Audit: Garland’s wholesale wastewater agreements show metering gaps, late-fee losses and missed surcharges

Garland’s Audit Committee on April 8 received a comprehensive internal-audit review of the city’s wholesale municipal wastewater agreements that identified multiple compliance and billing gaps, including unmetered flows for Richardson, missed late-payment penalties, missing surcharges for excess biochemical oxygen demand (BOD) and total suspended solids (TSS), and inconsistent sampling and meter calibration practices.

Auditor Erin summarized the audit, which covered billing and operational records from October 2022 through November 2024, saying generally that “meter reading data used for billing was found to be accurate and most agreement requirements are being met by the parties with some exceptions described in this report.” The report noted about 9,600,000,000 gallons treated over the audit scope and about $28,000,000 in payments received.

Key findings included: - Richardson point of entry is unmetered. The auditor reported Garland has been using a flow estimate based on studies dating as far back as 1995 and recommended installing meters or commissioning a new flow study. The report noted growth in commercial development in Richardson since the most recent professional flow study in 2009 and warned this could lead to over- or undercharging. Management said Garland Water Utilities (GWU) has evaluated metering locations and is exploring feasibility and engineering options; substantive changes could require capital work and possibly renegotiation of long-term contracts that expire in 2027. - Late-payment penalties are not being consistently applied. The audit sampled 48 of 150 bills and found 12 payments paid 7–70 days late; 11 of those were not charged late penalties, which the auditors estimated resulted in about $168,000 in foregone fees if a 5% penalty were applied. Some wholesale customers had late-fee exemptions configured in the billing system without a clear justification; Dallas and Richardson contracts contain no late-fee language. Management plans to seek the city attorney’s opinion on applying city-ordinance late fees to Dallas and Richardson, remove exemptions for some customers in the billing system, and include late-fee language when contracts are renegotiated. - Surcharges for excess wastewater strength (BOD/TSS) are not being consistently assessed. The audit found more than half of sampled strength tests exceeded ordinance limits at least once and that no surcharges were identified during the review. Staff will request legal guidance on which calculation method to use for noncompliant wastewater surcharges and aims for an implementation target of September 30, 2025, for that guidance. - Sampling gaps and calibration reporting. One Sunnyvale point of entry was not sampled at all during the audit period, and the Dallas entry lacked seven consecutive months of strength sampling. The Dallas meter calibration reports were not provided to Garland; the report noted calibrations are required every four months under the Dallas agreement, and GWU staff will request past and future calibration reports and coordinate with Dallas on access, citing ongoing highway construction that complicates access. - Insurance and liability inconsistencies. An agreement with Dallas County MUD No. 4 required $5,000,000 general liability insurance; the policy on file initially showed a lower amount but GWU reported confirmation that coverage had been increased with documents awaited for review by city attorney and risk management. - Meter-inoperable calculation methods and documentation. Agreements provide conflicting or incorrect calculation examples; Garland staff generally use a practical 12-month average method plus adjustments. The audit recommended clarifying contract language and documenting calculation methods when meters are inoperable.

Management concurred in whole or in part with the audit recommendations and proposed a mix of near-term administrative steps (remove exemptions from the billing system, request city-attorney opinions, improve sampling processes) and longer-term actions tied to contract renegotiations slated for 2027. Committee members pressed for an interim status update; Councilman BJ Williams requested a progress report to council within six months. City staff recommended a six-month status report to the committee to cover short-term fixes, with renegotiation of expiring contracts part of a longer timeline.

The audit also recommended operational steps to improve monitoring and enforcement, including periodic audits of billing system configurations, establishing or enforcing security-fund deposits for late-paying customers where contracts allow, and formalizing sampling and industrial pretreatment reporting with municipal customers. Several enforcement or recovery options (including HUD in other contexts) would be the responsibility of the respective state or federal agencies or dictated by contract terms.

Committee members thanked audit staff and GWU management and asked for a follow-up timeline; staff proposed specific implementation dates for administrative items (e.g., remove late-fee exemptions, coordinate on calibration reports) and a plan to negotiate contract language in the next two-year window ahead of 2027 expirations.

The presentation did not formalize new council policy at the meeting; it produced management directions and a request from the committee for periodic progress reports.