Rainwater seeping into Selma’s sewer system is costing the town money and could require a rate increase, according to an audit of the town’s 2013-14 spending.
Last fiscal year, the town billed its customers for 195 million gallons of sewage, a 6.34-percent drop from the year before. At the same time, the county, which treats Selma’s sewage, billed the town for 401 million gallons, an increase of nearly 38 percent.
Town Manager Jon Barlow blamed the increase in gallons treated on all of the rain over the past year. Rainwater seeps into cracks in sewer lines and finds its way to the county treatment plant.
In anticipation of a repeat this year in gallons billed vs. gallons treated, Selma raised water and sewer rates. Another rate increase might be in order next year, Barlow said.
The town manager called for a cost-of-service study to determine how to build infrastructure repairs and improvements into Selma’s utility rates. The town is currently spending $1.2 million to rehabilitate its main sewer-outfall line along Noble Street.
“We really need one for water and sewer,” Barlow said of a cost-of-service study. “I don’t think we have a good handle on where we need to be.”
Until then, the town has little choice but to raise utility rates, said Councilman Eric Sellers. “You can’t continue to sell something for less than it costs to deliver,” he said.
Dollar woes in the sewer fund were one of four “material weaknesses” found in the audit by Cary-based accounting firm Joyce and Company. Another was the absence of checks and balances in the finance department, which the auditor blamed on the finance director wearing too many hats.
“Currently, the finance director’s job responsibilities include making general ledger journal entries and all other functions of the town’s accounting,” the audit stated. “These include cash collections, deposits, bank reconciliations, issuance of purchase orders, accounts-payable processing and check signing. This results in no separation of duties for internal control purposes.”
Past audits have found the same weakness, and last year, the town hired a part-time employee to take some of the burden off of finance director Kim Batten. But the town still needs to do more, the audit said.
The audit also found that Selma had broken its promise to keep enough cash on hand to cover 110 percent of annual interest and principal payments on water and sewer debt. Instead, the so-called “debt service coverage ratio” in the water and sewer fund was negative 748 percent last fiscal year. The audit called for diligence on debt coverage and perhaps a rate increase.
Separately, the audit faulted Selma leaders for not reviewing monthly financial statements in order to make needed budget amendments. This has led to misstatements in yearly financial reports, the audit said.
In accounts receivable, purchases are sometimes recorded incorrectly, and item costs aren’t always accurate, according to the audit, which laid the blame on lack of training and staff vacancies. The town has taken steps toward improvement by purchasing software to keep track of water, sewer and electric inventory, the audit noted.
Things fall through the cracks because Selma operates on a small staff, Barlow said. “When you have a small staff, that’s a problem,” he said. “We know what the issues are; now we need to address them.”
Mayor Cheryl Oliver said in an email that the Town Council still has questions about the audit. The council has invited the auditor to its Dec. 8 work session for more in-depth explanations.