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HomeMy WebLinkAboutStaff Report 9352 City of Palo Alto (ID # 9352) Policy and Services Committee Staff Report Report Type: Action Items Meeting Date: 6/21/2018 City of Palo Alto Page 1 Summary Title: Status Update for Audit Recommendations for Accuracy of Water Metering Billing Audit Title: Staff Recommendation That the Policy and Services Committee Recommend the City Council Accept the Status Update on the Accuracy of Water Meter Billing Audit From: City Manager Lead Department: Utilities Recommendation Staff recommends the Policy and Services Committee recommend that the Council accept the attached Status of Audit Recommendations for the Accuracy of Water Meter Billing Audit. Background The City Auditor’s Office previously issued an audit with objectives to determine if the water utility customers were accurately billed for the water meter type, size, and related adjustments. This will be the first update since the audit was presented to Council on August 22, 2017. (https://www.cityofpaloalto.org/civicax/filebank/documents/62279) The Utilities and Administrative Services Department have completed four of the eleven recommendations. The recommendations and actions taken for completion are listed in the attached document (Attachment A). Recommendation 1.3 is in progress. Staff expects to issue a request for proposal (RFP) in August 2018 to conduct a field audit of the metered services in the City; this field audit will capture all meter sizes, including the recommended 2” and above meters. Due to staffing constraints, Utilities has not been able to conduct the water cost of service study for finding 1.4 regarding fixed meter charges. Staff expects to issue a water cost of service RFP by end of calendar year 2018. For recommendation 2.1, staff will review and update existing policies and procedures to inform Council of significant infrastructure changes. Two of the recommendations 2.2 and 2.3 are related to electronic water meters. Utilities is awaiting an adoption of an American Water Works Association (AWWA) standard for electronic meters. The public comment period on the City of Palo Alto Page 2 proposed new standards closed on April 29, 2018. Final publication of the standard may take several months. Staff will notify Council if Utilities adopts the new electromagnetic and ultrasonic water meter standards. For recommendations 3.1 and 3.2 The Administrative Services Division is currently working on incorporating the nuances of the Sole Source process into Purchasing’s Policy and Procedures. Training is currently being conducted on an as-needed basis. Formal training will be conducted once the Policy and Procedures have been updated. Attachments:  Water Meter Billing_June 2018 Final 5-31-18 STATUS OF AUDIT RECOMMENDATIONS ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17 6055039 PAGE 1 The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented. Recommendation Responsible Department(s) Original Target Date and Response Current Status Implementation Update and Expected Completion Date Finding 1: CPAU has not adequately prevented, detected, nor corrected water meter billing errors. We recommend that CPAU: 1.1. Correct the billing errors identified. Utilities Concurrence: Agree Target Date: November 2017 Action Plan: Utilities staff is confirming the specific addresses and errors cited in the audit. Staff will then take immediate actions to rectify the overcharge situation by contacting the customers and updating their accounts with the correct meter charge as well as reconciling the incorrect charges for the past three years. For the undercharge or backbill scenario, staff plans to recommend Council approval to modify current meter billing policy and eliminate mandated customer backbilling for utility- caused metering errors under certain circumstances. Completed June 2018 Management Update: In August 2017, staff notified 258 customers by letter of the water meter billing error. 125 customers were overcharged. Staff updated the customer accounts with the correct meter charges. The customer accounts were credited of the overcharged amounts. 133 customers were undercharged. Staff updated the customer accounts with the correct meter charges. Council approved an amendment to Utility Rule and Regulation 11 “Billings, Adjustments, and Payments of Bills” which allows Utilities to waive undercharges of up to $500 per incident, subject to the three year retroactive billing adjustment period. The undercharges for the 133 customers were waived because the City was responsible for the billing error. Staff Report: https://www.cityofpaloalto.org/civicax/filebank/documents/64141 Status: Completed 1.2. Investigate each of the 123 water meters that do not match the meter purchasing record, determine if a record or billing correction is required, and correct accordingly. Utilities Concurrence: Agree Target Date: November, 2017 Action Plan: Staff has completed an initial inspection of the 123 meters in the field. Staff will need to conduct further investigation on a few of the accounts to confirm meter type, pipe connection size, and dial register. Thus far, staff has confirmed 84 Completed June 2018 Management Update: All 123 meters were field inspected and customer accounts have been adjusted accordingly. There were 70 undercharges, 6 overcharges, and 47 non-billing errors such as incorrect meter size description. The undercharges and overcharges have been rectified under finding 1.1. STATUS OF AUDIT RECOMMENDATIONS ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17 6055039 PAGE 2 Recommendation Responsible Department(s) Original Target Date and Response Current Status Implementation Update and Expected Completion Date water meters did not match the meter or billing record. Staff will take the necessary actions to rectify the overcharges and undercharges. Status: Completed 1.3. Review and correct the meter record errors identified for meter sizes larger than 2 inches. Utilities Concurrence: Agree Target Date: December 2018 Action Plan: In preparation for the new CIS Utility billing system and potential advanced meter deployment, staff will consider an in- house or contract service audit of the three metered services (electric, gas, water). Staff will also review and update as needed roles and responsibilities for key staff involved in ensuring meter accuracy, including procurement, inventory, testing, installation, and billing records management. In progress June 2018 Management Update: Staff will be issuing an RFP for contract services to conduct a field audit of 74,000 meters. One of the requirements is verification of service connection size for 2” or greater water meters. Expected Completion Date: June 2019 1.4. Explore options for addressing equity when making changes to customer meter size rates and establish a policy and process for determining, documenting, and notifying customers of changes to their meter size and, if appropriate, the rate change associated with the new meter size. Utilities Concurrence: Agree Target Date: July 2018 Action Plan: The audit’s questioning of utility practices regarding changes to meter sizes is based on a unique situation that occurred 22 years ago and does not reflect current policy or process. The situation arising out of Southgate was a unique case and staff does not agree that this or other meter replacement practices raise equity issues. In Progress June 2018 Management Update: Due to staffing changes, the Utilities Department was not able to engage with a consultant to begin the water cost of service study in FY 2018. Staff expects to issue an RFP in the first half of FY 2019. Options to consolidate the fixed rates for 5/8” and 1” meters will be considered. The study results and staff recommendation will be brought forth for Council review when completed. Expected Completion Date: April 2019 STATUS OF AUDIT RECOMMENDATIONS ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17 6055039 PAGE 3 Recommendation Responsible Department(s) Original Target Date and Response Current Status Implementation Update and Expected Completion Date With regard to differential rates for different meter sizes, staff is currently reviewing policy options for addressing this issue going forward, and will develop options such as consolidating the fixed rate for 5/8” and 1” meters for consideration by the City Council. STATUS OF AUDIT RECOMMENDATIONS ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17 6055039 PAGE 4 Recommendation Responsible Department(s) Original Target Date and Response Current Status Implementation Update and Expected Completion Date 1.5. With the understanding that CPAU will be migrating to a new ERP system: a. Implement a temporary monitoring or reporting system to identify record discrepancies that may result in billing errors and correct as discrepancies are identified. b. Ensure the new ERP system will have automated controls in place to prevent such discrepancies and identify them if they do occur. Utilities Concurrence: Agree Target Date: December 2019 Action Plan: a. Staff has established a monthly reconciliation report to monitor and identify inconsistent billing and meter attributes which will ensure comprehensive detection of potential error sources across inventory, meter change activity, and billing databases. b. Elimination of redundant manual entry has already been identified as a system requirement for the new CIS system. Staff will monitor the ongoing procurement for a new customer information system and enterprise resource planning system to ensure system requirements continue to prioritize minimizing manual entry through integration across databases and automated data entry. Completed with Alternate Implementation Plan June 2018 Management Update: a. Staff has been running a monthly reconciliation report since August 2017 to monitor and identify inconsistent or incorrect meter billing data. To date, staff has identified five non-billing data discrepancies and one incorrect billing type. Since these errors were corrected in a timely manner, no billing adjustment was required. Status: Completed b. Elimination of redundant manual entry in SAP will require a large customization effort which will be resource intensive and costly. Since the City is in the process of upgrading or replacing the ERP and CIS systems, customization of the existing system is not a good return on investment. Elimination of redundant entries and reduction of manual entries are key criteria in the ERP and CIS system evaluation process. Expected Completion Date: February 2021 STATUS OF AUDIT RECOMMENDATIONS ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17 6055039 PAGE 5 Recommendation Responsible Department(s) Original Target Date and Response Current Status Implementation Update and Expected Completion Date Finding 2: CPAU has installed 1,178 water eMeters throughout the City’ however, there are no testing standards, and the accuracy, performance, and reliability of these meters are uncertain. We recommend that CPAU: 2.1. Develop a policy and procedure to transparently report significant, systemic, infrastructure changes to Council and update any CPAU Rules and Regulations that may be outdated to current practice or affected by policy changes. Utilities Concurrence: Agree Target Date: Immediately Action Plan: Major infrastructure changes are presented to Council for approval. However, standards are technical documents that provide the general conditions and specifications for the construction of the Water Gas and Wastewater System. Updates to standards are subject to multiple levels of professional review including engineering, procurement and legal. Updated standards will be communicated to Council as informational when substantive. In Progress June 2018 Management Update: The Utilities Department will inform Council when technical standards are substantive. Since August 2017, the department has not updated the technical standards for electric, gas or water. American Water Works Association (AWWA) has drafted new standards for electromagnetic and ultrasonic type water meters. The public comment period on the proposed new standards closed on April 29, 2018. Final publication of the standard may take several months. Staff will notify Council if Utilities adopts the new electromagnetic and ultrasonic water meter standards. Staff will review and update existing policies and procedures if applicable. Expected Completion Date: June 2019 2.2. Seek direction and approval from Council before proceeding further with the future installation of eMeters or any electronic meters. Utilities Concurrence: Agree Target Date: Ongoing Action Plan: Procurement and installation of e-meters will remain suspended until adoption of an AWWA standard for testing and the availability of independent test resources (either in-house or contracted). It is expected that a final standard for testing of E-meters will be available at the end of 2017. The new standards are not expected to change the accuracy requirements In Progress June 2018 Management Update: American Water Works Association (AWWA) has drafted new standards for electromagnetic and ultrasonic type water meters. The public comment period on the proposed new standards closed on April 29, 2018. Final publication of the standard may take several months. Staff will notify Council if Utilities adopts the new electromagnetic and ultrasonic water meter standards or seeks to install additional eMeters. Expected Completion Date: June 2019 STATUS OF AUDIT RECOMMENDATIONS ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17 6055039 PAGE 6 Recommendation Responsible Department(s) Original Target Date and Response Current Status Implementation Update and Expected Completion Date from those expected of the positive displacement meter with the exception that there will likely be an extended range of accuracy for low flows. It should be noted the E- Meters is a specific product line, and mechanical meters may also have electronic components. 2.3. Determine if the 1,178 installed eMeters should be uninstalled and replaced with the original displacement meter and if billing adjustments are required. Utilities Concurrence: Agree Target Date: July 2018 Action Plan: All customers with e- meters installed will be immediately notified of this audit, and that additional information will be provided as available. For eMeter testing, staff will send a sampling of eMeters to independent testing companies to determine if they are performing per manufacturer specification, and based on these results will determine next steps. In addition, the Water Meter Shop has staffing challenges and does not currently have the resources required to undertake this replacement project. At this time, staff will continue to monitor the meter reads for irregularities of both the installed positive displacement and eMeters as part of the billing exception process. Staff is also developing a customer plan for addressing any accuracy concerns with the e-meters already installed. In Progress June 2018 Management Update: The Utilities department sent letters to the 1,178 residents with installed eMeters. In response, 55 customers requested their meters to be exchanged. A couple credit adjustments were required for the eMeter exchanges. As of June 2018, the City has 1,122 eMeters installed. Status: Completed Staff hired a contractor to test a sampling of eMeters. The contractor tested the eMeters under four different scenarios. Overall, the testing results measured correctly within the manufacturer’s specifications and guidelines of +/- 1.5%. After AWWA publishes the final standards for electromagnetic and ultrasonic type meters, staff will meet with other water agencies to determine the pros and cons of these meters. Staff will make a determination in 2019 on whether to standardize displacement and/or ultrasonic type meters. Expected Completion Date: June 2019 STATUS OF AUDIT RECOMMENDATIONS ACCURACY OF UTILITY WATER METER BILLING AUDIT – ISSUED 8/16/17 6055039 PAGE 7 Recommendation Responsible Department(s) Original Target Date and Response Current Status Implementation Update and Expected Completion Date Finding 3: Purchase of water eMeters did not meet purchasing policy and eMeter expenditures were not monitored. We recommend that ASD Purchasing Division: 3.1. ASD Purchasing to clarify its purchasing policy and procedures for new and renewals of product standardization. ASD Concurrence: Agree Target Date: December 2017 Action Plan: Staff will update the policy and coordinate with stakeholders to ensure the policy is clear and easy to follow. Staff will then finalize the policy and disseminate to departments. In Progress June 2018 Management Update: This is in the queue for development to update Purchasing’s Policy and Procedures. Purchasing has the “Solicitation Plan Checklist” already and the nuances of the process are currently being written. The current Exemption Form addresses the “Standardization” process in the P&P. The “How To” and step-by- step self-learning tool regarding standardization are in development. Expected Completion Date: Q4 of FY18 3.2. ASD Purchasing to retrain appropriate ASD and CPAU staff on Purchasing policies and procedures, and completion of required forms. ASD Concurrence: Agree Target Date: January 2018 Action Plan: In conjunction with 3.1 staff will provide training. In Progress June 2018 Management Update: Training is being done on an as needed basis. Purchasing will conduct formal training once item 3.1 is complete. Expected Completion Date: Q2 of FY19 3.3. ASD Purchasing to determine roles and responsibilities and develop a procedure for tracking Sole Source purchases to prevent the overspending of approved amounts. ASD Concurrence: Agree Target Date: March 2018 Action Plan: The SAP system does not currently provide an automated check on sole source spending. Staff will evaluate whether the system can be configured to allow for this. If not, staff will implement manual procedures to track sole source spending. Complete with Alternative Implementation June 2018 Management Update: Purchasing staff is tracking through a manual spreadsheet-type process, which is complete. The department is in development on how to track sole source purchases and spend within the current ERP system (SAP), if possible, and in the future replacement RFP. Expected Completion Date: Manual tracking is complete. Automation tracking is expected to be complete in 2021 as part of the new ERP.