Financial Consultant Biffs the Numbers Big Time
Jack Durham of the McKinleyville Press was the first in reporting the news:
A mistake made by a financial consultant has cost McKinleyville $400,000 – an amount that will raise each customer’s sewer/water bill by nearly $20 per year as the district seeks to recover the lost funds.
The McKinleyville Community Services District Board of Directors (MCSD) discussed the problem during a closed session Wednesday, July 10, when it considered potential litigation against Willdan Financial Services over defects in the company’s 2011 rate analysis
Willdan received a $24,840 contract in May 2011 to conduct a detailed rate analysis for the MCSD’s sewer and water funds. Based on that analysis, the MCSD raised its water and sewer rates in July 2012, and based its budgets on the anticipated revenues.
However, as soon as the new rates went into effect on July 1, 2012, the MCSD noticed a drop in anticipated revenues…
So what happened?
After some truthy investigation, McKinleyville General Manager Greg Orsini summed it up succinctly: the consultant left out the cost of buying water from the Humboldt Bay Municipal Water District.
Oops, Ouch, and Egads. Back to the drawing board, we’re reminded a leaky faucet wasting a drop of water per second loses 2,700 gallons a year, while a leaky accounting firm screwing up the numbers can lose $400,000 at a moment’s notice. McKinleyville residents are already ringing from those exorbitant-interest school Capital Appreciation Bonds (CABS) previously bought based upon the incompetent financial advice from their school board.
Passing the buck, Willdan Financial Services refused comment, requesting questions be referred back to McKinleyville authorities.
“The numbers just didn’t get put where they were supposed to. With the rate increase, we’re just backstepping a bit. We’re backfilling money we lost already,” MCSD Board President Dennis Mayo said.
“Their cooperation is excellent and we keep using them because they’re the standard in the industry. It looks a bit embarrassing right now, but it really isn’t,” Mayo told the Times-Standard.
Orsini said there may be an increase in water rates or the city can run deficits for five years, following a series of public hearings and a special election held before rates can be adjusted.
You can read the full story by Jack Durham at the McKinleyville Press: McKinleyville to Pay for $400,000 Mistake by Consultant.
The Times-Standard’s story by Catherine Wong followed up with theirs today: McKinleyville Considers Litigation for $400K ‘Mistake’.