Audit Report on the Department of Environmental Protection’s Billing of Hotels for Water and Sewer Usage

The Department of Environmental Protection (DEP) provides water and sewer services to all hotels operating in New York City. DEP’s Bureau of Customer Services (BCS) maintains customer account information, bills customers for water and sewer charges, and tracks payments and customer complaints in its Customer Information System (CIS). DEP’s CIS contains approximately 834,000 water and sewer customer accounts—781,000 accounts are billed based on actual metered consumption, and 53,000 accounts are billed on an annual flat-rate system, called frontage, which calculates the bill based on the size of the building and the number of plumbing fixtures (i.e. sinks, toilets, showers, and faucets). Of the 834,000 accounts, 1,509 accounts relate to 1,049 hotels. Since hotels are large consumers of water and sewer services, this audit focused on these accounts. The objective of this audit was to determine whether DEP properly bills hotels for water and sewer usage and is making efforts to collect outstanding water and sewer usage fees from hotels.¹

Audit Findings and Conclusions

In general, DEP is properly billing hotels for water and sewer charges in accordance with its policies and procedures and the New York City Water Board Water and Wastewater Rate Schedule. However, we noted discrepancies regarding DEP’s billing and collection practices that resulted in 20 hotels that were not billed the correct amount because of problems with the meters on the property or meters that DEP did not know exist. We estimate these 20 hotels owe $1,092,669. In addition, there are 49 hotels that have not paid $1,594,435 in outstanding water and sewer charges. DEP needs to be more aggressive with customers that have large outstanding water and sewer charges and make no attempt to pay these charges.

Audit Recommendations

To address these issues, we made five recommendations that DEP should:

• Bill all hotels identified in this report for the appropriate water and sewer usage fees.
• Coordinate with the Department of Buildings (DOB) to investigate why hotels cited in this report were issued a certificate of occupancy without having a proper water meter installed.
• Solicit DOB input and consider instituting a procedure that would require DEP to verify all meter installations before DOB issues certificates of occupancy.
• Establish a process that includes the termination of service for hotels that default on a payment agreement and/or have a large outstanding water and sewer account balance.
• Assign a new, unique Multiple Account Group Code for all hotels to better track hotel accounts.

DEP officials agreed with the audit’s findings and four of the five recommendations. However, they do not agree with our recommendation to terminate water services.