Utility billing errors caused West Fargo to lose $1.25 million in taxpayer money

WEST FARGO — The city of West Fargo has been incorrectly charging some properties for city utilities, resulting in a loss to taxpayers of at least $1.25 million in revenue, according to The Forum's analysis of figures recently obtained through a public records request.

City officials discovered this year that some properties had been overbilled, underbilled or, in some cases, not billed at all for up to years at a time for city utilities such as water, garbage, and sewer service.

This included an estimated $1.4 million undercharge for water and sewer use by Cargill, one of the city's largest water users. The company has agreed to pay about $509,000 of that amount, but not the remainder.

Other billing errors to multiple customers, if not discovered, would have cost the city an additional $377,000 in lost revenue annually, The Forum's analysis found.

Asked for the total net loss to taxpayers that resulted from the billing mistakes, city officials did not provide an answer to The Forum.

The billing errors for water and sewer service affected mainly commercial properties; no single-family homes were affected, city officials said.

"The city discovered the errors when the Public Works Department began to gather detailed information" for a sanitation study, said former city spokeswoman Melissa Richard. "This uncovered the errors and new processes for the city to ensure accurate billing."

The billing errors do not trace back to just one cause, one department, or one change in city processes. Instead, each error developed at various points and from various sources, such as at Cargill where one cause was eventually determined to be an improperly working meter, according to records obtained by The Forum.

"A variety of errors have been identified, and those who could best speak to the contributing factors for these errors are no longer with the city," Richard said, referring to the recent departures of several city department heads.

"The errors that occurred, we weren't catching them partially because of human error and partially because the software doesn't red-flag issues," Mayor Bernie Dardis said. "It puts the onus on staff to cross-check things and correct things."

The most costly error was the underbilling of Cargill, a global food corporation based in Minnetonka, Minnesota. At the West Fargo plant, most of Cargill's water use is for the operation of steam boilers and cooling towers.

The city found that it had underbilled the company about $1.4 million in water and sewer charges since 2017.

According to records of city staff communications, the underbilling may have been due to multiple reasons, but one cause shown to have occurred between February 2021 and December 2022 was an inaccurate utility meter, which caused Cargill to be underbilled $509,652.

In a Feb. 2, 2023, email to Public Works Director Matt Andvik, the public works employee who discovered the errors said Cargill's meter appeared to have been turned off by someone in the billing department in 2014, but the reason for this was unclear to all. The meters were rebooted in 2017, but then at least one meter did not work properly. The meter readings were off by a digit, resulting in readings of 2 million gallons appearing as 200,000 gallons, for example.

"Luckily, we were billing for sewer usage based on the water reads on the two water meters," the public works employee said in the email. "Occasionally, that led to some overbilling sewer usage on a monthly basis, but overall, it looks like we missed out on billing 111,665,000 sewer gallons. It appears we charged different sewer rates per 1,000 gallons at different times so I believe our net sewer loss is roughly $335,656."

According to city emails obtained by The Forum, former Finance Director Judy Afdahl reached out by phone to the Cargill plant manager and the company agreed to pay for the underbilled water usage between Feb. 1, 2021, and Dec. 1, 2022, for a total of $509,652. The city estimated that amount based on what the meter readings would have been had the meters displayed the correct extra digit.

Afdahl reported the agreement with Cargill to then City Administrator Tina Fisk as well as then Assistant City Administrator Dustin Scott, who's now interim city administrator, and Andvik.

The agreement, however, has not been discussed publicly, or brought before the City Commission as a whole for approval.

On Tuesday, May 9, city spokeswoman Addie Stewart said Fisk and Afdahl "were directly involved in resolving those matters." And, while Stewart would not provide additional details, she said in an email to The Forum, "There were other accounts besides Cargill in which billing corrections were made which included both receiving payment and refunding payment."

Cargill plant manager Michael Gregoryk said in an email to Afdahl that the company would pay $509,652 and the matter would be considered settled.

The Forum's request to Cargill seeking comment on this story, which Gregoryk said he passed onto Cargill's corporate offices, had not been returned as of publication time.

On Jan. 4, the West Fargo City Commission unanimously approved a $105,000 study of the city's sanitation and recycling rates by Burns & McDonnell Engineering Company Inc. to be completed by July. The study is expected to "provide recommendations and strategies for enhancing the sanitation department, as well as a 10-year financial plan for analyzing revenue inadequacies and expenses to adjustment rates as needed," Andvik said when he requested the study. Sanitation rates last increased in 2019.

Shortly after the commission approved the study, the public works employee who ultimately discovered the billing errors began requesting billing information with the intent to provide it to the study consultants. It was then that the employee found about eight examples of revenue the city had missed out on collecting, such as $27,884 that was not charged to two businesses for their sprinkler systems, according to emails obtained by The Forum.

The city also found it was underbilling about $11,000 per month or $132,000 per year for dumpsters that should have been charged to the customers.

"We are also losing money on recycling fees and residential garbage but on a much smaller scale," the public works employee said in an email to Andvik, who forwarded the message to the city administrator and assistant city administrator on Feb. 2.

Staff also found that more than 800 forestry and mosquito-control fees had not been charged, resulting in a loss of about $19,200 annually.

More than 100 accounts had been charged the wrong sewer and water rates. In July 2022, the city underbilled more than $10,000 in sewer rates and overbilled more than $3,000 in water charges.

"So potentially that would be $120,000 annual sewer loss if usage didn't change," city staff said in an email. About a dozen accounts had not been charged for sewer usage at all, city staff added.

The city of West Fargo instituted a new sump pump charge for residents in 2020. Homes built since then are supposed to be automatically billed if their sump pump discharges into the city's sewer system. The annual fee is $60, to be billed monthly at $5.

Established homes have the option to opt into the program. However, city staff found that about 650 new properties built since 2020 had not been assessed the charge, resulting in a loss between $39,000 and $78,000. City spokeswoman Addie Stewart said no residential customers have been back-billed for unpaid sump pump charges.

Last month, the city decided to hire an outside firm to provide the city with financial services for three months at a total cost of $144,000 due to the financial department's current skeletal staff.

City department heads learned of the utility billing errors in late January and early February. Afdahl, the former finance director, told city staff in January that she would leave her post by spring, which she did on April 7.

In February, three finance department employees were fired by Fisk, the city administrator, and Human Resources Director Jenna Wilm. Both Wilm and Fisk have since resigned from their positions. Fisk abruptly resigned April 15, citing commissioners' desire for a different leadership style, and Wilm resigned April 21 to "seek another opportunity."

In a statement, Andvik said Friday, May 5, that "At this time, the city believes the utility billing errors have been corrected."

"Part of it is training, understanding what the software does and doesn't do, and the other part is looking at if there is more current software out there that assist in irregularities," Dardis told The Forum.

The mayor said he and city staff have been in touch with the company that provides the city with billing software, and the company is working to place safeguards into its software to prevent such errors in the future. The city is also looking at additional software that would have such safeguards to prevent similar billing issues, and additional staff training will also be considered.

Dardis said the sanitation study, once finished and reported back in July, will provide another set of eyes on the city's current rates and processes and provide a method of preventing something like this from happening again.