An audit criticizes the Honolulu Board of Water Supply for awarding lucrative bonuses to two top executives before there was much to show for their work.

The audit also found that the water board spent nearly $75 million on development projects outside its core mission while postponing pipeline maintenance, and undertook a costly restructuring that has yet to deliver discernible benefits and that has left "continuing instability" in the organization.

Further, city auditor Leslie Tanaka noted, the semi-autonomous city agency has been unable to cover its operating costs and just this month began raising rates to customers, with a 13 percent increase.

Clifford Lum, chief engineer for the board, defended the agency yesterday, saying that the auditor relied on some inaccurate information, that the agency is well run and offers water at one of the nation's best rates. There is some change needed to improve every agency, he said.

He also wrote in a lengthy response that the board has proactively managed its organization.

"We specifically challenge the audit report's primary conclusion — that the BWS drained its resources on re-engineering projects at the expense of pipeline maintenance," he said.

As for the rate increase, it had been 11 years since rates were raised, Lum said.

He said a 30 percent increase in such costs as salaries, fuel and construction materials prompted the need for a rate increase, not a reorganization plan that is still continuing.

INCENTIVES PAID

The Advertiser reported in July that the agency gave bonuses of $63,000 and $54,000 to the top two executives in 2004. The bonuses were among $555,763 in incentives given to 49 employees over three years.

The bonuses went to then chief engineer Clifford Jamile and then deputy manager Donna Kiyosaki.

Tanaka said "the previous board of directors awarded bonuses and salary increases to the previous manager and deputy manager before efficiencies were realized."

Lum said he has not issued any additional bonuses since the first ones were reported.

Tanaka also recommended eliminating any bonuses for the deputy manager. Lum said he has already done that.

The Board of Water supply manages, controls and operates the city's waterworks on O'ahu, providing fresh water to more than 902,000 residents and generating an average revenue of more than $101 million each year for the past seven years.

The audit covers the period from 1998 until this year. Lum became manager and chief engineer in January.

Another area cited by the audit is the number of water main breaks in recent years.

But Lum said statistics show a recent decrease in the number of water main breaks. "We average about 400 breaks a year; it used to be average 500," Lum said.

A number of employees have complained that the board tinkered with a well-organized team to bring in new and highly paid consultants without making them accountable.

And the audit found that the reorganization was costly and failed to deliver. The auditor said consultant costs totaled $10 million over five years and benefits remain uncertain. And the lack of a final organizational chart "shows continuing instability."

The audit also found that the board's limited budget for pipeline maintenance has focused attention only to the pipes in the most critical condition.

DATA DISPUTED

Coupled with a high number of water main breaks, Tanaka raised concerns "that resources for maintenance and repair of existing drinking water infrastructure may have been compromised by these organization changes."

Lum said some of the data in the audit was inaccurate and led the auditor to incorrect conclusions. He said the audit understates the amount budgeted for pipeline projects by more than $139 million from fiscal year 1999 to 2005.

He said the board also focuses on other fundamental components of the water system and spends money on wells, reservoirs, pumping stations as well as pipelines.

Tanaka recommended that the board establish policies for evaluating the manager and chief engineer and put in place systems to assure accountability.

Tanaka noted in the report that the problems with the agency "shows that change cannot occur solely on the basis of one manager's vision, but particularly for a semi-autonomous municipal entity like the BWS, must be reinforced with accountability through documented systems of evaluation, monitoring and reporting that will institutionalize desired changes, preserve the strengths of the organization and protect ratepayers' interests."

Lum said some of the recommendations already were in place before the agency got the audit.

He also said he thinks the agency was wise to try new policies — from the bonuses to the reorganization and business ventures — to adapt to a changing workplace.

"I don't think it's wasteful," he said.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.