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The City Journals

Decimal error causes $814,000 gift for Murray water users

Feb 05, 2019 03:17PM ● By Shaun Delliskave

Murray Water crews clean the sewer line in the Aspen Heights subdivision. (Photo courtesy Murray City)

By Shaun Delliskave | [email protected]

For Murray City water users, it was a gift; for the City, it was an $814,000 hit — all due to a decimal. A decimal point error in the programming of the City’s new tiered rates cost the city nearly a million dollars in missed revenue, and rather than punting the expense back onto Murray City water users, the City Council voted to use Murray Water’s financial reserves to cover the error.

According to Danyce Steck, director of the Murray City Finance Department, “There were a series of errors that occurred in the process of implementing the system to a tiered-rate structure — both administrative (human) and technical (system).”

Utah State law requires all retail water providers to have a culinary water pricing structure based on blocks of water and requires the price to increase with use (often referred to as a tiered-rate structure). The intention of this legislation was to incentivize water conservation. 

Murray City delayed making this change because it was in the middle of implementing a new software program (Munis) that would include a new utility billing system. The City intended to make this rate structure change at the time of conversion. However, the software conversion for utility billing has taken longer than anticipated, and at the end of 2017, the City was contacted by the State and asked to implement the tiered-rate structure sooner rather than later.

“The challenge was implementing this change into an outdated utility billing system,” said Steck.

The water utility billing error was a two-fold discovery. First, the Finance Department was performing a year-end analysis of the water utility and noted that consumption increased, and rates increased, but revenue decreased. A request was sent to the Treasurer’s Office to review the system and rates to find the cause. Around the same time, an apartment complex contacted the utility billing supervisor about their bills being much lower than they were the previous year. Having a specific account to focus on assisted the City in quickly identifying the issue.

“When the new rates were entered into the system, the programmer misunderstood how the rates were structured. The rates entered contained larger rate blocks of water than was adopted, which meant more water was being sold at the lower rates than was intended,” Steck said.

In programming the rates, a decimal point was placed incorrectly, which reduced the rate to 10 percent of what it should have been for certain meters. “There was not a thorough internal control policy in place to support independent rate confirmation after the rate change was programmed into the system,” remarked Steck.

The City also encountered technical issues with the implementation. In April and May, the system imported meter reads incorrectly, and the system began overriding the programmed rates with seasonal rates from prior years. “The reason for both of these issues is still unknown,” noted Steck.

To prevent the error in the future, Mayor Blair Camp reorganized the reporting structure and placed the billing system under the supervision of the Finance Department. Other safeguards include having internal controls written and developed to support an independent review of the system on a regular basis by both the Finance and Information Technology Departments and an independent confirmation and testing of all rates during rate change processes.

All Murray water bills will now be independently analyzed for two billing cycles (60 days) to confirm the system is correctly calculating the bills and usage. Further, a complete utility billing audit is being performed on every utility by the Information Technology and Finance Departments.

Steck explained, “No capital projects were put on hold. The City’s water system has the funding it needs to complete several large water projects that will take several years to finish. The effect of this billing error is that projects further down on the master plan may slip a year; however, no projects have been removed or eliminated from the plan. Projects may be delayed to the following fiscal year to allow revenues to catch up.”