Audit of Select Management and Operational Practices at the Board of Water Supply

From Honolulu City Auditor September, 2014

This audit was conducted pursuant to City Council Resolution 13-201, FD1, which requested the city auditor to conduct a comprehensive management and performance audit of Honolulu’s Board of Water Supply (BWS). This audit was included in the Office of the City Auditor’s Proposed Annual Work Plan for FY 2014-15 and performed in accordance with generally accepted government auditing standards from November 2013 to August 2014.

In Resolution 13-201, FD1, the city council expressed several concerns. These concerns included the BWS management policies and procedures; performance measurements used to gauge operations; and financial tools and controls in place to provide assurance the BWS is using ratepayer funds effectively and efficiently. Other issues concerned the status and powers of BWS as a semi-autonomous agency; problems associated with the new billing system; and the conversion from bi-monthly to monthly billing.

The audit objectives were to determine if BWS could improve its operational efficiency, effectiveness, and reduce costs by (1) improving its management policies and/or procedures; (2) improving customer service, especially by decreasing call wait times; and (3) improving transparency through better communication with the public and the city council. The audit also determined if the BWS rate structure was fair to its customers by comparing BWS rates, water costs and operational costs with similar jurisdictions across the nation.

Background:

The Board of Water Supply is the largest municipal water utility in the State of Hawaiʻi and provides approximately 145 million gallons of water a day to nearly one million people on the island of O‘ahu. The semi-autonomous entity has the authority to manage, control and operate the water systems that include nearly 2,100 miles of pipeline, 171 reservoirs, and 94 active potable water sources. BWS fixes and adjusts water rates and charges for water services so that the revenues derived are sufficient to make the BWS self-supporting as authorized by the provisions of Article 7, Revised Charter of Honolulu.  

Beginning in 2008, BWS initiated a project to replace its old customer billing system, the Customer Account System (CAS), with a new Oracle-based Customer Information and Billing System (CIS/CC&B). The system was developed in-house by BWS staff that was augmented by consultants and other staff that could provide BWS project management, configuration, and implementation support services. Originally estimated to cost about $5 million and take 18 months to implement, the system cost $16.4 million as of August 2014. After lengthy delays, the system was activated in January 2013.

After going live, billing problems resulted in complaint calls to the Customer Care Center that increased significantly in June 2013 and generally continued through October 2013. BWS assigned more staff to handle the increased complaints, but reacted too slowly to prevent abandoned calls, long waits, and many complaints to the City Council. BWS also discovered an increase in estimated billings and billing errors that resulted in big bills which generated more complaints to the City Council....

Conclusion and Recommendations

Honolulu residents are fortunate to have some of the best drinking water available in the world. Our water is safe and of high quality. In 2013, 74 percent of Honolulu residents rated drinking water quality as good or excellent. This rating for drinking water quality has exceeded 70 percent over the last four years. The Honolulu Board of Water Supply (BWS) has done a good job of managing our water resources to ensure that quality water is available to O‘ahu residents, businesses, and visitors today and into the future. Infrastructure upgrades, increasing water demand, and expanding operational costs pose challenges for the BWS. Improvements are needed for BWS to sustain O‘ahu’s water collection, treatment, and distribution system.

In January 2013, BWS implemented a new customer care and billing system, which also included a change from a bi-monthly to a monthly billing cycle. The changeover was fraught with problems, most notably increased billing errors that caused a surge in customer complaints. BWS’ call center was overwhelmed with customer calls which resulted in many dropped calls or long wait times. BWS has since corrected the problems and the call center is normalized. This was a lesson learned opportunity for BWS. Going forward, when BWS implements program or infrastructure changes, they need to heed the advice of consultants, improve planning by consulting other jurisdictions who have implemented similar program changes, and consult with customers to identify any end-user impacts.

Operational improvements are also needed to ensure program effectiveness and efficiency. The Automatic Meter Reading (AMR) meter readers are not performing as expected. BWS has relied on redundant attempts to conduct reads and increased overtime to get accurate reads. While BWS could argue that it is effective in getting meter reads, the process is far from efficient. Additionally, BWS needs to account for its monthly water charges to O‘ahu customers. BWS claims that the billing charge is justified to defray administrative costs associated with billing and cost recovery for installing the new billing system. BWS, however, could not provide sufficient data to support its current monthly billing charge. In the spirit of full disclosure and accountability, BWS should provide detailed justification for its current and future billing charges.

BWS should also make customer service a higher priority. The agency does a good job of communicating and disseminating information outward via its website, social media applications, and attendance at community meetings. It lacks, however, adequate communication within the organization and with its stakeholders. Best practices suggest surveying customers and possibly conducting focus groups to gauge public input.

BWS should also establish performance benchmarks related to customer service, collect appropriate data, and report results to various stakeholders, particularly the city council. This can be a valuable tool for management to gauge customer service levels and make improvements as necessary. For stakeholders, the results can reveal BWS performance and, hopefully, assure customers that they are receiving satisfactory service.

read ... The Rest of the Report

Flashback: Djou: Honolulu Board of Water Supply is out of control

PDF: City Council Resolution 13-201, FD1

HNN: Report: Board of Water Supply overcharging customers

SA: Billing system drowns in errors

SA: Audit: Water billing system 'fraught with problems'