DuPage Water Commission reveals yet another error

Thursday's DuPage Water Commission meeting saw the agency borrow $40 million, lose $41,000 and reveal a new, $426,515 mistake.

The commission's former finance administrator was blamed again for another accounting error that cost the agency $426,515 over the span of the last two fiscal years. Unlike the last accounting missteps that caused the commission to spend all of its $69 million reserve fund, these dollars will be recouped.

Commission officials said former finance chief Max Richter erroneously adjusted a billing formula for Darien in July 2008. The mistake had a major impact on that municipality's water invoices while simultaneously creating a minor undercharge for the other two dozen municipal customers.

Darien owes the commission $185,000, but all the others except Naperville owe less than $10,000, commission officials said. Naperville, the agency's largest customer, owes more than $50,000.

The commission voted to allow the municipalities to pay back the cash-strapped agency over two years, the same amount of time they were underbilled.

The commission also approved a $40 million one-year loan Thursday. The money will be used to pay off construction debt and restore the commission's reserves to $20 million to stabilize the agency's tumbling bond rating. The agency received a 2.5 percent interest rate, which will add an extra $1 million in interest costs to repay the loan.

If the commission's bond rating declines further in the next year, the bank can add an extra 1.5 percentage points in interest onto the debt, according to the loan agreement.

The commission borrowed another $30 million in December shortly after learning of the reserve depletion. That loan comes due in seven months.

Meanwhile, the commission also cut ties with auditing firm McGladrey & Pullen Thursday. The firm escaped relatively free of blame in a recent forensic audit report that outlined the causes for the commission's financial misfortunes.

But the firm had yet to complete the commission's 2009 audit and was seeking a written indemnity from the commission regarding the lost reserves. McGladrey & Pullen was also seeking an additional $27,500 to complete the audit, commission attorney Maureen Crowley said.

The commission refused and decided to look into hiring a new auditing firm that will handle the 2009 through 2011 audits. The commission has already paid the McGladrey & Pullen $41,000 for work on the 2009 audit, officials said.

The agency that provides Lake Michigan water to more than two dozen DuPage County communities and agencies has come under fire since the financial errors came to light late last year.

Earlier this month, the state legislature approved new regulations for the agency including requirements that all current members will be forced to resign at the end of the year and that a quarter-cent sales tax that generates roughly $30 million a year for the agency is eliminated in 2016. The legislation is awaiting Gov. Pat Quinn's signature before it becomes law.

Commissioners bristled at the legislation Thursday.

"When the legislature says we have to eliminate the sales tax in 2016 the water rates are going to have to go up in my opinion 50 percent to 60 percent," commissioner Don Zeilenga said. "That is being caused by the action of the legislature to eliminate a sales tax that has been in place for 20 years and allowed us to keep rates reasonable to municipal customers."