Audit Report on the Department of Environmental Protection’s Billing of Water and Sewer Usage for Properties Sold by the Economic Development Corporation

The New York City Economic Development Corporation (EDC) was formed in 1991 as a merger of the New York City Public Development Corporation (PDC) and the Financial Services Corporation of New York City (FSC). PDC’s primary objective was to retain and create jobs and generate revenue for the City by facilitating the sale and lease of City-owned property, which EDC has continued to do after the merger. The New York City Department of Environmental Protection (DEP) is responsible for reading water meters and charging fees related to water and sewer usage from property owners in New York City.

Generally, DEP is alerted to a change in ownership of a property through a Customer Registration Form. The Customer Registration Form lists the new owner’s name and the mailing address where the new owner can receive future water and sewer bills. Also, when EDC sells a property, EDC drafts a letter, signed by the Law Department, notifying DEP of the sale. Properties containing water meters that are classified (coded) in DEP’s Customer Information System (CIS) as City-owned are exempt from water charges, sewage charges, or both.

The objectives of this audit were to determine whether EDC is notifying DEP whenever properties are sold and whether DEP is updating CIS to properly bill the owner of the newly sold property for water and sewer usage.

Audit Findings and Conclusion

EDC properly notifies DEP when property is sold and, in response, DEP generally updates its billing system. However, for two of 39 properties reviewed, DEP did not update its billing system¹ . The new owners of these EDC-sold properties were not accurately billed and, as a result, the collection of $18,248 was delayed.

In addition, one of the 39 metered properties sold by EDC had an outstanding balance totaling $19,919. The balance was owed by EDC’s tenant and remained unpaid for nearly 28 months. EDC should have taken proactive measures before the charges accumulated or used the security deposit to satisfy the debt before the sale.

Audit Recommendations

The audit recommends:

• DEP should ensure that CIS is promptly updated upon notification of a sale from EDC.
• EDC should ensure that water and sewer charges of properties it manages are satisfied before they are sold, and if those charges are not satisfied, EDC should make sure that the water and sewer charges are satisfied from tenant security deposits.
• Should EDC receive a water and sewer bill for property it has sold, it should immediately notify DEP to adjust CIS.

Organization Responses

DEP officials agreed with their applicable recommendation. EDC officials agreed with one recommendation and partially agreed with the other.