City Has Flawed Decision-Making for Denver Water Services
Published on June 20, 2022
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DENVER – Denver puts too much trust in Denver Water to calculate city water bills and the city’s ongoing decision-making process for moving sewer billing in-house has not looked at all factors to ensure success, according to an audit out this month from Denver Auditor Timothy M. O’Brien, CPA.
“The city is planning for some significant changes to its utilities services and billing,” Auditor O’Brien said. “Changes to utilities impact every resident of Denver, so the decision-making process should be as comprehensive and accurate as possible.”
Our audit examined whether Denver Water charges the city correctly for water and billing services. We also looked at how the city is making decisions to change the billing process for sewer services to residents of Denver.
Denver Water is not a city agency; however, Denver Charter provides the Auditor with the authority to audit the organization.
The city’s departments of General Services and Transportation & Infrastructure both work with Denver Water. Transportation & Infrastructure’s Wastewater Management Division is working toward a consolidated utilities billing system that would bring sewer billing in-house instead of through Denver Water’s billing.
However, we found the city is not currently setting clear executive level direction and is not in line with leading practices for analyzing service-delivery options. This flawed decision-making process for moving billing in-house should be based on a complete analysis that ensures the best use of public resources.
As part of that analysis, the Wastewater Management Division has not outlined how it would communicate with customers to notify them of the change in billing or how the change would directly impact bills, levels of service, and who they should pay for sewer service.
“Residents would receive a bill that looks different and they would need to pay a different entity,” Auditor O’Brien said. “Clear planning and communication will be important to ensure people do not miss payments because they sent the check to the wrong place or might have tossed their bill thinking it was a scam.”
Additionally, the division should consider the flexibility, or lack thereof, if the city arranges to bill in-house. Even if the city decides to bill for sewer services in-house, it must still rely on Denver Water to read meters. The city should consider that it could be difficult to undo this decision if it does not serve the best interests of the public and consider cost and service quality.
There is still time to take these factors into consideration. Sewer services are expected to be one of the last to change to consolidated in-house billing due to the complexity of billing cycles. The figure below shows the planned timeline for billing consolidation.
Planned timeline to transition city utilities billing to a consolidated system. Composting services in 2021. Trash services added in 2022. Stormwater services added in 2023. Sewer services added in 2024.
In 2021, Denver Water produced about 2 million bills for more than 166,000 customers —collecting more than $110 million in sewer revenue on behalf of the city. If the city moves to in-house sewer billing, customers would still receive a separate bill from Denver Water for water consumption charges.
Separately, we found city agencies lack verification of what Denver Water charges for water at city buildings and for sewer billing services. In fact, the city’s dependence on Denver Water’s price setting could lead to the city overpaying for services.
The city does not check that the costs Denver Water uses to set the annual discounted governmental water rate are allowable under the Denver Charter. The city also does not check that the correct rate is properly reflected in the monthly water bills. And the city does not check that monthly service fees for sewer billing are accurate to ensure the city pays only its share of costs.
The billing determination process is different for the city than how Denver Water determines rates for individual Denver residents.
Although we did not find instances of noncompliance with the Denver Charter or overbilling for the city, we did find errors in the monthly water bills that led to the city paying $11,000 more than it should have. Denver Water credited that amount back to the city once the errors were discovered.
Overall, Wastewater’s review is inadequate and places excess trust in Denver Water. Without adequate processes to review charges, the city could overpay.
“Oversight for contracts, invoices, and agreements with external organizations is really lacking citywide,” Auditor O’Brien said. “Whether it’s millions of dollars or hundreds, those are public resources, and they should be monitored thoroughly and accurately.”
AUDITOR TIMOTHY O'BRIEN, CPA
Denver Auditor's Office
201 W. Colfax Ave. #705 Denver, CO 80202
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