Audit blasts city for 'mismanagement' of payments for Phipps' steam usage

The City of Pittsburgh failed to collect more than $800,000 from Phipps Conservatory, the botanical garden complex in Oakland, as part of a longstanding utility reimbursement agreement, according to an audit released Tuesday by Controller Rachael Heisler.

Phipps, a nonprofit, has since paid the city the bulk of that sum.

Heisler did not blame the Phipps for any problems.

Instead, she criticized the city for poor record-keeping and lax policies and procedures and described the situation as one of “alarming mismanagement” by Pittsburgh.

Heisler’s probe of the Phipps Conservatory Trust Fund showed the city did not request regular reimbursement payments for steam used to maintain the warm temperatures needed by the conservatory’s plants. City officials also kept poor documentation around the utility payments, Heisler said.

The trust fund was created in 1971 to hold cash the city receives from operating the conservatory. Pittsburgh in 1993 handed over operational control of the conservatory to the nonprofit that currently manages it.

Under the lease agreement, the nonprofit is supposed to reimburse the city for its use of steam. The city pays the Bellefield Boiler Plant directly and should receive reimbursement from the conservatory based on a five-year average of steam usage, per the agreement.

But Heisler’s audit of the trust fund from 2014 through 2023 found payments were made only in 2014, 2016 and 2017. Those payments added up to just under $556,000.

The city failed to collect more than $800,000 during that time frame, she said.

The initial lease agreement was set to expire in 2022 but has since been extended through June 2043. The agreement included a stipulation that the nonprofit repay the city nearly $680,000 in unpaid steam costs.

Phipps also started sending the city monthly checks for steam usage, Heisler said.

A spokesman for Phipps Conservatory declined to comment on the audit and the lease agreement.

“Although the modified agreement between the nonprofit and [the Department of Public Works] resulted in a reimbursement of $679,530.90, the city could have easily lost more than $800,000 due to the lack of consistent requests for reimbursement,” Heisler said. “This is an alarming mismanagement of these utility processes.”

She also criticized the Department of Public Works, which oversees the city’s utility payments, for having no documentation to prove they’re paying the bills.

The department did not respond to Heisler’s audit. A spokesperson for Mayor Ed Gainey’s administration did not immediately respond Tuesday to a request for comment from TribLive.

“Going forward, the department must establish clear policies and procedures for managing this and all financial agreements they’ve agreed to, and provide real oversight to make sure these policies are being followed,” Heisler said.