As Modesto investigates how it paid $2.2 million more in street repairs than it had authorized, interim City Manager Joe Lopez said the review indicates this was no one-time mistake.
“Our preliminary information shows we have other potential problems,” Lopez said. “It seems like there are similar errors of varying magnitude.”
Lopez declined to provide specifics because he said the review is not yet complete. It is expected to be done by the end of the year, and Lopez said the review and its findings will be made public.
Modesto also is bringing in the Fresno CPA firm of Hudson Henderson & Co. to conduct what is called a procurement compliance audit at a cost of $4,890. The audit will include purchasing and accounts payable and is in tandem with the city’s efforts. The audit also is expected to be completed by the end of the year. Lopez said Modesto also will launch a personnel investigation as part of getting to the bottom of what went wrong.
He said no employees have been placed on leave and does not expect that to happen.
All of this comes as Garrett Thompson Construction — one of the contractors that did the street repairs — has filed a claim against the city seeking $305,324 for additional work it has done but the city has not paid for. City Attorney Adam Lindgren said the claim is under review, and the city will be speaking with the contractor and its attorney.
Modesto went public with this problem in early September. Here’s a recap:
The City Council in September 2012 approved spending $3.7 million in asphalt repairs over five years and then increased that amount by $3.1 million in December 2014 for $6.8 million over the five years. But the city eventually paid for $9 million worth of work. That’s $2.2 million more than the council authorized.
Modesto-based Garrett Thompson Construction was designated as the primary contractor among the three selected to do what is called hot patch work. The work is to patch the asphalt after crews cut open the street to replace a water main, install a water line and similar work. Most of the work was done on behalf of the city’s water division. Acting Utilities Director Will Wong said the division has verified the work it requested was done.
A city report says employees in the Finance Department’s purchasing division entered larger amounts into the city’s financial system than authorized by the council and then in 2015 increased the amount authorized for Garrett Thompson Construction by an additional $1.784 million. The report says officials could find no council or other authorization for that action. The report says these employees no longer work for the city, and it attributed their actions to human error.
Garrett Thompson Construction performed $8.75 million of the $9 million in asphalt repairs. And that does not count the $305,324 in asphalt work Garrett Thompson Construction has asked for in its claim against the city. This work was done in the past few months.
Gianelli & Associates attorney Eric Nielsen represents Garrett Thompson Construction and said his client is not at fault. Nielsen said his client performed the work on an as-needed basis, with the city contacting his client with a list of hot patch jobs. His client did the work and submitted invoices to the city for payment, with the invoices based on the city’s pricing.
“My guy has been branded as someone who should have known better,” Nielsen said. “That is not true.” He said his client is prepared to file a lawsuit if the city does not pay the claim.
Lopez said the $2.2 million in overspending was discovered as part of a review of the city’s contracts and how it administers them. That review includes verifying that the terms of the contracts match what has been entered into the city’s financial system. Without providing specifics, Lopez said the city is taking corrective measures as it identifies problems.
“We have lacked proper internal controls that would catch issues like this,” Lopez said. “That has gone on for years.”
Kevin Valine: 209-578-2316