Auditor General and MAWC continue war of words

January 12, 2018 GMT

The back and forth between Pennsylvania Auditor General Eugene DePasquale and officials at the Municipal Authority of Westmoreland County took another step Thursday.

DePasquale this week issued a statement of support for a bill pending in the state Legislature that would enable his office to audit municipal authorities and singled out the Westmoreland utility as one of three agencies in need of state oversight.

Authority officials responded a day later that its finances were in order and suggested that state audits could have a “chilling effect” on operations.

On Thursday, DePasquale countered:

“Despite what the Municipal Authority of Westmoreland County asserts, a state audit will not have what they term ‘a chilling effect’ on their services. More likely, the effect would be quite the opposite.

“The rate-paying public has a right to know how the Municipal Authority of Westmoreland County is spending money, especially when the board this week raised water rates 7 percent for a total rate hike of 39 percent in just three years. The lack of state review of authorities that manage billions of dollars, and provide critical services such as water supply, does a great disservice to Westmoreland County residents and Pennsylvanians in general.

“The last authority that initially said it didn’t need a state audit was the Pittsburgh Water and Sewer Authority. Once the board responded to public pressure and allowed my team in, we uncovered wide-ranging problems that led to dramatic reforms. This is proof that a state audit would not be duplicative of the work of independent auditors that authorities currently hire, and that my audits drive positive changes and improve transparency.

“As I have said before, once SB 597 becomes law, my auditors will be on the steps of the Municipal Authority of Westmoreland County ready to launch a full, fair and independent review to ensure that ratepayers are getting the service they deserve.”

A day earlier, the authority issued its own lengthy statement in response.

Here is the authority’s statement in full:

“We are surprised at the disparaging remarks of the Auditor General, since we have a track record of good audits, and we have not heard from Mr. DePasquale or his staff about any concerns.

“The proposed bill, which authorizes Mr. DePasquale to audit municipal authorities, is already being done.

“The Auditor General states: ‘Authorizing my department to conduct financial and performance audits of various municipal authorities ... would give my qualified auditors the ability to dig deep so we can recommend changes that could cut costs and potentially reduce the need for the authorities to increase fees for the residents they serve.’

“Under existing state law, we are already audited annually by an independent company and our performance is enforced by qualified regulators at the Department of Environmental Protection, another state agency, along with county and federal regulators. The state Attorney General is already permitted to examine our books for any reason.

“The regulators from the DEP, ACHD and EPA are subject matter experts in the ramifications of management decisions that can effect public health, safety, the environment, and economic development. Neither the Auditor General nor his staff have the necessary licenses or experience to render judgment on the impact those financial decisions can have on public health.

“Our financial position is strong. Our audit has been publicly available on our website at mawc.org/financial-data. Another indication of financial strength is that we were recently rated as A+ by Standard & Poor’s.

In contrast to Mr. DePasquale’s statement that he wants to save money, his redundant audit would take ratepayer funds that could be used for system reinvestment and repair.

“According to the Auditor General, his desire to target us for an audit is because of rate increase complaints.

“As a municipal authority, we are not a for-profit organization, and the rates we charge go towards infrastructure investments and operations.

“Our proactive reinvestment was praised in a June editorial by the Tribune Review. Our rates are what support this reinvestment.

“Our capital plans will have reinvested approximately $440 million in our system between 2006 and 2021, which we believe is responsible utility management.

“Delaying infrastructure investment has negative impacts to public health, the environment, and economic development. We view all three as the highest priority for our customers and the region,” said Michael F. Kukura, resident manager of MAWC.

MAWC rates that take effect in April 2018 result in an average monthly bill of $46.64. According to the U.S. Census Bureau’s 2015 American Housing Survey (three years ago, published in January 2017), the national mean monthly cost for drinking water in 2015 was $46. The 2015 AHS shows that water is by far the least expensive utility.

The American Water Works Association (AWWA), American Society of Civil Engineers (ASCE) and Environmental Protection Agency (EPA) all agree that increased investment is needed in both water and wastewater systems in Pennsylvania and nationwide.

“As stewards of this critical public asset, we feel it’s our responsibility to be a leader in infrastructure reinvestment,” said Brian J. Hohman, business manager of MAWC.

Mr. DePasquale’s advocacy for a redundant performance audit based on rate increases strikes the wrong tone at this sensitive juncture. Senate Bill 597, which seeks to expand his powers, will have a chilling effect on infrastructure investments and could have a negative effect on the public water systems which support the daily livelihood, public health, environment and economy of the state’s residents.

“Responsible investment decisions are necessary to meet more stringent standards and replace aging infrastructure, the concerns raised by the ASCE, AWWA and EPA.

“Also, we would be remiss not to mention our competent, respected and professional staff with a track record of individual and group awards within the drinking water and wastewater industries. The investment we make in our team is well worth their track record of dedicated and innovative service,” said MAWC Chairman Randy Roadman.

“Although we believe this legislation is unnecessary, if the bill is passed, we will comply with the law,” he said.