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New York City Comptroller William C. Thompson, Jr. today issued an audit identifying how the City’s Department of Environmental Protection (DEP) had failed to collect more than $13.4 million in water and sewer charges from dozens of private hospitals in the city.

“The Department of Environmental Protection does not make timely and appropriate collection efforts,” Thompson said. “Given that a number of hospitals are now in bankruptcy or are recommended for closure, the DEP may never be able to recover all of the money it is owed.”

According to the audit – available at www.comptroller.nyc.gov - the 58 private hospitals in the city had outstanding water and sewer charges totaling $13.4 million ($14.7 million owed less $1.3 million credit balances) as of June 30, 2007.

Although 26 hospitals paid all or nearly all of their outstanding balances within one month, 32 did not pay off the balances. These 32 had outstanding charges totaling $12.6 million ($13 million owed less $354,912 credit balances) and have made payments totaling only $2 million by July 31, 2007.

Only private hospitals are directly responsible for water and sewer charges. DEP maintains customer account information, bills customers for the charges and tracks payments in its Customer Information System (CIS). The audit covered January 2004 to June 2007.

Auditors determined that in general DEP was billing hospitals for water and sewer charges in accordance with its policies and procedures and its Collection Department sent out notices of delinquency every 30 days. However, there were “significant internal control weaknesses” regarding collection practices, including:

DEP cannot readily identify all hospital accounts. Therefore, it cannot track outstanding hospital water and sewer charges efficiently and effectively. Auditors identified 313 hospital accounts not included in the DEP’s Management Analysis Unit (MAU) report used to track such charges. As of June 30, 2007, outstanding charges on these accounts totaled about $2.2 million, including:

• Eight NYU Hospitals Center accounts with outstanding charges totaling $963,421.
• Four Brookdale Hospital Medical Center accounts with outstanding charges totaling $461,201.
• Four Interfaith Medical Center accounts with outstanding charges totaling $246,409.

DEP cannot aggregate charges common to a single customer. According to DEP officials, collection efforts should begin when customers owe $50,000 or more for more than 30 days. But since charges are not aggregated and the MAU’s report does not include all hospitals and their associated accounts, DEP is not aware of when the $50,000 threshold is actually met. Hospitals may not even be aware of their total outstanding charges because they do not receive comprehensive bills.

Maimonides Medical Center receives 49 different bills at 22 addresses and as of June 30, 2007 had outstanding charges totaling $493,548. If DEP were able to aggregate charges and send comprehensive bills. DEP could more effectively monitor outstanding charges and hospitals could better grasp the magnitude of their outstanding charges.

DEP has not instituted written collection policies and procedures for its staff to follow when billing and pursuing collection from hospitals. DEP officials indicate that hospital and health care facility property accounts are not subject to DEP’s standard collection policies and procedures.

The Comptroller made nine recommendations, urging DEP to: pursue collection of the total outstanding water and sewer charges from private hospitals; create a comprehensive list of all private hospital accounts by surveying hospital properties and identifying all meters and their associates accounts; make timely and appropriate collection efforts; investigate the feasibility of aggregating private hospitals’ water and sewer charges and sending comprehensive bills to designated private hospital officials; and, institute written policies and procedures that address the duties and responsibilities of key employees responsible for the billing of private hospitals and the collection of charges due.

In its response, DEP agreed with all of the Comptroller’s recommendations.

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