District Six Magistrate Chris Harris has asked for an audit of MWD and Utilities Management Group (UMG), which runs the District. Questions have been raised as to the cost of the audit and which entity would pay for it.
It is usual practice for the entity being audited to pay for the audit. However, MWD has been in financial difficulty, and Rhonda James, who sits on MWD’s board, said she the District has recently undergone two required audits and have paid for both of those. If the District is forced to pay for a third audit, she continued, that cost of the audit would have to be passed onto customers of the District.
That is a step the District’s board does not want to take, she said.
Magistrate Chris Harris, who asked for the audit, has said he felt it was imperative MWD be audited, and if they could not pay for it, Pike County Fiscal Court should withhold some line item funding curently in its budget earmarked for Mountain Water to pay for the audit.
Judge Executive Wayne T. Rutherford has questioned the price tag set by the state auditor’s office to conduct the audit, an estimated $55,000, plus Mountian Water expects an additional $20,000 for its attorney and CPA to take part in the audit. Rutherford pointed out that an audit for the Fiscal Court was usually only about $20,000, and that budget is several times that of MWD.
The Daily News spoke to Brian Lykens, executive director of special audits at the state auditors office, about the issue of cost.
The amount charged for the Fiscal Court’s audits are subject to statue, Lykens said. The court is only charged half of the actual cost. In 2009, the audit was actually $35,000.
He said the states auditor’s office charges a per hour fee of $46.80.
“That is extremely reasonable,” Lykens explained. “The state contract review committee says we can charge up to $125 an hour.”
He went on to say that if an audit is estimated at $55,000, and the hourly fee is actually lower, the entity being audited is charged the lesser amount.
Lykens also said the type of audit his office will conduct of MWD is different in the scope than an audit of county finances.
“It will not be a financial audit,” he said. “This audit will answer questions, not give financial opinions. We will have to go back a few years to get perspective.”
He said the request from the Fiscal Court asks auditors to examine procedures, policies and to check issues.
Also to be included within the scope of the audit is Utilities Management Group — the company contracted to manage the day-to-day operations of MWD. Lyknes said the District is ultimately responsible for the performance of UMG.
“Even thought UMG is managing (Mountain Water), there are still processes we will look at to see how they are working,” Lykens said.
The state auditor’s office has received the request for the audit, although the question of who will ultimately pay for the audit is still being resolved. Lykens said the audit will go forward.
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