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Streamlining Operations Could Save Metropolitan Sewer District of Greater Cincinnati $1.9 Million
Columbus – The sewer district that serves the greater Cincinnati area could trim costs by $1.9 million without impacting services to citizens, according to a performance audit released today that showed some of the district’s costs are higher than its peers.
The audit, conducted by Auditor of State Dave Yost’s Ohio Performance Team, reviewed costs for the Metropolitan Sewer District of Greater Cincinnati (MSD) and determined the organization:
- Employed 16 more information technology employees than necessary (potential savings of $1.56 million), resulting in per-service costs up to 1,728 percent above national benchmarks;
- Could provide customer service dispatching services less expensively by outsourcing those tasks (potential savings of $237,100);
- Maintained more vehicles than needed (potential savings of at least $67,900); and
- Had overtime costs that were up to three times higher than the industry benchmark.
In addition, the county’s monitoring of MSD lacked goals and performance metrics to assess its effectiveness.
“The inefficiencies identified in this audit cannot continue,” Auditor Yost said. “The current structure is not workable. I hope this audit serves as a wakeup call for leaders of Cincinnati, Hamilton County and MSD to restructure the system to improve operations and monitoring to reduce internal costs. Ultimately, these improvements will reduce the rates homeowners and businesses pay for service.”
Yost noted that MSD management has already taken steps to achieve some of the efficiencies recommended in the audit.
In addition to the performance audit, Yost’s office is conducting a special audit of MSD after concerns arose about the district’s competitive bidding, contracts and payments.
That review, begun at the request of Cincinnati and Hamilton County officials, is ongoing.
Hamilton County and the city of Cincinnati first entered into a consent decree with the federal government in 2002 to reduce untreated discharges from combined sewer overflows into waterways. The consent decree was finalized in 2010. An extensive, $3.1 billion capital improvement program was undertaken to comply with the consent decree, with the first portion of the two-phase project slated for completion in 2018. By comparison, similar consent decrees at the Northeast Ohio Regional Sewer District (NEORSD) and the city of Columbus are budgeted to cost $3 billion and $3.5 billion, respectively.
Since the project began, MSD customers have seen their rates climb nearly 196 percent. With the exception of 2016, MSD has increased rates every year since 2003, with the larger increases concentrated in the first half of the project (increases in five of the first eight years of the project exceeded 11 percent).
During the same period, customers of the NEORSD system have experienced increases totaling nearly 270 percent, and Columbus system customers have seen increases totaling nearly 150 percent. The consumer price index during that period rose slightly more than 33 percent.
The average annual cost of service for a Cincinnati-area resident was $603 (per 1,470 cubic feet), which is more than the $488 paid in Cleveland but less than the $758 in Columbus.
MSD’s cost per customer account for 2015 was $475, compared to $378 in Columbus; $324 in Cleveland and the American Water Works Association’s national median of $319. Auditors said that although MSD has been “successful in maintaining moderate growth in operating expenditures,” a comparison to Columbus, Cleveland and the national median “shows that opportunity exists to decrease operating costs.”
Technology: MSD’s computer networking operations are maintained by two groups – a dedicated IT group, with 21 full-time employees, and Supervisory Control and Data Acquisition (SCADA) system team with nine full-time and one part-time employee within the Wastewater Treatment Division. The two divisions were created following a consultant’s recommendation to enhance security.
Auditors reviewed MSD’s technology staffing three ways: average cost per ticket; tickets handled per month, and; users supported per full-time employee. Because tickets vary in complexity and time demands, auditors based their potential savings estimate on the number of users served per employee. Regardless of which approach was used, however, auditors found both the IT and SCADA groups have potential to reduce staff.
- The national benchmark for staffing is 42 users per support team member. The IT group supported just half that many (an average of 21 users), while the SCADA group supported an average of six users.
- The IT group’s cost per ticket was $1,191, and the SCADA group’s per-ticket cost was $2,286. The benchmark: $125 per ticket, meaning IT’s average cost was $1,066 above the benchmark and SCADA’s was $2,161 higher.
- Each member of the IT team handled an average of 7.3 tickets per month, while the SCADA group members each handled an average of 4.1 tickets per month. The benchmark: 88 tickets per month.
“These large variances relative to cost and workload efficiency benchmarks suggest higher than necessary (computer network) staffing levels,” auditors wrote. “(MSD) is significantly overstaffed” when it comes to users per support team member.
Auditors recommended both the IT and SCADA teams reduce staffing by eight employees each to achieve appropriate efficiency levels, even though the remaining staffing level would be higher than industry norms. The recommendation would save about $1.56 million annually.
Monitoring: Auditors found there are no goals, performance measurements or operating parameters to assess the effectiveness of the construction monitoring process. However, the cost associated with administration and overhead was $49 per customer for 2015, or $2.9 million, nearly 28 percent of which was for county monitoring costs. “It is imperative that goals and measurements agreed upon by MSDGC and the County are put into place to assess effectiveness,” auditors wrote.
Overtime: Auditors found the overtime costs for almost every division of MSD were significantly higher than the benchmarks established by the Bureau of Labor Statistics. For instance, overtime in the Wastewater Collections Division was $669,590, or 7.6 percent of the division’s total personnel cost of just under $8.8 million, however, a staffing analysis determined this overtime level was justified. The benchmark is 0.4 percent.
Auditors made a similar finding in the Wastewater Treatment Division, where overtime of $1.25 million was 7.2 percent of the division’s $17.3 million in personnel costs, and the benchmark is 0.4 percent.
MSD’s customer service dispatching function employs four employees to cover 7 a.m. – 9 p.m., seven days a week. During the hours dispatching is not staffed, those functions are handled by a contractor at a rate of 99 cents per minute, in addition to a flat fee of $250 per month.
In 2015, MSD dispatched 6,077 calls – 4,225 by MSD employees and 1,852 by the contractor. MSD’s internal cost for dispatching was $245,657, and the contractor’s cost was $10,662, for a total dispatching cost of $265,319. Had the contractor dispatched all calls in 2015, the cost would have been $28,140.
In 2016, the number of calls handled by the contractor soared as a result of a 100-year storm saturating the Greater Cincinnati area on Aug. 28, increasing the percentage of calls dispatched by the contractor to 68.7 percent from 30.5 percent.
Given the contractor’s ability to handle the call volume and the average cost per call, auditors recommend outsourcing the dispatching function completely to save $237,100.
MSD has a fleet of 183 passenger vehicles that includes sedans, sport utility vehicles, pickup trucks and vans, which are used to transport employees.
During the course of the audit, MSD analyzed its fleet usage relative to the requirements of the city of Cincinnati. MSD reduced its fleet by 21 vehicles it determined were underutilized.
However, six additional vehicles could be eliminated based on the city of Cincinnati policy, 30 vehicles could be eliminated using the standards set by a peer group (Cleveland, Columbus and Lexington, Ky.) or those of the Ohio Department of Administrative Services (DAS), auditors found. Using the standards of the Ohio Department of Transportation, MSD could eliminate 75 vehicles.
A full copy of this performance audit is available online.
The Auditor of State’s office, one of five independently elected statewide offices in Ohio, is responsible for auditing more than 5,900 state and local government agencies. Under the direction of Auditor Dave Yost, the office also provides financial services to local governments, investigates and prevents fraud in public agencies and promotes transparency in government.
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