OCA Audit Reports

Issued: October 2008

This report presents the results of our audit of the Austin Energy (AE) Automated Meter Reading (AMR) contract. In April 2002, AE entered into a 15-year, $36M service and meter purchase contract for approximately 123,000 with one-way wireless communication technology. In December 2006 and in January 2008, AE amended this contract to expand to a two-way automated meter reading services for an additional 234,000 meters.

The purpose of this audit was (1) to determine whether the AMR contract and amendments had reasonable cost foundation and had complied with City requirements; and (2) to determine whether accepted deliverables were in compliance with contract terms and related payments were accounted for in the accounting system, as well as monitored to ensure that the desired outcomes were met.

For the most part Austin Energy (AE) exercised diligence and prudence in developing and executing the 2002 AMR contract for one-way metering services. The contract had a reasonable cost foundation and was expressly approved by City Council resolution. However, AE did not involve purchasing staff in the negotiation and execution of the AMR contract as required by Council resolution and as a result, certain standard contract provisions, such as an audit clause and price warranties for all goods and services, were not incorporated in the contract.

For one-way metering service, AE has routinely monitored contractor performance which has complied with contract terms and achieved desired outcomes. In addition to monitoring contractor performance, the contract spending balances in the financial system should always be accurate to maintain their relevance and value to management in controlling expenses to be within the authorized spending limit. However, we found that the 2002 AMR contract’s authorized spending balance in the financial system was overstated by $7.9M.

Further, when executing the amendments to the 2002 AMR contract which expanded the contract to use two-way technology, AE did not apply the same prudence as used when developing and executing the original contract. Specifically, AE did not seek Council approval despite committing AE to additional expenditures. Also, AE did not compare pricing agreed to in the amendments to other utilities or vendors, did not conduct a citywide impact study, and did not incorporate penalties for delays into the amendments. Lastly, AE could not readily provide a reliable inventory figures for the number of two-way meters purchased, installed, and on-hand.

We have issued eight recommendations aimed at correcting identified deficiencies. Management concurred with these recommendations.

Download the entire text of our Automated Meter Reading (AMR) Contract Audit in Adobe Acrobat. You will need Adobe's Acrobat Reader to view these files. Or request a hard copy of this audit report, No. AU08104, by submitting this audit report request form.

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