Review of Delinquent Water and Sewer Accounts

Audit Date: February 26, 2008
Controller: Alan Butkovitz

Executive Summary

$161 Million in Delinquencies Remain Uncollected

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(PHILADELPHIA) – Today City Controller Alan Butkovitz released his report on Review of Delinquent Water and Sewer Accounts. Butkovitz said “Philadelphia must be vigilant in using our existing resources to do things better – and collect the revenue the city is owed. Enhancing our collection practices can serve as a source for much needed revenue for the city”.

Butkovitz announced the results of a review conducted of delinquent Philadelphia Water Revenue Bureau accounts to determine if collection efforts were adequate – and to explore ways to improve the collection of delinquent water and sewer accounts.

Butkovitz added “During our test date period of May 31, 2007, Water Revenue records recorded past due accounts totaling $161 million – 73% of that outstanding balance equaling $117 million was owed by 62,000 customers. Most of these accounts were delinquent for 3 months or longer”.

Butkovitz emphasized that all of this information came directly from Water Revenue billing data. In the course of the Controller’s review, the Water Revenue Bureau acknowledges that their computer system overwrote enforcement and collection activity after one year. This means that the bureau acknowledges that they have no standards for accountability of their enforcement and collection ability.

Butkovitz stated, “The Water Revenue Bureau’s system did not allow for easy tracking of account history, nor for automatic referrals to the Law Department of past due accounts. In our test sample of Water Revenue’s ten significant delinquent accounts totaling 1.3 million dollars, we found four accounts which have been delinquent for 15 years”.
“These accounts owe a combined total of $327,000. In another account, the City Solicitor’s Office directed the Water Revenue Bureau to execute a full abatement of $276,000 of water and sewer charges for one customer with no supporting explanation”.

Butkovitz continued, “We also found that the Water Revenue Bureau was unable to provide any formal written enforcement collection practices and procedures related to delinquent account balances for federal and state government accounts totaling $1.3 million in one case – and $562,000 in another case. According to their records, one customer’s account grew to an outstanding balance of $1 million over nine billing periods. This was a delinquency for 6.5 million gallons of water”.

The Controller recommends:

• Management reevaluate the entire collection process
• Develop procedures to track complete water usage and payment history for all customer accounts
• Immediately start collection efforts when accounts become delinquent
• Implement and follow established collection enforcement policies
• Review accounts on a regular basis for unexpected usage
• Investigate the nature of the usage, and take corrective action, if needed, to resolve billing issues before they grow into large delinquencies.

Butkovitz concluded, “Instead of the Water Department increasing rates these past years, it would be more prudent for them to collect the $161 million in water billings owed by dead beats. It is not fair that hard working Philadelphians who pay their water bills subsidize those who do not”.

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