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Water utility admits $9M accounting error

Copyright © 2014 Albuquerque Journal

The chief financial officer for Albuquerque’s water utility acknowledged this week that the agency’s 2013 and 2014 budgets included a $9 million accounting error.

In response to questions from Elaine Hebard, an Albuquerque resident who first pointed out the mistake, Stan Allred briefly acknowledged the mistake in a meeting of the water utility’s board of directors April 23 and elaborated on it in a Journal interview this week.

Allred, CFO for the Albuquerque Bernalillo County Water Utility Authority, said the mistake was unrelated to recent financial difficulties that forced the agency to cut spending and propose a 5 percent rate hike for the fiscal year beginning July 1.


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Allred and other agency officials have blamed their current financial problems on a shortfall caused by reduced water sales as a result of Albuquerque customers’ water conservation success. Water use in the metro area is down 12 percent in 2013-14 compared with the same period a year ago.

Allred said the accounting mistake only affected the tables in the agency’s annual published budget report and that his internal accounting system reflected the accurate revenue projections.

As a result, he said, the mistake had no impact on the agency’s current budget troubles, despite the fact that the $9 million accounting mistake and the $8.7 million revenue shortfall due to less water consumption are nearly identical in size.

But Hebard argued that the mistake does have a bearing on the water utility’s current budget problems. By publicly underestimating its revenue needs, the agency made it difficult for ratepayers to track the water utility’s growing financial difficulties.

“It obscured the decisions that had to be made,” Hebard said in an interview.

Last May, Allred told the water utility’s board the agency would need $199.5 million in revenue to meet its 2013-14 budget. But in revised budget tables made public last week, Allred acknowledged that the real number was $208.5 million. Allred blamed the error on a switch in computer accounting systems, which miscounted $9 million of customer water and sewer revenue. In an interview Wednesday, Allred acknowledged that the same error had persisted undetected in the agency’s 2012-13 budget.

Revenue has fallen short of that $208.5 million target and water utility officials have been cutting spending, planning a rate hike and considering borrowing money to deal with their financial problems, but Allred said those moves are the result of reduced water sales, not the accounting error.

Accounting difficulties have been a persistent problem for the agency as it makes the transition from a finance system run by the city of Albuquerque to its own financial management system. For example, the agency still has not published its final audited financial reports for 2012-13, nearly 10 months after the fiscal year ended.

Fitch Ratings, a company that passes judgment on agency credit worthiness, last June said the agency’s accounting difficulties threatened its bond rating. “Continued delays in the availability of timely information regarding the system’s financial position could lead to negative rating action,” the ratings agency concluded.