Modesto is going public with a second instance in which it has paid a company substantially more for work than what the City Council authorized.
The council in September 2011 approved paying Modesto-based ABS Direct $146,270 annually over five years for printing and mailing services, for a total of $731,350.
But the city continued to use ABS Direct after the contract ended in September 2016 and did not seek council approval to extend it. Modesto has paid ABS Direct $113,554 in the year since the contract expired and owes the company an additional $7,262 for work it has done but not been paid for.
Modesto also reimbursed ABS Direct $3.1 million for postage over the contract’s five years. A city report says while reimbursing ABS Direct was not clearly identified as an obligation in the contract, those costs are the city’s responsibility. Modesto has paid $426,452 in postage since the contract expired and owes ABS an additional $35,335 in postage reimbursement.
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Acting Finance Director DeAnna Christensen said she and her staff still are looking into the reasons why this happened. She said she could have more information by Tuesday’s City Council meeting but added the city is fixing problems as it finds them. “As we’ve identified these issues,” she said, “we are putting in place better systems, processes and controls to avoid these situations from happening again.”
Christensen said ABS Direct generates, prints and mails the city’s utility bills and business licenses. She will ask the City Council on Tuesday to amend the ABS Direct contract to pay the company the $7,262 for work it has done but not been paid for and extend the contract to May 31, 2018, at a cost of $136,763.
The city report said the extension is necessary to ensure there is no interruption in sending out utilities bills and business licenses, which are critical revenue sources for Modesto, while the city works on issuing a new contract. The report says the city does not have the staff or equipment to send out the utilities bills and business licenses.
The report also says the city has gone through a bidding process for a new contract and expects to present those results at the council’s Nov. 27 Finance Committee meeting. The report says it will take about six months to transition to the new contract for a variety of complex technical reasons.
ABS Direct direct did not respond to a request for comment Friday.
About a month ago, city officials revealed Modesto had paid contractors $9 million for asphalt patch work to streets, though the council had authorized $6.8 million worth of work. City officials have blamed human error among former employees in the Finance Department for entering incorrect amounts into the city’s financial system, which allowed for more work to be performed and money to be spent than authorized.
Both mistakes come as the city is reviewing its contracts and how it administers them. Interim City Manager Joe Lopez has said the review is expected to be completed by the end of the year. He also has said the review and its findings will be made public. “We have lacked proper internal controls that would catch issues like this,” Lopez said in a recent interview. “That has gone on for years.”
The council meets at 5:30 p.m. Tuesday in the basement chambers of Tenth Street Place, 1010 10th St.
Kevin Valine: 209-578-2316