Quarterly Report: 2010, April - June (Q4), Klawock

Community:
Klawock 
Staff:
Lawrence Blood  
DCRA Regional Office:
 
Gov't Type:
First Class City 
Borough:
 
Agreement?
No 
Agreement Date:
 
Entity:
City of Klawock 
Population:
743  
Assessment Status:
 
Assessment Date:
 
Exp Date:
 
Last Updated:
8/17/2010 
Community Sanitation Overview:
Over 90% of homes are fully plumbed. Water is derived from a dam on Half Mile Creek, then is treated, stored in a tank, and piped throughout Klawock. Most homes have piped sewage collection, which receives secondary treatment. The City provides refuse collection, which is hauled to a permitted landfill shared with Craig and other island residents. The Tlingit-Haida Regional Electric Authority purchases electricity from Alaska Power and Telephone over the Craig/Klawock intertie. THREA also owns four standby diesel generators in Klawock. 
RUBA Status & Activities This Qtr:
The city clerk successfully completed a 32-hour Utility Clerks class held in Klawock, April 19-23, 2010. The course was co-sponsored by the City of Klawock and the Division of Community and Regional Affairs' RUBA program. The Utility Clerks class is designed to build skills, knowledge, and capacity associated with the safe and efficient operation of water and sewer utilities in rural Alaska. RUBA staff assisted with the repair of the Wastewater Control Unit. The computerized control system used to automate the Klawock's wastewater treatment process and maintain safe environmental conditions inside the treatment plant was out of service and needed to be repaired by Boreal Controls Inc. located in Juneau. The computer contained critical control programming and was vital to the operation of the treatment plant. RUBA staff was informed of the problem while in Klawock on other business but offered to take the control unit and personally deliver it to Boreal Controls saving the utility shipping costs and most importantly, reducing the turn around time in getting the system repaired and the wastewater treatment plant back online.  
RUBA Activities for the Coming Qtr:
On site assistance including a city council work session on utility rates and improving collections.
Scores:
 
Essential Indicators:
23 of 27
Sustainable Indicators:
16 of 27
Total Score:
39 of 54

Finances

Essential Indicators
Answer Question
Yes All revenues and expenses for the utility are listed in the utility budget.
Yes The utility has adopted a balanced realistic budget.
No Monthly financial reports are prepared and submitted to the policy making board.
Yes The utility is current in paying all water/wastewater electric bills.
Yes The utility has on hand a year's adequate fuel supply or it has a financial plan to purchase an adequate supply.
Yes The utility is receiving revenues (user fees or other sources) sufficient to cover operating expenses.
Sustainable Indicators
Answer Question
Yes The utility is receiving revenues (user fees or other sources sufficient to cover operating expenses and Repair & Replacement (R) costs.
No YTD revenues are at a level equal to or above those budgeted.
No YTD expenditures are at a level equal to or below those budgeted.
Yes A monthly manager's report is prepared.
No Budget amendments are completed and adopted as necessary.
Finances Comments
The fiscal year for the City of Klawock is July 1 through June 30. The fiscal year 2011 budget was adopted by a non-code ordinance on July 6, 2010. The budget is separated into two main parts, the general fund and other fund budgets. The other fund budget section includes grant programs, business-type activities and utility enterprise funds. The utility enterprise funds including water, wastewater, and solid waste are accounted for independently and adequately illustrate revenues and expenses for each utility service. All three utility budgets have revenue projections equal to expenditures after a general fund transfer is applied. The budget ordinance fails to include a comparative statement of actual expenditures and revenues for the preceding fiscal year which is recommended by RUBA and required by Klawock Municipal Code. After comparing prior year revenue and expense reports to current year projections, the budget appears to be justified and realistic. The Administrator gives a verbal financial report at regular Council meetings. Revenue and expense reports and balance sheets can be prepared upon request, however written financial reports are not routinely provided. The administrator chooses not to present these documents on a monthly basis due to the time necessary to prepare the reports. The problem stems from the way the chart of accounts is integrated into the accounting system. The budget and financial reports do not follow the same format. The budget lists revenue and expenses that are unique to specific enterprise funds under the appropriate fund where as the financial report clusters similar revenues and expenses from all utilities into one major Utilities and Services Fund. Even though revenues and expenses are identified as to which enterprise fund they belong, it makes a budget verses actual comparison difficult to create. The administrator must export the financial information in to Microsoft Excel and then manipulate the data to create a budget verses actual financial report. The Community offsets the cost of providing water, sewer, and garbage services by charging user fees. The unmetered single family water rate is $42.81 per month. The utility has several classes of commercial businesses and charges commercial water rates ranging from $39.50 to $528.96 per month depending upon the type of business and the estimated water usage. The utility charges a decreasing per gallon rate for metered customers. The metered rate is $30.22 for the first 8,000 gallons, .0038 per gallon up to 100,000 gallons, and .0025 per gallon for amounts over 100,000 gallons. Wastewater rates are $46.00 for a single family residence, and range from $43.69 to $450.95 for commercial business. Metered water customers are charged wastewater rates that are based on the amount of water used. Utility rates were last adjusted in 2006. Utility user fee revenues accounts for approximately 92% of the water budget and 88% of the wastewater budget. Utility related expenses exceeded revenues, however; the governing body elects to subsidize the water, sewer, and solid waste services. The primary source for the utility subsidy comes from the community liquor store. The subsidy is budgeted and completed though a funds transfer in the accounting system. The subsidy is stable and sufficient enough to cover operating expenses and repair and replacement costs. Based upon available financial documents, RUBA was unable to determine how year to date revenues and expenses compared with budgeted amounts. Once the budget has been adopted and subject to Council approval, the Mayor may establish new line item expenditures within an authorized appropriation or transfer money not exceeding 10% or $10.000. from one appropriation to another. Larger amendments must be approved by ordinance. RUBA found no evidence of any budget amendments being made within the last three years.

Accounting Systems

Essential Indicators
Answer Question
Yes The utility has adopted a collection policy and actively follows it.
Yes The utility bills customers on a regular basis.
Yes An accounts receivable system is in place which tracks customers and reports past due accounts and amounts.
Yes An accounts payable system is in place.
Yes The payroll system correctly calculates payroll and keeps records.
Yes A cash receipt system is in place that records incoming money and how it was spent.
Yes The utility has a cash disbursement system that records how money was spent.
Sustainable Indicators
Answer Question
Yes A chart of accounts is used that identifies categories in a reasonable, usable manner.
Yes Monthly bank reconciliations have been completed for all utility accounts.
No The utility has a purchasing system that requires approval prior to purchase, and the approval process compares proposed purchases to budgeted amounts.
Accounting Systems Comments
The City has an adopted collection policy which is contained in Title 10 of the Klawock Municipal Code. The City follows the collection policy and actively pursues delinquent utility accounts. The collection policy is somewhat flexible and contains two discretionary methods for collection of past due accounts. Any customer more than 60 days past due, at the discretion of the city, may either be turned over for collection or the water service will be disconnected. Of the two methods, the community does not favor water service disconnections and will do so only as a last resort. The City uses Ketchikan Credit Bureau Inc. when turning customer accounts over for collections. In addition to the consequences found in the collections policy, the City encourages payment plans and Permanent Fund Dividend (PFD) assignments to avoid collection actions. The utility bills customers each month. Bills normally go out on or around the 5th of the month. The Administrator acknowledged that bills are periodically delayed due to staff availability to read the water meters prior to the mailing deadline. The City is currently using accounting software by Cougar Mountain. Cougar Mountain is designed for nonprofit and government entities needing basic general ledger fund accounting. General ledger functionality includes an unlimited number of funds, departments, or grants, as well as inter-fund transfers, fund balancing, and allows multiple grants with varied year ends. A bank reconciliation function is included for reconciling bank statements with actual checks and deposits. The program consists of five integrated modules: General Ledger, Accounts Receivable, Accounts Payable, Inventory, and Order Entry. The City also purchased the Payroll and Purchase Orders modules separately. Each module has standard reports such as income statements, balance sheets, cash requirement and cash flow statements that adequately provide financial information, but are not easily customized without an additional report generating add-on. The General Ledger contains internal controls such as permission settings and audit trails. Accounts Payable Section issues checks, manages vendor information and interfaces with Purchase Orders and General Ledger modules to enable full encumbrance accounting. Accounts receivable module maintains customer account and payment information, documents customer payments and reports past due accounts. Accounts Payable Section issues checks, manages vendor information and prints 1099 and 1096 tax forms. The payroll module automatically posts payroll expenses to the General Ledger and allows direct output printing for 941, W-2, and W-3 forms, and meets payroll reporting requirements for Alaska. The program maintains payroll history for five quarters to allow processing of the current year's payroll before finishing W-2s for the prior year. The company continues to support the software with updates and provides annual IRS Circular E updates for current tax requirements at an extra cost. The City uses a purchase order system for all purchases and maintains a cash disbursement system to track expenditures. Department heads complete purchase orders which are then submitted for approval. Purchase orders are not always compared with remaining budgeted funds. This has caused a few occasions where purchases have exceeded budgeted amounts. The Administrator completes monthly bank reconciliations and reports reconciling all bank accounts through February 2009.

Tax Problems

Essential Indicators
Answer Question
Yes The utility has a system to accurately calculate, track, and report payroll tax liabilities.
Yes The utility is current on filing tax reports.
Yes The utility is current on making tax deposits.
No If there are any past due tax liabilities or recorded tax liens, a lien release has been issued or a repayment agreement has been signed and repayments are current.
Tax Problems Comments
On March 22, 2010, the administrator authorized RUBA staff to obtain federal tax information from the Internal Revenue Service (IRS) and employment security information from the Alaska Department of Labor and Workforce Development. Compliance checks with the Internal Revenue Service (IRS) and State Department of Labor showed that the City was in compliance with all State and Federal tax reporting and deposit requirements. The Taxpayer Advocate Office did report that the City of Klawock is deemed non-compliant with employment tax filing and deposit requirements. Taxpayer advocate records show that the city owes federal taxes for 1st and 2nd quarters 2008, and failed to file information returns for 1st quarter 2009. The city disputes the IRS findings and has provided proof of payment. RUBA staff visually inspected the community's last four 941's Employer quarterly federal tax returns and verified electronic debits. It appeared that the last four quarters of 941's were filed timely. The city is working directly with the Taxpayer Advocate Office to either correct the information being reported or if it is found to be accurate, resolve the tax deposit and payment deficiencies. The City of Klawock was released from an Alaska Employment Security Tax lien on 2/17/09. The City has not received any derogatory correspondence from the Alaska Department of Labor and Workforce Development (ADOLWD) within the last year.

Personnel System

Essential Indicators
Answer Question
Yes The utility has a posted workers compensation insurance policy in effect.
Sustainable Indicators
Answer Question
No The utility has adopted and uses a Personnel Policy, which has been reviewed by an attorney, AML or Commerce for topics and language.
Yes The utility has adequate written job descriptions for all positions.
Yes The utility has adopted and follows a written personnel evaluation process that ties the job description to the evaluation.
Yes The utility has an adequate written hiring process.
Yes The utility has personnel folders on every employee that contain at least: I-9, Job Application and Letter of Acceptance.
Yes The utility has a probationary period for new hires that includes orientation, job training/oversight, and evaluations.
Yes The utility provides training opportunities to staff as needed and available.
Personnel System Comments
Current coverage for workers compensation insurance was verified through Alaska Public Entity Insurance Company (APEI). The policy is effective from 7/1/10 through 6/30/11. The policy covers work-related accidents and occupational diseases up to the Alaska statutory limits for each occurrence. Copies of the workers compensation policy is posted in accordance with state statute in all public buildings. In addition to workers compensation insurance, the APEI municipality insurance program includes general liability, automobile and property insurance and coverage for public officials and law enforcement officers. The city has an adopted personnel policy handbook. Every employee is expected to follow the personal policies but are not required to submit a signed statement that they have read and understand the handbook. The administrator admits to it being outdated and in need of review and some revising. The city has recently contracted with a consultant to review the employee handbook and bring the existing material in line with applicable State and federal laws. The city has job descriptions to aid in the staffing, wage and salary administration, and training for all positions. The job descriptions are up to date and clearly outline each employee's required duties. Personnel files are well organized and in most cases, contain all the necessary employment documents. The city does not use acceptance letters when offering employment. All files connected with an employee are considered strictly confidential, and are kept in the city clerks office in a locked filing cabinet. To limit access, the key to the filing cabinet is kept in the office safe. The city clerk reports that access to the personnel records are limited to only the employee, to those who have a job-related need to know, and to those who have been authorized by the employee to see the file. A probationary period for new employees last up to 90 days from the date of hire. During the probationary period, an employee may be terminated without advance notice and without cause. Upon satisfactory completion of the probationary period the employee becomes a permanent employee. The probationary period also includes work place orientation, job training, oversight, and performance evaluations.

Organizational Management

Essential Indicators
Answer Question
Yes The entity that owns the utility is known; the entity that will operate the utility is set.
Yes The policy making body is active in policy making of the utility.
No The policy making body enforces utility policy.
Yes The utility has an adequately trained manager.
Yes The utility has an adequately trained bookkeeper.
Yes The utility has an adequately trained operator or operators.
Yes The utility has adopted the necessary ordinances (or rules and regulations) necessary to give it the authority to operate.
Sustainable Indicators
Answer Question
No The utility has adopted an organizational chart that reflects the current structure.
Yes The policy making body meets as required.
Yes The utility complies with the open meeting act for all meetings.
Organizational Management Comments
The City of Klawock owns and operates the water, wastewater and solid waste utilities. The council is the formal governing body and meeting minutes verify that it is actively engaged in making decisions on behalf of the utilities. They meet the first Tuesday of each month and hold additional work sessions if necessary. Overall, the council supports and enforces established utility policies. However, once the policies are set, there is no annual review to ensure that the policies are still up to date and are meeting the needs of the community. RUBA staff received information that it has been several years since the council has reviewed utility policies such as ordinances, personnel policy, and water rates. By city ordinance, the mayor is the chief administrative officer of the city, however he has delegated the majority of the administrative officer functions and authority to the city administrator. The city administrator, under the direction of the mayor and council performs administrative duties, supervises administrative staff, and is responsible for managing daily operations. The administrator is in a multiple responsibility position. In addition to his administrator duties, he serves as the city accountant, responsible for the maintenance of the books and as the utility manager. The administrator shares some of his utility management duties with the public works director. His duties include supervision of operational utility staff and the daily operations and maintenance of the sanitary facilities including water, sewage, garbage collection and maintenance of the sanitary landfill. The council has adopted all the ordinances necessary to own and operate utility services. Title 10, Chapter 1 of the Klawock Municipal code establishes the policies and procedures for the operation, regulation and maintenance of the water and sewer facilities The city has an organizational chart; however the chart is very basic and does not effectively show the direct relationship between supervisor and subordinate. It does not accurately reflect the organizational structure of the Ccty and fails to define either lines of authority or lines of communication.

Operation of Utility

Essential Indicators
Answer Question
Yes The utility operator(s) are actively working towards necessary certification.
No The utility has a preventative maintenance plan developed for the existing sanitation facilities.
Sustainable Indicators
Answer Question
Yes The manager receives a monthly O&M report from the utility operator and routinely "spot checks" the facilities to see that the maintenance items are being completed.
No The utility has a safety manual and holds safety meetings.
Yes Utility facilities have not suffered any major problems/outages due to management issues that are unresolved.
Yes The utility is operating at the level of service that was proposed.
Yes The operator provides status reports to the manager on a routine basis.
No The utility has completed and distributed its "Consumer Confidence Report".
No The utility is not on the "Significant Non-Complier" (SNC) list.
No The utility maintains an inventory control list.
No The utility maintains a critical spare parts list.
Operation of Utility Comments
The city operates the following sanitation systems: Level 2 Water Treatment Level 1 Water Distribution Level 1 Wastewater Treatment Level 1 Wastewater Collection The city encourages professional development training and the utility operators are adequately trained given the classification of the sanitation facilities. There are three operators responsible for operating and maintaining the sanitary systems with the following certifications: Bennet Charles, Water/Wastewater Operator Water Treatment 2 Exp. 12/31/2011 Wastewater Collection 1 Exp. 12/31/2009 Sam Nickerson, Water/Wastewater Operator Water Distribution OIT Exp. 12/31/2009 Wastewater Collection 1 Exp. 12/31/2010 Water Treatment 1 Exp. 12/31/2011 Wastewater Treatment 2 Exp. 12/31/2009 Harry Jackson, Water/Wastewater Operator Water Distribution P Exp. 12/31/2010 Wastewater Collection OIT Exp. 12/31/2010 Water Treatment 1 Exp. 12/31/2010 Wastewater Treatment 1 Exp. 12/31/2009 Utility staff was unable to produce a preventative maintenance plan, however, the administrator reports that daily preventative maintenance is completed and the sanitary facilities have not suffered any major problems or outages. The Klawock public water system is not listed on the most recent (11/09/09) Significant Non-Compliance List, however, the last Consumer Confidence Report (CCR) providing drinking water quality information as required by the Safe Drinking Water Act was completed and distributed in 2006. The utility does not maintain an inventory control or critical spare parts list. The utility maintains a sufficient level of supplies and tools but due to the community's island location and dependence on air and ferry service, the level of critical spare parts may be inadequate to prevent a service outage. The FY10 utility budget has allocated zero dollars towards repairs and maintenance.