Kodiak's new harbor billing check flags about a quarter of statements, consultants say

Consultants hired to review Kodiak's harbor billing told the City Council on Tuesday that a new review tool flagged about a quarter of the billing it checked, part of an effort to clear a finding in the city's last audit.

Tim Altman of TA Accounting and Consulting and Slava Lounev of Lounev Advisory Services presented the update at a council work session. Lounev said the tool, run against roughly 10,000 monthly statements, found "about 25%, 24, 25% error within the analysis." He described what it catches as "flags, not errors."

Lounev described the tool as "an AI build." It checks about 1,300 harbor files that staff scanned, including vessel agreements, against the roughly 800 invoices the harbor sends each month, and flags mismatches for staff to review. He said they kept its reliance on AI limited because of cost and the sensitivity of the records. One use is reading scanned handwriting, to tell whether a character is "an I or an L or a 1," he said.

The work responds to the city's fiscal 2025 audit, which cited a significant deficiency in internal control over harbor billing. Auditors tested 40 harbor billing transactions and found five errors: two moorage charges at the wrong rate, a tax miscalculation, a customer undercharged for electricity and a customer charged for four days of dockage instead of a full month. Altman said harbor billing findings also appeared in the fiscal 2024 audit.

The council hired Altman's firm and Lounev's in April for up to $60,000 to help review and reconcile harbor billing from July 2024 on, according to council minutes. The minutes describe Altman as a co-founder of Altman, Rogers & Co., the firm that audited the city's fiscal 2025 books, and the current principal of TA Accounting and Consulting.

Altman said the harbor's billing software, which the minutes say was installed in June and July 2024, probably had "some implementation errors." Boat lengths in the system also didn't always match vessel agreements, which were updated at different times, he said. Lounev said the length mismatches also threw off taxes on some services.

Rates left over from earlier years were used in fiscal 2026 billing, Lounev said, and staff have since updated them. One rate setting is still hard to fix in the software, so transactions it affects are flagged and adjusted by hand when needed.

With the tool, staff can review 60 to 70 flagged statements instead of all 800. Lounev said that added review is what auditors found missing. "The finding was on the internal controls," he said.

The analysis covered billing linked to vessel agreements. Electricity readings and some other charges are still recorded by hand, and Lounev said they found few discrepancies when tracing those readings back to the system.

"The errors go both ways," Lounev said. Customers who were overbilled have received credits. Going back to collect old underbillings "would be slightly difficult," he said, and is up to city management.

Council member Nick Mangini said vessel length inconsistencies cost the city $131,000 "in '26 alone." He said a new insurance clause in harbor agreements would let the city see the vessel lengths owners report to their insurers. "If we're only charging a 100-foot boat that's actually 120 feet, it's a big inconsistency," he said.

Altman said corrections have been made to the city's general ledger for the items they found. Asked whether harbor billing will draw a finding in the next audit, he said that decision "does belong to the auditors," and that the consultants' work is "not an audit." Whether the finding goes away for the fiscal year that ended June 30, 2026, "I don't know," he said. "We would hope so." If the city keeps up the new review, he said, it should avoid more findings in the current fiscal year.