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City Council PresentationTuesday, October 3, 2017
Lyndon S. Remias, City AuditorGretchen Hudome, Deputy City Auditor
Tim Bell, Senior AuditorTony Gonzalez, Senior Auditor
Audit of Stormwater Management Utility
Purpose
• City Council, by resolution adopted on April 18,2017, requested an audit of the City'sstormwater management utility. "Utility" meansthe enterprise fund created to operate,maintain, and improve the City's stormwatermanagement system.
• This audit addresses the accounting for revenuescollected by the utility and the use of therevenue for the general welfare, health, andsafety of the City and its residents.
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Scope and Objectives• Scope
• Revenues and expenditures of the Stormwater Management Utilityenterprise fund and stormwater-related capital projects for the period ofJuly 1, 2016 through June 30, 2017 and multi-year analytics.
• Audit Objectives• To ensure proper and appropriate assessment, accounting, and
completeness of the City’s stormwater management utility revenue.• To ensure City’s stormwater revenues are expended only for stormwater
purposes and controls are in place for proper accounting for stormwaterexpenditures.
• To ensure the City’s stormwater capital improvement program (CIP)revenues and expenditures are properly accounted for and appropriatelymanaged.
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Methodology• To accomplish our objectives, we performed the following:
• Obtained and reviewed pertinent laws, regulations, policies, processes, andprocedures regarding stormwater management through inquiry andexamination of documents and data.
• Met with appropriate staff to discuss the City’s stormwater managementand capital improvement programs.
• Assessed whether design of the City’s policies and processes are adequate toensure compliance and reduce the risk of noncompliance and loss to anacceptable level.
• Performed analysis and tests of data designed to identify trends and high-risk criteria.
• Selected samples of stormwater revenues, expenditures, and capitalimprovement projects for review based on the results of our analysis.
• Traced our samples to documentation supporting compliance. Investigatedanomalies/irregularities.
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Background• Stormwater management is the handling and/or managing of excess
rainfall (runoff) in a manner that controls flooding and limits waterquality degradation. An effective Stormwater Management Programaddresses flood control, water quality and regulatory compliance, andinfrastructure management including operations and maintenance.
• The City’s Stormwater Management Utility was established by CityCouncil ordinance in 1993 to provide for the general welfare, health,and safety of the City and its residents.
• The City’s stormwater management goals include:oPromoting effective storm water drainage from developed areas to minimize
floodingoMaintaining and protecting the City's long-term investment in its network of
storm drains and related infrastructureo Improving the quality of the storm water discharged into the City's waterwayso Informing and educating residents on storm water issues
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Stormwater Management Utility Fees• In accordance with City Code section 32.5-4, the City charges stormwater
fees for each developed residential and nonresidential parcel. The partyresponsible for payment may be the owner, property manager, or thetenant.
• Effective July 1, 2017, the ERU rate increased from 43.3 cents per day to45.8 cents per day.
• The stormwater fee is billed monthly as part of the City’s combinedservices (water, sewer, stormwater and waste management) bill.
• The City switched from a bi-monthly to a monthly billing cycle on July 1,2017.
• Public Utilities assumed full stormwater customer service and accountmanagement responsibilities from Public Works on July 1, 2016. Prior toFY17, Public Utilities was responsible for billing and customer service.Public Works was responsible for account management.
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Stormwater Management Utility Fee Revenue
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
0.400
0.450
0.500
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Daily
Fee
Fee
Reve
nue
Fiscal Year
Assessed Fees Collected Fees Daily Fee
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Stormwater Management Utility• The maintenance and repair of the current stormwater infrastructure
system is accounted for in the Stormwater Management Utility Fund,and financed by stormwater utility fees
• The City’s stormwater infrastructure includes:• 1,200 miles of pipe• 790 lakes and ponds• 44 miles of canals• 564 miles of ditches• 38 dams and spillways• 59,000 manholes and basins• 15 pump stations• Oceanfront Boardwalk and Seawall
• In FY17, there were 15,474 work orders completed for maintenanceand repairs to the stormwater infrastructure throughout the City.
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Legend
FY18 Completed Work Order
FY17 Completed Work Order
Open Work Orders
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Stormwater Management Utility
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Stormwater Management Utility• The Public Works Engineering Division oversees development and
management of stormwater capital improvement projects,stormwater strategic planning, and the MS4 stormwater permit.
• The Public Works Operations and Maintenance Division does theactual hands-on maintenance of maintaining, cleaning, and repairingthe various stormwater components.
• Each year, the fund transfers a budgeted amount for building and/orreplacing additional stormwater infrastructure to sustain flood controlfunctions, protect water quality, and maximize lifespan of theinfrastructure to the Stormwater Capital Projects Fund.
• In FY17, maintaining the current stormwater system accounted forapproximately $28,779,053 of $37,869,053 expended for stormwaterwhile $9,090,000 was transferred to stormwater CIP projects.
NOTE: FY17 Expenditure Amounts based on InSITE data extracts and reports as of August 6, 2017, prior to year-end closeout.11
Stormwater Capital Improvement Program
• Stormwater infrastructure is the foundation that enables the City tomanage stormwater runoff to control flooding and erosion andmaintain water quality for its citizens and the environment. Theacquisition, construction, expansion, rehabilitation, and upgrade ofinfrastructure are accomplished through CIP projects.
• Stormwater related capital project funding and expenditures areadministered and accounted for separately through the StormwaterCapital Projects Fund.
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Legend
Operations and Maintenance Projects
Water Quality Projects
Flood Control Projects
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Audit Results
1. Stormwater Revenue2. Stormwater Expenditures3. Stormwater CIP
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Results: Stormwater Revenue
• At the time of our review, there were 131,164 active stormwater accounts.
Service TypeNumber of
Accounts ERUs
Commercial (CSTM) 4,693 96,488.4
Government (GSTM) 8 140.0
Multifamily (MSTM) 3,322 30,700.3
Residential (RSTM) 123,618 124,112.3
Total 131,641 251,441.0
Commercial (CSTM)
39%
Government (GSTM)
0%Multifamily (MSTM)
12%
Residential (RSTM)
49%
Active Stormwater Accounts by Service Type and ERUs
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Results: Stormwater Revenue• We performed analysis and tests of data designed to determine the
completeness and accuracy of the stormwater account datamaintained within the Banner CIS system.
• We identified the following issues related to completeness andaccuracy:
Exception Type # Inactive Accounts without Corresponding Active Accounts 139 Possible Service Misclassification 37 Accounts with Active Service, Not Billed 13 Residential and Commercial Accounts Billed where ERU is less than 1 32 Accounts with Active Service, Not Billed in Last 90 Days 5 Accounts where Impervious Area and/or ERUs are Blank (See NOTE) 7 Erroneous GPINs 5 Inactive Accounts with Active Service 1 NOTE: Impervious area is used in the calculation of the stormwater rate
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Results: Stormwater Revenue• There were seven (7) accounts where the ERUs and/or the impervious
surface area fields were blank. • The impervious surface area is necessary for fee determination.• These accounts were initiated in June 2017 using the newly
implemented mobile dispatch capabilities, which allows fieldpersonnel to complete and close service orders in the workorder system. Field results are automatically uploaded toBanner CIS.
• Public Utilities is currently working with the vendor to fix theproblem and has implemented a manual workaround to ensureall required fields are populated until the issue is corrected.
• The accounts identified during our audit have been updated.• For these seven accounts no revenue was lost.
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Results: Stormwater Revenue• We compared the Geographical Parcel Identification Numbers (GPIN) of
active stormwater accounts to the City’s Land Book data maintained by theReal Estate Assessor’s Office to ensure completeness.
• We identified 2,051 parcels as high-risk with regard to not beingcharged stormwater fees based on our comparison of the GPINs ofactive stormwater accounts to the Land Book data.
• There were 37 parcels where the REA property type = commercial andthe stormwater service type = residential.
• We selected a random sample of 100 of these high-risk parcels for furtherreview.
• We determined that the stormwater fees for 90 (90%) of the parcelswere exempt, currently being billed to a master account, or an accountlinked to an incorrect GPIN. Additional research and/or fieldverifications were requested for the remaining 10.
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Results: Stormwater Revenue• We determined the FY17 total fees assessed and recorded to be
reasonable given the total ERUs recorded.• We recalculated the last billed stormwater amount for each active
account in our extract to ensure accurate calculation andreasonableness.
• There were no exceptions.• We traced properties with final plumbing and/or building permits
issued in May 2017 to active stormwater accounts to ensure newaccounts, when needed, were activated in a timely manner.
• There were no exceptions.• Based on Public Utilities’ research and field verifications completed
through September 22nd, we have identified 21 additional ERUsamounting to $3,511 in annual billings.
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Recommendations
• In order to ensure the accuracy and completeness of stormwater account information, management should:
• Review accounts identified as high-risk and exceptions noted toensure account information is correct and stormwater fees areproperly assessed.
• Implement a process to ensure changes to GPINs, including butnot limited to splits and mergers, are promptly identified andrecorded.
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Audit Results
1. Stormwater Revenue2. Stormwater Operating Expenditures3. Stormwater CIP
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• The operating expenditures for the Stormwater Management Utilityare those generated and accounted for by the various Stormwaterbudget units, while conducting stormwater-related activities includingstreet sweeping; ditch maintenance; pipe cleaning; inspections ofvarious stormwater infrastructure; pipe cave-in repairs; design,planning, and management of stormwater projects; and compliancewith mandated stormwater regulations.
• Generally speaking, operating expenditures are the costs associatedwith those activities that maintain the current existing stormwaterinfrastructure.
• These expenditures are supported by the utility fees.
Results: Stormwater Operating Expenditures
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Results: Stormwater Operating Expenditures• Per City Code, Chapter 32.5, Stormwater Management Utility, all
revenues collected shall be used exclusively to provide services andfacilities related to the stormwater management system. Therevenues shall be used for the following:
• Acquisition of real or personal property, and interest therein necessary toconstruct, operate and maintain stormwater control facilities;
• The cost of administration of such programs, to include the establishment ofreasonable operating and capital reserves to meet unanticipated oremergency requirements of the utility;
• Engineering and design, debt retirement, construction costs for new facilitiesand enlargement or improvement of existing facilities;
• Facility maintenance;• Monitoring of stormwater control devices; and• Pollution control and abatement, consistent with state and federal regulations
for water pollution control and abatement.
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Results: Stormwater Operating Expenditures
Stormwater Management Utility Expenditures
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Results: Stormwater Operating Expenditures• FY17 Accomplishments
Pipes and Catch Basins
660 linear feet of pipe
installed
1,451,831 linear feet
of pipe maintained
203 catch basins
repaired
32,316 cubic yards of material removed
Cave Ins
814 orders initiated
753 orders completed
Ditches
42.4 miles maintained
18.5 miles inspected
Pump Stations
287 maintenance work orders completed
BMPs
778 inspections
of City-maintained
656 inspections of
privately owned/maint
ained
Spills
60 cleaned up
Street Sweeping
13,512 miles of streets swept
23,286 cubic yards
of debris removed
Dredging
11,935 cubic yards of Top 50
lakes dredged
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Results: Stormwater Operating ExpendituresFY17 Stormwater Management Utility Expenditures by Category
SOURCE: InSITE data extract of FY17 expenditures as of August 6, 2017.
Category FY17 Total %Salaries $9,984,942 26% *1
Fringe Benefits 3,199,237 8%Contractual Services 6,835,076 18% *Internal Services 1,501,770 4%Other Charges 316,003 1% *Supplies 675,811 2% *Capital Outlay 1,718,918 5%Site Acquisition/Improvements 23,191 0% *Debt Service 1,507,031 4%Transfers to Other Funds 12,107,073 32%
Total $ 37,869,053 100%*Higher risk category
*1 Expenditures for Contracted Manpower deemed to be higher risk 26
Results: Stormwater Operating Expenditures• We reviewed the stormwater expenditures to ensure City’s
stormwater revenues are expended only for stormwaterpurposes and controls are in place for proper accounting forstormwater expenditures.
• We identified trends and changes between FYs 15-17 expenditure data to determine causes.• We performed analysis of FY17 stormwater expenditures. Expenditure categories classified
as high-risk were sampled for deeper review to determine if internal controls overexpenditures were reasonably adequate to ensure compliance with the following criteria:
• Proper authorization;• Payment amount and payee agreed with support documentation;• Paid from original invoice;• Charged to correct fiscal year;• Charged to proper budget unit and account;• Adherence to contract (if applicable) and the City’s purchasing policy;• Trace to workorder (if applicable). Review workorder for proper authorization and
confirm activity is allowable use of stormwater funds.• Adherence to City Code 32.5 criteria for stormwater expenditures.
• We identified no issues except as noted.
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• We reviewed all invoices and supporting documentation forcontracted street sweeping.
• Supporting documentation included all areas swept by the contractor duringthe period of the invoice and was verified and confirmed by the contractmanagement inspector.
• Contractor was compliant with contract terms and we noted noexceptions.
Results: Stormwater Operating Expenditures
• Contracted street sweepingIn April 2016, the City awarded DeAngelo Brothers,LLC (DBi) the contract to sweep all of the City’sresidential streets (3,600 lane miles) with the goal ofsweeping each street at least six (6) times a year on abi-monthly basis.
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Results: Stormwater Operating ExpendituresTransferred To FY17 Total PurposePublic Utilities/Water and Sewer Fund (Billing System)
$911,134 Annual transfer of Stormwater Management Utility’s portion of the costs incurred by Public Utilities for billing, customer service and account management (includes positions and system costs).
Parks and Recreation/ Landscape Services
$52,790 Annual transfer provides landscaping services on Stormwater’s behalf of various locations such as Lynnhaven Mall and Town Center BMPs.
Information Technology/IT Core Services
$56,909 Annual transfer of Stormwater Management Utility’s share of various computer and telecommunications services.
Planning Department/Stormwater Regulations
$142,324 Annual transfer to Planning Department to cover the positions in the Development Services Center and Permits and Inspections supporting the increasing stormwater regulations.
Public Works/Building Maintenance/Direct Costs
$17,916 One-time reimbursement of costs incurred for the renovation of office space for Surface Water Regulatory Compliance group.
General Fund/Indirect Costs
$1,836,000 Annual charge to cover Stormwater Management Utility’s portion of the City's indirect costs (i.e., accounting, human resources, payroll, building maintenance, asset management, etc).
Stormwater Capital Projects Fund
$7,500,000 Annual budgeted transfer to the stormwater capital improvement program (CIP).
Stormwater Capital Projects Fund
$1,590,000 One-time transfer to Stormwater Capital Projects fund. On January 17, 2017, City Council appropriated this amount from the Stormwater Management Utility to the Elizabeth River TMDL Implementation Plan project.
Total Transfers $12,107,073
• Transfers to Other Funds Include both recurring (budgeted) and one-time transfers for various purposes, such as:• Reimbursement of Stormwater’s
share of direct costs incurred by other departments
• Transfer of funding to support Stormwater CIP
• Reimbursement of indirect costs based on annual cost allocation plan
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Finding and Recommendation• Finding: Electrical Services
• In our audit sample of Other Charges expenditures, we noted thatStormwater electricity charges were allocated to the ProjectManagement budget unit. Project Management is under theEngineering Division of Public Works and is primarily involved withCIP projects and strategic planning of stormwater technicalaspects, not ongoing charges after a project is completed. Reviewand payment of charges for electrical services is better suited tothe operations side of Public Works and will enhanceaccountability and presentation in InSITE.
• The electrical service charges amounted to $53,390 for FY17.
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Audit Results
1. Stormwater Revenue2. Stormwater Expenditures3. Stormwater CIP
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Results: Stormwater CIP• Stormwater has risen to one of the major categories of the City’s CIP
starting in FY18.• Annual appropriations increased from $23,779,414 in FY17 to $43,063,514
in FY18, bringing total planned appropriations to $422,022,332.• The Stormwater CIP is now the third highest among the ten CIP categories,
behind Roadways and Schools.• Financing for Stormwater CIP projects up to FY17 came from Stormwater
Utility (SWU) Bonds and the Stormwater Management Utility (SWU) Fund.In the subsequent six (6) fiscal years beginning with FY18, the increasedinvestments in these CIPs will be funded by increases in SWU Bondfinancing and Stormwater Management Utility Fund contributions, andadditional funding from the General Fund Pay-As-You-Go allocation.
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Results: Stormwater CIP
Project Type Past Appropriations FY18
Un-Appropriated Subsequent YearsTotal
FY19 FY20 FY21 FY 22 FY23
SW Utility151,484,774
7,500,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000386,142,852
SWU Bonds 30,143,013 30,243,013 30,843,013 33,243,013 30,843,013 31,843,013General Fund Pay-As-You-
Go- 5,420,501 5,420,501 5,420,501 5,420,501 5,420,501 5,420,501 32,523,006
Other Sources (Federal,
State, Private)
3,356,474 - - - - - - 3,356,474
Total 154,841,248 43,063,514 43,663,514 44,263,514 46,663,514 44,263,514 45,263,514 422,022,332
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Results: Stormwater CIP• We performed the following procedures to determine that revenues and
expenditures for stormwater capital projects are appropriately authorized, managed, and recorded.
• Reviewed supporting documentation of FY17 funding transactions foraccuracy and completeness.
• Conducted visits to several active project sites, performed walkthroughsabout internal controls over contracting process, project management,monitoring of contractors, records maintenance, review of invoices, andtracking project activities/finances.
• Tested a sample of expenditure invoices to determine thatamounts/quantities were accurate/complete, reasonableness, correctlyrecorded to the right account/activity/project, and that CIP was sufficientlyfunded.
• Reviewed supporting documentation to ensure financial-related closeoutprocedures were properly performed and recorded in InSITE.
• There were no exceptions.
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Audit Conclusion• Based on our analysis and tests of the City’s stormwater management
utility revenue, we determined revenues to be properly and appropriatelyassessed, accounted for and, except as noted, to be substantially complete.
• Our audit analysis of stormwater management expenditures did not findsignificant issues. We determined the internal controls over thestormwater expenditure process were adequate and the expenditureswere exclusively to provide services and facilities related to the stormwatermanagement system in compliance with the City Code.
• We also determined that the stormwater capital improvement programrevenues and expenditures were appropriate, properly accounted for, andappropriately managed.
• Overall, we determined that the City’s Stormwater Management Utilitysystem of internal controls and oversight over its financial operations isworking effectively.
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What Can You Do?REPORT ISSUES!
•FOR ASSISTANCE WITH• Flooding • Street Sweeping • Storm Drains • Caved In Pipes or Structures • Lake Vegetation and Dredging • Ditch Maintenance • Mosquito Control • Spills in the Drainage System•CONTACT:
•Public Works/Operations at 385-1470
•City Information at 385-3111
•Online at www.vbgov.com/government/departments/public-works/Pages/service-requests.aspx
•VB Works (Free app in your App Store)
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What Can You Do?ONLY RAIN DOWN THE DRAIN!
•Never allow anything other than rain to enter the storm drain; no grass clippings, leaves, trash, etc.•Dispose of yard waste in clear plastic bags for city pickup on regular trash day•Don’t put yard debris bags out days ahead of your trash pickup days•On rainy trash pickup days, be sure your bags aren’t in the gutter line or at a storm drain catch basin•Keep storm drains and gutters clean – yard waste, trash, and dirt will clog the storm drain system.•Protect our canals and lakes – don’t put yard debris, trash, or dirt on their banks or in them•Contact Public Works Real Estate (385-4161) before placing items in city easements such as sheds, decks, docks, bulkheads, rip rap, etc.
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Questions?For further information please contact:
Lyndon S. Remias, City AuditorOffice of the City Auditor
Visit our website at www.vbgov.com/cityauditor
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