PERFORMANCE AUDIT OF THE PUBLIC UTILITIES DEPARTMENT …

PERFORMANCE AUDIT OF THE PUBLIC UTILITIES DEPARTMENT'S WATER BILLING OPERATIONS

Office of the City Auditor

City of San Diego

July 2018

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July 26, 2018

Honorable Mayor, City Council, and Audit Committee Members City of San Diego, California

Transmitted herewith is an audit report on the Public Utilities Department's Water Billing Operations. This report was conducted in accordance with the City Auditor's Fiscal Year 2018 Audit Work Plan, and the report is presented in accordance with City Charter Section 39.2. The Results in Brief is presented on page 1. Audit Objectives, Scope, and Methodology are presented in Appendix B. Management's comments on our audit can be found after page 50.

We would like to thank the Public Utilities Department (PUD), Department of Information Technology - SAP support, and their staff for their assistance and cooperation during this audit. All their valuable time and efforts spent on providing us information are greatly appreciated. The audit staff responsible for this audit report are Joe Picek, Greg Cleary, Stephanie Chernau, Jenny Song, Nathan Otto, Megan Garth, Rod Greek, Luis Brise?o, Kevin Christensen, Andy Horita, Steve Gomez, Andy Hanau, Shawne? Pickney, Danielle Knighten, and Kyle Elser.

Respectfully submitted,

Eduardo Luna City Auditor

cc: Kris Michell, Chief Operating Officer Stacey LoMedico, Assistant Chief Operating Officer Rolando Charvel, Chief Financial Officer Vic Bianes, Director, Public Utilities Department Paz Gomez, Deputy Chief Operating Officer, Infrastructure and Public Works Johnnie Perkins Jr., Incoming Deputy Chief Operating Officer, Infrastructure and Public Works Lee Ann Jones-Santos, Assistant Director, Public Utilities Department Tracy McCraner, Director, Department of Finance Scott Clark, Assistant Director, Department of Finance Mara Elliott, City Attorney Andrea Tevlin, Independent Budget Analyst Jessica Lawrence, Policy Advisor, Mayor's Office

OFFICE OF THE CITY AUDITOR 600 B STREET, SUITE 1350, SAN DIEGO, CA 92101

PHONE (619) 533-3165 FAX (619) 533-3036 TO REPORT FRAUD, WASTE, OR ABUSE, CALL OUR FRAUD HOTLINE (866) 809-3500

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Performance Audit of The Public Utilities Department's Water Billing Operations

Table of Contents

Results in Brief

1

Background

4

Audit Results

12

Question 1: In Calendar Year (CY) 2017, What Contributed to Higher Water Bills?

12

Question 2: How Often Are Meter Reads Inaccurate?

18

Question 3: What Factors Potentially Cause Inaccurate Meter Readings?

24

Question 4: Did Customers Pay More Due to the Extended Billing Cycle?

35

Question 5: Did PUD's Methods of Communication Exacerbate Public Discontent with the

Increase in Water Bills?

36

Conclusion

40

Recommendations

41

Appendix A: Definition of Audit Recommendation Priorities

44

Appendix B: Objectives, Scope, and Methodology

45

Appendix C: Example of a Customer Bill if the Public Utilities Department (PUD)

Had Not Prorated Charges to Account for the Extended Billing

Cycle

49

Appendix D: Example of Customer Bill Where the Public Utilities Department

(PUD) Prorated the Charges to Account for the Extended Billing

Cycle

50

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