Collaboration in Civic Spheres

Audit: Soap Lake Didn’t Collect Up To $515,000 In Utility Fees

by Lindsay Crocker March 4th, 2011

SUMMARY: Due to a combination of frequent turnover in the position of city clerk, and the introduction of new billing software which decreased city oversight of utility account classification changes and resulting billing rates, the City of Soap Lake, Wash. failed to collect as much as $515,000 in utility revenues which it was owed, from 2005 to late 2010. The findings come in a state audit issued this week.

BACKGROUND: The Central Washington city of Soap Lake, population 1,790, is governed by an elected seven-member council and mayor. The utilities provided by the city include water, Soap Lake water, sewer, and garbage. For billing purposes, customers are divided into three main classifications, each with a different rate: residential, commercial-residential, and commercial. Different utility rates are charged to each customer classification. This audit is based city on financial records covering the period from January 2, 2008 through December 31, 2009, but the findings extend from 2005 to 2010.

KEY LINK: Accountability Audit Report, City of Soap Lake, Wash., Washington State Auditor’s office, issued February 28, 2011.

KEY FINDINGS

  • The city changed its utility rates in 2005 when two related ordinances were passed, but didn’t update account classifications until October 2010, leaving some new revenues uncollected. A combination of frequent turnover in the city clerk’s position in the last five years, combined with the 2008 introduction of new utility billing software which employees failed to master, led to under-billing. The net effect was that city let customers self-report adjustments in the billing category classifications of their properties for five years.
  • The audit reviewed 26 adjustments made in 2008 and 2009 and found no supporting documentation other than brief comments. Nine of the adjustments appeared to be not warranted based on histories of the accounts. Untracked adjustments or unsupported variances totaled $112,500 in 2008 and $191,400 in 2009.
  • The under-billing may have cost the city as much as $103,00 per year from 2005 through 2010, or $515,000, if the accounts had been properly classified, according to estimates by the state auditor’s office. The city billed $714,000 for utilities in 2008 and $734,000 in 2009. Its annual budgets in those years were $3.6 million and $3.9 million.
  • The State Auditor recommends that the City begin the process to properly classify customer accounts immediately, ensure that all City employees have a full understanding of the new billing system, create and maintain documentation to support account classifications, and print and review reports following all account adjustments to guarantee accuracy and completeness.
  • The City of Soap Lake responded, conceding the possibility that revenues it was due went uncollected but stating its belief that all accounts are now properly classified. The City also created adjustment logs to manually document account changes. The affected property owners were notified and the City allowed them to offer comments on the situation at several council meetings. The council then approved a new ordinance which more clearly defines the different billing classifications.

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