The assistant director of the city’s Administrative Services Department has expressed worry with a number of city accounting and billing activities.
Beau Musser, a former CFO for the St. Joseph School District, has worked in the Administrative Services Department for the city for about a year.
Last month, Musser emailed City Manager Bruce Woody and Mayor Bill McMurray with multiple concerns about things he said he has witnessed in the department.
Musser did not respond to multiple requests for an interview, but an information request for the email revealed concerns over sewer billing and accounting practices.
Sewer billing issues
Musser wrote that a “horrific revenue billing oversight” could be causing the city to miss out on nearly $1 million annually and he implemented procedures to fix the billing issues, adding many customers who were not being billed.
“With this new internal control in place, the city has picked up nearly 200 accounts that should have been getting bills that weren’t,” Musser wrote.
He estimated that it will add another $150,000 annually to the account.
Musser wrote that he searched the system and found that he himself owed the city roughly $100 for sewer, but he was never sent a monthly invoice despite being flagged as an autopay account.
Director of Administrative Services Tom Mahoney said the sewer billing is an issue that’s being worked on and there are likely more customers who should be added to the billing list.
“Some of the procedural things need to be addressed and it is a concern and we did find (problems), and Beau found quite a bit of that,” Mahoney said. “It’s being addressed and it’s still a work in progress.”
Woody said changes may need to be made in order to solve the problems.
“The utility billing is a concern and I’m seriously considering whether or not outsourcing our billing might be a way to be more efficient,” Woody said. “I’ve got to talk to a lot more staff and to Tom and Beau both.”
In the email, Musser says a commercial customer, a metal fabricator, was not billed for years and was even paid by the city.
“Just three weeks ago, it was discovered that a commercial sewer customer has never received a sewer bill even though the city’s own permitting records indicate that a sewer tap permit was issued and paid in 2013,” Musser wrote. “To make matters worse, City Council passed an ordinance in 2013 to reimburse the company approximately $45,000 for part of the expense of tapping into the city’s sewer. We paid a guy $45,000 to join our sewer system and then never sent him a bill for six years.”
Musser wrote that the cause of the problem in that case was that the permitting division was not printing monthly sewer tap connection reports to give to the billing department as addresses to be billed.
Woody confirmed that the customer is now paying for the usage. He said the customer was on septic for some time and made the switch to city sewer, but was not removed from the list of water customers who do not drain into the sewer system.
Woody said the city has a policy that allows them to collect back pay in that kind of situation, and another that allows them to give funds when a customer is overcharged or charged when they are not actually using sewer. He is not sure if back pay will be sought from the commercial customer at this time.
“This was our error, not theirs,” Woody said. “Although it certainly would have been good if they did the right thing and acknowledged the fact that they weren’t receiving a bill. At the present time we have not back billed them.”
Musser also wrote about concerns with account reconciliation, stating that upwards of 20 city bank accounts are not being reconciled regularly.
“Every single bank account should be reconciled every month,” Musser wrote. “Prior to my arrival, the vast majority of city bank and investment accounts were not being reconciled on a monthly basis.”
He wrote that the Civic Arena account, a largely cash-based operation, had not been reconciled in 12 months.
Woody said this basic accounting action not being performed concerns him the most out of Musser’s points.
“I don’t disagree that several of those actions, although they are done and accounted for throughout the year, they’re not always done on a timely basis, and that does concern me,” Woody said.
He said large accounts and bond accounts are reconciled monthly, but the smaller accounts may not be, which is a problem.
Mahoney said all accounts are and have been reconciled regularly.
Musser wrote that the police pension account went unreconciled for four months, which meant that the pension payments in that period were not recorded on the general ledger.
He wrote that the fund contains $37 million with annual pension payments that exceed $2.5 million.
He stated that when he reconciled pension liabilities, he discovered that the health insurance liability was understated by $259,540 and the LAGERS pension liability was overstated by $48,951.
“13 P/R liability accounts went unreconciled for years and, as a result, I had to increase our total P/R liabilty by $250,000,” Musser wrote. “That’s a direct hit against fund balance. Money that we thought we had, but actually didn’t.”
Mahoney said there is no loss of funds in the police pension funds and the unfunded liability is low.
“They moved all the police pension from the St. Joseph Police Pension fund to LAGERS with the rest of the employees,” Mahoney said. “We left the existing balance in the pension plan to cover the retirees that were existing at that time. Lagers are the ones that offered to take on this liability and the unfunded is extremely low but when you net it against the rest of the city and the fire, it’s manageable. It’s not a concern.”
Musser also wrote about concerns in TIF accounting, money being taken from the wrong funds for projects, annual audits and sewer bond payments.
Mahoney and Woody were in agreement that these concerns are a matter of difference of opinion and do not reflect any losses of revenue.
Mahoney said the city has received an unqualified opinion 21 years in a row from auditors and has received awards for such.
Musser expressed concern in his email about the city being cited for material weaknesses in its internal controls for years in its annual external audit.
He expects not-monthly reconciled accounts to be noticed in the next audit, even if they are reconciled by the end of the year.