such as Lynnhaven Mall and Town Center BMPs. $56,909 Annual transfer of Stormwater Management Utility s share of various computer and telecommunications services. $142,324 Annual transfer to Planning Department to cover the positions in the Development Services Center and Permits and Inspections supporting the increasing stormwater regulations. $17,916 One-time reimbursement of costs incurred for the renovation of office space for Surface Water Regulatory Compliance group. $1,836,000 Annual charge to cover Stormwater Management Utility s portion of the City's indirect costs (i.e., accounting, human resources, payroll, building maintenance, asset management, etc). $7,500,000 Annual budgeted transfer to the stormwater capital improvement program (CIP). $1,590,000 One-time transfer to Stormwater Capital Projects fund. On January 17, 2017, City Council appropriated this amount from the Stormwater Management Utility to the Elizabeth River TMDL Implementation Plan project. 29

30 Finding and Recommendation Finding: Electrical Services In our audit sample of Other Charges expenditures, we noted that Stormwater electricity charges were allocated to the Project Management budget unit. Project Management is under the Engineering Division of Public Works and is primarily involved with CIP projects and strategic planning of stormwater technical aspects, not ongoing charges after a project is completed. Review and payment of charges for electrical services is better suited to the operations side of Public Works and will enhance accountability and presentation in InSITE. The electrical service charges amounted to $53,390 for FY17. 30

31 Audit Results 1. Stormwater Revenue 2. Stormwater Expenditures 3. Stormwater CIP 31

32 Results: Stormwater CIP Stormwater has risen to one of the major categories of the City s CIP starting in FY18. Annual appropriations increased from $23,779,414 in FY17 to $43,063,514 in FY18, bringing total planned appropriations to $422,022,332. The Stormwater CIP is now the third highest among the ten CIP categories, behind Roadways and Schools. Financing for Stormwater CIP projects up to FY17 came from Stormwater Utility (SWU) Bonds and the Stormwater Management Utility (SWU) Fund. In the subsequent six (6) fiscal years beginning with FY18, the increased investments in these CIPs will be funded by increases in SWU Bond financing and Stormwater Management Utility Fund contributions, and additional funding from the General Fund Pay-As-You-Go allocation. 32

33 Results: Stormwater CIP Project Type Past Appropriations FY18 Un-Appropriated Subsequent Years FY19 FY20 FY21 FY 22 FY23 Total SW Utility 7,500,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000, ,484,774 SWU Bonds 30,143,013 30,243,013 30,843,013 33,243,013 30,843,013 31,843,013 General Fund Pay-As-You- Go Other Sources (Federal, State, Private) 386,142,852-5,420,501 5,420,501 5,420,501 5,420,501 5,420,501 5,420,501 32,523,006 3,356, ,356,474 Total 154,841,248 43,063,514 43,663,514 44,263,514 46,663,514 44,263,514 45,263, ,022,332 33

34 Results: Stormwater CIP We performed the following procedures to determine that revenues and expenditures for stormwater capital projects are appropriately authorized, managed, and recorded. Reviewed supporting documentation of FY17 funding transactions for accuracy and completeness. Conducted visits to several active project sites, performed walkthroughs about internal controls over contracting process, project management, monitoring of contractors, records maintenance, review of invoices, and tracking project activities/finances. Tested a sample of expenditure invoices to determine that amounts/quantities were accurate/complete, reasonableness, correctly recorded to the right account/activity/project, and that CIP was sufficiently funded. Reviewed supporting documentation to ensure financial-related closeout procedures were properly performed and recorded in InSITE. There were no exceptions. 34

35 Audit Conclusion Based on our analysis and tests of the City s stormwater management utility revenue, we determined revenues to be properly and appropriately assessed, accounted for and, except as noted, to be substantially complete. Our audit analysis of stormwater management expenditures did not find significant issues. We determined the internal controls over the stormwater expenditure process were adequate and the expenditures were exclusively to provide services and facilities related to the stormwater management system in compliance with the City Code. We also determined that the stormwater capital improvement program revenues and expenditures were appropriate, properly accounted for, and appropriately managed. Overall, we determined that the City s Stormwater Management Utility system of internal controls and oversight over its financial operations is working effectively. 35

36 What Can You Do? REPORT ISSUES! FOR ASSISTANCE WITH Flooding Street Sweeping Storm Drains Caved In Pipes or Structures Lake Vegetation and Dredging Ditch Maintenance Mosquito Control Spills in the Drainage System CONTACT: Public Works/Operations at City Information at Online at VB Works (Free app in your App Store) 36

37 What Can You Do? ONLY RAIN DOWN THE DRAIN! Never allow anything other than rain to enter the storm drain; no grass clippings, leaves, trash, etc. Dispose of yard waste in clear plastic bags for city pickup on regular trash day Don t put yard debris bags out days ahead of your trash pickup days On rainy trash pickup days, be sure your bags aren t in the gutter line or at a storm drain catch basin Keep storm drains and gutters clean yard waste, trash, and dirt will clog the storm drain system. Protect our canals and lakes don t put yard debris, trash, or dirt on their banks or in them Contact Public Works Real Estate ( ) before placing items in city easements such as sheds, decks, docks, bulkheads, rip rap, etc. 37

38 Questions? For further information please contact: Lyndon S. Remias, City Auditor Office of the City Auditor Visit our website at 38