0 | Unannounced Audit of Petty Cash and Change Funds February 2016 111 Karen E. Rushing Clerk of the Circuit Court and County Comptroller Office of the Inspector General Sarasota County, Florida Audit of Public Utilities Billing and Collection Processes August 2024
1 | Audit of Public Utilities Billing and Collection Processes July 2024 Contents Executive Summary 2 Background and Objectives 3 Opportunities for Improvement and Management Responses 7 Audit Services Jeffrey Lilley, CPA, CIG Director of Internal Audit and Inspector General Auditors Sofya Bogdanova, CFE, CIGA, CIGI, CGI Internal Auditor/Investigator Blake Withee Internal Auditor/Investigator Please address inquiries regarding this report to Jeffrey Lilley, by e-mail at jlilley@sarasotaclerkandcomptroller.com or by telephone at (941) 650-0948. This and other reports prepared by the Office of the Inspector General are available at http://www.sarasotaclerk.com/inspectorgeneral/inspector-general-audit-reports.
2 | Audit of Public Utilities Billing and Collection Processes July 2024 Executive Summary As part of the Annual Audit Plan, the Clerk of Circuit Court and County Comptroller’s Internal Audit Department and Office of the Inspector General conducted an independent audit of the Public Utilities Billing and Collection Processes. The purpose of the audit was to review internal controls and test compliance with applicable laws, ordinances, and policies and procedures related to Public Utilities Billing and Collection Processes. The audit identified the following deficiencies: • Non-Compliance with County Resolution No. 2022-185, Order Adopting and Ratifying Water, Wastewater, Reclaimed Water, and Other Utility Rates, Fees, and Charges for the Sarasota County Utilities System, regarding security deposit fees • Non-Compliance with Standard Operating Procedure 520.56.1, Setting Up New Commercial Accounts, regarding attaching required documentation in billing system and inconsistency with Standard Operating Procedures for creating new customer accounts • Non-Compliance with County Resolution No. 2022-186, Adoption of Sarasota County Public Utilities Department Water and Wastewater Rules and Regulations, regarding refund processing • Lack of formal policy for refund processing • Lack of formal policy regarding terminating service for delinquent sewer‐only accounts Lack of compliance with Sarasota County Utilities Department Rules and Regulations regarding Public Utilities Billing Processes could result in a higher level of reputation and public relations risk. Additionally, a failure to address issues related to termination of sewer only delinquent accounts could result in the county under-collecting funds for services rendered.
3 | Audit of Public Utilities Billing and Collection Processes July 2024 Background and Objectives The Clerk of the Circuit Court and County Comptroller’s Internal Audit Department and Office of the Inspector General has completed an audit of Public Utilities Billing and Collection Processes. The audit was planned and conducted in conformance with the International Standards for the Professional Practice of Internal Auditing (Standards). Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. The purpose of the audit was to review compliance with applicable county ordinances, and policies and procedures related to utility billing. Background Sarasota County’s Public Utilities Department maintains and operates approximately 100,000 water connections, 88,000 waste water connections and 4,000 reuse connections. Each of the 100,000 water connections has a coordinating water meter. Each meter is assigned to a specific billing cycle and route. Meters are read monthly, based on their geographic location, by eleven meter readers. Readings taken during the day are uploaded nightly into the billing application, with the monthly bill generated the following day. The Board of County Commissioners (BCC) has adopted the following County Resolutions: • No. 2022-186, Adoption of Sarasota County Public Utilities Department Water and Wastewater Rules and Regulations. Adopted 30th of August, 2022. • No. 90‐036, Adoption of the Establishment of a Minimum Interest Rate on Customer Deposits under “Sarasota County Water and Sewer Franchise Utility Rules & Regulations.” Adopted 6th of February, 1990. • No. 2021-140, Adoption of the Sarasota County Utilities System Water and Wastewater Equivalent Dwelling Units Table. Adopted 24th of August, 2021. • No. 2020-156, Adoption of the Sarasota County Public Utilities Adjustment Policy. Adopted 7th of July, 2020. • No. 2022-185, Adoption of Ratifying Water, Wastewater, Reclaimed Water and other Utility Rates, Fees and Charges for the Sarasota County Utilities System. Adopted on 30th of August, 2022. • No. 2023-148, Adoption of Ratifying Water, Wastewater, Reclaimed Water and other Utility Rates, Fees and Charges for the Sarasota County Utilities System. Adopted on 12th of September, 2023.
4 | Audit of Public Utilities Billing and Collection Processes July 2024 County Resolution No. 2022-186 is a set of rules and regulations applicable to the Public Utilities Department, which is necessary for proper administration, management, and operations of the department. This resolution enhances the ability of both the BCC and the department to regulate, operate, and provide efficient utility services to existing and future customers served by the county owned system. County Resolution No. 90‐036 established that the Public Utilities Department is required to pay a minimum interest rate of five percent (5%) on customer’s security deposits. Security deposits are collected or billed upon application for service. Sarasota County reserves the right to add or increase a deposit due to meter tampering, discontinuance of service, history of late payments on existing or prior account(s) or non‐payment of account and may hold the deposit until the account is closed. County Resolution No. 2021-140 established that the Public Utilities Department is required to impose and collect capacity fees on new connections to the Utilities System. The resolution contains one exhibit A. Exhibit A represents a fillable form that contains formulas and instructions that must be completed by customers in order to assess the utility capacity and connection fees and to apply for a permit to connect to the county's utility system. County Resolution No. 2020-156 adopted a uniform adjustment policy in order to establish guidelines for making adjustments to the utility bills of customers. The policy established customer eligibility, customer requirements, and adjustment procedures for water bills, sewer bills, undercharges, overcharges, late charges, miscellaneous charges, other adjustments, and unexplained one-time only usage adjustments. County Resolutions No. 2022-185 and No. 2023-148 adopted and ratified water, wastewater, reuse, and other utility rates, fees, and charges. This Resolution contains three (3) exhibits. • Exhibit A – This exhibit defines the monthly billing charge, water, wastewater, reuse, septage receiving, fire safety (fire lines), fire hydrant meters, security deposits, and miscellaneous rates, fees, and charges for the majority of customers. • Exhibit B – This exhibit defines the capacity fees for water and wastewater customers. • Exhibit C – This exhibit defines the fees for building permits, utility construction permits and inspection fees. Objectives, Scope and Methodology The objectives of this audit were to determine if the Public Utilities billing processes are operating efficiently and effectively and in compliance with relevant Accounting Policies and Procedures, as well as the following County Resolutions: • No. 2022-186, Adoption of Sarasota County Public Utilities Department Water and Wastewater Rules and Regulations. Adopted 30th of August, 2022.
5 | Audit of Public Utilities Billing and Collection Processes July 2024 • No. 90‐036, Adoption of the Establishment of Minimum Interest Rate on Customer Deposits under “Sarasota County Water and Sewer Franchise Utility Rules & Regulations.” Adopted 6th of February, 1990. • No. 2021-140, Adoption of the Sarasota County Utilities System Water and Wastewater Equivalent Dwelling Units Table. Adopted 24th of August, 2021. • No. 2020-156, Adoption of the Sarasota County Public Utilities Adjustment Policy. Adopted 7th of July, 2020. • No. 2022-185, Adoption of Ratifying Water, Wastewater, Reclaimed Water and other Utility Rates, Fees and Charges for the Sarasota County Utilities System. Adopted on 30th of August, 2022. • No. 2023-148, Adoption of Ratifying Water, Wastewater, Reclaimed Water and other Utility Rates, Fees and Charges for the Sarasota County Utilities System. Adopted on 12th of September, 2023. The scope of the audit included a review of customer accounts within the billing application, including utility billing statements, for the period of January 01, 2023 through December 31, 2023. The methodology used to meet the objectives of the audit and the procedures performed included, but were not limited to, the following: • Inquiries of county personnel. • Walkthrough of the utility billing process. • Reviewed policies and procedures, and evaluated internal controls, related to: o Billing statements; o Interest paid on deposits; o Adjustments; o Payment plans; o Opening new accounts; o Security deposits; o Account write offs; o Refunds; o Delinquent accounts; o Disconnect policies; o Billing estimates; • Examined the following items: o A random sample of 130 billing statements between the dates of January 01, 2023 through December 31, 2023. o A systematic random sample of 100 accounts with active deposits that had interest paid between the dates of January 01, 2023 through December 31, 2023. o A random sample of 50 adjustments within the billing application between the dates of January 01, 2023 through December 31, 2023. o A random sample of 29 payment plan agreements between the dates of January 01, 2023 through December 31, 2023.
6 | Audit of Public Utilities Billing and Collection Processes July 2024 o A random sample of 50 new accounts opened between the dates of January 01, 2023 throught December 31, 2023. o A systematic random sample of 50 active security deposits between the dates of January 01, 2023 through December 31, 2023. o A random sample of 30 accounts that had charges written‐off at the end of Fiscal Year 2023. o A systematic random sample of 100 accounts with credit balance refunds issued between the dates of January 01, 2023 through December 31, 2023. o A random sample of 70 delinquent accounts between the dates of January 01, 2023 through December 31, 2023. o A random sample of 20 disconnected accounts between the dates of January 01, 2023 through December 31, 2023. o A total of 7 estimated billing accounts within the billing application between the dates of January 01, 2023 through December 31, 2023. o A total of 60 estimated billing accounts based on previous months consumption within the billing application between the dates of January 01, 2023 through December 31, 2023. • Identified opportunities for improvement.
7 | Audit of Public Utilities Billing and Collection Processes July 2024 Opportunities for Improvement and Management Responses The audit disclosed certain policies, procedures, and/or practices that could be improved. The audit was neither designed nor intended to be a detailed study of every relevant system, procedure, or transaction. As a result of the audit, observations and recommendations identified below are related to Standards: International Professional Practice Framework Standards (2017) • (Standard 2110) Communicating risk and control information to appropriate areas of the organization, and • (Standard 2130.A1) The effectiveness of controls related to operations and programs, reliability and integrity of financial and operational information, and compliance with laws, regulations, policies, procedures, and contracts. Global Internal Audit Standards (2024) • (Standard 9.1) Communicates risk and control information throughout the organization. • (Standard 9.1) To understand risk management and control processes, the chief audit executive must consider how the organization identifies and assesses significant risks and selects appropriate control processes. This includes understanding how the organization identifies and manages the following key risk areas: Effectiveness and efficiency of operations and programs, Reliability and integrity of financial and operational information, Safeguarding of assets and Compliance with laws and/or regulations. The Opportunities for Improvement presented in this report may not be all-inclusive of areas where improvement may be needed. There were five (5) Opportunities for Improvement identified as a result of the audit: 1. Non-Compliance with County Resolution No. 2022-185, Order Adopting and Ratifying Water, Wastewater, Reclaimed Water, and Other Utility Rates, Fees, and Charges for the Sarasota County Utilities System, regarding security deposit fees with one (1) instance of an incorrect security deposit charged to a customer 2. Non-Compliance with Standard Operating Procedure 520.56.1, Setting Up New Commercial Account, regarding attaching required documentation in the billing system and inconsistency with Standard Operating Procedures for creating new customer accounts
8 | Audit of Public Utilities Billing and Collection Processes July 2024 3. Non-Compliance with County Resolution No. 2022-186, Adoption of Sarasota County Public Utilities Department Water and Wastewater Rules and Regulations, with one (1) instance of a customer not credited a required refund 4. Lack of formal policy or Standard Operating Procedures regarding issuance of customer refunds 5. Non-Compliance with County Resolution No. 2022-186, Adoption of Sarasota County Public Utilities Department Water and Wastewater Rules and Regulations, regarding terminating service for delinquent sewer‐only accounts
9 | Audit of Public Utilities Billing and Collection Processes July 2024 1. Non-Compliance with County Resolution No. 2022-185, Order Adopting and Ratifying Water, Wastewater, Reclaimed Water, and Other Utility Rates, Fees, and Charges for the Sarasota County Utilities System, regarding security deposit fees with one (1) instance of an incorrect security deposit charged to a customer Observation Sarasota County Resolution No. 2022-185 was adopted to establish and ratify water, wastewater, reclaimed water, and other utility rates, fees, and charges for the Sarasota County Utilities System and was part of the county’s efforts to ensure appropriate pricing and cost recovery for utility services provided to residents and businesses. It is important to note that County Resolution 2023-148 superseded County Resolution 2022-185, however, it was not effective until October 1, 2023, and the discrepancy was created prior to this date. One of the fees listed within the Resolution is the security deposit fees. Security deposit fees are collected upon service application and are based on water meter sizes. The auditor selected a stratified sample of fifty (50) accounts out of a population of 10,850 with a security deposit that was charged in 2023. During the review of the fifty (50) sampled accounts, observations included one (1) security deposit not in compliance with County Resolution No. 2022-185. A customer was charged $1,200.00 as a security deposit instead of the correct amount of $3,000.00, leaving a difference of $1,800.00. A-lower-than required security deposit may not cover the cost if a customer defaults on their payments, leaving the Public Utilities Department with a financial loss and causing additional administrative burden to help recover these costs. The discrepancy was observed after the account was finalized and the security deposit was refunded. Recommendation • Due to the account already being finalized, there is not an opportunity to correct this specific matter. However, the Public Utilities Department should continually train staff responsible for account setup and billing to ensure they are fully aware of the security deposit requirements and its correct application. • The Public Utilities Department could enhance the billing system to automatically flag or prevent the processing of amounts with incorrect security deposit amounts once the meter sizes are inserted into the billing system. This can help reduce human error and ensure compliance with County Resolution 2023-148. Management Response Training Enhancement: Call Center leadership will periodically provide documented refresher training to staff to ensure deposit requirements are assessed in compliance with County Resolution 2023-148. Completion Date: Friday, July 19th.
10 | Audit of Public Utilities Billing and Collection Processes July 2024 Customer Information System Upgrade: Sarasota County Public Utilities has initiated the process of upgrading the Customer Information System (CIS) from Naviline to Itineris UMAX. This new CIS offers significant enhancements, including the capability to ensure that deposits are correctly assessed based on the type of service selected for connection, thereby preventing future deposit collection errors. Completion Date: October 2025.
11 | Audit of Public Utilities Billing and Collection Processes July 2024 2. Non-Compliance with Standard Operating Procedure 520.56.1, Setting Up New Commercial Account regarding attaching required documentation in the billing system and inconsistency with Standard Operating Procedures for creating new customer accounts Observation Standard Operating Procedure 520.56.1, Setting Up New Commercial Account, outlines the stepby-step process that a Customer Service Representative utilizes to ensure consistent, efficient and compliant setup of utility services for new commercial customers. One of the requirements within the Standard Operating Procedure is the Customer Service Representative shall “Attach any documents such as lease, deed, letters of authorization, Sunbiz.org info, etc.” into the billing system. After reviewing Standard Operating Procedure 520.54.1, Setting up New Residential Accounts, it was found that it did not explicitly require Customer Service Representatives to attach supporting documentation into the billing system. The auditor inquired whether this requirement also applied to residential accounts and management confirmed this step is necessary for the creation of new residential and commercial accounts. The auditor selected a random sample of fifty (50) newly opened residential and commercial accounts out of a population of 7,359 accounts from 2023. During the review of the fifty (50) sampled accounts, it was observed that thirty-six (36) accounts did not include a copy of the customer’s application in the billing system and six (6) accounts did not include a copy of the customer’s deed, lease, or rental agreement in the billing system. These documents provide evidence that the customer was originally eligible for service and where pertinent information was obtained. Recommendation • To ensure consistency with creating customer accounts, the Public Utilities Department should amend their Standard Operating Procedure 520.54.1, Setting up New Residential Accounts, to add the process of attaching required documentation into the billing system. • The Public Utilities Department should continually train staff responsible for opening new accounts to ensure they are aware of the requirements of opening a new account. • Public Utilities Department could enhance the billing system to automatically flag the account if no attachments were included upon creation of the account. Management Response Training Enhancement: Call Center leadership will periodically provide refresher training to staff to ensure that all required documentation for establishing an account is attached in compliance with County Resolution 2023-148.
12 | Audit of Public Utilities Billing and Collection Processes July 2024 Completion Date: Friday, July 19th. Customer Information System Verification: Sarasota County Public Utilities technology staff is working closely with the new CIS (Itineris UMAX) to ensure that required documents are verified and attached before completing the establishment of an account. Completion Date: October 2025.
13 | Audit of Public Utilities Billing and Collection Processes July 2024 3. Non-Compliance with County Resolution No. 2022-186, Adoption of Sarasota County Public Utilities Department Water and Wastewater Rules and Regulations, with one (1) instance of a customer not credited a required refund Observation Sarasota County Resolution No. 2022-186 was adopted to establish rules and regulations for the operation of the Sarasota County Utility System. Within the Resolution, it states “In the event of an overbilling, the Department shall refund the overcharge to the Customer based on available records. If the commencement date of the overbilling cannot be determined, then an estimate of the overbilling shall be made based on the Customer’s past consumption.” The auditor selected a stratified sample of one hundred (100) accounts out of a population of 4,361 accounts that were credited a refund. During the review of the one hundred (100) sampled accounts, observations included one (1) refund not in compliance with County Resolution No. 2022-186. A customer remitted a payment of $634.40 for a closed account without any outstanding bills or balances. Despite roughly four (4) months passing since the payment, no refund was issued to the customer. Recommendation Upon notification of the discrepancy to the Public Utilities Department, the refund was promptly issued and the matter was corrected. The Public Utilities Department could enhance the billing system to automatically flag an account if a payment is made to a finalized account and requires a review to determine if a refund can be issued. Management Response Sarasota County Resolution No. 2022-186 addresses refunds due to overbilling. While the resolution does not specifically cover overpayments due to customer error, the Utility agrees that a mechanism should be in place to review and refund accounts closed with a credit balance. The Utility’s technology team is developing a Cognos Report that will provide the call center team with this information weekly. Additionally, the new CIS (Itineris UMAX) will be designed to automatically issue a refund request for any account that has been finalized for 30 days and maintain a credit balance. Completion Date: Friday, July 19th.
14 | Audit of Public Utilities Billing and Collection Processes July 2024 4. Lack of formal policy or Standard Operating Procedures regarding issuance of customer refunds. Observation The Public Utilities Department lacks a formal policy or standard operating procedure regarding refunds. Having a policy or procedure is essential for maintaining consistency, efficiency and accuracy when processing refunds. It ensures that refunds are processed the same across different transactions and circumstances and helps streamline internal processes, reducing the likelihood of errors or delays when processing refunds. Recommendation To ensure consistency and accuracy of refunds, the Public Utilities Department should implement a Standard Operating Procedure for a refund policy. Management Response Call Center leadership is working on a formal Standard Operating Procedure (SOP) for refunds to ensure consistency and accuracy in processing. They are also working with the new CIS (Itineris UMAX) to ensure a formal process is built into the system, guaranteeing that refunds are consistently handled based on the type of request received. Completion Date: Wednesday, August 7th.
15 | Audit of Public Utilities Billing and Collection Processes July 2024 5. Non-Compliance with County Resolution No. 2022-186, Adoption of Sarasota County Public Utilities Department Water and Wastewater Rules and Regulations, regarding terminating service for delinquent sewer‐only accounts. Observation Most Public Utilities department customers when initially applying for the services to be activated for their property will have a water meter installed on the property. The water meter then tracks the water consumption at the property location and this consumption provides the basis for calculating both water and sewer consumption. However, if a property does not need water service, but needs sewer service, the owner may request to connect to the Sarasota County Utilities system for sewer‐only services. Sewer‐only accounts are billed a monthly flat rate based on their Equivalent Dwelling Unit. Sarasota County Resolution No. 2022-186 was adopted to establish rules and regulations for the operation of the Sarasota County Utility System. Within the Resolution, section 4.15(2)(g) states “As applicable, the Department may refuse or discontinue service under the following conditions provided that, unless otherwise stated, the Customer shall be given written notice and allowed a reasonable time to comply with any rule or remedy any deficiency, with such notice being provided by the Department by mail or delivery, which may be electronic: For nonpayment of bills or noncompliance with the Department's rules and regulations in connection with the same or a different type or a different class of utility service furnished to the same Customer at the same premises by the same or affiliated Department utility only after there has been a diligent attempt to have the Customer comply, including at least five days written notice to the Customer. Such notice shall be separate and apart from any bill for service.” In the event that a sewer‐only customer does not pay their sewer bill and becomes delinquent, it then becomes difficult for the County to terminate service to the property. Currently, there is no formal policy or procedure in place to terminate service to a sewer‐only account. Upon discussion with the auditee, it was apparent a Standard Operating Procedure is currently being drafted for approval. Auditor selected a sample of 15 sewer only customer accounts out of the total population of 140 sewer only accounts that were at some point delinquent on their bill during the period of January 01, 2023 through December 31, 2023. Out of 15 sampled accounts tested, three (3) accounts were identified as delinquent, but not terminated. These accounts totaled approximately $20,000.00 in past due services. Recommendation To ensure consistency and accuracy of processing delinquent sewer only accounts, the Public Utilities Department should create Standard Operating Procedures to define the process of terminating service for delinquent sewer‐only accounts. These procedures, at a minimum, should address items such as delinquency, the review and approval process, notification of service termination, and the service termination process.
16 | Audit of Public Utilities Billing and Collection Processes July 2024 Management Response Billing leadership has created a formal Standard Operating Procedure (SOP) for terminating service for delinquent sewer-only accounts. This process is also being integrated into the new CIS (Itineris UMAX) to ensure work orders are triggered once specific thresholds are met, ensuring consistency and preventing delays in addressing delinquencies and the continued accumulation of bad debt. The SOP is currently under review for final approval. Completion Date: Wednesday, August 7th.
flippingbook.comRkJQdWJsaXNoZXIy MzM3Mjg=