County loses $330K in IT dispute



Everyone involved agrees that it is imperative for counties to cooperate and use new technology to streamline their work, but this year nearly $400,000 in disputed bills threatened to derail the electronic data management system (EDMS) that Winona County provides five neighboring counties. Winona County and the customer counties have been in a months-long dispute over bills for the program, which digitizes paperwork for the customer counties. Three of the five counties have yet to pay. Winona County staff are still working on a final resolution to the problem. Winona County Commissioners were supposed to be involved in overseeing that process, but, according to County Board Chair Marcia Ward, that did not happen. If staff's proposed resolution is successful, the misstep would still cost Winona County $330,000 in lost revenue in 2014 and 2015.

Officials in Fillmore, Freeborn, Goodhue, Houston, and Wabasha counties had sticker shock this summer when Winona County sent them the bills for EDMS. In some cases the bills were tens of thousands of dollars more than Winona County staff had told customer counties to expect.

"When the bill came, it was a shock," said Fillmore County Coordinator Bobbie Vickerman. She had expected the EDMS program to cost $15,000 to $17,000, not the $51,366 she was billed in June.

In a 2012 email, Winona County's former county administrator told Goodhue County Health and Human Services Deputy Director Mike Zorn the EDMS program would cost Goodhue County $47,191 the first year and $35,911 each following year. Zorn was billed $69,615 this summer, $22,424 more than he had budgeted.

Notes from a 2012 meeting between Houston County and Winona County officials indicate that Houston County officials believed the program would have an initial "buy in" cost of up to $40,000 with annual costs of around $17,000. Houston County was billed $122,266 this summer, $65,000 more than Houston County officials expected. "That's a big difference," said Houston County Board Chair Theresa Walter. 

One official, who spoke on the condition of anonymity, said that the large discrepancy between the quotes and the bills led the official to conclude that the difference was not caused by a simple mistake. "In my mind it was not. They were astronomically different from what we thought," the official stated. The individual claimed that Winona County was intentionally trying to profit from the program.

Other individuals hinted at similar concerns. Walter said, "They had quite a turnover in Winona with their administrator. I think that was part of it. They were trying to recoup the money with their levy problems and everything else, but now I think they're trying to work it all out."

"That's not the case," said Winona County Information Technology (IT) Director Mark Anderson when asked about the claim that the discrepancy in quotes and bills was the result of an attempt by Winona County to earn a profit on the program. "That's too bad they feel that way."

Asked about the discrepancy between quotes and bills in a previous interview, Anderson said, "We poorly explained ourselves when we were talking to other counties about what the costs were." Anderson and former county administrator Duane Hebert were the only county staff involved in selling the EDMS program to other counties. Anderson also said that the actual costs for the program were higher than what he and Hebert anticipated at the time they provided quotes to other counties, and that there was miscommunication when the bills went out because Hebert had recently been fired and Anderson was absent from work for medical reasons at the time. Staff who had not been involved in providing quotes to customer counties were left to send out the bills, Anderson explained. He added that he was not familiar with all of the conversations the former administrator had had with officials from customer counties.

Freeborn County Human Services Director Brian Buhmann said he viewed the discrepancies as an honest mistake. Buhmann said he had signed off on the revised EDMS bill and that a check would be soon be mailed. Some of the counties who have not paid may not trust Winona County, he suggested. However, he said, "As counties, we're in this together to meet the needs of all our citizens. To think that one county may be trying to take advantage of another — I guess I've never seen that, and I've been in the business for 16 years."

No more 'gentlemen's agreement?'

While customer counties were provided quotes for the EDMS program — some in writing, some verbal — none of the counties signed a contract with Winona County. As summarized by Winona County Commissioner Wayne Valentine when Winona County staff broke the news of the dispute this summer, the $400,000 program was based on "a gentlemen's agreement."

When asked if the lack of written agreement on the cost of the program concerned him prior to launching the program, Buhmann of Freeborn County said, "There has to be some level of trust with your partner counties."

One county official claimed to have asked Winona County for a contract repeatedly prior to the launch of the EDMS program and received repeated promises from Winona County staff that a contract would be prepared. "We kept asking for contracts and asking and asking, and [the contracts] were forthcoming and forthcoming," the official stated. "They kept saying, 'We'll have it. We'll have it.'"

Winona County staff said they are working on preparing contracts that should be ready in early 2015. Officials from other counties reported that Winona County staff promised contracts would be ready this fall. Wabasha and Fillmore counties do not plan to pay the new bills until such contracts are finalized. 

With a contract in place, at least the county will know what price to expect, said Wabasha County Commissioner Mike Wobbe. Houston County has already paid its new bill, but Walter, too, stressed the need for a firm contract. "I just think it's a good business practice to have a contract in place," she said.

Ward: Oversight committee never oversaw

On October 7, 2014, the Winona County Board agreed that county commissioners should be involved in the resolution of the bill dispute and voted unanimously to create an EDMS oversight committee that would include Anderson, Ward and commissioner Steve Jacob. 

"I've had several, if not many members of the public, ask how we as commissioners didn't understand or know that this was happening," commissioner Valentine stated, making the case for board oversight of the EDMS bill dispute during the October 7 meeting.


"Early on, assurances were made," commissioner Jim Pomeroy said, referring to the former county administrator's promises that the EDMS program would provide the county with a return on its investment in five years. "If those assurances have changed, to what extent? I think having a board member with you will help provide a conduit for sharing that information," he told Anderson.

"I feel we were oversold by our administrator on this project in its entirety and we didn't maybe have the oversight or involvement we needed," Jacob stated. "We trusted it's a win-win for everyone. I think our reputation is on the line here because I think other counties are thinking this was more of a win for Winona County than it was for others."

"I think having you guys involved is a fine idea," Anderson told the commissioners.

However, according to Ward, the EDMS oversight committee met once immediately following the vote and never met again, despite her and Jacob's expressed desire to hold additional meetings on how to resolve the bill dispute. In November, Ward was surprised to learn that Anderson had sent new bills to the customer counties without consulting the committee. "We as a committee had not met to look at it, but he took upon himself to send this out," Ward stated. "That's disturbing. We created a committee for this particular reason," she added.

Financial impact for Winona County

When Winona County set its 2014 budget in the fall of 2013, Hebert and Anderson planned on receiving $450,000 in revenue from customer counties for EDMS. For 2015, the county had initially included for another $352,000 in EDMS revenue in its budget, though the County Board already lowered expected revenue for 2015 to $220,000 around the same time the revised bills were mailed. 

All in all, Winona County will receive $330,000 less in revenues in 2014 and 2015 than it had originally expected. The reduction in revenues will decrease the county's Capital Improvement Plan (CIP) reserve funds. Ward has advocated for operating the EDMS program as an "enterprise fund" so that its gains and losses will be isolated from other county funds.

Anderson said that the original plan for billing customer counties "front loaded" the cost of the program, so that customer counties would pay high bills during the first two or three years and lower bills after that. Now, he said, the customer counties will pay the same amount year after year. That means that Winona County will still get a return on its investment, but that the payback will take longer than anticipated, he stated. If Anderson had refused to lower the bills for customer counties, some of them may have dropped out of the program entirely. 

"We expended the money, so we're in the hole right now," Anderson said, referring to Winona County's capital costs to establish the EDMS program. Winona County spent $1.2 million on EDMS in 2013 and 2014, not including the salary of a staff member employed to operate the program. "If we recover the money in a shorter period of time, that's better for our bottom line. If we receive the money back in a longer time and have better partners, it's better for everybody. And we want to be good partners," Anderson continued.

In a November board meeting, Jacob expressed a different point of view. "It's a burden on our budget every year," he said. "The bottom line is that EDMS is going to have the opposite effect than we thought it would," he added.

What now?

Officials from all of the other counties praised the value of digitizing government paperwork and cooperation between counties. "That's the way we have to go," Walter stated. She said that Houston County will likely expand its use of EDMS in the future. "That's the way of the future. We don't have anything planned for it at this point, but we'll work with them," she added.

Staff members are counties' biggest expense and EDMS helps reduce the amount of staff time needed to complete tasks by automatically filling forms and eliminating the need to hunt down paper files, Buhmann said. "In the long run what we're trying to look at is doing our job more efficiently and with less expense. With any new program we're going to have bumps… this was just an unfortunate hiccup and we have to roll with some of the leadership changes that have happened."

"We've got to fix it," Ward said of the EDMS program. "I think it's still broken, so we need to fix it." She said the Winona County Board needed a clear picture of how much the program costs. "The big take away is that under the previous administrator, we were not supposed to micromanage, and this is exactly what happens when county commissioners aren't part of the committees from the get-go."


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