RALEIGH — City employees and contractors mismanaged a $30 million overhaul of major pieces of Raleigh's computer system, including its water and sewer billing, by failing to provide enough oversight and direction, according to an independent audit.

To get the project back on track, the Raleigh City Council is spending $2.25 million to hire IBM consultants. The city's chief information officer, Gail Roper, dismissed the project manager, an independent contractor, after the Sept. 22 Ernst & Young audit.

The 130-page audit found the technology project has been "managed in an ad-hoc manner," the "existing project plans are poorly designed and flawed," and "who is in charge and ultimately accountable is not clear."

The problems caused council members to delay plans for a tiered billing system that promised lower rates for Raleigh and Garner residents who conserve water. The Dec. 1 kickoff was pushed back to July; council members approved a 13 percent rate increase for next month so the city's public utilities system could make its budget.

A complex project

Despite the setbacks, the project will still come in at $30million, said City Manager Russell Allen. The audit's findings were intended to show what needed to be done and reflected the complexity of the project, Allen said.

"We weren't just looking for someone to pat us on the back," Allen said.

Council member Thomas Crowder this week questioned the new IBM contract, which had previously been estimated at $659,000.

"We keep adding and adding and adding," Crowder said. "When are we going to get a handle on the costs?"

Money for the $2.25 million IBM contract to take over management will come from the troubled project's $30 million budget and by cutting back on contracts with other vendors, Roper said.

The project, which began in July 2008, uses contractors and city staff to tear down and rebuild the city's outdated payroll, financial and utility billing systems. The restructuring is a large undertaking complicated by the need to make sure all of the city's old systems coordinate with the new one developed for $18million by New Jersey-based CherryRoad Technologies, Roper said.

The Ernst & Young audit evaluated 27 components of the project and found two-thirds of them had problems that could result in the project not getting finished or that could cause significant cost overruns. The audit found no areas without significant problems.

If the management problems aren't fully addressed, the city could have to shell out more money to fix the project, the audit found.

"This will result in late stage surprises of unforeseen events, overly optimistic plans, and increased costs for accelerated remediation," the audit's authors wrote in the executive summary.

Frustrated customers

Allen and Roper pointed out that two of the three major parts of the technology project have already been rolled out: the city's payroll and financial systems.

The delay in the tiered water billing system, which will also charge more for higher consumption, prompted frustration among some of the thousands of customers in Raleigh and Garner. They had been looking forward to Dec. 1 to start saving money.

"It's like a slap in the face when you see you did such a good job [conserving], and now we're going to raise your rates," said Sharon Hart, who has tried to cut back usage in her Northwest Raleigh townhouse.

Hart cut her daily usage to 25 gallons after Mayor Charles Meeker's call for conservation during the drought of late 2007 and early 2008.

She understands the need to have a technology system that will last but said the delay of the tiered system and the 13 percent rise in water rates came at a bad time for her.

"As a consumer, you see everything going up but our salaries," Hart said. "It makes you feel like you don't have a lot of control over your expenses."

sarah.ovaska@newsobserver.com or 919-829-4622