Quarterly Report: 2015, July - September (Q1), Adak

Community:
Adak 
Staff:
Glen Hamburg  
DCRA Regional Office:
Anchorage regional office 
Gov't Type:
Second Class City 
Borough:
 
Agreement?
No 
Agreement Date:
 
Entity:
City of Adak 
Population:
283 2013 DCCED Certified Estimate 
Assessment Status:
Assessment Pending 
Assessment Date:
7/22/2014 
Exp Date:
7/22/2016 
Last Updated:
9/18/2014 
Community Sanitation Overview:
The City of Adak lies in the northern half of Adak Island, approximately 1,200 miles southwest of Anchorage in the middle of the Aleutian Island chain. The city owns and operates the community’s sanitation services and its council serves as the utility’s policy-making body. Drinking water for the community is derived from Lake Bonnie Rose, treated at a small water system, stored in four holding tanks, and then piped to facilities and housing units. All housing units in Adak are fully plumbed. There is a wastewater treatment facility in Adak, but it has not been operating since the US Navy left the island; untreated wastewater is now simply piped to an ocean outfall in Kuluk Bay. The city also collects solid waste and deposits it at a landfill. Bulk fuel is provided by the Adak Petroleum, which maintains nine underground tanks with a total capacity of approximately 18 million gallons of marine diesel, gasoline, and jet fuel. Diesel-generated electrical power is provided by TDX Adak Generating. The city is working with engineers and other experts on a project that would begin with disconnecting water service to the numerous unoccupied homes in Adak and include the installation of meters on water lines left operating. The meters will help the city determine how much water is being consumed in the community, which is essential for planning upgrades to, or replacement of, the existing water treatment facility in the future. The city reports that it is working to improve conditions at its solid waste burn dump in order to protect bald eagles; until those conditions are improved, it will be burying the community’s solid waste.  
RUBA Status & Activities This Qtr:
RUBA staff traveled to Adak this quarter to conduct a utility management assessment, which recommended the city fully enforce its collections policies, complete its 2013 Consumer Confidence Report, employ job descriptions and an employee evaluation process, and implement other important management practices. The visit also allowed RUBA staff to provide training and guidance to city staff and officials on drafting ordinances, absentee voting, conflicts of interest, records retention, inventory control and critical spare parts lists, and matters of parliamentary procedure. Further, RUBA staff communicated with the city council and the city officials to develop proposals for employee health insurance alternatives during the visit. In the balance of the quarter, RUBA staff made recommendations in the development of employee letters of acceptance, assisted in analyzing Adak’s utility bill collection rate, and gave reminders of voter registration notification requirements. RUBA staff also advised in the amendment of collections policies by resolution, provided sample code language authorizing the utility to refer delinquent accounts to a private collections agency, and procedures for removing items of business from a proposed council meeting agenda. 
RUBA Activities for the Coming Qtr:
RUBA staff will continue to provide assistance to the city in its efforts to address its utility bill collections policy, develop and employ job descriptions and a formal evaluation process for all positions, and improve other utility management practices as requested. RUBA staff will also continue to invite city staff and officials to utility management trainings.
Scores:
 
Essential Indicators:
24 of 26
Sustainable Indicators:
17 of 27
Total Score:
41 of 53

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.
Yes 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.
Yes YTD revenues are at a level equal to or above those budgeted.
Yes YTD expenditures are at a level equal to or below those budgeted.
No A monthly manager's report is prepared.
Yes Budget amendments are completed and adopted as necessary.
Finances Comments
The City of Adak follows the State’s fiscal year running from July 1 to June 30, and adopted its FY15 budget by non-code ordinance timely on June 25, 2014. The ordinance compares FY15 income and expenses alongside then-estimated year-end FY14 actual amounts. Water and wastewater income and expenses are budgeted for separately as an enterprise within the overall budget city budget. The city plans to balance roughly $121,000 in sanitation service-related expenses in FY15 with nearly $130,000 in revenue from user fees alone; no subsidies from other sources are expected to be needed. The budget realistically accounts for expenses related to wages, payroll taxes, insurance, fuel and electricity, operator training and certification, testing, supplies, telephone and internet, chlorine gas, merchant service fees for the utility’s credit card payment system, and repairs and maintenance. Income estimates are similarly realistic, with nearly all values at or below FY14 budgeted amounts. The city council, which serves as the utility’s governing body, receives financial reports at each of its monthly meetings which include a profit and loss report comparing budgeted and actual amounts and a statement of cash flows. According to May and June 2014 financial reports, year-to-date (YTD) revenues exceeded budgeted amounts and YTD expenditures were below budgeted amounts. Meeting minutes do not indicate that a manager’s report addressing utility matters, either verbal or written, is consistently given to the council monthly. RUBA staff verified that the city is current in paying its electric bills to TDX Adak Generating, the local electric utility. Fuel for the community is provided by Adak Petroleum, which maintains sizeable storage tanks on the island and receives regular bulk fuel shipments. The city has budgeted for, and has sufficient funds on-hand to purchase, fuel from Adak Petroleum whenever necessary.

Accounting Systems

Essential Indicators
Answer Question
No 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.
Yes 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’s utility bill collections policy is outlined in Chapter 4.11 of Adak’s municipal code. In accordance with those policies, bills are sent to customers at the end of each month of service and due within 30 days. Utility bills include charges for water, wastewater, and garbage services at authorized rates. Services are itemized as required by the city’s utility ordinances. Customers can pay their bill with cash or check, or by credit card. With signed authorization from customers, the city will also processes recurring charges for utility service by entering the customer’s credit card information manually each month. Receipts for any payment are available and the previous month’s payment is noted on monthly statements. The city does not charge the penalty of 1.5 percent or $20 (whichever is greater) on utility accounts as soon as they become delinquent, as mandated by Section 4.11.10(B) of the code; only the 10.5 percent per annum interest on those delinquent accounts is assessed in accordance with Section 4.11.10(C). The city also selectively refers delinquent accounts to a private collections agency, though these efforts are outside of the collections measures authorized by ordinance. Until the city fully enforces its adopted collections policy as it is currently written, or until it amends its policy to authorize and then fully enforces other actions, the relevant essential indicator in this section is marked ‘No’. A review of a customer aging summary and a billings report shows that approximately 81 percent of customers routinely pay their current bills on time and in full each month. However, roughly 35 percent of customers owe the city for utility bills that are more than six months old and, in total, the city is due more than $35,000 in utility charges more than 30 days past due. The city uses QuickBooks for its accounts receivable and accounts payable processes, and Intuit Full Service for payroll. The city has an organized chart of accounts with a logical five-digit numbering system. Bookkeeping operations are divided between the city manager and the city clerk. The clerk largely handles customer payments (except for her own), while the manager tracks accounts payable and payroll. All employee purchases must be approved and made by the city manager after a standardized purchase request form is completed and submitted. Available budgeted funds are considered before every purchase. Purchase orders are matched to checks and invoices and duly filed. All checks must carry two approved signatures.

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.
N/A 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
The city uses Intuit Full Service for calculating and processing payroll tax liabilities. The IRS’s Taxpayer Advocacy Service confirmed on September 10, 2014 that the city is in compliance with its federal tax filing and deposit requirements. The State’s Department of Labor and Workforce Development (DOLWD) granted the city Employment Security Tax clearance on September 5, 2014. The city is not listed on the July-August 2014 Lien Watch report published by DCCED.

Personnel System

Essential Indicators
Answer Question
Yes The utility has a posted workers compensation insurance policy in effect.
Sustainable Indicators
Answer Question
Yes The utility has adopted and uses a Personnel Policy, which has been reviewed by an attorney, AML or Commerce for topics and language.
No The utility has adequate written job descriptions for all positions.
No 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.
No 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
The city carries an Alaska Municipal League Joint Insurance Association (AMLJIA) workers’ compensation insurance policy valid until July 1, 2015. The policy covers incidences up to the statutory limit. Coverage is posted in accordance with State law at the city office, both city shops, and the airport. Since 2011, the city’s personnel policies have been included in a formal ‘Personnel Policy Manual’ that is separate from the municipal code and amendable by council resolution. The manual appropriately defines job classification types (regular full-time, regular part-time, temporary, and probationary) and provides for a detailed system of progressive discipline. Additionally, it addresses work hours and overtime, pay periods, deductions, leave accrual, holidays, insurance, travel and per diem, harassment, grievances, nepotism, drug usage, hiring, a six-month probationary period, and promotions. While Section 5.01.50(5) of the manual requires that job descriptions be available for all positions, and Section 5.01.50(1) that the city manager conduct a performance evaluation for each regular employee every 12 months, these policies are not fully enforced. Job announcements are posted for any vacancy, but they do not necessarily detail all of the position’s duties and responsibilities. The city manager is responsible for conducting evaluations of Public Works Department staff, including the operators, while the city/utility clerk’s evaluation is to be conducted by the city council. Personnel files are available for all positions and include necessary tax and immigration paperwork, as well as an employee’s original application, but they do not contain signed letters of acceptance. The community is only accessible by a 1,200-mile flight twice each week from Anchorage, and local internet access is limited and expensive. These conditions generally constrain employees’ ability to attend trainings in-person or online. Nonetheless, the city has allocated $5,000 in its FY15 budget for operator travel and training and the city always supports utility staff seeking training whenever it’s available and affordable.

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 Adak owns the community’s utility systems and, in accordance with Title 2 of its municipal code, administers sanitation services. The city council is the governing body for the utility and meets the third Wednesday of every month, with notices posted at the two entrances of city office, a local store, the tribal office, and other community facilities in accordance with the Open Meetings Act (OMA). A review of six months of meeting minutes shows that the council has been actively engaged in utility-related business by adjusting monthly rates as necessary, approving a sanitation service business plan, reviewing utility easements, pursuing utility feasibility studies, adopting an annual budget on-time, and considering other matters as they’re presented. The essential indicator in this section related to the enforcement of utility policy is marked ‘No’ until the collections practices are in line with adopted policies, as addressed previously in this report. The city manager serves as utility manager. He has worked for the city for approximately four years. The city clerk serves as utility clerk, and has been employed with the city for over two years. As described in the ‘Accounting Systems’ section of this report, bookkeeping process are split between the manager and the clerk. Both have degrees in business administration and are adequately trained. The Alaska Department of Environmental Conservation (ADEC) recognizes one primary operator and one backup operator, but a third Public Works Department employee is also involved in certain utility operations. No operator with the city is certified; however, that the utility is not on the July 2014 Significant Non-Complier (SNC) list, operates at the proposed level of service, and has not suffered service outages due to operator error, as detailed in the following section of this report, indicates that the three are adequately trained. A staff organizational chart was included with a recent utility business plan, but showed the city clerk as appointed by the city manager, rather than by the city council as the city code requires. A corrected organizational chart provided to RUBA staff has not yet been formally adopted.

Operation of Utility

Essential Indicators
Answer Question
Yes The utility operator(s) are actively working towards necessary certification.
Yes The utility has a preventative maintenance plan developed for the existing sanitation facilities.
Sustainable Indicators
Answer Question
No 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".
Yes 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
It was noted in previous sections of the report that the community’s exceptionally remote location, the expense and infrequency of transportation, and the high cost of internet limit operators’ ability to obtain necessary training and certifications. However, the city has arranged to have the operators take proctored certification exams at the local school this fall, and the operators have been supplied educational materials from ADEC to study in the meantime. The city manager reports to only visit utility sites for spot checks about once per year, which is not sufficient to ensure that maintenance items are being completed as appropriate, or that workplace conditions are clean, safe, and organized. The city manager and utility staff will sometimes participate in AMLJIA’s monthly safety teleconferences, but no routine safety meetings are held and documented. Nonetheless, the manager is in regular communication with the operators and safety and operational concerns are addressed as they arise. The city reports that there have been no service outages in the last five years due to management problems, and the utility continues to operate at the level of service proposed. It is not listed on the most recent SNC list. The city has not completed and distributed its 2013 Consumer Confidence Report (CCR) by the July 1, 2014 deadline. Adak’s sanitary survey, which must be completed every three years, is also overdue, though the city reports it has been unable to have State officials travel out to the community to complete the survey, even at the city’s offered expense. Following municipal incorporation in 2001, the city inherited a sprawling, aged sanitation system built by the US Navy to service a population of about 6,000 people while the military base was in operation. The city doesn’t know the full nature of that system; it doesn’t know the condition of all the pipes, the location of all valves and appurtenances, and the severity of any leaks. The type and number of backup supplies that are kept on hand are based on the system as it is known to the city and its operators. The utility does not maintain inventory control or critical spare parts lists; parts are ordered as-needed. While the infrequency of air travel to the community could potentially delay the delivery of parts, contracted jet airline service increases the likelihood parts orders will arrive within a week.