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Now browsing: Hometown News > News > Volusia County

Finance director announces retirement as Port Orange investigates $825k water billing mistake
Rating: 2.85 / 5 (39 votes)  
Posted: 2012 Oct 19 - 00:13

By Michael Salerno

For Hometown News

PORT ORANGE - The city's finance director of 25 years announced his retirement, shortly after he and another employee were suspended as the City Council called for an investigation to determine why a billing error cost the city $825,000 in water system revenue.

City spokesman Kent Donahue confirmed finance director John Shelley submitted his retirement letter on Thursday, Oct. 11, tendering an effective date of Jan. 11, 2013, which marks 25 years since he was first hired as the city's finance director. Mr. Donahue added an interim finance director would be selected in the coming days.

"My time has been both rewarding and exciting ... helping me grow into a better person and at the same time experiencing a small community develop into a city," Mr. Shelley wrote in his retirement letter, addressed to City Manager Ken Parker. "... I have not always agreed with your positions, but have always found you to be fair, intelligent and savvy, with final determinations in the best interest of the city."

In the letter, Mr. Shelley also requested to use his accumulated leave time in advance of his retirement, which must be approved by the city manager, Mr. Donahue said.

The news Mr. Shelley intends to retire came just days after he and customer service manager Betty Barnhart were suspended with pay pending an investigation into what caused and who was responsible for the billing errors.

At the heart of the scandal is a failure of internal controls that resulted in wholesale water customers in Daytona Beach Shores being undercharged on their bills due to incorrect rate tables, according to city leaders. The problem also involved malfunctioning water meters in the city that were reporting incorrectly.

City council members were scheduled to meet Wednesday night to OK a request for proposals to seek an independent auditor that would head the investigation. Details were not available before press time.

Mr. Parker said an energy surcharge for water usage, which the City Council enacted in 2009, was not passed along to customers in Daytona Beach Shores. That error cost the city $825,000 in revenue, he said.

City leaders and several residents were angered over that discovery.

"The party's over," Mayor Allen Green said. "You don't embarrass my community without paying the price."

In a memo sent to city staff, Mr. Parker said a city employee told him there was a calculation problem with the city's water rates. An initial review determined errors in some multi-family and commercial units in the city, but a more detailed review discovered the error involving Daytona Beach Shores' rates.

"The Shores rate table failed to charge for the energy for gallons used and recorded by the master meter," Mr. Parker said. "The sewer energy fee setup calculated the sewer energy fee based on the water consumption rather than the sewer consumption."

The incorrect rates in Daytona Beach Shores were not "readily apparent" because of the city's number of closed hotel units and its depressed real estate market, Mr. Parker added.

The meter issue also affected a number of Port Orange's 26,000 water customers. Comptroller Stella Gurnee said about 700 customers in the city have been affected out of the accounts that were reviewed and that number could go up.

In response to the costly billing mistake, Mr. Parker changed the internal control process for water billing, with the accounting side of the finance department responsible for data entry and customer service responsible for verifying the data. Until the change was made, customer service was responsible for data entry.

Mr. Parker compared the process to a three-legged stool, saying, "If any one of the legs is not in place, then the stool collapses."

Councilman Bob Ford said the former procedures should have worked and believed human error was to blame.

"Evidently, the problem was the old process wasn't followed (by department heads)," he said.

Mr. Ford, as well as several citizens who spoke at a meeting on the water billing and meter issues, said the city's internal auditor noted several internal control weaknesses several years ago, but their recommendations were not addressed.

Councilman Don Burnette said whatever action the city takes must be aimed at restoring the public's trust in city operations.

"Because of the magnitude of this, my faith in staff right now is shaken," Mr. Burnette said. "My faith right now in our audit process, internally and externally, is shaken. It takes a lot for me to get to that point."




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