City water board is wasteful, audit says
The report criticizes the agency for not adequately funding line maintenance
City Auditor Les Tanaka criticizes the Honolulu Board of Water Supply in a soon-to-be-released audit, accusing the agency of fiscal waste for not adequately funding maintenance of the city's aging water lines.
The criticisms -- using money for water projects rather than maintenance -- are contained in a letter to city officials written by Board of Water Supply Manager and Chief Engineer Clifford Lum that responds to a draft of Tanaka's audit.
"In that regard, we specifically challenge the audit report's primary conclusion -- that the BWS drained its resources on re-engineering projects at the expense of pipeline maintenance," Lum's letter said.
The final audit, which could be released as early as tomorrow, comes as the agency this month hiked water rates by 13 percent, the first rate hike in 11 years. The board is planning to increase rates nearly 58 percent over five years.
The agency said that rate increase was necessary in part because revenues were flat as expenses were climbing as it continued to upgrade its aging water pipelines.
Tanaka said yesterday that he could not comment on the contents of the audit because by law the audit is confidential until released.
"We're following our same process. We're responding to their comments so it'll be in our final report, which will hopefully come out to the public by (tomorrow)," Tanaka said. "I think when you read ours, you'll see how we rebut that."
Board of Water Supply spokeswoman Su Shin also declined to comment on the contents of the audit but she said that the letter speaks for itself.
"We tried to highlight what we felt were the most significant discrepancies because when you're doing an audit you're basing your conclusions based on the facts. If those numbers are incorrect, then naturally you would then question the conclusions," she said.
According to the letter, the auditor criticizes or questions decisions made by the agency:
» Inadequate budgeting for pipeline projects and suggests increasing the budget. The agency says that the overall budget for pipeline replacement actually increased.
» The $18 million purchase and improvement of the Ewa water shaft, a large groundwater well in Central Oahu, from Campbell Estate, a purchase which the audit said favored the estate over ratepayers. Lum said the board actually saved ratepayers money because developing a new water source would have cost $54 million more.
» The $48 million purchase of the Honouliuli Recycled Water Facility. Lum pointed out that revenues from the Honouliuli recycled water program exceeded operating expenses for all but one of the years covering the first five years of operation.*
City Councilman Charles Djou said the audit comes when the Board of Water Supply is trying to restructure the way it does business and he doesn't want to see that effort reversed but he also questions the agency's attention to its bottom line.
"From my perspective, I like the direction that the Board of Water Supply is trying to go with, the re-engineering of their management in trying to be more flexible, in trying to be more like a private corporation, and that's where I compliment the Board of Water Supply," Djou said.
"Where I'm critical of them is their spending practices. While changing your management, changing your thinking is all good ... that still doesn't get away from being fiscally responsible. You've got to make sure costs don't get out of control."
Djou has introduced a resolution asking the Board of Water Supply for a report on the rate increase, the bonuses to agency executives and civil servants and other issues.
BOARD UNDER SCRUTINY
The city auditor criticizes or questions these decisions made by the Honolulu Board of Water Supply:
» Inadequate budgeting for pipeline projects. The auditor suggests increasing the budget. The agency says that the overall budget for pipeline replacement actually increased.
» The $18 million purchase and improvement of the Ewa water shaft, a large groundwater well in Central Oahu, from Campbell Estate, a purchase that the audit said favored the estate over ratepayers. Board of Water Supply Manager and Chief Engineer Clifford Lum said the board actually saved ratepayers money because developing a new water source would have cost $54 million more.
» The $48 million purchase of the Honouliuli Recycled Water Facility. Lum pointed out that, contrary to the audit, the water recycling program's revenues exceeded operating expenses for all but the first five years of operation.
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CORRECTION
Thursday, October 26, 2006
» The Board of Water Supply contends in a letter to the city auditor that revenues from the Honouliuli recycled water program exceeded operating expenses for all but one of the years covering the first five years of operation. An incorrect position was stated in a Page A1 story on the audit yesterday.
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