JERSEY CITY — The state comptroller's office has issued a highly critical audit report that describes multiple instances of fiscal mismanagement at the Jersey City Municipal Utilities Authority.

The MUA repeatedly raised water and sewer rates despite having multimillion-dollar surpluses; did not perform financial reviews to determine if rate increases were necessary; lost an estimated $575,000 in revenue after failing to collect payments from bulk-water customers; and allowed its former executive director to give himself raises and other benefits without board approval, according to the 36-page report, released today.

The news comes as the MUA, an autonomous city agency that operates with a $120 million budget, is negotiating a new, multi-year contract with Suez, the private company it pays to manage the city's water system. The comptroller's report says the public agency provides "questionable" oversight of Suez, formerly known as United Water.

Suez is also the target of criticism from the comptroller's report, which says the company failed to collect outstanding bulk-water fees from two Suez-owned companies.

"Customers paid more for their water and sewer services each year, when JCMUA's board and management failed to ensure sufficient justification or need for any of these rate increases," State Comptroller Philip James Degnan said in a statement. "The residents of Jersey City have no choice in the selection of what entity delivers water to their homes. As a result, JCMUA and its vendor have a heightened responsibility to safeguard residents' funds and justify any necessary rate adjustments with a proper and transparent process."

The MUA's current contract with Suez expires in April. The agency paid the company at least $14.7 million in 2016.

The audit covered the two-year period starting on Jan. 1, 2013. Mayor Steve Fulop took office on July 1 that year.

The report focuses on four areas: water and sewer rates; water consumption, billing and collections; agency procurement and contract administration; and employee salary and benefits. Among its findings:

the MUA hiked water and sewer rates every year from 2010 to 2015 — costing an average family of four an extra $300 — even as the agency had annual surpluses topping $12.5 million;

the former executive director, Dan Becht, approved more than $26,000 in salary increases and other benefits for himself without the board's OK or knowledge and authorized a policy that allowed him to reimburse himself more than $18,000 for unused vacation and sick days;

the agency could not justify a public relations contract it awarded (the wife of a Fulop supporter was

three vendors were paid $94,000 more than they were authorized to receive.

Fulop spokeswoman Hannah Peterson noted that Becht was hired prior to Fulop's 2013 election (he quit in early 2017) and that rate increases were baked into a preexisting contract with Suez.

"The rate increase implementation predates the Fulop administration and was put in place by the previous administration and board members they selected," Peterson said.

In a Jan. 12 letter responding to a draft version of the report, John Folk, the MUA's finance director, largely did not dispute the report's findings and said the MUA has taken steps to rectify any issues.

Folk did take issue with the comptroller's contention that the agency hiked water and sewer rates while accumulating an $86 million surplus. Folk's letter says the true surplus is $31.6 million.

A request for comment from Jeremy Farrell, the MUA's executive director, was not immediately returned. Farrell took over the MUA on a part-time basis in February 2017 when Becht retired suddenly. Farrell, who is also the city's corporation counsel, is slated to take over the MUA on a full-time basis once his City Hall replacement is found.

Maureen Hulings, chair of the MUA board of commissioners, told The Jersey Journal she has not read the report yet. Becht could not be reached to comment.

A Suez spokesman did not immediately return a request for comment. Fulop's re-election campaign last year returned $11,800 in donations from the company and its PAC after a series of stories in The Jersey Journal raised questions about whether the contributions violated local pay-to-play restrictions.

Terrence T. McDonald may be reached at tmcdonald@jjournal.com. Follow him on Twitter @terrencemcd. Find The Jersey Journal on Facebook.