An audit has found potential fraud in a water rebate program for low-income San Francisco residents. City auditors say the program is being poorly managed by the San Francisco Public Utilities Commission.

About 7,000 low-income households receive a discount on their water bills through SFPUC's program. The City Controller’s Office looked at a sample of those households and found about half weren’t qualified for the discount or hadn’t verified their income.

"Basically we’re discovering we need to do a better job of verifying," says SFPUC spokeswoman Allyson Kastama. The agency requested the audit, which also found about 500 city employees who get water rebates, even though a third have incomes that would disqualify them.

"We need to do a further investigation to see what the actual living situation is of the account holder at that address because they may be renters, they may be elderly parents or something of that nature. We don’t know yet," says Kastama.

The auditors say weak monitoring and verification has made the program susceptible to abuse.