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The Department of Environmental Protection (DEP) is failing to ensure that it properly identifies properties whose accounts should be billed for water and sewer charges – in some cases for as long as 15 years, according to an audit released today by New York City Comptroller William C. Thompson, Jr.

“My audit uncovered a pattern of lapses: properties that were incorrectly placed on inactive status, deficient files, and poor monitoring of water use,” Thompson said. “As a result of this incredibly lax oversight, the City lost out on potentially collecting hundreds of thousands of dollars, and cannot even try to recoup much of this money because the law prohibits collections beyond four years. At a time when the mayor is threatening tax increases and layoffs to close a budget gap, the city is letting all of these previous dollars go down the drain.”

Thompson’s audit, which can be viewed at www.comptroller.nyc.gov, offered several examples from the audit sample of such properties around the city. One example – the Old Westminster Church in Carroll Gardens, Brooklyn – had maintained its exempt status, even though it had been converted into a residential apartment building since June 1993.

“Because it did not periodically review exempt accounts to ensure that they are still properly categorized, DEP did not bill this account for 15 years, an estimated loss of more than $70,335 in water and sewer charges,” Thompson said. “Due to the four-year limitation, only $22,235 of this past-due balance can be recouped.”

“Without significant improvement to DEP’s internal control measures, there is an increased risk that accounts may not be billed for water and sewer use and monies due the City will go uncollected,” he added.

Furthermore, Thompson’s audit found that DEP needs to improve its monitoring of accounts: there was untimely or lack of completion of work related to meters or remotes and accounts with three or more consecutive estimated bills were not always investigated as required.

“I urge DEP to implement an adequate tracking system for monitoring overdue work orders related to meters or remotes,” Thompson said. “Additionally, DEP should implement formal procedures for calculating estimated bills in which the average amount of water use is computed manually, and for assessing whether properties are eligible for exemption from payment of water and sewer charges.”

DEP protects the environmental health, welfare, and natural resources of New York City and its residents. Among its responsibilities, DEP manages the City’s water supply, which provides more than a billion gallons of quality drinking water daily serving half the population of New York State. It also manages 14 wastewater (sewage) treatment plans in the City as well as 9 treatment plants outside the City.

In addition, DEP is responsible for the billing and collecting of water and sewer charges from all properties within the City. Approximately 90 percent of the City’s water and sewer charges are from residential property owners.

DEP’s Bureau of Customer Service (BCS) handles customer billing matters and complaints. It maintains customer, premise, and utility information, updating it when there is a change in property ownership or in an owner’s mailing address. BCS verifies water meter accuracy, inspects meter and remote receptacles to installations, repairs and replaces malfunctioning meters and remotes, and issues permits to plumbers for various types of water and sewer services.

BCS uses the Customer Information System (CIS) to maintain information for the billing and collection of water and sewer charges for all properties. Relevant information for each property is entered into the system. A property that uses water and sewer service is placed on active status in CIS, and the account is generally billed for water and sewer charges. When a property’s water service has been terminated or a property has been demolished, the account is placed on inactive status in CIS and is not billed for water and sewer charges.

According to CIS, during Fiscal Year 2007 there was a total of 765,431 accounts associated with residential properties citywide that were billed approximately $1.4 billion in water and sewer charges.  The audit looked at 50 accounts covering 204 bills to determine whether DEP accurately calculated the water and sewer charges.  The audit also looked at 99 inactive accounts and 71 exempt accounts to determine whether they qualified for such status.  

“Our audit found four accounts that were incorrectly placed on inactive status and should be billed for water and sewer charges,” Thompson said. “Similarly, auditors found three accounts that were exempt from water and sewer charges that should not be. It is imperative that DEP investigate these accounts and, if warranted, start billing the accounts in order to recoup money owed for unbilled records.”

Thompson made 23 recommendations as a result of the audit, including that DEP should:

• Create a tracking system that would effectively monitor the inactive accounts. This system should include, but not be limited to: the date the account becomes inactive, the reason the account has become inactive, and an indication of whether or not the account will permanently remain on inactive status.
  
  
• Establish formal procedures for calculating estimated bills in which the average amount of water use is computed manually rather than automatically in CIS. The procedures should include all of the situations in which bills would be manually estimated and the appropriate methods for their calculations.
  
  
• Develop and implement written procedures for the Exemption Unit. The procedures should include the steps that the Exemption Unit needs to take to ensure compliance with the rules governing exempt properties in the New York State Law and the City Administrative Code. Among the procedures should be those for handling new organizations requesting exemption from the payment of water and sewer charges and periodically reviewing organizations that have already been granted exemptions to ensure that all of them should continue to be exempt.
  
  
• Improve its oversight of accounts to ensure that work related to the installation, repairing, or replacement of meters or remotes is completed in a timely manner and that accounts receiving three or more consecutive estimated bills are investigated.
  
  
• Ensure that a work order is closed and indicates a resolution when DEP has completed the work and performed the work under another work order.

DEP officials agreed with 19 of the 23 audit recommendations and disagreed with the remaining 4 recommendations.

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