QUINCY — Auditors with the Washington Auditor’s Office recommended city of Quincy officials “strengthen internal controls” over billing for its wastewater treatment system in a management letter attached to the city’s 2020-21 audit released last week.

“City operations complied, in all material respects, with applicable state laws, regulations and its own policies, and provided adequate controls over the safeguarding of public resources,” according to the report issued by the auditor’s office. “However, we noted certain matters related to utility billing that we communicated to city management and the city council in a letter dated March 28.”

The letter highlights an overcharge to Microsoft, the only customer in the city’s reuse utility, and of three customers in the city’s industrial utility class.

Quincy Clerk/Treasurer Nancy Schanze wrote in an email that the city needed to make some emergency repairs to the wastewater treatment facility, which were charged to the three industrial customers.

“The users chose to have (the cost) spread out in their rates for the remainder of the year,” Schanze wrote. “The city’s rate resolution did not get updated accordingly.”

The city’s sewer system is operated by an outside contractor, she wrote, and the rates are set at the beginning of the year, and any overcharges or undercharges are balanced at the end of the year.

The overbilling of Microsoft occurred between 2018 and 2020, the management letter said. Schanze wrote that the contractor overestimated the costs of operating the reuse utility, which was still being set up at the time. An analysis of the costs found the overcharge, and the contractor refunded the money to the city in 2021, Schanze wrote. At the same time, the contractor had undercharged three industrial customers, and the combination of the overcharge in one customer class and the undercharge in another meant the city received a refund of about $771,500. The Quincy City Council approved a refund to Microsoft in July 2021.

Domestic sewer rates are set by council resolution, Schanze said. While there was a refund of about $63,400 from the contractor, the city had a capital project that cost more than originally budgeted, and the money went toward that, she said.

City officials have been working with the contractor to address the issues identified, she said.

“We had already done a lot of (the suggestions),” she said.