The Southern Water and Sewer District’s response to questions posed by the Kentucky Public Service Commission shed light on where some of the district’s funds have been spent, and the commission’s new chairman said a review of district policies is now needed.
Among other documentation, the PSC asked Southern Water to provide receipts for all meals purchased for employees or commissioners in 2018 and to include the meal dates, who benefited and why it was purchased.
The majority of receipts uploaded to the PSC website in the case, however, don’t provide all of that information, and some of the receipts were not legible.
The PSC also sought expense reports for each employee lodging or meals. They were informed in Southern Water’s response, “No expense report was done.” A request for invoices or receipts for gas purchased in 2018 “could not be located,” the filing says.
The receipts provided reflect thousands of dollars in food purchased at restaurants and businesses by district employees, and some of those purchases were made in the evening hours and at businesses including breweries.
Commission Chairperson Jeff Prater, who was appointed with a new board at Southern Water in February, said the commission has not yet reviewed or discussed the district’s policy for employee reimbursements and purchases. After reviewing the receipts filed in the PSC case over the weekend, however, Prater said a change may be needed.
“I would assume that you would pay for meals for employees to go to school or any kind of travel on behalf of the water district, for overnight stays,” Prater said. “But there was an enormous amount of receipts that, as I looked through, that I’m not sure about.”
The receipts were filed in response to questions the PSC asked during a hearing in May, in which Southern officials reported a former employee was repaying $35,500 that was allegedly embezzled. Receipts filed in the case show that the former employee, who was never criminally charged, repaid those funds by December 2018. When she started making the $500 monthly payments, she signed the money orders with references to Bible verses, like Psalms 27:14, Luke 21:14 and Mark 9:23.
The PSC hearing also showed that Southern Water ratepayers were paying monthly SiriusXM Radio subscriptions for the former district Manager Dean Hall and funded other questionable purchases at the district.
PSC officials questioned whether these expenses would be removed from the amount of revenue Southern Water is seeking to obtain in its rate increase request.
The $639 credit card expense at Peking in Pikeville in Feb. 2018, Southern Water reported, was for an appreciation meal for employees and their spouses.
The receipt was time-stamped for 9:15 p.m. and, like many of the receipts provided, it records only the total and it doesn’t detail the specific items sold. A handwritten note on the receipt says it was an employee appreciation dinner “for hard work 1-1-18/1-20-18” and it also notes, “freezing line breaks.”
When asked whether the district, under its current administration, would approve a similar purchase for employees and their spouses, Prater said a review of district policies is needed — a statement he repeated to answer several questions about these receipts.
“I don’t know what Southern’s policies for reimbursements or meals would have been at that time, but you know, I think that’s something the board and I need to address going forward,” Prater said. “There was a large amount of receipts that seemed to be unusual, but of course, that was before myself and the others came on board.”
He did not know what the district’s policy allows for reimbursement.
“Seeing those receipts over the weekend, going through the information, kindly brought it to light,” Prater said. “There has been so many things going on, I guess it’s not something we had thought about, not something I had thought about until I reviewed all of that information. Definitely, if people travel, they need to be reimbursed for appropriate expenses, but the board needs to be, needs to review any kind of policy that we have and adjust accordingly, if it’s needed. If the policy needs adjusted or changed, then we definitely need to do that.”
He talked about one credit card payment of $1.91 for crackers and a fountain drink at a gas station in Salyersville in February. The reason listed on the receipt for that charge was a trip to Frankfort to talk to the Division of Water about the Wheelwright water plant.
“I can’t speak to what they did at that time. Obviously, we had no control, myself and the other board members, over that, but seeing those things does make me realize that we need to do, we definitely need to review that policy and make sure that we’re comfortable with the way the reimbursement takes place,” Prater said. “Definitely, you know, reasonable travel expenses is one thing, and protecting Southern’s customers from excessive charges would be important to myself and, I’m sure, the others.”
Prater said the amounts of some payments and the times in which meals were bought were “just odd.”
Several purchases were charged after regular office hours in other areas of the state when employees were attending trainings and/or conferences.
No reason was given for the $135 former manager Dean Hall spent at Hofbrauhaus Newport, a brewery in Newport, at 8:18 p.m. last April. That receipt does not list what was purchased on the district’s credit card. It only shows an amount of about $120 and a tip of $17 paid.
When Southern Water officials went to Florence for a meeting in that month, charges included $17 for various snacks and drinks after 10 p.m. at Walmart, $25 at 6 p.m. on April 10 for food at a truck stop restaurant, a $52 purchase at City Barbeque at 6:45 p.m. on April 12 and, among other bills, $58 at 7:19 p.m. on April 11, 2018, for a full rack of ribs and a rib eye at BJ’s Restaurant and Brewhouse.
According to receipts filed, Southern Water ratepayers also paid $20 for purchases at the Hard Rock Café in Louisville at 9:23 p.m. on Aug. 26, $24 for room service delivery of lemon cheesecake and a Choco Icebox pie at 10:25 p.m. that evening, as well as $3.71 for a two-ounce Oreo cookie, Pop Tarts and Reese at 4:16 p.m. on Aug. 27, 2018 and a $32 purchase at Rally’s in Lexington at 5:30 p.m. Aug. 28, 2018.
When Southern Water officials were in Lexington on that trip, ratepayers also funded a $26 meal at TGI Friday’s, which included a kid’s meal with chicken fingers, juice and milk.
It wasn’t the only kid’s meal funded by Southern Water customers. That month, ratepayers also bought a chicken nugget Happy Meal at McDonalds in Salyersville.
Numerous receipts were not itemized to show what was purchased, including $163 spent at Joe’s Crab Shack and $87 in purchases at the Bluegrass Brewing Company.
No reasons were given for purchases of $34 at Wendy’s, $19 at the Mellow Mushroom, $29.20 at McDonalds, $61 at D’s Grocery or several other receipts showing food purchases in Floyd County and elsewhere.
Some receipts gave reasons for the purchases, however.
Southern Water paid about $60 for potato chips and food at IGA and Champs restaurant in McDowell for the funeral of an employee’s father-in-law in April 2018.
A $20 bill at Subway in McDowell, not far from the district’s office, was listed as a training with the Kentucky Division of Water in October 2018, and there were also reasons listed for several other purchases at local restaurants: $45 spent at Champs in Minnie was for breakfast for the crew, one receipt said, a $19 bill at that restaurant was for a “truck clean-up,” while a $28 bill there last January was for a “check signing” with a former commission member.
The district’s reimbursement policy allows for the reimbursement of “reasonable business travel expenses,” including mileage and transportation costs, meals, lodging and other expenses “directly related to accomplishing the objective of (the) trip.”
The policy, adopted by the district in 2006, specifically notes that entertainment and alcoholic beverages are not reimbursable. It also gives full discretion for approval to the district manager.
“It is the express policy of the district that employees will exercise moderation and discretion in incurring any costs while on district business. The above notwithstanding, the district manager has full discretion as to the appropriateness of any or all expenses for which reimbursement is requested by district employees,” the policy states.
Office Manager Paula Burke testified about approvals of these purchases in May, telling the PSC she received approval to pay them from Hall. She said on Monday that UMG officials are currently reviewing district policies in preparation to recommend changes.
She also reported that she is not aware of any other meal reimbursement policy Southern Water has that would permit meal purchases in the county.
In the rate case in which these receipts were filed, the PSC granted Southern a temporary across-the-board flat rate for all customers so the district can stay financially afloat as the rate case is pending a final decision.
On Monday, Southern Water filed a motion in the rate case to ask the PSC for permission to borrow $150,000 from Community Trust Bank with a five percent interest.
Southern Water has until July 16 to repay the Floyd County Fiscal Court $150,000 that the district borrowed from the county in April.
If the loan is not repaid by that date, the agreement requires Southern Water to pay the fiscal court “liquidated damages” of $100 per day until the full $150,000 is repaid, plus any other costs incurred by the fiscal court if actions must be taken to collect the debt. The agreement also noted that Southern Water cannot discharge the debt through bankruptcy.
Monday’s filing included a financing commitment from the bank, which requires Southern Water to make monthly payments of $3,500 for 48 months to pay off the loan.
As collateral, the bank will take out a lien on a money market account that the fiscal court has, the document says, but the borrower will be Southern Water.
On Monday, Southern Water also filed the first invoice it has received since it awarded management contract to Utilities Management Group, as requested by the PSC.
That document notes that from March 26 to June 28, UMG billed Southern Water nearly $71,700 for services. Most of those charges, $43,400, were for services provided by Don Compton, who works daily at Southern Water. Owner Greg May offered his services at no charge.